Come October, we will know if the global 0.5% sulfur limit will be implemented from 1.1.2020 or 1.1.2025. A lot of speculation and prophecies surround this topic. The committee appointed to study the availability of 0.5% sulfur fuels for the marine industry has confirmed that it possible to do so with a few caveats.
On the other hand, a group of industry experts are predicting chaos and confusion due to non‐availability and are stressing the need to slow down the implementation date.
Which way will it go?
EU has jumped the gun and said that they will stick to the 1.1.2020 deadline and will not allow another 5 years of higher sulfur emission. The MEPC meeting in October promises to be most exciting. At this point of time, it is worthwhile examining if, indeed, there are no alternatives. After all, bunker fuels constitute only 7% of petroleum products. More than the ability to find supplies of 0.5% sulfur bunker fuels, the concern may be what to do about 250 Million Tons of high sulfur fuels in the market.
If 54% of the ships are going to be fitted with scrubbers then the surplus high sulfur heavy fuel is going to be only around 115 Million MT. I have a sneaking suspicion that the major oil companies and refineries, though appearing to be unconcerned, are secretly getting ready to introduce 0.5% sulfur fuels in the market.
The technology for desulfurizing heavy fuels is not new or unknown. As early as in 1970’s and 1980’s, various oil companies have been involved with technologies such as bio desulfurization process, adsorption process using catalysts, catalytic hydrotreating, oxidative technologies, hydro cracking etc.
The challenge is to achieve desulfurization at low cost and have the ability to handle smaller quantities. Everything cannot be carried out in the refineries and therefore for a desulfurization cost of $50/MT, the system should achieve effective desulfurization. Even if the technology is able to achieve reduction in sulfur to 0.5%, it will be a winner.
The need for ultra‐ low sulfur (0.1% sulfur) is only for ECA areas which is a much smaller percentage. In the recent past major oil companies (followed by others) sprang a big surprise in introducing ultra‐low sulfur fuel (0.1% sulfur) into the market to tap into the differential between high and low sulfur fuels. Considering that the price difference between high sulfur and low sulfur is at least $200/MT and is likely to go up with falling demand for high sulfur and increasing demand for low sulfur fuels, it will not be a surprise if the oil companies jump in to harvest this alluring margin. MEPC, of course, may provide some concessions and introduce stages in the implementation to mitigate the shock of a sudden switch from 3.5% to 0.5% fuel.
Scrubber manufacturers are making boastful claims that they can manufacture and fit all the scrubbers needed on 48,600 ships (54% of 90,000) before the year 2020. This claim is too good to be achievable. Therefore, concessions, multi stage implementation etc. are definitely on the cards. This will be the reality even if the rules dictate otherwise.
Dr. Vis
President
Viswa Lab
