- Ocean Bunkering Services, a top marine fuel supplier in Singapore has started testing its VLCC with LSFO ahead of IMO regulations.
- The demand for low-sulfur marine fuels in Singapore climbed to a record high in June as the shipping industry prepares for the new IMO rules.
- Concerns over the compatibility and stability of various blends of VLSFO has prompted shippers to test the new fuel type well ahead of the 2020 deadline.
- FMC has promised to closely monitor how the container carriers recover their anticipated increasing fuel costs from shippers to ensure they do not violate the Shipping Act.
- Far East-Europe service would raise the bunker cost per TEU to $62 on the headhaul direction and $39 per TEU on the backhaul direction.
According to an article published in Reuters, Singapore’s Ocean Tankers very large crude carrier (VLCC) Pu Tuo San has started testing out lower sulfur fuel to prepare their fleet for the transition.
Increase in installation of scrubbers
The trails come in the wake of new International Maritime Organization (IMO) rules prohibiting ships from using fuels containing more than 0.5% sulfur, compared with 3.5% currently, will start on January 1, 2020, as a way to combat air pollution.
The move will affect fuel supplies to more than 50,000 merchant ships globally. Shippers will have to either invest in exhaust cleaning systems, known as scrubbers, to continue using cheaper high-sulfur fuels, or burn more expensive oil products, such as very low-sulfur fuel oil (VLSFO) and marine gasoil, or use liquefied natural gas (LNG).
Majority of shippers dependent on LSFO
The bulk of the global shipping fleet is expected to switch to low-sulfur fuels as only about 3,600 ships will have installed scrubbers by 2020, data from ship classification society DNV-GL showed.
Ocean Tankers, the shipping unit of Singapore’s largest independent oil trader Hin Leong Pte Ltd, said it will convert its fleet of more than 100 oil tankers to burn VLSFO instead of high-sulfur fuel oil in the fourth quarter.
Vessel being evaluated
The Reuters energy team boarded the Pu Tuo San on July 11, which loaded about 1,000 tonnes of VLSFO for the first time. The ship also loaded 2,000 tonnes of high-sulfur fuel oil. A laden VLCC will typically burn about 55 tonnes of fuel oil per day at normal cruising speed. The Pu Tuo San is currently heading to Fujairah in the United Arab Emirates. The Pu Tuo San is Ocean Tankers’ second vessel to test the new fuel, the company said.
“We have been training the operators in proper bunker management and segregation, preventive maintenance, as well as to ensure that heating temperature is in accordance with engine maker’s specifications,” Ocean Tankers said in an e-mail. “We do have concerns which are why we’re now in a trial period where our own fleet is starting to burn LSFO.”
FMC to keep a tab on LSFO
The Federal Maritime Commission will monitor the transparency of bunker-adjustment factor formulas as the IMO low-sulfur fuel mandate looms, according to FMC Chairman Michael Khouri.
He added, “We are paying particular attention to the validity and transparency of announced bunker-adjustment factor formulas. Our oversight of the new low- sulfur mandate is ongoing and will extend well past January 1, 2020.”
Khouri told members of the Senate Commerce Committee during a hearing in early April that the commission will closely monitor how the container carriers recover their anticipated increasing fuel costs from shippers to ensure they do not violate the Shipping Act.
“A primary concern to the commission under the Shipping Act is whether ocean carrier bunker charge adjustment formulas are clear and definite,” Khouri told senators at the hearing.
LSFO prices to increase
According to various industry analyst estimates, the low-sulfur requirement could increase ship-operating costs by one-third and additional costs of $10 billion to $15 billion to the ocean carrier industry. Refineries also are scrambling to prepare to supply bunker with 0.5% sulfur content.
Ships operating in the so-called “emission control areas,” or within 200 nautical miles off the coasts of North America and parts of North Europe (including the Baltic Sea, North Sea and the English Channel), will continue to be required to burn bunker fuel with a 0.1% sulfur content.
Bunker costs to increase as well
U.K.-based consultancy MDS Transmodal Ltd. said, “bunker costs per TEU are set to increase by over 50% from January 2020 as the IMO 2020 rules force global container lines to switch to more expensive low-sulfur fuels.”
For example, the firm said calculations using its online BAF calculator suggest that the switch from the commonly used bunker, known as IFO 380, to marine gas oil (MGO) for an 18,500-TEU containership on a “benchmark” Far East-Europe service would raise the bunker cost per TEU to $62 on the headhaul direction and $39 per TEU on the backhaul direction.
Results to depends on type and service of the ship
MDS Transmodal cautioned, however, that there are significant variations around these benchmark results depending on the service and ship size. The increase on Far East-Europe service “could be as high as $81 per headhaul TEU and $51 per backhaul TEU,” the firm said. “This level of increase in BAFs will in itself lead to heated negotiations as shippers seek to avoid additional costs and the lines look to protect their bottom lines,” MDS added.
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Source: Reuters
