18-02-2019

Shipping industry jittery over fuel cost as deadline for new emission norms nears

Fuel costs are set to go up for the shipping industry over the next year, as new IMO (International Maritime Organisation) regulations kick in from January 2020. The increase could be between 25 per cent and 40 per cent over current levels, experts say.

The IMO regulations stipulate reduction of sulphur emission from ships, forcing the industry to pay more for cleaner fuels.

The regulations demand reduction in the usage of sulphur in fuel onboard ships to 0.50 per cent m/m (mass by mass) from the current limit of 3.50 per cent m/m for ships operating outside designated emission control areas (ECA). There is even stricter limit of 0.10 per cent m/m already in effect in emission control areas.

The emerging situation warrants developing a new blend of oil for ships and probably gas oil with very low sulphur content, as it can be blended with heavy fuel to lower sulphur content, experts in the sector said.

Rising gas oil prices

Gas oil now trades at a premium of about $250/tonne and if the shipping industry adopts it, it is expected to drive up the price with forecasts of $380/tonne by early 2020.

Either way, these blends are going to cost more than the heavy fuel oil (HFO) bunker fuel used by the majority of ships today. Ships can choose to switch to a different fuel altogether or will have to install scrubbers to reduce the sulphur content in the exhaust to meet the new requirements.

Quoting a forecast made by an international bank, experts pointed out that the global shipping fleet consumes about four million barrels a day of high sulphur fuel oil.

Prabhat Singh, Managing Director and CEO, Petronet LNG Ltd, told BusinessLine that LNG had extremely low sulphur content and its usage over fuel or even diesel has a distinct advantage on account of lower emissions. With the use of LNG as fuel, there is no sulphur emissions and even emission of nitrogen and greenhouse gases is significantly reduced.

“LNG is truly a marine fuel of the future and is set to steer global shipping into IMO’s Sox emission control regime coming into force on January 1, 2020,” he added.

LNG, an ideal option

Prasad Panicker, Executive Director, BPCL-Kochi Refinery, said furnace oil is the preferred fuel used by ships worldwide today. LNG can be an ideal option but lack of adequate LNG bunkering ports hinders the fuelling requirements of ships. Marine diesel, though much costlier, is an alternative for which the existing jetties with the current facilities can be utilised.

An IMO study into the “assessment of fuel oil availability” also cited the refinery sector has the capability to supply sufficient quantities of marine fuels with a sulphur content of 0.50 per cent m/m or less to meet the demand.

Source: The Hindu Business Line

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