Preparing for the global sulphur cap

The 2020 global sulphur cap will mean major change. Here, World Fuel Services looks at strategies for managing it

On 1 January 2020, a new global cap on marine fuels emissions of sulphur will come into force, which will have a radical effect on the bunkers industry. The USA’s World Fuel Services Corp is urging the shipping, bunkering and energy sectors to work together to meet this new challenge.

The deadline for the new 0.5 per cent cap, which is a major reduction of the 3.5 per cent global limit currently in force, was confirmed at the 70^th session of IMO’s Marine Environment Protection Committee (MEPC). This will be a huge undertaking, but it is not unexpected. The industry has already had many years to prepare for it.

Marpol Annex VI was adopted almost two decades ago, in 1997, and came into force in 2005.The global sulphur cap was set at 4.5 per cent before being lowered to 3.5 per cent. Given that the average level of sulphur in marine fuel oil in 2015 was 2.45 per cent, these limits were not onerous. However, the maritime community and its bunkering partners have had to meet rigorous targets in emission control areas (ECAs), where a 1 per cent sulphur limit was introduced in 2010, and a 0.1 per cent cap in 2015. This experience in the ECAs will be invaluable preparation for 2020.

Prudent shipping companies and bunkers suppliers have been honing their strategies and making their preparations years in advance. For many, this has been a case not just of planning, but also of doing. With the introduction of the ECAs, bunkers suppliers have already begun to establish their sources of low sulphur fuel supply.

In addition to buying low sulphur fuel, shipowners can reduce sulphur emissions by installing exhaust gas cleaning systems (scrubbers). Using alternative fuels is another option that some shipowners have taken up. Liquefied natural gas (LNG) is the best known and has been winning support. In addition to LNG, shipowners can look at other clean energy sources, such as methanol, ethanol, biofuels, solar power and fuel cells. They will not be suitable for all ships, but they will play their part in the overall energy mix.

IMO has not set specific sanctions or fines for non-compliance with the new regulations. Instead these will be determined by the individual member states. But what is certain is that the consequences of non-compliance will not be trivial.

Communication will be vital in the run-up to 2020. The world’s refining sector, the fuel storage operators, the port and flag state authorities and, of course, the bunkering community will have to work together constantly to make sure that tanks are full with the right kind of fuel on 1 January 2020 and on every day thereafter.

For shipowners lifting bunkers in ports all over the world and buying on the spot market from suppliers that they may have known only fleetingly, there could be considerable uncertainty. In many cases, bunkers buyers will be looking to their trading partners to bridge this information gap – and this will become an increasingly important part of the trader’s role in the post-2020 bunkers market.

Preparing for 2020 will be a costly business, and for companies that get their strategy wrong it could be very costly indeed. World Fuel Services will be helping its clients to make the right investments that will bring an environmental and operational return, and avoid the mistakes that could put their businesses in jeopardy.