BIMCO has recently issued a digital bulletin focusing on the challenges ahead for the compliance with the 0.5% suplhur cap in less than 18 months. The Association highlights that there are still many contractual and technical issues that need to be addressed and provides updates on action taken so far.
In this regard, BIMCO has set up the ‘2020 Task Force’, developed a Sulphur clause for its contracts and submitted related papers to IMO.
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As Mr. Angus Frew, Secretary General & CEO at BIMCO explained:
“We focus on finding solutions and try to make sure that authorities don’t jump on people who have not been able to comply through no fault of their own – at least in the initial Implementation stages”
Further, Mr Frew cited three factors that may lead to significantly higher oil prices, which, as BIMCO warned two years ago, may result in a domino effect for other sectors. The factors include:
- Higher demand for crude oil with a lower Sulphur content driving up crude prices;
- A lack of refining capacity to turn high- Sulphur crude to low-sulphur products;
- The shutdown of inefficient refineries no longer able to sell high-sulphur products.
Scrubbers are considered as one option for compliance and many reports so far have tried to forecast demand, most of them concluding that these systems are about to represent only a small percentage of the world fleet. On the other hand, demand for scrubbers has increased strongly and there are many charterers who have started to demand that scrubbers be fitted on chartered ships, according to James Forsdyke, Hong Kong and Taiwan Area Manager for Marine and Offshore. However, he notes, this increased demand ‘will not be enough to change the fundamentals of how the majority of world fleet will choose to comply’
In addition , BIMCO refers to a recent report by Morgan Stanely which revealed that scrubber update has been softer than expected, estimating that approx. 1,200 scrubbers are to be installed by 2020, out of a fleet of 60,000 ships.
However, for the operators who opt for scrubbers, BIMCO is currently addressing important issues related to its cost. Mr. Grant Hunter, Head of Contracts and Clauses at BIMCO, clarified that a cost-sharing agreement must be always specified in the contract.
If the ship has a scrubber system, the charterer will benefit in the short term, because they can continue to buy and use HF, which initially, will be much cheaper. The shipowner may then ask if that is fair, or if the parties ought to share the cost of fitting a scrubber on the vessel.
In this context, the association has formed a group of experts to work on a new clause in September and help to minimize possible disputes.
In the bulletin, BIMCO explains that for the operators who will not opt for scrubbers, the low sulphur fuel remains a gray area. Currently, all eyes are on whether fuel suppliers can provide what the industry needs, however, the biggest concern for the bunker industry is that they have to sell a product in 2020 that today does not exist’, Mr Niels Henrik Lindegaard, Managing Director of Maerk Oil Trading highlighted. For this reason, ship operators need to take precautions and start planning, In particular, Maersk Oil Trading shares the following six tips:
- Put a procedure in place for how to make sure that all ‘old’ high-sulphur fuel has been burned ahead of 1st of January 2020.
- Put a procedure in place of how to clean the tanks if that becomes necessary.
- Understand the respective flag state and PSC requirements for compliance documentation.
- Plan the procedure for how to handle each low- Sulphur fuel batch in case the batch is not compatable.
- Actively use laboratory results from the tests of the bunkered fuel to understand how to handle each batch on board.
- Consider increasing fuel reserves on board – at least temporarily – until enough experience with the new fuel types has been acquired.
Also, Mr. Lars Robert Pedersen, Deputy Secretary General at BIMCO, refers to blending considerations with respect to quality. History teaches us, he explained, to believe that quality issues will arise; what is more, a rise in the frequency of these issues is expected.
“When it comes to fuel quality, expect all fuels to be inherently incompatible and prepare the procedures for fuel management on board accordingly’’ he concluded.
Find out more about how BIMCO is getting prepared for the Sulphur cap by reading its latest bulletin here
