Global shipping regulator, London-based UN Agency, the International Maritime Organization released a statement on the effect of the fuel that spilled into the waters of Mauritius from Japanese vessel, The Wakashio, in which they admit they do not know the effects of releasing this amount of fuel (VLSFO) into the biodiversity-rich coral lagoons of Mauritius.

On 19 August 2020, an IMO spokesperson said “because this fuel is so new, research has only just been initiated on its fate and behavior in the environment, particularly over a longer period. We know that some of the oil companies are financing research on this, and oil research centers e.g. CEDRE and SINTEF, have initiated work, but we don’t have any concrete information on this as yet, given the relative newness of these bunkers. In terms of the response related to the release of this fuel, it looks and behaves essentially the same as any other bunker fuel spill. It’s really the longer term fate and effects that are not yet known.” Bunkers are the fuel oil used by ships

Over 1 million gallons of a particular type of ship engine fuel (technical name Very Low Sulfur Fuel Oil or VLSFO) was being transported by the Wakashio, one of the biggest ships in the world when it ran into the coral reefs of Mauritius.

Source: forbes

PASAY CITY – Department of Transportation – Office for Transportation Security (DOTr – OTS), together with the Philippine Coast Guard (PCG) and Maritime Industry Authority (MARINA) hosted a week-long visit from delegates of the International Maritime Organization (IMO).

The visit, held from 24 to 28 February 2020, focused on the IMO Global Maritime Security Integrated Technical Cooperation Programme which consists of Security Needs Assessment, Development of National Maritime Security Strategy, Provision of Technical Experts, Maritime Table Top Exercises, and Training Courses.

In his Opening Remarks last 26 February 2020, OTS Administrator Undersecretary Raul L. Del Rosario vowed that extra efforts will be made to run abreast on terror tactics that have evolved through the years.

“We know for a fact that the maritime industry plays a crucial role in global trade and economy, and protecting such from lawless terror attacks is a challenging task that one cannot simply bear alone. That is why it is very critical that we are on the same page in implementing measures to secure our transport systems. Whatever will be accomplished in this undertaking, is accomplished collectively,” USec. Del Rosario expressed.

Atty. Charina Flor A. Cacho-Fernin, Officer-in-Charge of the OTS Maritime Transportation Security Division discussed the agency’s role in relation to the implementation of international standards and protocols espoused in the International Ship and Port Facility Security (ISPS) Code.

She likewise highlighted the policy-determining functions and oversight capability of the OTS, as well as the importance of having a strong inter-agency coordination in terms of maritime security domain, adhering to the provisions of Executive Order No. 197 and its Implementing Rules and Regulations.

During the discussion on the implementation of the ISPS Code, it was confirmed that its provisions were carried out effectively through the conduct of audits, assessments, inspections, training of maritime security personnel through accreditation of training schools, centers or institutions, and certification of security personnel to evaluate their knowledge and competencies.

Such validation of security effectiveness was bolstered after IMO’s visit at the Asian Terminals Inc. (ATI), an ISPS-compliant port facility located in Manila South Harbor.

The discussions also touched on national policies, rules and regulations governing the certification of personnel involved in the implementation of security measures, and accreditation of training institutions, centers, or schools which cater to the security training needs of transport operators and stakeholders.

To confirm the effectiveness of this core function, the IMO visited Magsaysay Learning Resources Inc., one of the OTS-accredited institutions, which adopts and implements the prescribed maritime security curriculum and Program of Instruction (POI).

IMO positively noted that the Philippines is well-situated on the international maritime policies and protocols, and that it fully implements the provisions of the ISPS Code, even promulgating a national transportation security program to cover non-SOLAS ships and port facilities.

For IMO representative, Alyekka Stella Aber, the Philippines has always been a good example in the efficient implementation of the ISPS Code, not only to its neighboring ASEAN countries, but to the rest of the IMO member states.

The OTS, along with other agencies under the DOTr, assured that Philippines, being a maritime and archipelagic nation, remains committed to international maritime standards, and proactively promotes a strong security culture.

The IMO representatives to the Philippines include Mr. Mourad Ghorbel, Technical Officer – Maritime Safety Division, Ms. Alyekka Stella Aber, and Atty. Josephine Uranza, IMO Regional Presence for East Asia.

Also present were representatives from PPA, PHIVIDEC Industrial Authority, Regional Ports Management Authority – Bangsamoro Autonomous Region in Muslim Mindanao, Subic Bay Metropolitan Authority, and Cebu Port Authority.

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Shipping companies in Asia and around the globe are steaming ahead with efforts to minimize their carbon footprint as the urgency to decarbonize intensifies after a fairly smooth transition to the International Maritime Organization’s low-sulfur mandate for marine fuels.

The IMO in April 2018 laid out its strategy to reduce the shipping industry’s total greenhouse gas emissions in 2050 by at least 50% from 2008 levels, and to reduce CO2 emissions per transport work by at least 40% by 2030.

Various non-government environmental organizations recently voiced support for the emission reductions at IMO’s virtual GHG talks in early July.

The NGOs in a joint statement said “good technical progress” made at the virtual event “revealed that a properly enforced goal-based operational efficiency measure would unlock net savings for the shipping industry, as well as reducing CO2 emissions, and … looks increasingly inevitable.”

Shell, Deloitte Netherlands and Deloitte UK collaborated in a report released July 7 showing 95% of shipping executives interviewed worldwide viewed decarbonization as important, or a top-three priority, and nearly 80% noted its importance had increased significantly over the past 18 months.

“While shipping leaders are rightly focused on the current challenges of the COVID-19 pandemic, our research shows that they still have their sights on the horizon and identify decarbonizing shipping as a top priority,” Grahaeme Henderson, vice president Shell Shipping & Maritime, said in a statement then.

Companies ramp up efforts

Shipowners are already making plans to intensify their GHG initiatives.

On July 7, Japan’s Kawasaki Kisen Kaisha, or K Line, revised its Environmental Vision 2050-Blue Seas for the Future, rearranging its targets into decarbonization with an “aim for zero environmental impact,” and setting new milestone goals.

K Line said it now targets improving CO2 emission efficiency for 2030 by 50% compared with 2008 levels, surpassing the IMO target of a 40% reduction.

Last year, NYK dry bulk carrier Frontier Sky conducted a trial use of biofuel, considered carbon-neutral, in Europe after the fuel was bunkered at the Port of Rotterdam in the Netherlands.

Taiwan’s Yang Ming Marine has already met its IMO 2030 target roughly over a decade early. In 2019, its fleet’s average carbon intensity – CO2 emissions per transport work—was down 51% compared with 2008 levels, falling from 99.4 g/TEU-km to 48.1 g/TEU-km, the company recently said.

Japanese steel firms JFE Steel Corp. and Nippon Steel Corp. recently formed a working group within Japan’s Carbon Capture & Reuse Study Group to advance initiatives for zero-emission ship fuels through the use of methanation technology. The steel firms intend to recycle carbon dioxide emitted from their manufacturing operations to produce synthetic methane.

Ports to play pivotal role

Ports and port authorities will play a strategic role in decarbonization, and some have already listed the environmental push as a priority in their maritime agenda.

Singapore, the world’s largest bunkering port, has launched a Maritime GreenFuture Fund to create ecosystems for trials and test-bedding of low-carbon technologies.

Supported by the Maritime and Port Authority of Singapore, the Singapore Maritime Foundation has also established an International Advisory Panel on Maritime Decarbonization to foster a strategy to achieve GHG emission cuts.

Singapore and ports in Japan, China and South Korea are also promoting LNG bunkering. LNG bunkering is a promising option as it can easily serve the maritime industry, Jan-Olaf Probst, business director container ships DNV GL, said in a webinar July 1.

LNG fueled shipping fleet

LNG as a marine fuel not only cuts sulfur emissions, but compared with existing heavy marine fuel oils emits 90% less nitrogen oxide. Through best practices and appropriate technologies it minimizes methane leakage, and realistically reduces GHG by 10%-20% with a potential for up to 25%, according to industry sources.

South Korea’s Busan Port Authority has agreed to form a LNG bunkering joint venture with other local partners including Korea Gas Corp., Posco International and oil refiner S-Oil Corp.

A Kogas official told Platts the company plans to sell 1.36 million mt of LNG to ships by 2030, with Won 1 trillion ($832 million) in revenue, through the bunkering joint venture, and reduce 8,315 mt of sulfur oxides and 2,557 mt of fine dust emissions by then.

Accelerating decarbonization

In the short term, the maritime industry should invest in initiatives that bring incremental energy-efficiency gains, industry sources said, adding this could include ordering more eco-friendly smart vessels, vessel modification and optimization projects for the existing fleet.

In the end, concerted coordinated industry efforts as well as continued research and development for energy efficiency improvements will accelerate the pace of GHG emission cuts as will increased pressure from customers to address climate change, sources said.
Source: Platts

The IMO’s hard-won 2018 agreement on shipping’s greenhouse gas reduction targets for 2030 and 2050 have now been superseded by more ambitious requirements set forth in last December’s European Green Deal. Once again, the European Commission has forced shipping’s hand, risking the creation of separate emissions regimes in different geographies.

Whilst many of those at shipping’s top table welcome the direction of travel, few are looking forward to the journey, not least because there will be no deep-sea low or zero-carbon fuel options available for many years.

“The coffee’s not coming from Starbucks,” declared Ms Şadan Kaptanoğlu, Managing Director of Turkey’s Kaptanoğlu Shipping and President of BIMCO at an online press conference recently. She was speaking about the importance and resilience of global supply chains which, despite major disruption in other transport sectors, have continued to function throughout the pandemic.

“Without shipping, without the global supply chain, we cannot survive,” Kaptanoğlu said, identifying recent disruptive developments, including trade wars, as potentially damaging. Shipowners had to be able to operate competitively, she added, citing a Turkish idiom which says that when things get tough, people break the rules.

As a truly international business, shipping needs a set of global rules and regulations to ensure fair competition. Kaptanoğlu made her comments at a press conference convened by the organisers of the postponed Hamburg shipping event, SMM. As the participants agreed, turning a global transport sector which is almost entirely reliant on the only widely available source of cheap fuel – oil – into a climate-friendly business is not a short-term process. Mid-century is little more than one generation of ships from now.

Critical role

Kaptanoğlu’s reference to coffee was intended to emphasise the fact that the vast majority of the world’s public, including most politicians, have no idea how their cars, food, fuel, medicines and microwaves reach shops and other outlets. They may know that ships have a role in the world’s supply chain, but they certainly have no comprehension of the extent of shipping’s critical role.

Nor do most people realise that although some cargoes are shipped by sea after short voyages from neighbouring countries, most shipments arrive in Europe following long hauls from faraway places in Asia, the Middle East and the US. Meanwhile, very few people outside of shipping have even heard of the 174-member International Maritime Organization (IMO) or its continuous work on issues including safety, ship efficiency and the sector’s environmental profile.

It is against this unfortunate backdrop that global shipping, under the auspices of the IMO, has embarked on its ambitious decarbonisation journey following a hard-won compromise agreed in 2018. By 2030, international shipping should have reduced its carbon emissions by 40% compared with 2008 levels, and by at least 50% by 2050, the IMO has declared. These ambitions stand until 2023 when the IMO will decide whether or not they need to be revised.

Considering that its members include major oil producers whose economies are oil-dependent, climate change deniers, and developing countries with more immediate concerns including regional conflicts, famine and broken economies, the 2018 compromise was itself something of a miracle.

No easy alternative

The IMO’s targets are unquestionably ambitious. Experts point out that almost all seagoing vessels are powered by hydrocarbons, mostly heavy residual fuels from the bottom of the barrel … quite literally. Today, there is no large-scale alternative. Any future option, moreover, together with a global distribution network, will take many years and billions of dollars to develop.

But pressure is mounting, particularly since Covid-19 has amply demonstrated the fragility of human existence. The sustainability of our planet and cutting greenhouse gas (GHG) emissions have leapt up the agenda. And transport – cargo shipping in particular – is highlighted with a red star.

Even before the virus struck, politicians in Europe were throwing their weight behind new climate initiatives. With good cause. Despite growing concern about global warming and the many initiatives to tackle GHGs. DNV GL, a classification society, says that emissions have continued to rise steadily. At a press briefing late in June, however, it suggested that the impact of Covid-19 could mean that 2019 turns out to be the year of peak emissions.

On December 12 last year, just as the first Covid-19 infections were developing in China, European Commission President Ursula von der Leyen announced the European Green Deal (EGD), an ambitious move to transform the high-emission, carbon-based economy of the 27-member European Union to a low-emission one. Through a series of ten key steps, the ex-German Defence Minister announced “Europe’s man-on-the-moon moment”, and a range of measures to transform every sector of the European economy. Including shipping.

Initial estimates suggest that the EGD could cost €1trn. Others believe it could be three times as much. No-one yet knows where the money will come from.

The EGD leaves the IMO’s 2030 and 2050 ambitions way behind. Instead of a 40% cut in GHG emissions by 2030 compared with 2008, the EGD’s target is a 50-55% cut compared with 1990. By the middle of the century, the von der Leyen plan envisages net-zero emissions across the entire bloc, compared with the IMO’s ambition of at least 50% for international shipping.

So, what is the feedback on von der Leyen’s EGD from shipping’s seasoned diplomats? First of all, there is uncertainty. “Whatever the EU decides to be applicable for ships calling at EU ports will be additional to IMO rules,” explained Lars Robert Pedersen, BIMCO’s Deputy General Secretary. “If such regional requirements are too stringent, some ships may not be able to call.”

Martin Dorsman of the European Community Shipowners’ Association (ECSA) believes that shipping should be regulated at an international level – for environmental affairs, by the IMO. He would like to see the EU playing a proactive and constructive role at IMO meetings, as well as providing financial support for R&D, creating the right regulatory framework for tests, and stimulating investment in bunker infrastructure for new fuels.

Dorsman is emphatic that a universal regulatory regime is essential across the world – ensuring no risk of conflicting regulations and no risk of compliance difficulties. “Placing additional burdens of EU shipowners in these very challenging times would be counterproductive,” he said.

BIMCO’s Pedersen referred to a proposal that an International Maritime Research Fund (IMRF) should be established, overseen by an independent board, to collect and disperse up to $5bn in funding for R&D into new marine fuels over a ten-year period. “The shipping industry does not yet have available sustainable options to decarbonise,” he pointed out. “That is why the industry has suggested setting up the IMRF. When the options are commercially available, their cost may call for carbon pricing to drive up their uptake. It makes no sense to discuss carbon pricing before the right options are available.”

Shipping economist and non-executive President of Clarkson Research Services, Martin Stopford, believes that after 50 years, globalisation has run its course. He thinks that shipping can meet at least the IMO targets by taking various steps such as reducing speed, raising efficiency in terms of performance and cargo volumes shipped, reducing the carriage of hydrocarbons as demand falls away, and focusing on short-sea and regional shipping as an alternative to more carbon-intensive transport modes such as road and rail.

As is already apparent in a range of application across Europe, new sources of power including hybrids incorporating electricity and fuel cells are already being used in short-sea trades. Coastal and short-sea shipping provides a “brilliant” setting in which to test new propulsion technologies, Stopford said. Certainly, the regulatory backdrop is far simpler – short-sea trades usually fall under the jurisdiction of individual coastal states, rather than the international regulatory framework agreed at the IMO.

Norway is in a fascinating position. On the one hand, it has built its supreme wealth on the development of oil and gas. On the other, its state energy company, Equinor, has the most ambitious emissions-cutting targets of any energy firm anywhere. CEO of the Norwegian Shipowners’ Association, Harald Solberg, takes a pragmatic view on decarbonisation. Many of his members are involved in energy-related transport.

“We’re not too worried about the gaps between the [emission reduction] targets,” he says. “Both initiatives clearly pull in the same direction. We still firmly believe a regulatory solution has to come at [an IMO] level, but we have fully endorsed the aims of the Green Deal and want to see the EU take a lead at the IMO on R&D.”

Solberg pointed out that the Association’s shipowners had already agreed an emissions strategy with the same targets as those set out in the EGD. “As a national association, we are eager to speed up pace as much as possible,” Solberg said. “To facilitate this, NSA members will, from 2030, only order vessels with zero-emissions technology. These are hairy goals, but we want to use the 2020s to make that technological leap.”

Source: motorship

The IMO has made its compendium of data structures available as a tool for software developers to create systems for exchanging data electronically.

The aim is to facilitate the streamlining of the many administrative procedures necessary when ships enter or leave port.

The IMO Compendium is a reference manual containing data sets and the structure and relationships between them that will enable IMO Member States to harmonize the information needed to fulfil the mandatory obligation (in place since April 2019 through the Facilitation of International Maritime Traffic (FAL) Convention) for the reporting formalities for ships, cargo and people on board international shipping.

In its Annex, the FAL Convention contains standards and recommended practices and rules for simplifying formalities, documentary requirements and procedures on ships’ arrival, stay and departure. Since April 2019, the FAL Convention makes it mandatory for ships and ports to exchange FAL data electronically and encourages the use of the single window concept in which all the agencies and authorities involved exchange data via a single point of contact.

Ideally, this helps make cross-border trade simpler and the logistics chain more efficient for the more than 10 billion tons of goods which are traded by sea annually across the globe.

The IMO is not the only organization dealing with electronic data exchange in maritime transport, but the World Customs Organization, the United Nations Economic Commission for Europe and the International Standards Organization have aligned their own data structures with the IMO Compendium to promote harmonization.

Source: maritime-executive

NEW YORK/LONDON – After strong profits in 2019, oil traders have been hit hard early in 2020, losing tens of millions of dollars on bets on gas oil price spreads due to an unexpected collapse in demand in January, sources familiar with the matter said.

The global oil industry expected this year would bring a sharp increase in marine gasoil demand due to new regulations from the International Maritime Organization (IMO) that limited the use of high-sulfur fuel oils beginning in January. Traders expected gasoil demand would spike as it met those regulations, so it could be substituted for higher-sulfur fuels.

Instead, gasoil and diesel demand dropped worldwide due to a warmer-than-expected winter in the Northern Hemisphere and a drop in consumption due to the global spread of the coronavirus.

ICE Gasoil, the European distillate benchmark, and U.S. benchmark heating oil futures last week both hit lows not seen since July 2017. Both are down about 25% this year.

Russell Hardy, chief executive of oil trading group Vitol, said in late February that he expected at least a 2.2 million-barrel per day drop in oil demand in the first quarter largely due to the coronavirus.

“Everyone was long diesel because of IMO,” one diesel trader said. “I think everyone lost and no one won.”

Money managers have stampeded out of positions betting on gains in gasoil. Those net long positions in ICE gasoil hit a more than seven-month high in early January and in a span of about six weeks dropped to their least bullish level in more than a year.

Most traders do not publish detailed results of their gains and losses on trading in individual products. However, eight market sources said numerous trading houses and oil majors have had losses on diesel due to wrong-way bets. The most active oil majors in trading are Total, BP and Shell, while the biggest oil traders are Vitol, Glencore, Trafigura, Gunvor and Mercuria.

Total did not respond to a request for comment. The others all declined comment.

Hedge fund Andurand Capital reportedly lost 8% in January on gasoil, according to the Financial Times.

Trading in U.S. gasoline refining margins has been choppy. The spread narrowed to its tightest level in four months in late January, only to spike to its widest gap since July a month later.

The spread of the coronavirus, particularly in Italy’s industrial heartland in the north, worsened the outlook for diesel. Diesel profit margins in Europe sagged to near a four-year low last week, below $7 a barrel.

“Expectations were that we would see a large share of the shipping industry shift to marine gasoil, which would be a bullish scenario for middle distillate cracks,” ING said in a note.

Another trader said most of the bullish positioning was concentrated in spreads – particularly the gasoil versus fuel oil contracts.

During the latest quarterly results, BP said 2019 was a record year for oil trading, while Shell said 2019 was its best year in the last decade for its marketing businesses with a strong performance from trading.

Glencore said its oil trading results were “excellent” and helped offset other headwinds. A source familiar with Trafigura said the firm had a record first quarter for its financial year that starts Oct. 1.

Other firms have not yet disclosed their results.

Source: energy.economictimes.indiatimes

SINGAPORE (Reuters) – Seven months after the United Nations’ shipping agency brought in hotly anticipated new rules to curb emissions, the raft of technical issues and leap in fuel prices that were expected to result have failed to materialise, ING Bank said on Tuesday.

Global shipping and oil firms had flagged major concerns over potential disruptions from International Maritime Organization (IMO) rules implemented at the start of 2020, which capped marine fuels’ sulphur content at 0.5% against 3.5% previously.

However, shipping and marine fuel suppliers say expected technical issues, such as damage to engines from blending different streams of very low sulphur fuel oil (VLSFO), have proved easier to resolve than previously thought.

Meanwhile, as the coronavirus outbreak battered global oil prices and slashed demand, prices of VLSFO slid along with those of other products.

“We are now well into the IMO 2020 shipping regulations, and it is clear that all the hype leading up to implementation was exaggerated,” said researchers at ING Bank in a note on Tuesday.

The impact of the transition to lower sulphur fuels was partly softened by the COVID-19 pandemic, said ING.

“COVID-19 has only added further pressure to 0.5% very low-sulphur fuel oil (VLSFO), with road transportation having been hit significantly as a result of country lockdowns,” said the Dutch bank.

Lower refiner output of road transportation fuels like gasoline and diesel during the lockdowns helped “ensure enough VLSFO availability for the shipping industry”, said ING.

However, with gasoline demand on the rise following the reopening of economies, VLSFO supplies could tighten throughout the remainder of the year if a resurgence in cases does not lead to renewed lockdowns.

Industry participants had expected ships to switch to burning gasoil to comply with the rules, but a jump in VLSFO output has seen more ships adopt that fuel instead, as a cheaper and more operationally familiar fuel.

In Singapore, by far the world’s largest bunkering hub, VLSFO sales account for about 70% of the monthly total.

However, with the market weighed down by rising inventories amid increasing output, the shipping industry’s preference for VLSFO has offered little support to prices, said ING, and it has performed more weakly than other marine fuels.

Third-quarter bunker fuel supply is estimated to rise by 620,000 barrels per day (bpd) from the second quarter as China and Brazil lift production, consultancy Energy Aspects said.

Dubai became the latest state to join the ongoing calls for ports around the world to make accommodations to permit crew changes. In other locations, including the Philippines, countries have also amended their processes in response to the calls from the IMO and other shipping organizations.

Dubai and the Philippines were both signatories to the statement issued at the end of the International Maritime Virtual Summit hosted on July 9 by hosted by the United Kingdom that discussed the impact of COVID-19 on crew changes. At the conclusion of the summit, thirteen member states issued a joint statement pledging to address solutions to the problems identified for seafarers, including recognizing the importance of their role in maintaining trade and commerce during the pandemic.

IMO Secretary-General Kitack Lim on July 13 sent a letter to  member states urging others to commit to the principles in the joint statement that include designating seafarers as key workers. The member states also committed to explore issues ranging from accepting seafarers’ ID documents as evidence of their key worker status to implementing protocols for crew changes by reviewing national quarantine restrictions and increasing access to commercial flights. In his letter, Lim urges the wide dissemination of the statement and invites member states to contact the U.K. government to join the declaration.

The Dubai Maritime City Authority (DMCA) in its July 15 announcement said that it is now allowing the resumption of crew changing across all ports and anchorage areas in Dubai. Crew changes are being allowed provided they comply with the COVID-19 guidelines and requirements set by the Dubai Health Authority (DHA).

Under Dubai’s new resolution, all agents are required to coordinate with the DMCA and other UAE authorities to ensure the quick processing of crew transfers to and from ships and the airports. All agents are urged to undergo the required medical examinations in compliance with the preventive procedures and guidelines for the COVID 19 virus to preserve the health and safety of both the ship’s crew and relevant personnel.

The DMCA also recently issued a resolution directing the resumption of maritime operations across Dubai’s anchorage areas, which is aimed at enabling ships located in the emirate’s territorial waters to have access to a diverse range of services, including maintenance and repair. They are still required to obtain the proper permits from the DMCA and other relevant authorities and all companies are urged to adhere to the guidelines and health rules to maintain the health and safety of ship crew, visitors and employees.

Earlier in July, the Philippines announced it was opening a “green lane” to allow the free movement of seafarers and personnel across borders. The Philippine government undertook the initiative to ensure that seafarers have access to “speedy and safe travel, subject to health protocols mandated by the government.” This includes safe and swift disembarkation and crew change while also seeking to prevent the spread of COVID-19 for both Filipino and foreign seafarers whether inbound, outbound, or transiting during crew change or repatriation.

“With these guidelines, we are answering the call of the International Maritime Organization (IMO) and the maritime industries, to put in place a framework for ensuring safe ship crew changes and travel during the COVID-19 pandemic,” Foreign Affairs Secretary Teodoro L. Locsin Jr.

The Philippines published a Joint Circular for seafarers, licensed manning agencies, shipping companies, airlines, and other entities involved in facilitating the travel of seafarers for purposes of crew change and repatriation during the COVID-19 pandemic. It sets the minimum standards and process flows that all stakeholders should follow to facilitate the speedy and safe conduct of crew change or repatriation. According to the government, the protocol seeks to complement the existing standard health and safety protocols while creating controlled travel corridors.

The Philippines, which had a large number of overseas foreign workers at the beginning of the pandemic, has been working hard to facilitate the return of its citizens and accommodate crew changes. As of this week, nearly 79,000 Filipinos working overseas have been brought home including over 37,000 seafarers with the most recent repatriates arriving from France, the Netherlands, Qatar, Saudi Arabia, the UAE, the USA, and Vietnam. The return of stranded seafarers from Europe continued this week as the Department of Foreign Affairs facilitated the repatriation of 1,204 sea-based workers who arrived from Italy, the Netherlands, Norway, and Turkey.

Source: pmo

With a planned effective date of January 1, 2020, the International Maritime Organization’s  (IMO) new regulations (IMO 2020) limit the sulfur content in marine fuels that ocean-going vessels use to 0.5% by weight, a reduction from the previous limit of 3.5% established in 2012. The IMO adopted the plan for this policy change in 2008, and in 2016 reaffirmed an implementation date of 2020.

The change in sulfur limits has wide-ranging repercussions for the global refining and shipping industries as well as for petroleum supply, demand, trade flows, and prices. The shipping and refining industries have already begun making preparations and investments to varying degrees to accommodate IMO 2020 regulations.

As the implementation date for the 0.5% sulfur cap approaches, the U.S. Energy Information Administration (EIA) expects that shifts in petroleum product pricing may begin as early as mid-to-late 2019. EIA anticipates that the effects on petroleum prices will be most acute in 2020, and the effects on prices will be moderate after that. However, the regulations will affect petroleum supply, demand, and trade flows on a more long-term basis.

EIA shows the effects of these new regulations in both the Short-Term Energy Outlook (STEO), published monthly, and the Annual Energy Outlook 2019(AEO2019), released in January 2019. Because IMO 2020 will affect petroleum markets across several years, EIA’s STEO forecast and AEO2019 projections provide complementary insights into the effects of the regulations.

Both STEO and AEO2019 are based on current laws and regulations. AEO2019 centers around a reference case based on relationships and general equilibrium models that satisfy projected energy demand under a set of constraints.

STEO provides forecasted data that are updated every month. EIA uses a combination of econometric models based on historical data to forecast where EIA anticipates energy markets will move in the next two years. The STEO relies on historical data, short-term trends, and analyst judgment in creating this forecast.

Although the STEO forecasts fewer variables than the Annual Energy Outlook, STEO’s publication frequency allows EIA to incorporate developments related to the IMO rule more regularly than AEO2019, which projects variables at an annual frequency through the year 2050. In addition, because the STEO is published monthly, EIA adjust its forecasts continuously to incorporate new information.

Because the current STEO forecasts end in December 2020, the data in AEO2019 provide EIA’s projections with insight into how IMO 2020 will affect petroleum markets beyond 2020. In addition, AEO2019 has more detailed data on refinery operations, marine fuel use, and fuel costs than the STEO. Projections in the Annual Energy Outlook are generated from EIA’s highly detailed, structured equilibrium models in its National Energy Modeling System.

The first section of this report explains the findings related to IMO 2020 from the STEO and AEO2019 analysis. The second section discusses the uncertainties that might affect the way that actual outcomes deviate from EIA’s forecasts and projections.

Globally, marine vessels are a critical part of the global economy, moving more than 80% of global trade by volume and more than 70% by value. They account for about 4% of global oil demand (about 4.3 million barrels per day (b/d) according to the International Energy Agency). In the United States, consumption of bunker fuel (the fuel mix consumed by large ocean-going vessels) is a relatively small share of total energy demand. In 2018, U.S. bunker fuel consumption represented about 3% of total transportation energy use and just 2% of total U.S. petroleum and liquid fuel use. Of the 4.3 million b/d of global marine sector demand, about 10% of those sales originated at U.S. ports. Those sales of marine fuels at U.S. ports represent the AEO2019 international marine demand projections.

Residual oil—the long-chain hydrocarbons remaining after lighter and shorter hydrocarbons such as gasoline and diesel have been separated from crude oil—currently accounts for the largest component of bunker fuel. Although distillate fuels, the other large component in bunker fuel, have alternative uses and markets outside of marine fuels, residual oils have few other alternative markets. About 80% of total U.S. residual fuel demand is for marine bunkering. Therefore, the steps vessel operators take to comply with the new IMO 2020 sulfur limits have major implications for the use of residual fuel oils in marine fuels, for the price of residual fuel oil and its competitors, and for the refineries that produce residual fuel oil.

Operators of marine vessels have several options for complying with IMO 2020 sulfur limits. They can switch their ships to a lower-sulfur fuel that complies with the new IMO rules, which would likely increase demand for distillate and low-sulfur residual oils. Another option is to use scrubbers to remove pollutants from ships’ exhaust, allowing ships to continue to use higher-sulfur fuels. Vessel operators can also switch their ships to non-petroleum-based fuels, such as liquefied natural gas (LNG). In the AEO2019 Reference case projections, the fuel mix of ocean-going marine vessel bunkering in the United States changes significantly because of the new global sulfur fuel limits.

The AEO2019 and STEO projections only consider sales of bunker fuel from ports inside the United States. Because the United States is a member of the IMO and U.S. port and maritime authorities currently enforce all IMO regulations, the implied rate of compliance to the IMO sulfur limits for the United States in the AEO2019 and STEO is 100%. Although the level of compliance with the new IMO sulfur limits may vary globally, the AEO2019 (and the STEO) do not make explicit assumptions about compliance levels beyond the United States.

EIA projects that the share of high-sulfur residual fuel oil consumed by U.S. ocean-going bunker fuel markets drops from 58% in 2019 to 3% in 2020, and then rebounds to 24% in 2022. Despite a recent increase in scrubber installation and orders, the number of vessels installed with scrubbers required to continue using high-sulfur residual fuel oil remains limited. As a result, AEO2019 projects a large but brief increase in the share of distillate fuel oil and low-sulfur residual fuel oil in 2019 and shortly after 2020. A recovery in high-sulfur residual fuel oil consumption driven by scrubber installations does not occur until 2022 but at levels far lower than before the 2020 IMO rule implementation. After 2023, high-sulfur residual fuel oil consumption declines throughout the AEO2019 Reference case projection, down to a 22% share of U.S. ocean-going marine vessel bunker fuel by 2025. In AEO2019, EIA projects that the share of low-sulfur residual fuel oil consumed in U.S. ocean-going marine vessel bunkering will increase from 38% in 2020 to 43% in 2025.

Similarly, EIA projects that the need to use distillate in lower-sulfur bunker fuels will increase distillate’s share of U.S. bunker demand from 36% in 2019 to 57% in 2020, although this share declines to 29% by 2025.

Outside of residual fuel oils and distillate, STEO forecasts that the use of LNG in marine bunkering will be limited through 2020. Similarly, the AEO2019 Reference case projects limited use of LNG in the next five years, reflecting the high initial infrastructure development cost and the limited current infrastructure to accommodate LNG bunkering at U.S. ports. In the medium and long term, this infrastructure barrier decreases, and LNG’s share of U.S. bunkering grows to 7% in 2030 and to 10% by 2050.

Despite bunker fuel’s relatively small share of both the global and U.S. liquid fuels markets, EIA expects a shift in demand in the global bunker fuel market from high-sulfur fuel oil to low-sulfur distillate fuel and low-sulfur fuel oil. This shift will result in a change in the relative prices of those fuels. EIA expects the demand shift to increase global prices for light- and low-sulfur refined petroleum products such as diesel fuel, gasoline, jet fuel, and low-sulfur fuel oil. This shift, in turn, will lead to a decrease in the prices of high-sulfur refined petroleum products, such as high-sulfur fuel oil. This price premium for lower-sulfur refined products will be most evident at the wholesale (refinery and bulk terminal) level in the form of higher refining margins for low-sulfur products such as diesel fuel.

Source: fuelsandlubes