International maritime regulators begin a new round of meetings on antipollution efforts this week under pressure from the U.S. and other nations to soften implementation of new rules that could cost the industry billions of dollars and lead to higher prices for businesses and consumers.
The rules, put into motion through the ocean transport-regulating arm of the United Nations, take effect Jan. 1, 2020, and are aimed at slashing the amount of sulfur in marine fuel by more than 80%.
The Trump administration raised the heat on the International Maritime Organization rules last week, saying it wants to ease the rollout because of the impact it may have on the economy and energy markets. A White House spokesman said the administration wants to phase in implementation to allow “experience building” that would lead to better understanding of the availability of cleaner fuels and their impact on ship operations.
U.S. energy giant Exxon Mobil Corp. said the change is “one of the industry’s most defining moments since the shift from coal.”
Industry executives have said the switch to cleaner fuels and emissions “scrubbing” technology will cost shipowners at least $15 billion a year. Ocean carriers expect to pass those costs on to cargo owners, and several operators have already announced surcharges for the effort.
The IMO is going into this week’s meeting in London with only a short extension until March 2020 on the agenda. That plan, which is expected to be approved, would allow ships more time to empty their tanks of the heavy oil. Also up for debate will be the availability of cleaner new fuels and whether they are safe burn on ships.
The IMO says the oil industry will have enough clean fuels for ships come 2020, and Exxon Mobil recently sought to assure operators about the availability of new low-sulfur fuel. But Greece, where many shipping companies are based, and flag states including Panama, Liberia and the Marshall Islands have been skeptical and now appear to have a big ally in the U.S.
The Trump administration fears the marine fuel demand will push up fuel prices in the run-up to the 2020 elections.
White House projections suggest the global economic costs could surpass $100 billion, with the U.S. portion of that potentially rising to more than $10 billion.
“We are proud that the Americans are supporting our position,” Theodore Veniamis, president of the Union of Greek Shipowners told The Wall Street Journal. “We have serious concerns about the availability of new fuels and how safe they are. The adjustment period should be between one and three years.”
Mr. Veniamis said big container lines have privately arranged for fuel supplies at ports that they usually use but “nobody else is ready.”
The Greek shipping companies, along with other private owners, make money by chartering vessels, including tankers, bulk carriers and container ships. The chartered ships move around 80% of all seaborne trade.
Although no IMO member nation is asking for the Jan. 1, 2020, deadline to be postponed indefinitely, a prolonged rollout of the rule could undermine goals to reduce sulfur emissions over the near term. Some countries want the IMO to adopt open-ended deferrals that would allow ships to continue using heavy fuel if cleaner fuels aren’t available at ports or if captains report safety or engine problems from the new blends.
Fuel is the biggest cost for shipping companies, and owners expect that low-sulfur oil will boost their bill by more than 50%. Fuel costs for ship operators have increased about 25% this year because of rising oil prices.
Some ship operators have said they fear the extra fuel cost will push them out of business.
Paddy Rogers, chief executive of Belgium-based Euronav, one of the world’s biggest tanker companies, said low freight rates and the rising fuel bill could push the top 10 tanker operators into the red this year.
IMO Secretary-General Kitack Lim said deliberations on the cleaner fuels began in 2008 and were adopted in 2016 with the backing of all IMO members, including those now raising concerns.
“There’s been enough time to prepare,” Mr. Lim told the Journal earlier this month. “I understand shipping is going through a difficult period, but as far I am concerned, the implementation date cannot change.”
Source: Wall Street Journal
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