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Majority of IMO 2020 compliant bunker demand to be met by marine gasoil, low sulfur fuel oil: IBIA exec

Singapore — Compliance to the International Maritime Organization's global sulfur limit rule is expected to be high with about 95% of the compliant bunker fuel demand likely to be met by marine gasoil and low sulfur fuel oil come 2020, Simon Neo, regional manager Asia at IBIA, said Tuesday.

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"Before 2020, things need to be ready as the date is cast in stone ... IMO 2020 is final and there will be no delay," Neo said at an industry event in Singapore.

The IMO will cap global sulfur content in marine fuels at 0.5% starting January 1, 2020, from 3.5% currently. This applies outside the designated emission control areas where the limit is already 0.1%.

Shipowners will have to switch to more expensive cleaner fuels or consider alternative fuels such as LNG or use HSFO with scrubbers to comply with this rule.

Scrubbers uptake will likely remain limited by 2022 or 2023, with the number of ships with scrubbers expected to reach about 3,800 at most, Neo said. That equates to less than 5% of the global fleet.

Reliability around scrubber technology and potential changes in the regulatory framework create uncertainty around the accelerated use of scrubbers, he said.

Specifications to use alternatives such as LNG, LPG and methanol are not ready yet to foster their widespread adoption as bunker fuels, while infrastructure availability for LNG also poses a concern, particularly in the smaller ports, Neo said.

Besides LNG, LPG and methanol form part of the hydrocarbon chain and will not help much in meeting upcoming greenhouse gas emissions rules due to their methane component, Neo said.

Blended fuels come with their own complexities, Neo said.

"If a vessel is taking LSMGO, there is not much of an issue but if a shipowner is buying low sulfur marine fuel oil, then the question is are we getting a straight run or a blended fuel?" Neo said.

Another concern is around how much gasoil should one blend with fuel oil to get a 0.5%-sulfur compliant fuel or should one be blending with cutterstocks or other blends, he said.

"Cargo traders and oil majors have not issued clarity around this aspect. So a lot of question marks are out there," he added.

Today, bunkers have big issues around quality, Neo said, adding that during the past few months, over 300 vessels globally was affected by fuel contamination matters.

The contamination, which originated in Houston early this year, spread worldwide, with about 50 vessels estimated to be tainted with chemicals in Singapore alone around June-July, Neo said.

Shipowners worried about quality or contamination may have to consider gasoil because gasoil itself is already 0.5%-S compliant fuel, Neo said.

This just goes to show that a majority of the vessels will likely rely on traditional fuels-- gasoil or low sulfur fuel oil, he said.

Meanwhile, the carriage ban on HSFO in bunker tanks from March 1, 2020 on ships without scrubbers will likely help ensure compliance to the IMO rule in the high seas, Neo said.

Port authorities are also expected to step up enforcement measures at the ports through imposing fines, penalties or even vessel arrests in case ships don't comply, he said.

IBIA will continue to build a better understanding of the guidelines ahead of 2020, to prevent chaos, Neo said.

-- Surabhi Sahu, surabhi.sahu@spglobal.com

-- Edited by Elizabeth Thang, newsdesk@spglobal.com

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