Coming into 2020, the world’s ocean shippers were bracing themselves for what would be a fundamental change to the way their ships operate on the high seas. That’s because beginning January 1, the International Maritime Organization (IMO), would limit the amount of sulfur in fuel oil to 0.50% m/m (mass by mass)—down from a previous 3.50% m/m.
By reducing the volume of sulfur oxides emitted by ships operating outside of designated emission control areas, IMO’s mission is to create positive health impacts and environmental benefits for the world. Those positive impacts will be felt the most by populations that reside near the world’s ports and coasts.
IMO regulations to reduce sulfur oxides (SOx) emissions from ships first came into force in 2005, under Annex VI of the International Convention for the Prevention of Pollution from Ships (known as the MARPOL Convention). Since then, the limits on sulfur oxides have been progressively tightened.
COVID Rears its Head
While few would argue with the merits of IMO’s new limitations on sulfur-laden fuel used by oceangoing vessels, the new rules—known as IMO 2020—would create new challenges and strains for carriers and shippers alike. To comply, carriers either had to upgrade their engines to allow for a change over to low-sulfur diesel fuels; install “scrubbers” to remove sulfur from the cheaper, high-sulfur fuel; or convert their equipment to an alternative fuel.
When COVID-19 surfaced in mid-January, the focus shifted over to a newer and bigger challenge. “The crisis created by the COVID-19 pandemic has produced all manner of unforeseen consequences in the energy and environment space, both in the U.S. and globally,” independent energy analyst David Blackmon writes in Forbes. “This has certainly been true in the maritime transport sector as well.”
Now, the sector is dealing with a global pandemic and the need to comply with IMO’s new regulations. “What was on the minds of all shipowners coming into 2020 has now been clearly over shadowed by the pandemic and its significant impact,” Hellenic Shipping News points out. “However, challenges remain on the full implementations of IMO’s 2020 sulfur cap.”
Some industry observers say early concerns over IMO 2020 compliance were somewhat unwarranted. “We are now well into the IMO 2020 shipping regulations, and it is clear that all the hype leading up to implementation was exaggerated,” ING’s Warren Patterson writes. “COVID-19 has certainly softened the impact of the shipping industry’s move to a low sulfur compliant fuel.”
Patterson says that halfway into 2020, it looks like the fuel of choice for ship owners is very low sulfur fuel oil (VLSFO), rather than a marine gasoil. “This is evident when looking at bunker fuel sales in Singapore, with VLSFO making up almost 70% of total fuel oil sales in the first six months of the year, this compares to around 11% when it comes to marine gasoil,” Patterson writes. “Meanwhile, given the use of scrubbers on some vessels, high sulfur fuel oil (HSFO) sales made up around 18% of total sales.”
Compliance is “Quite Strong”
In general, Patterson says compliance with the new fuel regulations has been “quite strong.” For example, he says that during the first quarter of this year, around 96% of ships entering Singapore’s ports used a compliant fuel. “[While] those which were marginally over were likely due to residual HSFO in the tanks,” Patterson added, “rather than purposely using a non-compliant fuel.”
In the first quarter of 2020, the Maritime Port Authority of Singapore (MPA) reported that most ships calling at the ports of Singapore have complied with the regulation, according to the publication. And, based on the pre-arrival notification submitted to MPA, 96% of the ships calling at Singapore used compliant fuel.
During this period, 326 Port State inspections and Flag State inspections were carried out in the port of Singapore. Out of these, 12 ships were not fitted with scrubbers and had fuels marginally exceeding the sulfur limit. “This was reported as likely due to remnant residues of high sulfur fuel in the fuel tanks and piping,” the publication notes. “It is expected [that] in time, the fuel tanks and piping would be sufficiently flushed with the continued use of compliant fuel.”
As the industry continues to acclimate to the new rules while also dealing with the impacts of the pandemic, Hellenic Shipping News says the next key regulatory milestone is the 2030 regulations, where a reduction of 40% of carbon emissions is the current objective. “It is widely expected that this threshold will be increased,” it adds.
