Published date: 26 April 2019
Tougher global marine fuel specifications will strain the smallest players onshore and at sea, industry experts said as companies plan for major sulphur reductions beginning next year.
Both terminal and vessel operators must grapple with cleaning out tanks used to store marine fuel that international accords will bar from use beginning 1 January 2020. Timing those preparations to make the most profit while meeting regulatory demands will favour the most sophisticated operators, experts said at the Argus Marpol Strategy Summit in Houston, Texas.
"IMO will change trade flows and stretch credit lines," Cargill's senior oil and tanker analyst Guillaume Flammier said.
All major global shippers must comply with International Maritime Organization requirements to reduce marine fuel sulphur content to 0.5pc, from the current 3.5pc, beginning 1 January. Fuel and shipping industries expect the rule, known as IMO 2020, to drive up short-term demand for global low-sulphur distillates and quickly slash prices for higher-sulphur products blended today into the marine fuel market. Because the rules prescribe no single blend of fuel, the range of incompatible solutions add complexity for suppliers and customers.
The change has triggered a scramble to test and place new fuel blends satisfying both the environmental standards and the reliable operations of ship engines. Lower-sulphur fuel combinations can behave in unexpected ways, clogging up fuel pumps and other vital equipment while at sea. That means preparing both on-vessel fuel tanks and onshore storage for the lower-sulphur fuels.
Vessels can use additives to clean out fuel tanks laden with residual bunker fuel from years of use, Kevin Cote, marine technical sales manager for Innospec, said. But that process can take months to complete.
Cleaning and inspecting terminal tanks and barges used to deliver marine fuel can help assure customers of the its quality, John W. Stone Oil chief executive Tony Odak said. Clearing and certifying an onshore tank alone can cost $250,000. Vessels that have installed special exhaust equipment, called scrubbers, capable of legally running higher-sulphur fuel will meanwhile still want the dirtier supply. Operators must weigh when to clear the tanks, considering both the time out of service and when to stop offering higher-sulphur products, he said.
Vessel operators will want to use the cheapest available fuel for as long as possible, Koch Supply & Trading vice president of shipping Andrew Smiley said. The tension between cost and preparation time will lead to lots of "problem solving" late this year, he said.
"It is not going to be easy turning off the hot water and turning on the cold water 1 January," Smiley said.
WHAT THE EXPERTS FROM EUROSHORE SAY:
Euroshore members are well prepared to receive additional wash waters of fuel tanks in order to avoid contamination with the required low sulphur fuels to be used from 01.01.2020. Clean oceans are a key worldwide objective Euroshore members want and can contribute to.