All eyes on next marine fuel deadline

SO FAR, so good seems to be the general consensus a month after the International Maritime Organization (IMO) 0.50 per cent sulphur in fuel limit came into force for the global fleet.

One group of shipowners should particularly pleased: those who fitted scrubbers in the run-up to the deadline and so can continue to burn high sulphur fuel oil (HSFO).

They took a financial risk but it seems they are reaping the rewards. Vessels fitted with the abatement technology are commanding high, reportedly sometimes very high, charter

Less pleased could be some owners who opted to use very low sulphur fuel oil (VLSFO) which is a blended product developed to comply with the 0.50 percent regulation. According to reports, prices have spiked due to a surge in demand and a lack of barge availability in some ports.

These are early days and it will be some time before clear trends emerge. One important question is what will happen to HSFO availability as refiners produce less of it.

By and large, the shipping industry and bunker suppliers have been well prepared for the switch. Maritime law specialist Hill Dickinson notes the transition to low sulphur fuels has so far been smooth, but warns there are some issues arising over the margin for error in testing the sulphur content. The presence of sediment is also causing concern in some areas.

It also highlights the March 1 deadline as Part 2 of the regulations bans the carriage of HSFO by ships not fitted with scrubbers. The law firm warns that owners must make sure they debunker this non-compliant fuel by the cut-off date. It will be interesting to see how many shipowners will have managed to get into that situation.

Beth Bradley, a partner at Hill Dickinson notes: "In the opening weeks of 2020 there have been very few reports of enforcement action taken against vessels for non-compliance with the sulphur cap. Consequently, the transition has been smoother than expected from a port state control perspective. This is in no small amount attributable to the efforts of the key stakeholders (owners, charterers, insurers and bunker suppliers) to prepare to be compliant as of Jan 1, 2020."

While this suggests a high level of compliance, it is only part of the picture, according to Ms Bradley. She says issues relating to the sulphur content of fuel, as well as the quality of some blended low sulphur fuels, are already emerging.

She notes: "Compliance with (the IMO regulation) means using a fuel with a sulphur content of 0.50 per cent maximum. If the sulphur content exceeds that threshold, owners may be exposed to enforcement action. Consequently, the frequency of owners having samples tested for sulphur content has increased.

"Where the bunkers are found to be marginally in excess of the limit, problems are arising largely owing to the difference between Regulation 14.3.1 and most supply contracts. An on-specification supply for sulphur content will, usually, from a suppliers' point of view be deemed to be up to 0.53% m/m, since that reflects the laboratory margin of confidence for testing."

She adds: "As a result, a time consuming and costly stand-off can occur while the sulphur content issue is resolved and decisions made regarding whether to de-bunker and obtain alternative bunkers."

Sediment issues

In addition, according to the law firm, over the past four weeks there have been a number of alerts issued concerning sediment issues, in particular, in low sulphur fuels supplied in several global bunkering hubs. Sediment can of course cause engine problems, from sludging of filters to engine damage and blackouts in the worst circumstances.

The prospect of vessels losing power in dangerous situations has been one of the big concerns but so far nothing disastrous has been reported.

Ms Bradley warns: "Quality claims relating to bunkers are not a new phenomenon but, in the past, they have tended to be localised. The spread of alerts concerning sediment, suggests a potentially wider issue concerning the stability of some blended low sulphur fuel.

"Liability, depending on the reasons for sedimentation, may not be straightforward. While charterparties and bunker supply contracts will contain a specification for the fuel, some organic compounds which cause sedimentation may not be covered

Hill Dickinson says from a practical point of view, the usual advice to owners applies: ensure they have clean bunker tanks; avoid co-mingling of bunkers; and monitor sampling during the supply.

So, after a month or so, it would seem the shipping industry has taken the switch in its stride. But it will be some time before we can be sure of the economic effect.