The 2020 IMO fuel sulphur regulation.

Catogory : Market Report

The International Maritime Organization (IMO) will enforce a new 0.5% global Sulphur cap on fuel content from 1 January 2020, lowering from the present 3.5% limit to a maximum of 0.5% will enter into force. The global fuel sulphur cap is part of the IMO’s response to heightening environmental concerns, contributed in part by harmful emissions from ships. The 2020 deadline was confirmed at the 70th session of IMO’s Marine Environment Protection Committee (MEPC) held in October 2016.The more stringent sulphur regulation has led to shipowners and operators mulling over which options they should choose in order to comply with the IMO regulation, and refiners considering whether to produce more low-sulphur fuel to meet possibly higher demand, as both parties anticipate an unprecedented change in the marine fuels supply landscape.

The issue with the 0.5% sulphur cap regulation is that it has turned into a textbook conundrum for refiners (the fuel suppliers) and shipowners (the fuel buyers), caught in a quandary whereby suppliers are unable to commit on how much to produce as buyers do not know how much is needed, vice versa. The shipping industry, the one on the receiving end of the IMO regulation, will have to deal with not only the upcoming global 0.5% sulphur cap, but also the existing 0.1% Sulphur cap in designated Emission Control Areas (ECAs). There are three options set out in this paper that shipowners can consider in order to comply with the IMO regulations. First, shipowners can install exhaust gas cleaning systems on their ships. Second, owners can simply buy compliant fuels at higher costs. Third, ships can run on the clean gas LNG as fuel.