Disputes In Emission Control Areas Over Low Sulphur Fuel

2769

Low Sulphur Fuel

IMO is authorised under MARPOL Annex VI to establish ECAs where vessels have to control and reduce nitrogen oxides (NOx) and sulphur oxides (SOx).  Currently there are four ECAs, comprising the Baltic Sea, the North Sea, North America and the United States Caribbean Sea areas where vessels have been required to use fuel with less than 0.1% sulphur content from 1 January 2015.  Vessels fitted with scrubbers or operating on LNG are exempted provided the meet the emission requirements/standards.  The disputes over sulphur emissions are not many as adaption to consume low sulphur fuel is relatively cheap.  

Before the lower 0.1% sulphur content requirement came into effect at the start of 2015, it was feared that sufficient low sulphur fuel bunkering ports may not be available in or near to ECAs.  Low sulphur fuels have been readily available, but at a higher cost than the higher sulphur fuels.  While a shipowner is obliged to comply with the MARPOL regulations, it is the time-charterer who pays for the fuel consumed chooses to consume the more expensive low sulphur fuel only when the ship is required to do this, within the ECAs.

MARPOL requires vessels to have compliant low sulphur fuel onboard and facility to change over to low sulphur fuel in sufficient time to ensure that compliant fuel is being consumed before the vessel enters the ECA. Any Charterer’s orders to sail into or through an ECA on high sulphur fuel are unlawful.  Even when passing through an ECA, the ship would be consuming low sulphur fuel or would have to take care to navigate outside of the outer limits of the ECA if consuming high sulphur fuel.

In a particular case, a port state control inspector took a sample of fuel from the vessel’s engine room, at a point immediately before the fuel entered the ship’s engine.  The sample was found to contain more than 0.1% sulphur.  The bunker delivery note for the fuel indicated that the fuel had less than 0.1% sulphur content.  Further investigation and analysis of samples taken at the time of bunkering confirmed the fuel had less than 0.1% sulphur content.  But, the fuel was stored in a tank that had previously contained higher sulphur fuel and residues of the higher sulphur fuel had increased the sulphur content above the 0.1% limit.  Owners faced a fine for breach of MARPOL and they had no claim against the time-charterers, who had supplied compliant fuel.

Many vessels, whether or not operating under time-charter, are expected to change over from low sulphur fuel to cheaper high-sulphur fuel and back to low sulphur fuels on a regular basis as they leave or enter ECAs. Whilst the vessel ought to be able to do this, the vessel’s engine might need different lubricating oils, to be compatible with the different fuels and advice should be sought from the engine manufacturer. Most time charters require charterers to provide and pay for fuel, but the provision of lube oil usually remains the Owner’s responsibility.

The vessel’s staff can face other technical challenges in changing between different fuels, with different temperatures, viscosities, or other incompatibility between fuels. Again, under a charter party that describes the vessel as capable of worldwide trading, or trading to or through an ECA, absent a clause to the contrary, the risks of operating the vessel on different fuels rests with the Owners.

Many vessels trading under the new regime were built before it was necessary to have both low sulphur and high sulphur fuel onboard and, therefore, have been adapted to trade under the new requirements by having some of their fuel tanks dedicated to low sulphur fuel. This might reduce the range of the vessel, with the effect that the time-charterer has to arrange more bunker stems. For example, if a vessel originally had four 500t capacity fuel oil tanks, and one such tank is now dedicated to low sulphur fuel, then the vessel might be limited to carrying a maximum of 1,500t of high-sulphur fuel. As such Owners should be careful to ensure the vessels’ tank capacities are carefully described in the charter party to avoid disputes.

It is probably uneconomic to change storage tanks from low sulphur to high sulphur oil on a regular basis if the vessel is frequently employed in trades through or in and out of ECAs (with the corresponding risk of contaminating low sulphur fuel discussed above). However, the Club is aware of cases where Owners and Charterers have agreed to apportion the risk and cost of converting a “dedicated” tank from one grade to the other, when the vessel’s employment has been changed to trades encompassing regular transit of ECAs to trades where there are no requirements for low sulphur fuel.

Most time charters include a clause which states the quantities and, agrees the prices of both high and low sulphur fuels for bunkers on delivery into the charter, and on redelivery. It is not unusual for charter parties to require that the vessel be redelivered with approximately the same quantities onboard as on delivery. Whilst low sulphur fuel is widely available in ports in or near ECAs, it can be difficult to source in other parts of the world, such as China and in the Indian Ocean, where there is no significant market for low sulphur fuel. A charterer redelivering a vessel in these areas might not be able to supply bunkers such that the ship redelivers with the same quantities of low sulphur fuel as on delivery. In these circumstances Owners cannot refuse redelivery but would have a claim for damages under the charter party which, dependent on the actual wording of the relevant clause(s) in the charter party, should be resolved by an adjustment of the final hire statement to take into account the actual bunkers onboard and prices. The vessel is unlikely to have an immediate need for low sulphur fuel in those areas, but Owners should be careful to describe accurately the bunkers onboard on delivery into the next time charter so the next Charterer is aware that low sulphur fuel will need to be supplied before ordering the vessel to an ECA.

Source: Steamship Mutual

1 COMMENT

  1. How fast the fuel system onboard comes to single system. Is it 2020 when ship will receive 0.1 S or much before as seafarers are facing threatened due to these laws. I am chief engineer and many times I took bunker in European ports and sulphur was 0.09 or 0.1 S and always there are chances that this figure might get crossed?

LEAVE A REPLY

This site uses Akismet to reduce spam. Learn how your comment data is processed.