Findings suggest that a more mature enforcement of sulphur regulations has developed
DNV Petroleum Services conducted a market survey covering the technical, regulatory and supply experiences of ship operators in managing their fuels last year.
We attempted to capture their views on the critical fuel management issues in 2011. From the responses of 96 customers and business associates, we are pleased to present a summary of the key findings, as well as our conclusions.
The survey responses were received globally. About 50% of the respondents were from Technical departments, 15% from Operations and 18% represented Management. About 60% of the respondents are involved in fuel purchasing.
Some 73% of the respondents have ships trading in the Emission Control Areas (ECA).
The survey findings suggest that a more matured enforcement of the sulphur regulations in Europe has developed, with ship operators gradually becoming adapted to the requirements in the EU and the Emission Control Areas.
About 64% of the respondents felt there has been an improvement in the Port State Control enforcement of fuel sulphur regulations over the past 12 months. Of the 15% who said they have had problems with fuel regulations when trading in the EU and the ECAs, these problems were mainly related to fuel change-over issues, fuel availability, and disagreements with suppliers on fuel sulphur regulatory compliance.
The technical findings are less promising. In the past 12 months, 94% of respondents encountered problems with their fuel deliveries, the majority of whom indicated off- specification bunkers as their biggest challenge. About 43% said the off-specification fuel deliveries were serious quality cases. Filter clogging was the most common problem encountered, followed by sludging, fuel pump sticking and seizures, and piston ring breakages.
While most of the respondents said the fuel quality cases they encountered were resolved in a satisfactory manner, 18% did not report a positive outcome. This latter group suggested that the availability of an industry standard on fuel contaminants, technical advice guiding the ship on how use problematic fuels, and debunkering would have been useful.
About 56% said the fuel testing agency was the most important party helping to resolve onboard fuel quality problems, while 26% saw the crew as the most important party in such situations.
Majority of the respondents purchased fuels mainly according to price and emission considerations. Energy Content and Supplier Performance were not reflected in the survey as key procurement drivers. Over 90% of the respondents involved in fuel purchase listed fuel performance indicators (eg. suppliers off-spec delivery records and delivery quantities) as most the important considerations when purchasing fuel.
Some 14% of the total respondents have had to debunker the seriously off-specification fuels they received, while 9% did not have to offload but managed to use their problematic fuels based on advice from their fuel management companies.
In addition, 24% of the respondents were able to claim compensation for the seriously off-specification deliveries from the physical suppliers. Of those who failed to do so, it was mainly because the suppliers samples were found to be within specification, while some respondents said their vessels did not have valid samples onboard.
Interestingly, 40% of the respondents said availability of low sulphur fuel oil products was a problem in 2010. About 35% were also short-supplied during deliveries.
On the resistance to using the new ISO8217:2010 fuel specification, 16% cited charter party agreements as the reason. About 14% reported problems with availability of products meeting the new specification.
Overall, however, only 10% of the total survey respondents said they would not eventually switch to ISO8217:2010.
In 2011, the survey respondents expect to encounter in order of importance problems related to fuel prices, fuel availability, engine operations, maintenance and repairs, and reliability of procurement sources. To help them manage these challenges, timely alerts on fuel quality issues, regular fuel testing, more stringent screening of suppliers performance, training, and consulting support would be the services required. The respondents also value visits and regular contacts with fuel management companies.
Over the next two to three years, regulatory pressure will continue to drive up the demand for low sulphur fuel oil products. To meet this demand, blending activities in the supply chain will increase correspondingly, and with that, we will most likely see a rise in the number of quality cases resulting from the use of blend components of poor quality.
Market-wise, it would not surprise us to find some adjustments in product distribution as suppliers will need to optimize the availability of LFSO and distillates in areas where they are most needed.
Finally, should bunker prices stay high, ship operators will have to be more vigilant in checking the quality and quantity of the products delivered to their vessels. DNVPS also expects a stronger interest among ship operators to identify and leverage opportunities in their vessel operations where greater fuel efficiency and waste reduction may be achieved.