The IMO’s decision to implement the 0.50 % sulphur limit for marine fuels on ships operating outside sulphur emissions control areas (ECA-SOx) from 1 January 2020 has the industry scrambling for solutions. After an initial period of scepticism and doubt, the debate has firmly turned towards the transition and implementation planning for 2020
Various market surveys indicate that most shipowners and operators intend to comply with the MARPOL Annex VI regulation 14.1.3 by[ds_preview] burning 0.50% Very Low Sulphur Fuel Oils (VLSFOs). As a member of various industry forums, LR’s FOBAS (Fuel Oil Bunker Analysis & Advisory Service) team is actively participating in these discussions to help guide the industry by carefully considering operators requirements and concerns.
Refiners and suppliers
Refineries, storage depots and physical suppliers will have to contend with over 150 mill. t of high sulphur residual fuel oil becoming surplus to demand from 1 January 2020, being replaced by the demand for maximum 0.5% VLSFO.
Refiners are faced with difficult decision to make multimillion pound long-term investment for bottom upgrading, source sweet crude or look for other outlets of high sulphur residual fuels after January 2020 when this convenient marine bunker option is no longer available. Some refineries have made a decision to invest in coking plants. However, there are others who may be playing a waiting game to see how the exhaust gas scrubber market evolves. The IMO fuel availability study predicted that around 3,800 ships with Exhaust Gas Cleaning systems (EGCS) will be in use by the implementation date; however, so far the projected numbers are more in the region of 1,500-2,000 units or ships. Considering almost fifty thousand ocean-going vessels will be affected, the aforementioned number appears not significant enough to have a major impact on global high sulphur fuel oil (HSFO) demand from 2020.
Nonetheless, in view of expected greater price differential between HSFO and 0.5% VLSFO by 2020, shipowners and operators have shown increased interest in EGCS installations yet there are a number of operational, logistical, technical, regulatory and commercial parameters requiring careful consideration, making it a complex decision-making process. LR has developed an options evaluator to help clients make an informed decision based on the specific operational profile of vessels.
To help the supply chain, we also emphasise to ship operators that they open dialogue with their charterers and suppliers and place their interest in the type of fuel they will need, based on ship operations and trading pattern, so that suppliers also get themselves prepared to meet the demand ahead of 1 January 2020 deadline.
An update from the IMO
MEPC 73 is scheduled in a week’s time (22-26 October) where S2020 will be a main discussion point. It is expected that the final draft on the carriage ban of high sulphur fuels (unless a ship is fitted with an EGCS) is expected to be adopted with the convention, eventually coming into force on 1 March 2020. It is also expected that at this meeting, the Ship Implementation Plan (SIP) for consistent implementation will be discussed including the guidelines for Port State Control.
A Joint Industry Project (JIP) working group has been tasked to develop »Joint industry guidance on potential safety and operational issues related to the supply and use of 0.5% max Sulphur fuels«. It is expected that a draft of this comprehensive guidance document will be submitted to PPR6 (Pollution prevention and Response – An IMO sub-committee) in February 2019.
Progress of ISO TC28/SC4/WG6
Currently, the working group developing the ISO 8217 standard is focussing on the quality of 0.5% VLSFO. There are two main sub-groups: 1) drafting of Publicly Available Specification (PAS 23263) »Considerations for fuel suppliers and users regarding marine fuel quality in view of the implementation of maximum 0,5 % S in 2020« and 2) evaluating the stability and compatibility characteristics of new (0.5%) sulphur fuel formulations. It is expected that PAS will be available in second half of 2019.
ISO TC28/SC4/WG6 also issued a statement about the concerns raised that ISO 8217:2017 would not cover the 0.5% Sulphur fuel grades. The statement indicates that the ISO 8217 standard does provide coverage for all marine distillate and residual fuel oils, the change in sulphur content does not alter this fact, however it is anticipated that some of the formulations that will be offered to the market will have characteristics which are unfamiliar to some ship operators. Further guidance is expected from ISO, CIMAC and other prominent industry bodies in this respect to help various stakeholders.
Quality concerns with new fuels
One of the main concerns at this time is the long-term storage stability and compatibility between two different bunkers. Stability is mainly a supplier’s issue as they are responsible for supplying a stable blend to the vessel. However, controlled mixing or complete segregation onboard between two potentially incompatible fuels is the vessel’s responsibility. Hence, there needs to be an increased awareness amongst all stakeholders on issues which can originate from unstable fuels and two stable but incompatible fuels. To help ship operators, LR’s FOBAS team is looking into the existing compatibility test method and any alternative methods which may be more suited to the new fuel formulations.
There is high probability of paraffinic blends making their way into the marine bunker market, which will not only increase the need to address higher pour points but also the general cold flow properties of fuels. It is expected that the majority of the 0.50% VLSFO will be light residual products with viscosity between the current distillate (DM) and residual (RMG) grades of ISO 8217. Moreover, relatively lighter blends would make it easier for any catfines to readily separate however, this may warrant increased monitoring and cleaning to remove accumulated catfines from tank bottoms.
Whilst at this time not many 0.5% products are around, our data indicates that there are naturally low sulphur heavy fuel blends being supplied in specific areas around the world such as South America, West Africa and North Africa. Moreover, due to the 0.5% Chinese emission control regulation, we have also been receiving 0.5% fuels which are most likely blended products to comply with the regional 0.5% sulphur regulation. LR’s FOBAS team have started to develop the characterisation of the 0.5% VLSFO with the currently available fuels and will continue to do this as these fuels come to market and expect this to rise as we come closer to 2020, and in particular when Taiwan and China bring in the requirements for 0.5% operations in their port areas and three main SOx emission control areas respectively.
The experience of using the 0.1% Ultra-Low Sulphur Fuel Oil (ULSFO) for both residual based and pure distillate fuel oil operations will stand you in good stead for tackling these new 0.5% VLSFO’s. It is well recognised however, that there are many thousands of ships that have not yet truly experienced operations on much else other than high sulphur residual fuel oils and the occasional switch to distillates, this would suggest that the lessons learnt by some from the switch in 2015 will have to be learnt by many more for 2020 and the same technical and operational warnings will need to be reiterated.
The implications of the IMO 2020 sulphur requirements on operations are now becoming clear and planning is the critical component to mitigate risk.
Usman Muhammad
