The wait is over – 2020 will be the date for the introduction of the 0.5% global sulphur cap. Bunkerspot has canvassed the opinions of key shipping organisations and marine fuel experts who say that certainty on the implementation date is welcome but the decision brings many challenges, not least the issues of fuel availablity and compliance enforcement.
In the event, the decision to opt for 2020 as the date for the introduction of the global sulphur cap was achieved through debate and mutual agreement among Member States at this week’s meeting of the 70th Marine Environment Protection Committee (MEPC) at the International Maritime Organization (IMO) headquarters in London.
The European Union had already decided that the 0.5% sulphur limit will be introduced in EU waters in 2020, and at MEPC all European Member States gave their support to this implementation date on a global scale. Other countries, such as Russia and Mexico, major heavy fuel oil producers, were not in favour of a 2020 implementation date.
An IMO-commissioned study, delivered by CE Delft, had concluded that there would be sufficient compliant fuel availability to meet a 2020 deadline. However, an independently commissioned report by BIMCO and IPIECA, undertaken by EnSys and Navigistics and also considered at MEPC, had been said to run counter to the assumptions of the CE Delft report.
Last month, Lars Robert Pederson, BIMCO Deputy Secretary General, commented on the 2020/2025 implementation date question and the findings of the two studies:’ ‘It is clear that the IMO study is flawed, meaning it is not possible to determine from the study that there would be sufficient fuel available in 2020. On that basis, our opinion is that it would be irresponsible for IMO to make the decision to go for 2020.'
After the decision at MEPC today it would seem that while consensus has been achieved on a global cap implementation date, there remains deep-rooted scepticism over the crucial question of fuel availability.
For the refining, shipping, and marine fuels sectors, clarity on the date is welcome, but commitment to 2020 will accelerate many difficult choices over compliance. To a large extent, shipowners have been in a period of limbo in terms of making decisions over the routes to abiding by the future rules – scrubbers, alternative fuels, and, of course, distillate fuels are all choices on the table, and 0.5% sulphur fuels will certainly enter the fuel mix, but now shipping has to make a clear (and probably expensive) commitment to one or, depending on trading patterns, a combination of these compliance options.
MEPC has recognised that implementation of the global sulphur cap will not be plain sailing and, as such, it has agreed to ask its Pollution Prevention and Response (PPR) sub-committee to establish a working group to address issues around the introduction of the cap, such as enforcement and transition.
Bunkerspot asked shipping organisations and key industry observers for their feedback on today’s momentous decision at MEPC.
David Dingle, Chairman of Carnival UK and Chairman of Maritime UK, told Bunkerspot: ‘The decision to implement the global 0.5% sulphur emission limit from 2020 was widely expected and provides welcome certainty to the shipping industry, which is already exposed to significant emission control areas and the forthcoming European 0.5% limit, and is now making good progress in the use of exhaust gas cleaning systems and alternative fuels.
‘We now await important clarification on the details of implementation and enforcement.’
Arthur Bowring, Managing Director of the Hong Kong Ship Owners Association (HKSOA), said: ‘The HKSOA is very grateful to the IMO delegates for the agreement of the date for the entry into force of the 0.5% global sulphur cap. We are also grateful for the agreement to refer to PPR the issues of implementation that were raised in papers submitted to MEPC and during the debate at MEPC.’
Simon Bennett, Director Policy & External Relations, International Chamber of Shipping (ICS), also highlighted the task that lies ahead for the maritime industry: 'The ICS welcomes the fact that IMO Member States have taken a clear decision about the implementation date of the global sulphur cap which will deliver a dramatic reduction in sulphur emissions by shipping worldwide.
‘However, there will be much to do between now and 2020 to ensure that sufficient quantities of compliant marine fuel of the right quality will indeed be available, and that this radical switchover to cleaner fuels will be implemented smoothly, in a harmonised manner, without distorting shipping markets or having negative impacts on the movement of world trade, about 90% of which is carried by sea.’
Marine fuels expert and commentator, Adrian Tolson, of 2020|Marine Energy, agreed that meeting the 2020 deadline will be a tough call: ‘It is the right decision and now the hard part starts – three years to make this work with lots of concerns and questions – but I think the industry is ready for this challenge!’
Michael Green, Global Technical Manager, Intertek ShipCare, also pointed to the scale – and industry challenge - of a step change from the current 3.5% global sulphur limit to 0.5%.
‘The decision to implement the 0.50% m/m sulphur cap on 1 January 2020 doesn’t come as a huge surprise but will provide an interesting time for the bunkering industry over the next few years.
‘It was evident that the industry needed verification of a definite date sooner rather than later in order to prepare for the necessary changes but many will ask, is three years enough?
‘Just looking at the implications from a supply and demand perspective, the step from 3.5% m/m sulphur fuels to 0.50% m/m is an enormous one which will have a huge effect on availability and quality of product.
‘Given the relatively short lead time it will be very interesting to see how all individual stakeholders within the industry react, particularly the refining sector.’
He concludes: ‘Looking at the decision from a shipowner’s/operator’s point of view, we now have a definitive point at which to aim but questions are sure to be raised in relation to how compliance will be achieved – which I suspect won’t be easy to answer.’
BIMCO’s Lars Robert Pedersen also highlighted the issue of a ‘disruptive transition’ from 3.5% sulphur to 0.5% sulphur.
‘Transition is the key aspect, and effective implementation while recognising that refiners cannot adjust overnight is what we need to deal with.
‘The decision for 2020 was followed with tasking the PPR sub-committee to consider the implementation issues including those related to the transition. We will focus our attention to this work that is critically important for the industry.’
So, ‘how’ not ‘when’ is now the question facing shipping over the introduction of the global sulphur cap. The IMO has taken a massive, irrevocable step forwards in London this week in addressing shipping’s sulphur emissions, and the International Bunker Industry Association (IBIA) is now focused on how the transition to 0.5% sulphur can best be effected.
IBIA had made a submission to MEPC 70 calling for a phased transition of the global sulphur limit, and its Chairman, Robin Meech, of Marine and Energy Consulting, told Bunkerspot that the association will be seeking participation on the PPR working group.
‘Do we have fuel availability – no,’ he told Bunkerspot.
‘There is a feeling of relief,’ he acknowledged. ‘So let’s get on with it – but it’s going to be a very difficult situation over the next few years.’
How the transition to 0.5% is achieved should be up for discussion, he said. Options for consideration could be fuel non-availability disclosures (as has been the case in the United States) or MARPOL Annex VI signatories could call for vessels to show that they have sufficient compliant fuel to transit to the next port. A year’s ‘period of grace’ to make the transition could also be another proposition open to discussion.
The extent to which shipowners will opt for scrubber technology to achieve compliance is another uncertainty – and how this plays out in practice will significantly impact the demand for residual fuels, said Meech.
There will also be a ‘multitude’ of 0.5% sulphur blends, he predicts. And with the prospect of numerous 0.5% blends comes many questions: ‘What is its compatibility, how does it work, do we need to heat it or chill it, or put it in the centrifuge,’ suggests Meech.
Capt. Peter Hall, CEO of IBIA, also adds his voice to the ‘good – but what now’ debate: ‘We are pleased that a decisive decision has been made. There is much for the industry to do in order to meet compliance in 2020.
‘It is timely that IBIAs international convention takes place on the 8th November in Gibraltar which addresses the challenges of meeting the 2020 sulphur cap.’