Feature: Technical Issues Loom Over VLSFO Bunker Fuel in 2020

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A report published in the Platts highlight the technical issues related to the new sulphur cap declared by IMO. As per the report, it’s likely that there will not be one standard very low sulfur fuel oil with a 0.5% sulfur content available in the market when the new sulfur cap comes into force in 2020. There are 3 areas of primary concern here

  • Fuel compatibility
  • Rise of Insurance premiums due to risk of engine damage
  • No ISO spec seen until late 2019

One possibility is that VLSFO fuels will fall into two groups, paraffinic and aromatic, with a different set of specifications for each of the two types.

Things To Keep in Mind

For the engineers and chemists seeking to avoid the new fuel blends causing engine failures, the two key properties to watch are stability — whether a fuel will separate over time or under particular conditions — and compatibility — whether two fuels brought into contact with each other will separate.

Sludge forming at the bottom of a bunker tank after a fuel separates can block a vessel’s filters and lead to engine failure.

Companies such as Cepsa and Exxon are also working individually to produce a very low sulfur fuel to meet the sulfur cap, however the wide variety of fuels being produced will make it difficult to avoid engine problems, especially for owners operating on a spot basis.

BP said during IP Week bunker buyers should be careful when buying new low sulfur fuels and arrange a contract with one supplier to ensure they get a compatible and stable product.

But for those operating a large fleet on a spot basis with various destinations this would be difficult to achieve, leaving companies at risk of fuel compatibility issues.

This also leaves a problem for physical suppliers who need to keep their customers in the loop, but many suppliers are in the dark about which fuel the refineries will offer them.

ISO SPEC AWAITED

The International Organization for Standardization is unlikely to publish its publicly available specification for 0.5% sulfur bunker fuels until late 2019, a member of the working group developing the standard said at the end of March.

The bunker market uses ISO specifications to ensure that the chemical properties of the fuels it deals in conform to a set of standards that mean they work properly.

The ISO is developing a PAS for the fuels as an interim measure to give guidance to the bunker and shipping industries in 2020.

The ISO is due to present information on the PAS to the IMO in the spring of 2019.

But this information is likely just to be “a framework” for the PAS without the full details, global technical manager for Intertek ShipCare and a member of the ISO working group Michael Green told S&P Global Platts at an industry event in Tenerife in March.

The full PAS will be published in late 2019, he said.

Engine Damage Chances

Marine insurers are raising concerns about potential engine damage and failure arising from the new fuel regulations.

By far the most common cause of loss in marine insurance is machinery damage, and according to a report published by the International Union of Marine Insurance in June 2017. The frequency of such cases is likely to increase come 2020, they warned.

Cat Fines

Cat fines are an element of risk Helle Hammer, Political Forum Chair of IUMI told S&P Global Platts. Cat fines are a by-product of the refining process, they are a by-product of catalysts used in the FCC unit of a refinery.

FCC residual products known as slurry and Light Cycle Oil (LCO) are used to blend down the viscosity of residual fuel oil to the levels required in marine fuels.

“Diesel fuels with low sulfur content usually have a lower viscosity than normal diesel fuels. By lowering the viscosity of the fuel, the lubricity also decreases and, as a result, the engines and equipment that depend on the fluid that is pumped for lubrication may have insufficient lubrication,” an ex-ship captain said.

“Hull and machinery insurers will have a hard time claiming that cover is canceled on account of non-compliance with the sulfur cap regulation despite the vast majority of hull and machinery policy wordings warranting that a vessel much remain in class in order to be seaworthy and as such have insurance cover,” an underwriter said. “Non-compliance with international regulations can see vessels being de-classed.”

The frequency of machine damage is likely to increase with the introduction of low-sulfur limits, according to IUMI.

Machinery damage accounts for 40% of hull claims and 30% of costs, IUMI said in a list of issues last year, identifying cat fines as the most well-known culprit for contamination and engine damage.

The reduction in sulfur in marine fuels has been in tandem with an increase in metals content.

IUMI referred to a report from DNV Petroleum Services which said the US bunker industry has seen a rise in metals content due to the introduction of the Emission Control Area.

The reason is that low sulfur fuels are less lubricating and this, along with the introduction of increased volumes of abrasive metals, causes damage to ships, IUMI said.

Claims due to cat fines so far add up to between $300,000 and $1.5 million, mostly in low speed engines, IUMI said.

This is expected to push up premiums, shipping sources said, without elaborating.

Some fuel oil traders believe there will be one main bunker fuel that will prevail in the market in 2020. However, the blend value has yet to be determined.

Refineries which have not invested in a coker unit have begun to experiment with producing low sulfur fuels and sweetening their crude slates by blending US crudes with heavier grades.

Thus, not just trade various technical difficulties are on the loop as the new emission rate nears. 

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Source: Platts

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