Bunker concerns ? the sulphur outlook

From next year, Annex VI requires that the sulphur levels in bunker fuel, burned on board any ship anywhere in the world, must not exceed 4.5%. This in itself will not cause a huge problem for most shipowners or bunker suppliers because, globally, the average sulphur levels in marine fuels are typically in the region of 3%. So most shipowners and bunker suppliers still have time to get used to the idea of tighter sulphur limits.

What will pose a challenge, however, is the introduction of the first sulphur emissions control area (SECA) in the Baltic Sea area. This will happen exactly one year later ? on May 19, 2006. The North Sea area will also become a SECA, probably sometime in 2007, and the possibility of more SECAs further down the line has not been ruled out. The sulphur content of fuel oil used on board ships in a SECA must not exceed 1.5%.

This is going to be more of a challenge and will have implications for shipping. When entering a SECA, a complete changeover to 1.5% sulphur fuel must have already taken place. So vessels entering the North Sea region will have two alternatives as things currently stand. The vessel will either need to burn low sulphur fuel for the entire duration of the voyage, an expensive option if it has sailed from the other side of the world, or the crew must change to low sulphur fuel during the course of the voyage. There may also eventually be a third possibility ? an option for approved abatement technology has been included in Annex VI. But although several projects are underway, it does not look like the technology will be market-ready before the first SECA comes into force.

The questions on most shipowner?s minds are how much will low sulphur product cost and where will I be able to purchase it?

Unfortunately there are no easy forecasts to make at this time, with the real answers to be determined by the market. However, current informed predictions suggest that there will be a $30 ? $50 per tonne price premium on low sulphur fuel. And what the levels of availability will be and which ports will supply it are questions that the suppliers are wrestling with, right at this very moment.

It?s a fair bet that low sulphur availability and demand will not match up, so we can predict that we will see more bunker cargoes transported around the world. For instance, Russia?s bunker fuel has traditionally tended to have high sulphur levels, while regions that tend to produce sweet crude, like South America, will be keen to cash in.

Shipowners need to be well under way with their own preparations. They need to consider how they will store the different grades of fuel on their vessels and must ensure that the crew are properly trained, not only to be able to comply with the more stringent record keeping requirements, but also to be able to safely and properly change the fuel the vessel is burning. n