- The clock is ticking down for the introduction of a piece of regulation for anti-pollution measures.
- The new regulations aim to reduce the amount of high-sulfur ingredients in bunker fuels — the low-quality oil products on most of the 80,000 commercial vessels.
- With an estimated cost of $2 million to $5 million per vessel, the cost to the shipping industry will be immense.
- For the Arabian Gulf oil industry, the change threatens to add to refining costs for its traditional high-sulfur product.
- Big Oil, the world’s leading energy companies, is increasingly under pressure from ethical investors determined to enforce new environmental standards.
- Experts in the refining business believe the industry can pretty quickly adapt plants to turn out the new low-sulfur fuel. Ports like Fujairah, on the Indian Ocean shoreline of the UAE, are already offering low-sulfur fuels
The clock is ticking down on the introduction of a piece of regulation that — if not managed properly — threatens to bring turmoil to global trade and energy markets, says an article published in Arab News.
Anti-pollution measures
By the end of the year, the world’s maritime industry is expected to have put in place new anti-pollution measures imposed by the International Maritime Organization, the regulator for the global shipping industry. Known as IMO 2020, the new regulations aim to reduce the amount of high-sulfur ingredients in “bunker” fuels — the low-quality oil products on which most of the 80,000 commercial vessels that ply international trade routes run.
The proposed measures and the deadline have been looming since they were first proposed 10 years ago, but the industry is only slowly waking up to the repercussions. The world’s shippers have to either move to new cleaner fuels — with a maximum 0.5 percent sulfur mix — or install scrubbers onto each vessel in the world.
With an estimated cost of $2 million to $5 million per vessel, the cost to the shipping industry will be immense. For the Arabian Gulf oil industry, the change threatens to add to refining costs for its traditional high-sulfur product.
Price to increase
Some oil analysts reckon that could add $7 to the price of a barrel of oil. Taken together with the price of installing scrubbers, the total cost of IMO 2020 could be as much as $1 trillion over five years, according to S&P Global Platts Analytics, the energy experts.
The price of oil is always a sensitive issue. The US President Donald Trump has made cheap gasoline a central policy requirement for his populist supporters. In Europe, much of the recent street protests in France was prompted by government-imposed increases to the cost of oil products. Policymakers are learning that they tinker with the oil price at their peril.
Poor air quality
Environmental lobbyists say the air quality around ports and refineries is among the dirtiest on the planet, so the new measures make sound environmental sense. But there is another challenge to global trade patterns associated with IMO 2020.
Some of the biggest ports in the world, like Singapore, have signaled that they will impose the new measures stringently. But there are no guarantee others will be so conscientious. Bunkering charges are a large element of shippers’ costs, and less meticulous operators might use the new regime to try to win market share. There are any number of ports in Asia that would like to take the top spot from Singapore, and might not really care about how they do that.
How effective are the rules?
There are question marks too over how effectively the new rules will be policed. Big Oil, the world’s leading energy companies, is increasingly under pressure from ethical investors determined to enforce new environmental standards.
Others, like Saudi Aramco, the biggest oil company in the world, have voluntarily introduced new environmental measures. Saudi oil is already one of the cleanest forms of hydrocarbon product in the world, according to recent scientific studies.
But the same cannot be said for all the operators in the energy and maritime business. There is a suspicion in the industry that less scrupulous operators will avoid the new measures and seek to unfairly take business from their more ethical rivals. The ability of the IMO to enforce the new rules even-handedly is also in doubt.
It is not all gloom
Experts in the refining business believe the industry can pretty quickly adapt plants to turn out the new low-sulfur fuel. Ports like Fujairah, on the Indian Ocean shoreline of the UAE, are already offering low-sulfur fuels, and expect to see a big increase in business in the course of the year.
There has been a recent surge in the installation of scrubbers, especially on very large container vessels and tankers. Much of the work of converting them to cleaner standards can be done by on-board engineers while the vessel is at sea, minimizing the disruption to normal business.
The industry may also find it has more time than it thinks. Trump, as opposed to climate change theory and environmental regulation, is reported to be considering requesting a delay in implementing the changes. If the US refuses to play ball in IMO 2020, the new regulations could well be stillborn.
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Source: ArabNews
