5 Oct 2012

IMO decision on fuel study sparks concerns for price hikes in 2020

By Belinda Liversedge

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The International Chamber of Shipping (ICS) fears the rejection of a call to speed up a major fuel availability study – preparing the maritime industry for ​The International Convention for the Prevention of Pollution from Ships (Marpol’s) rules on low-sulphur fuel – could lead to inflated fuel prices in 2020. This is when more stringent global sulphur limits come into effect and infrastructure will have to be adjusted accordingly.
 
The ICS made a bid to accelerate its ‘critical’ study into the global availability of low-sulphur fuel for ships at a meeting of The International Maritime Organization (IMO) Marine Environment Protection Committee (MEPC), at the beginning of October in London. But the majority of IMO member states voted against the motion and the study will continue, as planned, for completion in 2018.
 
The ICS has since expressed ‘disappointment’ at the verdict.

“The major refinery upgrading required could take a minimum of four or five years, perhaps longer, and we believe that completing the study in 2018 would simply be too late,” said ICS Secretary General, Peter Hinchliffe.

 
The main impact on the superyacht industry is the ICS’ prediction that insufficient preparation could lead to dramatic rises in low-sulphur fuel prices when Marpol comes into effect under ten years from now.
 
“Shipowners are worried about whether sufficient fuel will be available to allow ships to comply with the strict IMO regulations on sulphur emissions and whether, as a result of insufficient supply, the costs for those ships that are able to obtain the required fuels might be prohibitively expensive,” read the ICS statement.
 
Udo Kleinitz at ICOMIA agreed, stressing that the concern is not so much the blanket requirement to convert to low sulphur fuel, but prices.
“Today’s marine engines used on yachts do not operate on Heavy Fuel Oils with its significantly high contents of sulphur but on good quality fuels. The engine manufacturers generally limit sulphur content in fuel to a level far below what is being discussed here”, he said. The knock on effect of the Marpol annex VI regime, the regulation enforcing low sulphur fuel, is more likely to be inflated prices.
 
“If the shipping industry moves from heavy fuel oil to diesel there could be a higher demand for distilled fuels for diesels and that could drive the prices up,” he said.



The IMO has rejected ICS' call for more planning for Marpol before. Clearly the international body does not believe there will be much difference seen if work begins quicker, or if more studies are conducted.
 
In August the IMO Environment Protection Committee rejected the suggestion by ICS to conduct a ‘preliminary study’ before 2018. In its assessment of the proposal the IMO said a pre-feasability study was “supplementary (and) unnecessary and would not provide any additional certainty with respect to the availability assessment methodology currently under consideration.”
 
In 2020 the Marpol annex VI will require the maximum sulphur content of fuel to be 0.5%, down from the current 3.5% rate. In SOx Emission Control Areas (SECAs) the sulphur limit will be even lower, and the requirements will come sooner, with the 0.1% limit applicable to the Baltic Sea, North Sea and the North American ECAs by 2015.

Related Links

IMO Website
ICS Website
ICOMIA Website
 

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