IMO Archives - Page 18 of 24 - SHIP IP LTD

All regulations have their complexities and cost, but the catch with the 2020 sulphur cap is that any decision is essentially predicated on unknowns, such as compliant fuel prices, quality, and availability

In just over a year, it will be mandatory for ships’ bunkers to comply with a 0.5% m/m sulphur fuel limit globally, outside of dedicated emission control zones (ECAs), a steep drop from the previous 3.5% m/m limit. The complexity of weighing up the several fuel compliance options available means that some shipowners remain undecided.

Compliance options are being weighed for their impact on competitiveness, operations, and return on investment, which in turn depends on sector (container, tanker, bulk, etc), ship type and size, routes transited, and business models, such as charter, voyage, spot; also in the balance is harmony with current and future environmental regulations.

“2020 marks the first time in a long time that there has been no consensus across [the] industry on how to deal with a new regulation,” said Bureau Veritas marine marketing and sales director Gijsbert de Jong.

The options available to shipowners are essentially three-fold: install exhaust gas cleaning systems (scrubbers) powered by high sulphur heavy fuel oil (HFO); switch to a compliant fuel, such as distillates or low sulphur blends; or switch to liquified natural gas (LNG) or liquified petroleum gas (LPG).

The operational realities of the 2020 sulphur cap will be discussed in detail at Riviera Maritime Media’s Asian Sulphur Cap 2020 Conference which takes place 24-25 October 2018 in Singapore.

Most of the global merchant fleet of 95,000 ships is expected to opt for compliant fuel, particularly the cheaper blends. However, this option runs the risk of off-specification fuel, the potential for engine failure and port state penalties, not to mention supply and price constraints.

Fuel testing services will be “instrumental” during the switchover, said Mr de Jong, who noted owners should take independent specialist advice, “talk to fuel suppliers, understand the low sulphur fuels they produce, and test them, preferably in advance”.

Fuel quality concerns have prompted industry bodies to issue numerous comments. The International Organization for Standardization (ISO) has said that while its standard ISO 8217, which specifies requirements for marine fuels prior to use, does address the new fuel blends, it will provide further guidance on the application of this standard.

In addition, owners and charterers will be protected by an agreement on fuel testing agreed by IMO, where a 95% confidence factor will be applied to on-board fuel samples, while an “absolute 0.5% limit” will be maintained for supplier samples taken during bunkering.

“Eco-friendly investment propositions, provided the business case is sound, get a very good audience in the financial markets”

International Chamber of Shipping technical director John Bradshaw said this will mean that a ship will not be held for non-compliance based on test results which vary because different labs testing the same fuel often achieve different results. The new agreement allows for a margin to account for this anomaly.

“Until now this has not been a problem,” said Mr Bradshaw. “The range of sulphur is about 2.3% in HFO, which is well within the 3.5% limit. But as we go into 2020, the blenders are going to blend to the 0.5% limit, so the margins industry has enjoyed suddenly disappear and puts you in the area where a test result may be found to be slightly over 0.5%,” he said.

Addressing operations, the international bunker industry association has submitted guidance to IMO on the impact of blends on fuel and machinery systems, and regarding handling, storage, and use of blends. Fuel management safety under the 2020 cap will be addressed by IMO in October 2018.

The problem with scrubbers

Fuel concerns have resulted in a steady stream of owners opting for scrubbers, including Maersk, which had previously rejected the option.

Scrubbers require significant capital investment for retrofit or conversion, and other expenses include maintenance, crew training, technical risks, and future regulatory restrictions.

The choice of scrubber is essentially a gamble on the low price of HFO post-2020, and the associated return on investment. Conditional on HFO availability at the required ports, payback for owners who have installed scrubbers pre-2020 is in the region of one to three years, depending on ship size, according to classification society DNV GL’s 2018 report Global Sulphur Cap 2020.

Open-loop scrubbers however, which discharge waste into the sea, are restricted by some regional regulatory regimes and more may follow suit.

Current restrictions include Belgium and Germany under the EU Water Framework Directive, and California, where scrubber use is disallowed within 24 nautical miles of the coast (exemptions for research purposes must be applied for in advance). Due to this regulatory threat, the majority of scrubbers being fitted are hybrids, combining open- and closed-loop systems.

Scrubber installations per ship type

Source DNV GL

Deciding among the options for compliance is proving extremely challenging, as evidenced by the fact that established, pro-environmental shipowners, just 20 months from the deadline, remain undecided on their course of action. One such company is Korean container line, Hyundai Merchant Marine (HMM).

Scrubbers were installed on two recently launched 11,000 TEU sister ships, HMM Promise and HMM Blessing. But, for 20 on-order “eco-friendly mega containerships”, the company said that, following IMO’s announcement of the 2020 deadline, a decision on compliance for these had been delayed.

“HMM will opt for either installing scrubbers or LNG bunkering for all the new vessels after thorough discussions with shipbuilders,” the company said.

The option, of scrubbers or LNG, reflects the industry’s current position; it is at a fork in the road that ultimately leads towards IMO’s ultimate aim of a zero-emission future.

IMO’s Initial Greenhouse Gas (GHG) Strategy aims to reduce GHG emissions from international shipping “as a matter of urgency” and to “phase them out as soon as possible in this century”.

The strategy has “two main objectives” explained Mr de Jong: to cut GHG emissions for the whole sector, and to improve the overall energy efficiency of the fleet.

Using 2008 emission levels as its baseline of comparison (as per IMO’s second CO₂ study), IMO aims to cut overall CO₂ emissions from the industry 50% by 2050 and to improve the fleet’s energy efficiency (per tonne mile) 40% by 2030 and 70% by 2050.

“CO₂ emissions ‘per tonne/mile’ is a measure of how much CO₂ will be emitted to move one tonne of cargo one mile” and is the way IMO measures ships’ energy efficiency, Niels Bjorn Mortensen, former director of regulatory affairs at Maersk Maritime Technology noted.

“This [measure] also makes it possible to compare the energy efficiency between ships,” added Mr de Jong.

However, environmentalists, such as Rocky Mountain Institute (RMI) managing director Ned Harvey – RMI incorporates Richard Branson’s Carbon War Room – said these goals are “probably not high enough”, albeit conceding they were a “major step in terms of ambition”.

“Efficiency has driven our choice of fuels; the environment was not a key consideration. But now, the driver for fuel change is environmental”

Unfortunately for those advocates of the scrubber option, the reality is that these devises have more in common with the past than the future.

Dependent on 2%-5% higher levels of polluting HFO, scrubbers emit CO_2. As such, they stand in contradiction to the goal of reducing CO₂. They are also inconsistent with IMO’s Energy Efficiency Design Index and Ship Energy Efficiency Management Plan.

Indeed, Mr de Jong stated that when considering measures to help shipowners “achieve a continuous cycle of improvement through measuring fuel consumption and emissions, similar to ISO 9000 thinking”, scrubber installation leads to “an uptick [in fuel use and emissions] rather than a down tick.”

DNV GL estimates that “less than 10% of fuel consumption will correspond to ships with scrubbers.” But the organisation also noted that owners who install scrubbers “are aware of the risk” of future IMO rules that may demand a “significant reduction in GHG emissions”.

“Scrubbers are solving the 2020 goal, but certainly not the decarbonisation goal,” said Mr de Jong.

“Shipping has two environmental challenges: emissions affecting human health, and global warming. Their solutions are not always aligned, but if you take the decarbonisation route, you solve both. A decarbonised ship would, by definition, be a 2020-compliant ship,” he said.

Scrubber systems – pros and cons

Open loop and hybrid scrubbers constitute 84% of confirmed scrubber projects. Most smaller oil tankers fitted with a scrubber chose a hybrid system. Among large tankers, there is a trend for using open-loop scrubbers and switching to sulphur-compliant fuels when needed. (Source: DNV GL)

The shift towards LNG

For large merchant ships, in the absence of scalable clean fuel options such as electricity and hydrogen, LNG straddles past and future and DNV GL sees LNG and bio-fuels as taking the “larger share over time”.

LNG is still a fossil fuel that emits a degree of the GHG, methane, and significant quantities of CO₂ in its production and storage. But, it offers the complete removal of sulphur oxide and particulate emissions, a reduction of nitrous oxide emissions of up to 85%, and a reduction of GHG emissions by 10% to 20%, depending on engine technology.

Eero Vanaale, LNG business development executive with engineering consultancy Royal Haskoning, puts LNG at the current apex of a fuel evolution. From sail, to coal, to oil, and now LNG, the latter signals a change in the driver of fuel choice, from economics to environment.

“Efficiency has driven our choice of fuels; the environment was not a key consideration. But now, perhaps for the first time, the driver for fuel change is environmental,” Mr Vanaale said.

If viable alternatives appear, LNG could be a “relatively short-term” event. Otherwise “there is an abundance of natural gas reserves, and for 2020 LNG is one of the best options to comply,” he added.

It would take between four and five years, DNV GL estimates, for a shipowner to recoup their investment in LNG and some owners, such as container liners Hapag-Lloyd and CMA CGM, have now committed to this option.

Owners must now find what DNV GL calls an “optimum solution”, that depends “not only on payback time” but also on “GHG emissions, environmental profile, and long-term value creation potential”.

“2020 will effect a degree of slow steaming” and a “better utilised” fleet, said DNV GL. The expected reduction in supply “could also lead to higher charter rates on average”, with fuel-efficient ships with scrubbers gaining competitive advantage.

Marine Capital CEO-CIO Tony Foster calls LNG a “future-proofed eco-solution”, which he defines as a solution offering “a return over 10 years and that will not fall foul of future regulatory changes”. He added: “Eco-friendly investment propositions, provided the business case is sound, get a very good audience in the financial markets.”

In the long run, environmental measures are expected to save owners money from reduced fuel consumption and operating costs. Indeed, RMI’s Mr Harvey noted that structural changes in finance will start constraining owners that do not invest in greener ships.

“Energy efficiency in ships is similar to that in buildings,” said Mr Harvey. “Every percentage improvement in efficiency saves somebody some money.”

Shipping energy mix 2050

By 2050, only 47% of energy for shipping will be from oil-based fuels. The share of gas in the fuel mix will rise to 32%. More than a fifth will be provided by carbon neutral sources, such as biofuel and electricity (source: DNV GL).

2020: Options for compliance

Distillate fuel

Pros: Useable for most engine configurations

Cons: Higher fuel cost; may create operational issues due to low viscosity of the fuel

New compliant fuels

Pros: Useable for most engine configurations

Cons: Unknown fuel cost; no track record as per September 2018; uncertain availability; may create operation issues due to off-spec fuel or incompatibility

HSFO with scrubber

Pros: Can use conventional HSFO; possible for retrofit; reduces particulate matter as well as SOx; attractive business case for certain ship types

Cons: Initial investment (US$2M-US$10M); 3-5% fuel penalty; requires space for scrubber tower and supporting systems; requires chemicals (closed loop); requires integration with ship’s power management system; requires monitoring

LNG as fuel

Pros: Good environmental performance; can reach NOx Tier III requirements; positive impact on EEDI

Cons: High irivierammnvestment cost (US$3M-US$30M); costly to retrofit; large regional variation in LNG price; methane slip in exhaust; requires space for tank; some engine types need additional systems to reach NOx Tier III.

Source: rivieramm

During the course of the last decade or so, the shipping sector has been subjected to increased scrutiny & regulation related to its impact on the environment, with harmful airborne emissions being of particular concern. Since the Paris Agreement though, the focus has moved to some extent onto two long term objectives: zero emission ships and decarbonisation. These are noble ambitions, but is there a common understanding of what both terms mean and are we all moving towards the same objectives?

Advice often given to project managers is for them to ensure that their project objectives are SMART: this being an acronym for Specific, Measurable, Achievable, Realistic (or Relevant) and Time-bound. But in order to do this the aims of the project need to be clear and the deliverables well defined. So since shipping is aiming for zero (or low) emission vessels and is on a pathway to decarbonisation, then both of these specific terms should be clearly defined. Otherwise it’s going to be very difficult to implement projects that incorporate SMART objectives as will be required to meet these ambitious aspirations.

At this point some readers may let out a deep sigh and think to themselves that they know what zero emissions and decarbonisation mean and so does everyone else. However I have not heard consistent and clear descriptions of either term at meetings, conferences or seminars, nor have I been able to find consistent descriptions of these terms online or in published papers.

For example what exactly is a zero emissions ship? Some would say it’s a vessel on-board which, propulsive power is provided by a solution that emits zero airborne emissions. But what about shore-based emissions? Could a zero emissions ship using electrical propulsion and batteries still be considered “zero emissions” if the batteries are re-charged from electricity generated by a coal-fired power plant? If the ship uses alternative fuels (including biofuels) are land-based emissions that result from the production of these fuels taken into account? Can a ship be deemed to be zero emissions if CO2 emissions are offset by planting trees or via carbon sequestration? Yes? No? Maybe?

To complicate things further the term “net zero emissions” is frequently used and I’ve also seen a classification society use the expression “near net zero emissions”. This last term is so wonderfully ambiguous that it reads as though it has been lifted from Joseph Heller’s classic novel: Catch-22.

Even the term “emissions” can mean different things. Does it mean all airborne emissions including for example lead emissions, or Greenhouse Gas (GHG) emissions, or just CO2? What about discharges into the ocean? Are they not a concern?

Regarding decarbonisation this is defined in many different ways ranging from simply meaning the reduction of CO2 emissions to vague statements about removing carbon from economies and societies. Therefore to gain some understanding of how people view decarbonisation I prepared a single question survey and distributed it via social media. The first four available responses were taken from the websites of a university, a major automaker, a research paper & a safety & standards board. The last three available responses were definitions I proposed. The results of this survey are shown in the chart below.

Two observations can be derived from this simple survey. The first is that there does not appear to be a common perception regarding what decarbonisation means. The second observation is that the majority of respondents (around 72%) thought my flawed or vague definitions best matched their understanding or perception of the term. But then again, what does decarbonisation actually mean?

The International Maritime Organization (IMO) does not have its own formal definition for decarbonisation but has adopted a greenhouse gas (GHG) reduction strategy. This strategy has three levels of ambition and these are summarized as follows:

1) Carbon intensity of ships to decline through implementation of further phases of the energy efficiency design index (EEDI) for new ships.

2) Carbon intensity of international shipping to decline to reduce CO2 emissions per transport work, as an average across international shipping, by at least 40% by 2030, pursuing efforts towards 70% by 2050, compared to 2008.

3) To peak GHG emissions from international shipping as soon as possible and to reduce the total annual GHG emissions by at least 50% by 2050 compared to 2008, whilst pursuing efforts towards phasing them out consistent with the Paris Agreement temperature goals.

With respect to decarbonisation, IMO spokesperson Natasha Brown stated that from their perspective that this: “implies development and up-take of zero-carbon technologies and fuels, for which IMO provides the appropriate international platform.”

In addition according to an announcement published on the IMO website: “The IMO Intersessional Working Group on Reduction of GHG Emissions from ships has made significant progress in pushing forward with work to help achieve the ambitious targets set out in the initial IMO strategy on reduction of GHG emissions from ships, which aims, as a matter of urgency, to decarbonise international shipping in this century.”

Thus we can speculate that the IMO may facilitate some discussions regarding regulations specifically aimed at achieving decarbonisation targets. But will all parties in those discussions have the same understanding of what the term means?

Some financial institutions have also banded together and developed guidelines for shipping via the Poseidon Principles. The first of these principles is related to carbon intensity and according to a spokesperson for the Poseidon Principles Association:
“The carbon intensity is calculated by comparing the carbon emissions from a ship to a trajectory. This trajectory builds on the IMO’s initial greenhouse gas strategy to reduce emissions from international shipping by at least 50% by 2050 compared to 2008 levels, and to reduce the CO2 emissions per transport work by at least 40% by 2030, and pursuing a 70% reduction by 2050. The Principles currently only report alignment based on CO2 emissions.”

It’s good to see the banks getting involved but why only focus on carbon intensity and CO2? Furthermore how about also including a principle regarding the treatment of seafarers?

Meanwhile the European Union (EU) is rolling out The European Green Deal which outlines a new growth strategy where:

• There are no net emissions of greenhouse gases by 2050.
• Economic growth is decoupled from resource use.
• No person and no place is left behind.

It is stated that this strategy incorporates a roadmap with actions, although at this stage it appears to be more like an action plan to develop a roadmap. The EU strategy also incorporates terms including: “climate-neutral society”, “full decarbonisation” and “low carbon Europe”.

Since the EU either directly or indirectly has influence over shipping regulations then this will add another layer of complexity to the regulatory framework. Maritime nations outside the EU may also implement their own policies and we can only hope all these policy bodies will somehow be coordinated.

At this time my view is that there does not appear to be common definitions covering zero emissions & decarbonisation, nor is there a common understanding of what these terms mean. I accept though that I may be criticized for being pedantic. My counter argument would simply be: how can targets be set for reducing emissions & achieving decarbonisation when these terms are not clearly defined?

Conceivably some might contend that the term decarbonisation is defined and that in any case, worrying about such details is not important as long as shipping is heading towards reducing emissions. I accept that preposition up to a point, but would also stress that generally speaking projects that have vague objectives have a high risk of running over budget and not delivering good results. Also if clear and specific targets are not set then how are the results of these projects going to be assessed?

This article though is not intended to be critical of any organization, company or association. Rather the intention is to stimulate discussion so that perhaps strategies are improved and linked to clear and well defined objectives. This I believe will help avoid costly mistakes and also prevent poor policy decisions being made, as these might lead to unintended consequences that in turn may result in damage to environments & economies in ways that have not been considered.

Source: splash247

Philip Roche and Utsav Mathur with law firm Norton Rose Fulbright advise ship owners and operators, banks, insurers and energy companies on the legal, commercial and environmental risks of owning, and operating ships, including pollution risks, bunker contamination issues and International Maritime Organization (IMO) 2020 matters. In this Q&A, edited for length and clarity, Roche and Mathur discuss the effects of the IMO 2020 global marine fuel regulation on the shipping market. The two responded jointly to emailed questions.

If a vessel is caught burning high-sulphur marine fuel in international waters in 2020, which international governing body’s responsibility is to penalize the shipowner — IMO? Do you know if there are penalties being discussed?

No, the IMO has no enforcement powers. It will fall to the flag state to prosecute owners (so this is unlikely to happen). However this is only a temporary phase. After March 2020, no one should be carrying HS fuel, so no one should be able to burn it. [The IMO adopted a carriage ban which states that no ships should carry fuel that contains over 0.5pc sulphur in their fuel tanks as of 1 March.] Port state control will be able to prosecute owners for having it onboard in the territorial waters. This is the reason for the carriage ban.

In 2020, if a supplier sells high-sulphur marine fuel (non-compliant fuel) to a shipowner who does not have a scrubber on their vessel, could the supplier be held in contempt of the regulation, in addition to holding the shipowner in contempt? In 2020, should a supplier require paperwork from the vessel to prove that there is a scrubber on board the vessel if the owner claims that there is one on aboard and is looking to purchase high-sulphur bunkers?

I am not as aware of any legislation that prevents this — the sanction is against vessels using (and after March 2020 carrying) the fuel. If a bunker supplier fraudulently stated the bunkers were compliant when they were not, then the bunker supplier would be liable for that fraud.

It is not for bunker suppliers to police this regulation but they do have certain obligations. According to the IMO:

“The bunker delivery note shall include a declaration signed and certified by the fuel oil supplier’s representative that the fuel oil supplied is in conformity with regulation 18.3 of MARPOL Annex VI and that the sulphur content of the fuel oil supplied does not exceed:

· the limit outside ECAS (currently 3.50pc, falling to 0.50pc from 1 January 2020) under regulation 14.1;

· the limit in emission control areas (0.10pc m/m) under regulation 14.4; or

· the purchaser’s specified limit value, on the basis of the purchaser’s notification that the fuel oil is intended to be used:

1. in combination with an equivalent means of compliance; or

2. is subject to a relevant exemption for a ship to conduct trials for sulphur oxides emission reduction and control technology research.”

So a purchaser has to notify the supplier that it has an exhaust gas cleaning system (EGCS). The supplier does not need to check this, he can take the notification at face value.

Could a shipowner submit a fuel oil non-availability report (FONAR) and still get fined for non-compliance in 2020? Under what circumstances? Have you encountered cases like this?

FONAR is a new development for the 2020 0.5pc fuel regulation but I understand it has already been used for Emission Control Areas 0.1pc non-availability. The FONAR must reflect and document a genuine attempt to acquire compliant bunkers and demonstrate why such could not be obtained at the port of departure.

The vessel is not required to deviate its route to get compliant bunkers so may proceed with non-compliant bunkers. But there will need for good evidence that bunkers were not available and such a report has to be filed as soon as possible after the vessel sails. This may be difficult for the vessel owner if he is waiting for the vessel charterer to give them the information on availability.

The vessel owner is required to populate the FONAR. If it is found that compliant fuel was available, or there was excessive delay in reporting, or the owner/charterer made no real effort to obtain compliant fuel, the owner may be prosecuted and fined.

Shipowners are concerned that the 0.5pc sulphur fuels that the different suppliers are offering will not be compatible with each other. Mixing different specification fuels from different suppliers could cause vessel engine problems. Could a shipowner use FONAR, even if 0.5pc sulphur fuel is available for purchase, but the shipowner does not want to buy it because they are worried that the new fuel and the fuel that is already in their tank might not be compatible?

The answer is not entirely clear. If the compliant fuel available is truly not able to be mixed with other compliant fuel onboard, then a FONAR should be sent demonstrating why this is the case. But it is not known if the port’s inspection agencies, also known as Port State Control (PSC) will accept this defense if compliant fuel was available at the port of departure. The owner will need to demonstrate why they could not arrange bunkering so compliant fuel could be taken onboard. Indeed paragraph 7 from IMO’s guidance on ship implementation plan for 2020 compliance suggests that such measures will need to be taken in the management of bunkers to avoid such situations.

“The ship implementation plan could be used as the appropriate tool to identify any specific safety risks related to sulphur compliant fuel oil, as may be relevant to the ship, and to develop an appropriate action plan for the Company to address and mitigate the concerns identified. Examples should include:

1. Procedures to segregate different types of fuel and fuels from different sources;

2. Detailed procedures for compatibility testing and segregating fuels from different sources until compatibility can be confirmed;

3. Procedures to changeover from one type of fuel to another or a fuel oil that is known to be incompatible with another fuel oil;

4. Plans to address any mechanical constraints with respect to handling specific fuels, including ensuring that minimum/maximum characteristics of fuel oil as identified in ISO 8217 can be safely handled on board the ship; and

5. Procedures to verify machinery performance on fuel oil with characteristics with which the ship does not have prior experience.”

PSC will look at the individual ship implementation plan (SIP) and the circumstances to determine whether the vessel has made sufficient efforts to deal with this set of circumstances.

In the spring and summer of 2018, the shipping industry was plagued by slew of contaminated marine fuel cases which originated in the US Gulf. The contaminated fuel caused a number of vessels to stall without engine power. The contaminated fuel was also exported and spread to Panama and Singapore. Because the contaminated fuel is mixed with other fuel in the vessel tank, it is very hard to prove how the specification problems originated. Shipowners have about 15 days to present a marine fuel contamination claim against the fuel supplier. Do you have advice for these shipowners?

It is correct that bunker suppliers have very short limitation periods. Owners should ensure that fuel is tested immediately if they have any suspicions about the provenance of the bunkers supplied.

That said, the increase in quality of the bunkers that are supplied to vessels (i.e. no longer residual fuel oil) may make it more difficult for bunker suppliers to adulterate fuel with non-permitted substances without it being obvious quite quickly. Nevertheless, owners have to take samples and get them tested if in doubt and not wait until they use the bunkers.

Singapore and other places are making efforts to close down rogue bunker suppliers. A class action will be tricky for evidential reasons and the likely target of such action (the rogue suppliers) are unlikely to have any assets to satisfy the judgement/award — so it may be a pyrrhic victory.

A scrubber breaks down and the vessel does not have 0.5pc sulphur fuel onboard. Will the shipowner be subject to fines or arrest if they call the next port burning high-sulphur fuel?

No, but the PSC officers will require good evidence that the scrubber is properly maintained and the breakdown was a true fortuity, rather than due to a lack of maintenance, trained personnel, lack of parts etc. If a vessel has a “breakdown” frequently then this may cause PSC officers to become suspicious and less inclined to believe it was unavoidable. That said, EGCS are hard to run and we will probably see a lot of breakdowns.

What are the claims you expect to see from shipowners with regards to IMO 2020?

1) Supply of non-compliant bunkers;

2) Supply of off-spec bunkers leading to engine damage;

3) Claims arising from damage to machinery by bunkers that are on specification.

This will depend on the agreement that the shipowner and the charterer have reached in the time charter party agreement. Ship operators need to specify much more carefully what fuels will be compatible with machinery and what will not. This is part of the considerations that must be included in the Ship Implementation Plan. But with new types of fuel coming on to the market, it is not certain whether an apparently compatible fuel will damage ship’s machinery or whether this potential problem will be evident in advance.

4) Claims for non-availability of installed scrubbers – from charterers to owners and from owners to suppliers.

It is becoming apparent that exhaust gas scrubbers can be quite challenging to operate. In the initial introduction of a lot of these units may suffer from unreliability due to unfamiliarity and other issues.

Do you think that the US will ban the use of open loop scrubbers in its territorial waters?

Possibly. A number of ports in Europe and the Far East are banning the use inside port limits already.

What are the most common marine fuel record keeping violations you have seen shipowners commit?

Falsifying oil record books is always a favorite.

Do you know of cases where the US Coast Guard or the EPA has fined shipowners for not burning compliant 0.1pc sulphur marine fuel in the US Emission Control Area (ECA), since the ECA sulphur limit was established at 0.1pc maximum in January 2015? How are the non-compliant vessels typically caught?

Yes. Typically US Coast Guard only detains vessels for ECA violations, but, recently the US Department of Justice (DOJ) prosecuted a MARPOL case arising from an ECA violation. The case arose from a July 2018 Coast Guard examination on board a tanker. US Coast Guard observed discrepancies in the vessel’s bunker delivery notes. A more detailed investigation revealed false entries in the vessel’s oil record book and that some of the bunker delivery notes had been falsified. The investigation also found that an officer of the vessel had directed crew members to lie to the Coast Guard. The US government brought charges against the operator, owner, commercial manager, master, and chief engineer. This appears to be the first MARPOL enforcement case in which prosecutors have gone after a vessel’s commercial manager for directing a vessel to use non-compliant fuel. All defendants pled guilty.

In the matter identified above, the vessel’s owner and its operator were sentenced, under a plea agreement, to fines of $1.50mn, four-year term of probation, and implementation of an environmental compliance plan. The master and chief engineer were sentenced to three years of probation, during which time they cannot enter the US on any vessel. The officer who allegedly directed the crew to lie also received a three-year probation and an additional $3,000 fine. The vessel’s manager entered a plea agreement for a $500,000 fine.

Non-compliant vessels are identified through discrepancies in bunker delivery notes or the oil record book. Discrepancies are discovered during crew interviews. Whistleblower crew members can all trigger more detailed inspections or investigations. A more detailed inspection can include sampling of a vessel’s fuel.

Source: https://www.argusmedia.com/

Many ships at sea today fly fraudulent flags. Some flag states do not seem particularly bothered that their national flags are being abused in this way and no one knows exactly how many dodgy ships there are.

Those are the key messages announced at a symposium organized by the International Maritime Law Institute (IMLI) and the World Maritime University (WMU). The event was held at the International Maritime Organization’s (IMO) headquarters at London in early March. Its main objective was to consider a clause in the United Nations Convention on the Law of the Sea (UNCLOS). The new clause requires a “genuine link” between a vessel and the flag it flies.

Fraud was just one of the topics that was discussed. Surprisingly, it’s a big problem. One of the speakers was George Theocharidis, a professor of maritime law and policy at the WMU. He was asked what flag states could do to address the problem. His reply was not very encouraging.

“It’s sovereign states that you’re dealing with and whether they have a genuine interest to tackle the problem,” he said. “Some certainly do and have approached the IMO for help, but I have serious doubts about other states.”

Another senior official involved in the problem was Fred Kenney, director of the IMO’s Legal Affairs and External Relations Division. He spoke of “the scourge of fraudulent registries” and told the gathering when and how flag fraud first came to the IMO’s attention. It was in 2015 and the IMO itself was defrauded by a business group claiming to represent the Federated States of Micronesia (FSM).

Although the country is not an IMO member, FSM is a signatory to the STCW Convention. Official-looking documents were produced to show that the business group was authorized to issue STCW certificates for FSM and convinced the IMO to recognize it. The FSM government discovered that approval and contacted the IMO to say that it did not, in fact, have any ship registry.

Perhaps the worst case involved a ship, the M/V Commander Tide. She flew a Democratic Republic of Congo (DRC) flag and had been detained in a European port for multiple SOLAS deficiencies. Port state control (PSC) officers attempted to contact the DRC’s shipping officials. Like the FSM, the DRC has no ship registry. By the time the PSC officials discovered this, the ship had cleared its deficiencies and sailed. She was arrested again soon after in international waters. Turkish forces acted on a tip and found more than a ton of heroin on board.

The DRC then identified an additional 73 vessels that were flying its flag fraudulently.

Kenney identified three types of flag fraud. The most common involves situations such as the DRC, where a ship flies the flag of a country that does not have an international ship registry. In other cases, a country may have severed ties with its contracted registry administrators, but they continue to present themselves as having that authority. And then there is the type of fraud seen in the FSM case, where entities try to defraud the IMO to gain legitimacy.

So how big is the problem? Kenney displayed a summary of reports from a number of flag states. The estimated number was about 300 ships. The investigations also revealed that a significant number of these vessels were listed by the U.N. Security Council as sanctions violators.

In yachting, this topic is not as prevalent as in the merchant fleet. However, it still happens. Several years ago, I was involved with a business group supposedly representing the government of Sint Maarten. The island nation was in the process of transitioning to independence within the Kingdom of the Netherlands. This group presented itself very professionally with proper titles, paperwork, a fancy office, and a nice website. Everything appeared to be legitimate and official. It was not until during an offhand conversation that an anomaly was discovered.

In speaking with a colleague at the Netherlands Shipping Inspectorate, the friendly conversation drifted to the work to be initiated with Sint Maarten. The tone on the other end of the phone changed immediately. It went from jokes and trading old sea stores to serious questions, with requests for names, times and locations. Little did we know at the time, but the entire operation was fraudulent. The people that we had met were not government officials nor in any way associated with the island. Everyone and everything simply disappeared.

Needless to say, when choosing which flag of registry for a yacht, please complete due diligence. Make sure that the people who present themselves are actually members of that government or the administrator appointed to do so. An excellent source to verify this information can be found at the IMO’s shipping information website: www.gisis.imo.org.

Capt. Jake DesVergers currently serves as chief surveyor for the International Yacht Bureau (IYB), a recognized organization that provides flag-state inspection services to private and commercial yachts on behalf of several flag-state administrations. A deck officer graduate of the U.S. Merchant Marine Academy at Kings Point, he previously sailed as master on merchant ships, acted as designated person for a shipping company, and served as regional manager for an international classification society. Contact him at 954-596-2728 or www.yachtbureau.org. Comments on this column are welcome below.

Source: https://www.the-triton.com/

High sulfur fuel oil, once the cheap staple diet of the shipping industry, has been usurped by an abundance of low-cost, premium quality bunker fuel. That’s led to seafarers freezing orders for equipment to remove the sulfur from HSFO and maximizing compliant fuels.

But don’t write off shipping’s dirtiest fuel as shippers play a waiting game over the oil price recovery.

The COVID-19 driven collapse in oil demand has led to the spread between HSFO and very low sulfur fuel narrowing to less than $40/mt in mid-April based on the Northwest Europe differential for delivered bunker fuels at the Rotterdam hub.

That compares to close to $300/mt when the International Maritime Organization rules came into effect on January 1, requiring ships to sail with 0.5% sulfur fuel oil or have the sulfur removed using an exhaust gas cleaning system, or “scrubber”.

It’s no surprise to see a number of shippers delaying orders for scrubbers. International Seaways has postponed three planned scrubber installations to coincide with scheduled dry docking in 2021. Scorpio Tankers is delaying the installation of 19 scrubber retrofits until at least 2021, while Scorpio Bulkers has 13 scrubber installations on hold. Stolt-Nielsen was also among those to announce cancellations.

Scrubbers come with risks so the payoff has to make sense. Several ports across China, Europe the US and Singapore have banned the use of open-loop scrubbers, requiring ships to switch to compliant fuels when they are within port limits. And HSFO availability outside of the major ports has also been an issue.

Sources say that a price gap between the two marine fuels below $50/mt brings the payback logic of scrubbers into question. Wartsila recently announced a decline in new marine orders, largely due to a lack of scrubber investments.

That’s especially the case for retrofitting scrubbers, when it could take more than four years to pay back the outlay. But the repayment period is between 1.5-2 years if the exhaust gas cleaning systems are installed on a newbuild due to lower fitting costs and no offhire time, analysts estimate. Moreover, the ship has a longer life to make the returns worthwhile.

The number of scrubbers in operation at the start of the year was 2,200, according to Platts Analytics, and analysts’ estimates suggest that the total may struggle to get much above 3,000 by the end of the year after previous estimates of around 3,500.

Revival

“With oil prices going up and a slowdown in scrubber installations the Hi5 spread [low sulphur fuel oil vs high sulphur fuel oil], may widen again — although may be not to the $300-$400 levels seen before — and coupled with the expectations for decreasing freight (particularly in tankers) having a scrubber may become key,” said Anton Shamray, senior research analyst at Integr8 Fuels.

“So we could see more scrubber interest potentially towards the end of the year,” he added.

That also may explain the tactic to postpone rather than scrap scrubber orders as VLSFO starts becoming pricier again versus HSFO.

“Expectation of higher prices in years to come is perhaps one of the reasons why delays to scrubber installations and not outright cancellations are currently the preferred strategy of tanker owners,” said Gibson Shipbrokers in a research note.

Dated Brent – the physical benchmark used to price two-thirds of the world’s oil – has more than doubled in value since hitting a 21-year low in April. The measure of North Sea crudes has been trading in the mid-to-high-$30s range in the past week, and some market participants see the trend heading higher with OPEC+ production cuts and shut-ins elsewhere as the oil demand fall may have passed its nadir. Platts Analytics sees prices finding resistance at $45/b.

Go deeper: S&P Global Platts Oil Markets podcast – catch up on all the latest episodes

Euronav CEO Hugo de Stoop put it like this in a recent interview with Platts: “There is a big difference between retrofitting the fleet and buying tonnage with scrubbers already installed. And we have recently bought four vessels that will be delivered to us later this year or early next which are scrubber-fitted.”

Euronav has been opting for compliant fuels but still sees the merits of having scrubbers as part of its tanker portfolio.

Torm executive director Jacob Meldgaard told Platts in a separate interview a “balanced approach is working well for us,” with the tanker company having half its fleet fitted with scrubbers and with further installations due in the coming quarters.

But it’s not just within shipping that HSFO has found a home. Fuel oil is being used in both power generation and as a refinery feedstock, notably in the US.

With shipping now turning to the lofty goals of a carbon-neutral future, one could again see a limited lifespan for HSFO. However, given the lack of clean alternatives at this juncture and the life of vessels being around 25 years, this too remains to be seen.

Shipping may no longer have the same use for fuel oil but it will still play an important support role for many years to come.

Source: https://blogs.platts.com/

On June 2nd, 2020, Rodolphe Saadé was a key speaker at the UN Global Compact. Other speakers participated including Deputy UN Secretary-General Amina Mohammed, Prime Minister of Norway Erna Solberg, UN Secretary-General’s Special Envoy for the Ocean Peter Thomson, the Secretary General of the International Maritime Organization Kitack Lim, and Director General of WWF International Marco Lambertini.

As the entire world fights against the Covid-19 Pandemic, Rodolphe Saadé recalled the CMA CGM Group commitment for a more balanced globalization, which contributes to Economic and Social development, whilst respecting humanity and protecting the planet.

He made two major announcements:

• Our energy supplies will include 10% alternative fuels by 2023
• Our 2050 objective is to be Carbon Neutral

This is a new step for our Group, which is on track to reduce by 40% its CO2 emissions per tonne transported per km by 2030, a target set by the International Maritime Organization (IMO).

Rodolphe Saadé also precised:

“In 2019, we reduced our total CO2 emissions by 6%. These significant reductions were made possible thanks to our mobilization, the technological innovations implemented and an improved management of vessels operations.”

“We must move forward: it’s time to act !”

The year 2020 will also see the launching of the new 23,000 TEU LNG-powered vessels, confirming CMA CGM’s ambition for the energy transition of the shipping industry:

• This is a worldwide premiere, resulting in the reduction of greenhouse gas emissions around 20%, and the suppression of almost all Sulphur and fine particle emissions.
• This is a major event. It symbolizes the path that we are taking in terms of energy transition using the most advanced ecofriendly technology available today.

The CMA CGM Group, as a world leader in shipping and logistics committed to energy transition, has a major role to play in order to achieve a more resilient future.

Source: https://www.cma-cgm.com/