IMO 2020 Sulphur Cap
As of 1st January, 2020, amendments to MARPOL brought in a global sulphur cap of 0.50%. This regulatory change, although undoubtedly a positive one for the marine environment, has nevertheless brought with it significant commercial, financial, legal and practical implications for owners and charterers alike.
In this dedicated section of our website, we offer a series of focused bulletins as well as resources and external industry guidance for the benefit of our Members.
In the lead-up to 2020, owners and charterers alike sought to implement practical and contractual measures in time for the implementation of the sulphur cap on 1st January, 2020 and the carriage ban on 1st March, 2020.
Although the transition clauses issued by BIMCO are not of on-going relevance, Members are reminded to consider the incorporation of appropriate clauses relating to sulphur content and other relevant matters when drafting new charterparties. See our commentaries on the BIMCO IMO 2020 clauses and, in the context of voyage charters, bunker pricing clauses.
Bunker quality and compliance
With fuel regularly being found to have sulphur contents only marginally above the 0.50% cap, a common and often complex debate that has arisen, and continues to arise, is whether there a margin for error.
Aside from sulphur content, many of the quality issues associated with VLSFO that were anticipated at the outset of 2020 have indeed come to the fore. In particular, we have seen a number of cases involving high sediment content (TSP), as well as low flash point, excess cat fines and presence of unidentified contaminants. There have been incidences, for example, of jet fuel (surplus during the pandemic) being used in bunkers, with potentially volatile results. Owners have also encountered issues with the incorrect use of lube oils with the new types of fuel.
Although many of the teething problems with the new fuel appear to have settled down, there continues to be a steady stream of fuel quality issues which seems likely to continue for the short term at least, given the relatively volatile and varied nature of low sulphur fuel.
For detailed guidance to dealing with fuel quality claims, please see our comprehensive Guide to Bunker Claims. The Club can also provide Members with up to date reports on bunker quality and availability.
Finally, although the uptake of scrubbers as an alternative to using VLSFO has been relatively low, and may remain so in light of the narrowing price difference between VLSFO and HSFO, we remind readers of our commentary on the issues associated with scrubbers which considers some of the contractual considerations and practical pitfalls involved.
Whilst it is hoped that many of the disputes relating to the IMO sulphur cap will continue to tail off as problems with new fuels are ironed out and parties now have the appropriate contractual and technological framework in place, if issues do arise, Members are invited to contact the Club for further guidance and support.
The Club has partnered with Veritas Petroleum Services (VPS), a global market leader in marine fuel testing and bunker surveys.
Due to the reduced demand during the Covid-19 pandemic for both road transportation and aviation fuels, it appears that these fuels are being used as blending agents in marine fuels.
The increased use of very low sulphur fuel oil (“VLSFO”) following the new MARPOL sulphur regulations has brought with it a number of challenges for ship owners. One such challenge is how best to manage the use of cylinder lube oils with VLSFO to reduce the risk of accelerated wear to engine components. Incidents of this nature are coming to light in growing numbers and Members are therefore advised to pay particular attention to potential issues arising from the use of lube oils.
Concerns that wash water discharged from open loop scrubbers may have harmful effects on local waters has led to many ports banning ships fitted with open-loop scrubbers or impose additional requirements relating to the discharge of wash water from such systems.
In the last edition of our Sulphur Series we foreshadowed some of the potential considerations relating to the use of scrubbers as a means of compliance with the MARPOL sulphur cap regulations. Now that scrubbers have come into common usage on many ships, we take an updated look at some of the legal and practical issues that have come to the fore. Find out more.
Are you ready for the carriage ban?
As of 1st March, 2020, ships that were not fitted with scrubbers will not be permitted to carry on board fuel with sulphur content in excess of 0.50%, even if such fuel is not intended to be used. Any non-compliant fuel remaining on board will therefore need to be removed by 1st March.
As 1st January, 2020 looms large, with less than a month to go, many operators have started to use low sulphur fuels and, in line with industry predictions, issues are already being experienced in relation to the measurement of sulphur levels. In particular, it appears that purported “low sulphur” bunkers are regularly being found to be above the required 0.50% limit and discrepancies between test results for the same bunkers are being noted.
The first IMO 2020 compliant low sulphur fuels (“LSFO”) are starting to be trialled and appear on the market, but at present it is still really anyone’s guess as to how these new types of fuels will behave. Linked with this uncertainty are a myriad of potential concerns as to fuel quality and handling issues. We outline some practical and contractual precaution that can be taken to minimise risk and scope for disputes. Find out more....
On the 1st July 2019 the International Chamber of Shipping issued a document entitled 'Guidance to Shipping Companies and Crews on Preparing for Compliance with the 2020 Global Sulphur Cap’ for Ships’ Fuel Oil, in accordance with MARPOL Annex VI.
In response to industry-wide concerns as to whether there will be sufficient supplies of low sulphur fuel available after 2020, the IMO has made provisions in MARPOL. In the event of non-availability, ships are not required to deviate to find compliant fuel and may submit a fuel oil non-availability report, or “FONAR”. In this article we consider the extent of the protection afforded by these provisions and related contractual issues.