The quality and availability landscape of marine fuel oils will continue to evolve until 2020 and beyond.
Refiners and suppliers
The refineries, storage depots and physical suppliers will have to contend with over 150 million tonnes of high sulphur residual fuel oil becoming surplus to demand from 1 January 2020, being replaced by the demand for maximum 0.50% VLSFO.
Refiners are faced with difficult decision to make multimillion pound long term investment for bottom upgrading, source sweet crude or look for other outlets of high sulphur residual fuels after January 2020 when this convenient marine bunker option is no longer available. Some refineries have made a decision to invest in coking plant however there are others who may be playing a waiting game how exhaust gas scrubber markets evolves. The IMO fuel availability study predicted that around 3,800 ships with Exhaust Gas Cleaning systems (EGCS) will be in use by the implementation date; however, the figure is looking more likely to be about 1000-1500 ships. The relatively small uptake of EGCS at this time will be unlikely to make a significant difference. However, with the potentially greater price differential between high sulphur fuel oil (HSFO) and 0.50% VLSFO by 2020 and short pay-back, shipowners and operators have shown increased interest in installing scrubbers on their vessels. However, there are number of relevant operational, logistical, technical, regulatory and commercial parameters which require careful consideration when making a decision to install an EGCS making it complex issue. LR has developed an options evaluator to help clients make an informed decision based on the specific operational profile of vessels.
To help the supply chain, we also emphasise the ship operators to open dialogue with their charterers and suppliers and place their interest in the type of fuel they will need based on ship operations and trading pattern so that suppliers also get themselves prepared to meet the demand ahead of 1January 2020 deadline.
An update from IMO
During PPR5 (Pollution Prevention and Response – an IMO sub-committee) held in March 2018 and inter-sessional (PPR5_ISWG) meeting this month (9-13 July), few key areas of implementation of the regulation 14.1.3 were discussed and some actions agreed for PPR6 (February 2019). It has been made clear that the implementation date is 1 January 2020 and there is no possibility of any delays. Secondly, PPR5 principally agreed the proposal of carriage ban of non-compliant fuels on-board after the implementation date which is expected to come into force from March 2020. It has been agreed to present and review draft text of the following key documents at PPR6 (Feb 2019) in order to progress and subsequently finalise;
- Guidelines for consistent implementation of the 0.50% sulphur limit under MARPOL Annex VI
- Amendments to the guidelines for on-board sampling for the verification of the sulphur content of the fuel used on board ships
- Amendments to MARPOL on sampling points and fuel analysis methodologies
- Amendments to (Resolution MEPC.181(59)) to the 2009 guidelines for Port State Control officers under revised MARPOL Annex VI
The consistent implementation guide intends to cover various implementation parameters such as enforcement, safety, quality of fuel, verification, port state control, FONAR (Fuel Oil Non-Availability Report) etc. During PPR5_ISWG, various 0.50% sulphur fuel quality parameters such as fuel stability, cold flow properties, acid number, flash point, etc. have been raised as safety concerns. Moreover, the prevalent notion that current ISO 8217:2017 standard does not cover the future 0.50% sulphur fuels is also raised as safety issue. In response, a statement was made during ISWG from ISO delegation to counter these arguments and dispel concerns with enhanced understanding. Nevertheless, in order to address aforementioned 0.50% sulphur marine fuel quality concerns, a number of industry bodies have combined forces to form an expert group which will look into the various available guidelines and standards and come up with industry wide document to submit to PPR6 in February 2019.
Progress of ISO TC28/SC4/WG6 (ISO 8217 standard)
As it stands today ISO 8217:2017 provides coverage for all marine distillate and residual fuel oils, the change in sulphur content does not alter this fact, however it is anticipated that some of the formulations that will be offered to the market will have characteristics which are unfamiliar to some ship operators. We can expect further guidance from the ISO and CIMAC fuels working groups on how best to order and manage these less familiar formulations.
ISO TC28/SC4/WG6 is mainly working on the development of PAS 23263 (Publically Available Specification – an insert to latest ISO 8217) which will specifically address the 0.50% sulphur fuels quality. At the moment, it is not clear when exactly the PAS 23263 will be available however considering the demand from the industry, it is expected that somewhere soon after the middle of 2019. Secondly, there has been lot of concern with regards to the stability of the future fuels. An ISO sub-group has been actively working to evaluate and conclude the most appropriate test method(s) to determine the stability of new fuels formulations.
What are the quality concerns with new fuels?
One of the main concerns at this time is the long-term storage stability and compatibility between two different bunkers. Stability is the mainly a supplier’s issue as they are responsible for supplying a stable blend to the vessel. However, controlled mixing or complete segregation onboard between two potentially incompatible fuels is the vessel’s responsibility. Hence there needs to be an increased awareness amongst all stake holders on issues which can originate from unstable fuels and two stable but incompatible fuels. To help ship operators, FOBAS is looking into the existing compatibility test method and any alternative methods which may be more suited with the new fuel formulations.
There is high probability of paraffinic blends making their way into marine bunker market, which will not only increase the need to address higher pour points but also the general cold flow properties of fuels. It is expected that the majority of the 0.50% VLSFO will be light residual products with viscosity between the current distillate (DM) and residual (RMG) grades of ISO 8217. Moreover, relatively lighter blends would make it easier for any catfines to readily separate however this may warrant increased monitoring and cleaning to remove accumulated catfines from tank bottoms.
Whilst at this time not many 0.50% products are around, our data indicates that there are naturally low sulphur heavy fuel blends being supplied in specific areas around the world such as South America, West Africa and North Africa. Moreover, due to 0.50% Chinese emission control regulation, we have also been receiving 0.50% fuels which are most likely blended products to comply with the regional 0.50% sulphur regulation. LR’s FOBAS team have started to develop the characterisation of the 0.50% VLSFO with the currently available fuels and will continue to do this as these fuels come to market as expect this to rise as we come closer to 2020, and in particular when Taiwan and China bring in the requirements for 0.50% operations in their port areas and three main SOx emission control areas respectively.
The experience of using the 0.10% Ultra-Low Sulphur Fuel Oil (ULSFO) for both residual based and pure distillate fuel oil operations will stand you in good stead for tackling these new 0.50% VLSFO’s. It is well recognised however, that there are many thousands of ships that have not yet truly experienced operations on much else other than high sulphur residual fuel oils and the occasional switch to distillates, this would suggest that the lessons learnt by some from the switch in 2015 will have to be learnt by many more for 2020 and the same technical and operational warnings will need to be reiterated.
The implications of the IMO 2020 sulphur requirements on operations are now becoming clear. If you intend to comply through the use of compliant fuel oils, exhaust gas cleaning or alternative fuels LR has the knowledge and expertise needed for successful implementation.
