IMO sets global sulphur cap for 2020

Clarity for ship owners, oil companes and technology providers as 2020 global sulphur cap confirmed Clarity for ship owners, oil companes and technology providers as 2020 global sulphur cap confirmed

The global 0.5% sulphur cap for marine fuel will enter force on 1 January 2020, the International Maritime Organisation’s Marine Environment Protection Committee has agreed.

The decision on the cap, required under regulation 14 of MARPOL Annex VI, is in line with an official assessment on fuel availability – conducted by a CE Delft-led consortium – and provides much needed clarity to ship owners. The industry now has just over three years to decide on their compliance measures – either low-sulphur fuel, the installation of exhaust gas cleaning systems (scrubbers) or the use of alternative fuels (including LNG).

The MEPC also agreed to ask its Pollution Prevention and Response (PPR) subcommittee to consider implementation of the global cap - including enforcement and operational concerns.

As reported, the study by CE Delft concluded that global shortages of compliant fuel in 2020 are ‘improbable’. Refineries have adequate capacity in even the highest demand scenarios. A supplementary study, commissioned by BIMCO and other parties, also concluded that availability would likely be positive, but indicated there could be severe market impacts and logistical challenges with implementing a cap overnight.

The official study also pointed to some regional shortages, but noted that these could be compensated for by oversupply from the Middle East, as well as excess production from other regions. In the base case, CE Delft sees demand for 233 million tonnes of marine fuel with sulphur of between 0.1% to 0.5% in 2020. This would primarily be blends of residuals, hydrotreated residuals, heavy fractions from hydrocrackers and lighter hydrotreated fractions - with a very wide range of viscosities.

Consumption of LNG, both in LNG carriers that use the boil-off cargo for propulsion and in ships with LNG engines, is projected to increase from 8 million tonnes in 2012 to 11 to 13 million tonnes in 2020. Scrubbers are projected to be installed on 3,800 ships, collectively consuming 14-38 million tonnes of heavy fuel oil.

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