Lack of low-sulphur fuel oil may halt ship operations on east coast

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Most companies running out of green bunker; oil refiners blamed

Shipping operations along India’s eastern coast will come to a halt this week due to non-availability of low-sulphur fuel oil, which ships are mandated to use by a new global emission-cutting rule that came into force from January 1.

The new rule reduces the limit for sulphur in fuel oil used on ships to 0.5 per cent m/m (mass by mass) from the earlier 3.5 per cent.

Ship fuel, or bunker, accounts for as much as 40 per cent of a vessel’s operating cost.

“There is virtually no supply of low-sulphur fuel oil and all coastal ships, including the feeder container vessels plying between Indian ports on the east coast, will come to a standstill from this week as soon as they exhaust whatever little stock they have,” a top executive with a shipping company told BusinessLine . The looming crisis was discussed at a January 9 meeting called by the Government with ship owners, PSU oil refiners and the Director-General of Shipping.

Bunker suppliers say the east coast requires about 30,000 tonnes of low-sulphur fuel oil a month to meet the requirements of ships plying on local routes. The situation on the west coast is relatively better due to the availability of the fuel in Kandla and Kochi for most coastal ships.

Reason for the crises

Oil refiners have been blamed for starting production of low- sulphur fuel oil late. A bunker supplier said: “They should have been ready with the product in adequate quantities by December 1 to meet the demand.

“The first lot of the product was sold by Indian Oil Corporation and Hindustan Petroleum Corporation in the open market and then when the DG Shipping pushed them to supply to coastal ships, they made some priority rules that gave first preference to ships they have chartered to transport their own crude and petroleum products, followed by coastal vessels/Indian flag ships and then to other vessels.

“This prioritisation should have been done prior to start of sales.”

He said the east coast does not have the volumes to accommodate the bunker requirements of all coastal ships. “The refiners are only catering to own-use vessels. So, there is not much they can allot to coastal ships on the east coast,” he said.

“Whatever they produced is finished and virtually there is no supply and they want us to operate vessels. I don’t know how,” the shipping company executive said.

Not-so-workable option

At the January 9 meeting, the Government advised ship operators to use diesel oil till the situation improved. But ship-owners say this is not workable.

“That is not a sustainable solution because diesel oil costs Rs. 87,000 a tonne today. At least we know we will not be using diesel oil and as soon as we exhaust our low-sulphur fuel oil stock, we have no option but to stop operating ships,” said the shipping company executive mentioned earlier.

Source: The Hindu Business Line

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