JULY 23, 2012 — The International Chamber of Shipping (ICS), whose members represent more than 80 percent of the world merchant fleet, is calling on IMO to speed up a study into the global availability of low sulfur fuel for ships.
In a submission to IMO's Marine Environment Protection Committee (MEPC), which meets in October, ICS is again pressing IMO to get started on a study that can consider the impact all of the major changes required by new MARPOL limits on sulfur in fuel, before it is too late for the oil refining industry to respond and invest.
MARPOL Annex VI contains provisions for IMO to complete a review, by 2018, of progress made towards meeting the demand for 0.5 percent sulfur fuel that must be used globally outside of Emission Control Areas (ECAs) by 2020 or 2025.
ICS stresses that the enormity of the switch to distillate and its economic impact on shipping should not be underestimated.
ICS Secretary General, Peter Hinchliffe said: "Governments will surely want to avoid any perception that a blind eye has been turned to the practical implementation of the measures as the issue of fuel availability becomes increasingly pressing. It is essential that a global fuel availability study is carried out sufficiently in advance of 2020 in order to give the refiners adequate time to invest and react. The major refinery upgrading required could take a minimum four or five years, perhaps longer, and we fear that completing the study in 2018 would simply be too late."
He added that the need to move the IMO study forward "is more important than ever now that the European Union has signaled that it will definitely implement the 0.5 percent requirements in 2020, even if the IMO study results suggest, as permitted by MARPOL, that full implementation should be postponed until 2025 to ensure the availability of sufficient quantities of compliant fuel."
In its submission to MEPC, ICS suggests that a preliminary IMO study of the availability of compliant fuel, taking into account the introduction of the 0.1 percent sulfur in fuel requirements to be used in the Baltic Sea, North Sea and the North American ECAs in 2015, would provide a suitable test case. Such a study would provide a projection of possible scenarios resulting from the introduction of the 2015 0.1 percent ECA standard, against the background of the world market. This could then be considered in comparison with the real situation encountered in 2015.
"When the global requirement to switch to distillate was adopted four years ago," said Mr. Hinchliffe, "ICS supported the agreed IMO timetable as an acceptable compromise. But if the switch to low sulfur fuel is to be successful, those governments that advocated such ambitious goals need to do everything possible to help ensure that the refineries are able to deliver. We strongly believe this means undertaking the required studies of fuel availability as soon as possible."
ICS points out that fuel is by far the largest operational cost for shipowners and has already increased in price by about 300 percent since 2000. However, the current 50 percent price differential between low sulfur distillate and the residual fuel oil that is currently in use is predicted to increase further if the new demand that will be created by the MARPOL requirements is not matched by increased supply.
ICS notes that exhaust gas cleaning systems or "scrubbers" have been predicted to cost in excess of US$2 million per engine if fitted on board larger ships. It is still unclear whether these will be technically, environmentally, or economically viable for use on a widespread basis before the 2015 or 2020 deadlines).