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With One Year Left To Meet IMO's 0.5% Sulphur Cap, Is It Possible?

· shipping,sulphur

At the 70th session of IMO's Marine Environment Protection Committee (MEPC), in October 2016, the U.N's International Maritime Organisation confirmed the January 1st, 2020 deadline for enforcing a new 0.5% global sulphur cap on fuel content, lowering from the current 3.5% limit.

Currently the shipping industry uses 4 million barrels (bpd) of high-sulphur fuel oil, with demand expected to shift to marine gasoil to the tune of 1.5 million bpd. With gasoil trading at a $160-329 premium compared to the High Sulphur Fuel, and with usage between 20-80 tonnes per day for a typical vessel, this could see an operating cost increase of between $3,200 to $26,320 per day.

The use of exhaust gas cleaning systems (scrubbers) is a commercially available option for the shipping industry. However, experts have suggested that due to financing and dry-docking issues at shipyards, it will be impossible for all vessels to be fitted with this technology in time. It is estimated that 300-500 vessels per year can be fitted, falling well short of the 60,000 vessels that ply international routes.

The IMO has said they will ban ships not fitted with scrubbers from carrying any fuel oil, as a way to stop ships disobeying the laws. However, BP expects about 10% of ships to cheat, and Wood Mackenzie estimates about 30% is ships to cheat.

Either way, fuel costs are expected to rise 25%, pushing an increase on prices onto consumers.

Maersk Chief Executive Soren Skou said in an earnings call in late 2018 that changing to low-sulphur fuel will cost the shipping giant 1-2 billion USD annually, on top of their current annual fuel bill of 3.5 billion USD. Maersk has committed to installing scrubbers on a "limited number of vessels in our fleet of around 750 container vessels", said Niels-Henrik Lindegaard, head of Maersk Oil Trading.

"Using scrubber technology is a small part of – and just one of several elements in – our overall 2020 fuel sourcing strategy to ensure compliance in time"

"While we will continue to explore how to best comply with the 2020 sulphur cap, we still believe the best solution remains with compliant fuels from refineries on land."

Niels-Henrik Lindegaard, head of Maersk Oil Trading

There are many factors to consider in relation to the IMO 2020 Sulphur Cap, and there is no perfect solution for companies in this field.

Interested to learn more about this topic?

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