Uncertainty Looms Over Marine Fuel Sulfur Limit
Written by S&P Global Platts – S&P Global Platts is the leading independent provider of information and benchmark prices for the commodities and energy markets.
The International Maritime Organization has set a January 2020 deadline for a new 0.5% sulfur limit on marine fuels. The move is poised to force most shipowners to switch from burning residual fuel oil to a new, unfamiliar, less-sulfurous product.
A study by CE Delft, commissioned by the IMO in 2016 before it decided to cap the sulfur limit, shows demand for less-than 0.5% sulfur marine fuel will equal about 233 million mt/year when the rule takes effect in 2020.
Refiners are working on new products to meet the standard, but they won’t be ready to talk specifics any time soon. Uncertainty over what’s to come still has many in the shipping industry wondering what happens next. Will non-compliance be widespread? What is the viability of LNG bunkering as an alternative in the short term? How many shipowners will carry on as usual using fuel oil and installing scrubbers to clean emissions on board?
It’s thought the majority of shipowners will switch to a new 0.5% sulfur fuel, but refineries around the world are likely to take a wide range of approaches in choosing blending components to meet the new standard. The sulfur content is the only chemical property of these new fuels that have been confirmed.
The most important questions — what will these new fuels will look like and where will they be available — are still hanging over the shipping industry, and refiners are not ready to talk. But scraps of information have started to emerge this year.
BP revealed two new 0.5% sulfur fuels for the northwest European market in a private meeting with shipowners in February. One of the fuels will be more aromatic in nature and the other more paraffinic, but the company has not made exact specifications public.
In February, ExxonMobil told S&P Global Platts it would produce “more than two, but less than 42” new fuels. Another company representative said in March the refiner plans to have the fuels ready in tank by Q4 2019 and there will be a series of announcements before then about the fuels it can offer.
At an industry event in Tenerife in March, Spanish energy company Cepsa told Platts it plans to make a single 0.5% fuel of about 200 CST in viscosity for ships visiting Spain in 2020.
France’s Total told Platts in February it was “actively working on it” and has tested trial blends in its labs, but added it was still “too early for us to comment.”
And when a Shell representative was asked when it might be ready to make announcements and how many fuels it might produce, they simply said, “We can’t share those details at this time.”
Specifications of the new fuels matter because marine engineers need to know how they will interact with their vessels, and bunker purchasers need to start planning which fuels they will be able to buy, at which ports and in which combinations.
There is at present no guarantee any of the new 0.5% sulfur bunker fuels will be compatible with each other — when mixed in a single bunker tank, they may separate and form sludge that will block filters and ultimately cause engine failure.
“What frightens me most about these new-generation fuels is that they’re incompatible,” said Tom Strang, senior vice president for maritime affairs at cruise company Carnival Corporation, in March. “At the moment, I can go to a new port and load on top of the fuel I’ve already got.”
The Wait Continues
It’s remarkable the shipping industry is having to wait this long to learn about the fuel it will be burning in 2020. The shipping industry is used to being overlooked by refiners. The fuel oil it buys at the moment is worth less than the crude from which it is refined.
If operational issues in 2020 result in high-profile engine failures in bottlenecks like the Suez or Panama canals, the shipping industry’s concerns may start getting more attention.
, S&P Global Platts editors.