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The time is now for bunker buyers to find fuel: Capital Link Forum

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Bunker buyers should find their fuel suppliers as soon as possible, as compatibility and availability of compliant low sulfur fuel and scrubber-ready high sulfur fuel remain uncertain ahead of the January 1, 2020, implementation of the International Maritime Organization 0.5% sulfur bunker fuel regulation, panelists on the IMO 2020 & Beyond forum at Capital Link Forum said Monday.

John LaRese, technical liaison manager at ExxonMobil Marine Fuels, said the shipping industry is moving from a system of fuel procurement to fuel management in 2020, and emphasized the importance of finding the right fuel type.

"There is no one right answer as to which fuel to use," LaRese said.

"Look for where you need fuels for your particular ships. Pick for individual vessels. Companies that pick the right fuel for their operation will win."

LaRese outlined Exxon's fit-for-use assessment of compliant 0.5% fuel, which started over two years ago, and said Exxon has created a type of fuel that would blend well depending on fuel availability in ports.

"We're making our fuel a little bit more robust. You can't plan on what everyone else's fuel will look like, but if it does get mixed with other fuels it won't cause as many problems," LaRese said.

Problems expected from compliant fuel in early 2020 include blending compatibility and availability. LaRese said old methods of evaluating fuel oil such as CCAI may not be accurate for new types of fuel being developed, and that blends could have problems burning. LaRese said there can also be other issues depending on wax content, viscosity and other factors.

"Opportunistic blenders may not care if the fuel works on board, they just care if it meets the ISO specifications," LaRese said, urging bunker buyers to start discussions now with their trusted suppliers about the specifics of their fuel.

OWNERS DIFFER ON SCRUBBER PLANS

Scrubber plans were heavily discussed at the Forum, with shipowners differing on their stances on scrubbers in regards to IMO 2020 compliance.

Ioannis Zafirakis, director and chief strategy officer at Diana Shipping, said Diana is not investing in scrubber systems, and expected a low number of scrubbers in the market would increase the cost of high sulfur fuels.

"Oil producers can't come to a meaningful result on what to produce and where to provide," Zafirakis said. "Companies changing their entire chartering policy may lose money if the market goes the other way. The extra that scrubber users have paid, you will never get back."

The president of Star Bulk Carriers, Hamish Norton, disagreed with this view, and said the refining industry would have an excess of high sulfur fuel -- the 3.5% sulfur fuel currently permitted through the end of 2019 -- and that the company is contacting suppliers now to provide high sulfur fuel for their fleet, all of which are planned to be outfitted with scrubbers.

Norton supported the choice to install scrubbers as a hedge against the unknown price, availability and compatibility of the new 0.5% low sulfur fuel oil.

"We don't know what the price of compliant fuel is going to be, and the market doesn't know," Norton said. "The only way to hedge is to put in a scrubber that allows you to use residual fuel oil, which will always exist."

Norton also said the company plans to move its business model away from time chartering to spot voyage chartering after 2020.

Infrastructure for bunkering is still under question, as CEO of Team Tankers International Hans Feringa pointed out in a chemical tanker breakout panel. Feringa said high sulfur fuel oil would not be available everywhere after January 1, 2020, and perhaps earlier, with barges and tanks having to be cleaned before the IMO 2020 regulation implementation.

Feringa said trade flows would increase to non-major ports ahead of IMO 2020, and those ports in particular would not have HFO available.

"No one is building new infrastructure. HFO will be replaced by low sulfur blends, and marine gasoil will continue to be available," Feringa said.

--Marieke Alsguth, marieke.alsguth@spglobal.com

--Edited by Jennifer Pedrick, jennifer.pedrick@spglobal.com