IBIA anticipates low-sulphur fuel shortfall

As reported, the International Maritime Organization (IMO) is currently conducting, via consultant CE Delft, a fuel availability review concerning the timing of the MARPOL Annex VI requirement to introduce a 0.5% cap on fuel sulphur. The review is expected to conclude this year, with many observers predicting that the cap will be introduced in 2020 rather than 2025.

Speaking at IBIA’s annual dinner, chairman elect Robin Meech warned that there would be insufficient 0.5% sulphur marine fuel to meet industry demand by 2020. The result, he said, would be extreme price differentials in the bunker market, low levels of compliance and a 25% cost disadvantage for operators and charterers that do comply.

There are several alternative compliance methods to the 0.5% sulphur cap, including alternative fuels such as LNG and methanol, and the continued use of heavy fuel oil using exhaust gas cleaning systems (or scrubbers). However these face technical or infrastructure challenges that must be overcome before they can be viable on a broad scale: LNG infrastructure development has been haphazard, while retrofitting is costly; the price of methanol, at a premium to MGO, is a crucial barrier; and the ability for current technology to reduce both SOx and NOx emissions to within IMO limits while burning HFO is still largely uncertain.

Nevertheless, projected developments both in LNG infrastructure and economic viability, and in NOx abatement technology’s compatibility with HFO and scrubber operation, suggest that alternatives could be feasible by the introduction of the global cap.