The Storm Before the Calm or the Calm before the Storm

It has been some time since the new sulphur regulations came into force for sea transportation, compelling shipowners and shipping companies alike to ensure that their vessels burn fuel containing a sulphur amount of no more than 0.50%.

Thousands of vessels are affected by the new sulphur cap and these regulations place extreme pressure on the maritime industry to comply with them. Naturally, the implementation of these new regulations does not come without its challenges.

Issues relating to Low Sulphur Fuel Oil (LSFO) and blended fuel oil

It has been suggested that the maritime sector accounts for over half of the world’s demand of fuel oil. When the new sulphur regulations came into force, there was a widespread concern over the cost and availability of low sulphur fuel oil (LSFO), as well as a concern over the potential damages that may arise from using blended fuel oil.

After the initial jump in prices in January 2020, there has been a decrease in LSFO prices as the initial stages in the IMO 2020 transition fades, thus eliminating the first issue relating to a LSFO price increase[1]. However, an ensuing concern has arisen over the sudden unavailability of low sulphur compliant fuel. Various countries around the world (especially developing countries) have already started to experience a shortage in the supply of compliant sulphur fuel[2]. The port of Durban (the largest port in Africa) is responsible for distributing the majority of South Africa’s oil, including that of high sulphur fuel oil (HSFO) and very low sulphur fuel oil (VLSFO). As of mid-April 2020, Durban has completely run out of HSFO and is running short on VLSFO[3].

It is already clear that where a vessel does not have a scrubber system installed on board and is found non-compliant with the sulphur regulations due to unavailability of LSFO that a ‘fuel oil non-availability report’ (FONAR) will need to be completed and submitted to the relevant authorities. This however, raises a concern as to whether a shipowner who fills out a FONAR will still be issued with a fine. It has also been established that the non-compliant vessel will not be required to deviate its route to find compliant fuel, meaning that it will proceed on its voyage with the non-compliant fuel oil.

The second issue identified above relates to the use of blended fuel oils. The IMO has allowed refineries to blend high sulphur content fuel oil with LSFO in order to meet the requirements in Annex VI of MARPOL. The result, however, is that shipowners and shipping companies alike have now raised some concern over the potential contamination and incompatibility of these blended oils used within their vessel’s engines. Using blended fuel oils raises the chances of a mass breakdown in vessels due to fuel oils that have been blended badly.

In a further twist in the matter, just ten days after the new sulphur regulations came into force the IMO received submissions from Finland and Germany that a funded study has found that the new marine LSFO contains a higher percentage of compounds that increase the black carbon emissions from vessels than that which the previously used heavy fuel oil (HSFO) contained.

Alternatives to LSFO: Issues relating to the installation and use of scrubbers

An initial concern raised over the use of scrubbers is the cost of installing them. It has been estimated that the cost of a scrubber installation ranges from between $3-5 million per vessel. In addition to this, there have already been two reported cases of failed scrubber systems. During the course of 2019, two Oldendorff Carrier vessels experienced scrubber failures of which one almost caused a collision near Singapore. A report on the incident stated:

“The incident occurred due to a fault in the scrubber system which caused a catastrophic failure and flooded the exhaust lines and main engine of the ship with tons of washwater [sic] being dumped into the ocean.  The scrubber failure and its flooded engine room caused the ship to lose propulsion in one of the busiest areas for maritime traffic in the world, and it was a miracle that a tragic incident did not occur.”[4]

This is not the only issue to have been discovered after the installation of scrubber systems. Scrubber systems can come in three forms: open loop scrubbers, closed loop scrubbers and a hybrid between the two. An open loop scrubber system washes the exhaust gases (along with the harmful sulphur and carbon compounds) from the vessel and then discharges the washwater into the sea. A closed loop scrubber system washes the exhaust gases (along with the harmful sulphur and carbon compounds) from the vessel and then stores it in an on board tank until it reaches an appropriate port where it can be discharged and disposed of accordingly. A hybrid scrubber system allows the vessel to switch between open loop and closed loop as required by the vessel, the location and the various port authorities.

The issue that arises here is that, while open loop scrubbers eliminate sulphur emissions into the earth’s atmosphere on a marginal level, it does nothing to protect the environment as the waste material is simply being diverted into the earth’s oceans. This is equally true for the hybrid scrubber systems as they provide the option for an open loop system to be used. The only true environmentally protective system used is that of the closed scrubber system – depending of course on what happens to the discharged waste at the relevant port.

An opportunity for business

Although the initial transition into IMO 2020 has provided an array of legal issues and industry challenges, there is still some hope on the horizon. There is a global debate on whether the scrubber and LSFO options have succeeded in resolving future environmental damages caused by the maritime industry or whether such systems have instead only diverted the harm caused into other areas of the environment[5]. The upside is that there is now an opportunity for innovation and new business[6]. As stated by John F. Kennedy in his campaign speeches of 1959 and 1960:

“In the Chinese language, the word 'crisis' is composed of two characters, one representing danger and the other, opportunity.”