Shipowners, operators, and oil & gas companies in Panama and around the world prepare ahead and brace for the impact of the International Maritime Organization’s new sulfur content caps.
Every year, global shipowners and operators take around 4.5 metric tonnes of bunkers through the increasingly-busy Panama Canal. With the International Maritime Organization’s (IMO’s) new 0.5% mass by mass (m/m) global sulfur cap on fuel content (down from a current 3.5%) on track for a January 1, 2020 enforcement date, shipowners and operators in Panama and around the world are now figuring out the best way to comply with these new IMO regulations.
Under the new sulfur limit, any “fuel on board” that is used in main and auxiliary engines and boilers must have a sulfur content of no more than 0.5 percent. According to the IMO, ships can meet the requirement by using low-sulfur compliant fuel oil; by using fuels like methanol or gas (when ignited, gas produces negligible sulfur oxide emissions); or by retrofitting ships with systems that “clean” the emissions before they are released into the atmosphere, so-called scrubbers.
Compliance can be met either through installing scrubbers that remove emissions before release into the atmosphere, using a low-sulfur fuel (distillate fuels had an average world sulfur content in 2017 of 0.08 percent) or by using a completely different fuel such as liquefied natural gas, according to FreightWaves.
Major Reductions in Store
According to the IMO, the new regulation will significantly reduce the amount of sulfur oxide emanating from ships and should have major health and environmental benefits for the world, particularly for populations living close to ports and coasts.
Last year, the IMO rejected a so-called experience-building phase (EBP), initially promoted by countries including the Bahamas, Liberia, and Panama, that would allow one-time waivers if vessel operators were able to prove that the lower-sulfur fuel wasn’t available for bunkering at certain ports of call, JOC reports.
As a compromise, the IMO agreed to boost efforts to lessen the mandate’s impact on the market, according to JOC. Those potential efforts—which include the enhancement of measures to guarantee fuel oil quality and the reporting of when low-sulfur fuels aren’t available—could be discussed at a May meeting.
“Industry analysts expect the vast majority—all between 5 percent and 10 percent – of vessels to use low-sulfur fuel to meet the IMO’s requirements, with a small percentage initially installing scrubbers,” the publication notes. “With an annual price tag of at least $5 billion and CMA CGM (a French container and shipping organization) estimating it will increase the average cost of moving a TEU by $160, carriers have to pass the costs onto forwarder and carriers—or risk collapsing.”
Preparing for the Switchover
In Panama’s Bunker Suppliers Prepare for IMO 2020, Maritime Executive reports on how the second-largest bunker supplier in the Panama Canal Zone has brought a new bunkering tanker to the region to meet growing demand. At 8,800 dwt, ACCRA is now the largest vessel of its kind operating in the Canal.
“Today, the total fleet of bunker barges in Panama holds an average age of 31 years and 3,100 dwt. So, employing our own quality tanker brings new opportunities for ships transiting the Canal and further helps us challenge status-quo in the local market,” said Monjasa Americas managing director Rasmus Jacobsen in a statement.
The move is part of Monjasa’s strategy to prepare for the IMO 2020 bunkering regulations. It already operates two bunkering barges on the Canal, one in Balboa and the other in Cristobal.
Far-Reaching Effects Expected
According to Maritime Executive, the International Energy Agency (IEA) expects demand for compliant fuel to have far-reaching effects on the refined product market.
“Refiners are expected to increase capacity rapidly over the next several years,” it reports, “but as they will be processing larger quantities of low-sulfur crude to meet the demand for low-sulfur bunkers, the cost of other fuels that depend upon the same feedstock could rise.”
With IMO 2020 less than a year away, ocean shippers should be working with their ocean logistics providers to keep a close eye on how carriers, shippers, and refiners are responding to the new 0.5% global sulfur cap.