- The EU’s proposal of shipping reporting mechanism change is up for a debate at the MEPC of the IMO next month.
- The current reporting system would be expanded to allow for reporting and testing of sulphur fuel content for 3-5 years.
- In addition to shipowners reporting fuel non-availability, the proposal also calls for the testing agencies to provide data on ports, dates and fuel quantity supplied.
- As of February, 3 ships have reported compliant fuel non-availability whereas IMO’s global integrated system reports of 11 non-availability situations.
- Hence, the EU proposes that the Global Integrated Shipping Information System collect data on fuel non-availability, fuel quality, and the sulphur content.
- Already, countries such as Denmark have employed Sniffer Technology on its water to detect non-compliant fuel offenders.
- Meanwhile, oil majors have assured of the compliant fuel availability and haven’t made a comment on the quantity and the pricing yet.
- In such a situation, the availability of low sulfur fuel is assured and its price is likely to decline post IMO 2020 deadline but there will be a modest demand of increased oil production
The European Commission and the European Union (EU) member states, including the United Kingdom, have submitted a proposal to modify shipping’s existing reporting mechanisms to enable the enforcement of the International Maritime Organization’s (IMO) 2020 Sulfur Regulation, says a report published in Freight Waves.
The Proposal
- The proposal will be debated at next month’s meeting of the Marine Environment Protection Committee (MEPC) of the IMO, which is scheduled to be held at the organization’s headquarters in London on 13-17 May.
- The EU proposal is to utilize the existing processes used by the IMO’s Global Integrated Shipping Information System to collect data on fuel availability and quality, including the sulfur content of the fuel.
Why is it important?
“The current obligation for administrations to report on availability could be made more effective by requiring testing agencies to contribute to the monitoring program by providing information not just about the sulfur content but also about the ports, dates, and quantity of the fuel oils supplied. Such information should be provided on a more regular basis, for example, quarterly in the first year and then bi-annually for the duration of the collection period,” according to the European submission, that has been submitted to the MEPC in advance of its 74th meeting.
How will it be done?
Reporting of data would take place for a period of three to five years and would be accomplished through the expansion of the current reporting process provided by companies based on the testing of fuels supplied to ships.
The Necessity of Modification
- The EU said results of the monitoring program reported to the IMO committee in 2017 were based on 141,175 fuel samples, totaling 121.429 million tonnes of fuel supplied to ships.
- Of these samples 72,286, 12.2 million tonnes were distillate fuels or between 25 and 35 percent of all deliveries.
- “Only 0.33 percent of the tested residual fuel oils exceeded 3.50 percent sulphur, the current global limit, down from 0.53 percent in 2016,” said the report.
- However, the Europeans want to modify the process currently in use to test for the quality of fuels and in particular to report testing data from specialist testing institutions.
- A reporting template would “ensure uniform and unambiguous provision of quality data focusing on deviation from required specifications affecting the handling and usability of the fuel oil by ships,” said the European submission.
Disparity in Reporting Non-compliant Fuel Availability
As of February, ports have been required to report the availability of compliant fuels and to report when a ship has given evidence of a lack of available compliant fuel as well as when the supplied fuel failed to meet the regulatory requirements.
- Since then only five reports on the availability of fuel have been received through the integrated reporting system.
- Only three ships have provided evidence of non-availability of compliant fuel in the same period, but there have been 11 reports of non-compliant fuel supplied via the global system.
The Problem
Observers have noted that one method to reduce the costs of the Sulfur Cap is simple non-compliance. In this scenario rogue operators would simply continue to burn high-sulfur heavy fuel oil rather than switching to the more costly distillate or fitting a ship with scrubber technology, risking what they hope will be a small fine.
Competitive Disadvantage Pushing This Reform
If some owners use this option without risking significant fines when caught, owners that have chosen to comply with the new regulation fear this would put them at a competitive disadvantage.
Crucial for Prosecuting
Therefore, the need to know where and when compliant fuel is available will be crucial to prosecuting rogue operators. Some owners believe it is irresponsible for the IMO to implement the regulation without putting a workable enforcement system in place and have sought to delay implementation.
Other Ways of Monitoring
Some jurisdictions are, however, moving to meet their obligations. Denmark announced on 16 April that it will deploy ‘sniffer’ technology in its waters to detect non-compliant operators.
UAS Skeldar V-200 drones equipped with sulfur gas sensors developed by the European Maritime Safety Agency are to be deployed along the Great Belt region where large tankers travel to and from the Baltic Sea. The drones will fly into a vessel’s exhaust gas and analyze the content of the plume.
DNV GL Says
Eirik Nyhus, Director of Environment at risk assessment and ship classification society DNV GL-Maritime, told an audience in London recently that up to 5 percent of shipowners still believe that the implementation date will not be met.
“Implementation preparations for the sulfur cap are virtually complete. We do not see any kind of delay in the implementation of the IMO 2020 Sulfur Cap,” Nyhus told an audience in London at the end of March.
For ship operators, DNV GL’s Ship Implementation Plan or other similar reference material is a key guidance tool, giving owners guidance on preparing for IMO 2020.
However, Nyhus added that some uncertainties remain – particularly in the areas of fuel availability and pricing there is “uncertainty and volatility.”
Oil Majors Unreliable Assurance
Nyhus added, “Oil majors are saying that fuel will be available, but they are not saying in what quantities or at what price point. That is of course because these are commercial decisions.”
In some instances, oil majors have claimed that European competition regulations are preventing them from giving out pricing and quantity information, a view that Nyhus indicated he did not share.
Christian Lelong, formerly an analyst with Goldman Sachs, has looked at the market and aside from the two main choices for owners to meet the IMO 2020 regulations (either to use distillate fuel or fit scrubbers), gas power is only really cost-effective for new ships.
Options for the Refineries
There are a number of options for refineries, however. In Lelong’s analysis of the refining industry, he argues that oil companies have a choice – they can use their increased capacity to refine more distillate, optimize feedstocks for coking plants and the power sector, increase the amount of crude they use or adjust the balance in production between gasoline and distillate.
In mid-2018 Lelong explained that refiners have a great deal of capacity about to enter the market because fuel oil consumption is declining, so declining demand will see spare capacity. “This means refiners can produce less high sulfur fuel and more low sulfur fuel at no extra cost,” he said.
In addition, some of the low sulfur fuel currently produced is being used by the power sector. “From 2020 that will be the wrong choice of course,” said Lelong. Instead, the power stations, many of which have land-based scrubbers already fitted, will opt for the high sulfur option, leaving the more costly low sulfur fuel for shipping.
Modest Increase in Oil Production
Lelong predicts that optimization of fuel flows will mean that low sulfur fuel will be available and the cost for this fuel will decline over time after 2020. He also predicts the need for increased oil production is likely to be modest.
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Source: Freight Waves
