World Fuel Services Prepares for Global Sulphur Cap

From 1 January 2020, a new global sulphur cap on marine fuels will come into effect which will turn the whole bunker industry upside down; and World Fuel Services is urging the shipping, bunkering and energy sectors to work together to meet this new challenge.

The 2020 deadline for the new 0.50% cap, which is a significant reduction on the 3.50% global limit currently in force, was confirmed at the 70th session of the International Maritime Organization’s (IMO) Marine Environment Protection Committee (MEPC). This will be a huge undertaking but it is not unexpected. The industry has already had many years to prepare for this reckoning.

MARPOL Annex VI was first adopted almost two decades ago back in 1997 and came into force in 2005.The global sulphur cap was set at 4.50% before being lowered to 3.50%. Given that the average level of sulphur in marine fuel oil in 2015 was 2.45%, these limits were not so onerous. However, the maritime community and their bunkering partners have had to meet rigorous targets in the Emission Control Areas (ECAs) – where a 1% sulphur limit was introduced in 2010, and a 0.10% cap in 2015. This experience in the ECAs will be invaluable preparation for 2020.

Prudent shipping companies and bunker suppliers have already been honing their strategies and making their preparations years in advance. For many, this has been a case of not just planning, but also doing. With the introduction of the ECAs, bunker suppliers have already begun to establish their sources of low sulphur fuel supply.

In addition to buying low sulphur fuel, shipowners can reduce their sulphur emissions by installing exhaust gas cleaning systems (EGCS or scrubbers). Using alternative fuels is another avenue that some shipowners have followed. Liquefied natural gas (LNG) is the best known and has been winning support. In addition to LNG, shipowners can also look at other “clean” energy sources, such as methanol, ethanol, biofuels, solar power and fuel cells. They won’t be appropriate for all ships, but they will play their part in the overall energy mix.

IMO has not set specific sanctions and/or fines for not complying with the new regulations: instead these will be determined by the individual States. But we can be sure that the consequences to non-compliance will not be trivial.

Communication will be vital in the run-up to 2020. The world’s refining sector, the fuel storage operators, the port and flag state authorities and, of course, the bunkering community will have to work together constantly to make sure that the tanks are full with the right kind of fuel on 1 January 2020. And on every day thereafter.

For shipowners lifting bunkers in ports all over the world and buying on the spot market from suppliers whom they have perhaps known only fleetingly, there could be considerable uncertainty. In many cases, bunker buyers will be looking to their trading partners to bridge this information gap – and this will become an increasingly important part of the trader’s role in the post-2020 bunker market.
 
A global organization such as World Fuel Services (WFS) does not just extend credit, it also provides credibility. Fuel buyers can have confidence that they are dealing with a partner who, with extensive expertise, is fully familiar with the fuel supply situation in every major port and has a clear understanding of each supplier’s reputation. Indeed, WFS will have a close knowledge not just of the supplier but of every player in the supply chain.

The WFS technical team will be tracking all the developments, filtering out the noise and getting the real news to their customers. Preparing for 2020 will be a costly business; and for companies that get their strategy wrong, it could be a very costly business indeed. WFS will be helping its clients make the right investments that will bring an environmental and operational return, and avoid the mistakes that could put their business in jeopardy.