1. What are ECA zones?
ECAs (Emission Control Areas) are designated areas where the International Maritime Organization (IMO) has imposed stricter limits on sulphur than on the high seas.
4 ECAs have been designated through the IMO: Baltic Sea (2006) North Sea and English Channel (2007) North American (US and Canada) Emission Control Area (from Aug 2012) Carribean (US Puerto Rico area) from Jan 2014
Further ECAs and other sulphur limits are expected to be put in place within the next 5 years, and the sulphur emission limits for the ECA’s will be lowered over time.
The specific regulations are as follows:
- Emission Controlled Area (ECA)
Current limit 1.00% S (10’000 ppm) Jan 1 2015 0.10% S (1000 ppm)
Current limit 3.50% S (35’000 ppm) 1 Jan 2020/2025 0.50% S (5000 ppm)
In addition to the ECA zones comes special regulatory measures for all EU and Turkish ports as well as California that requires all vessels to use even cleaner ultra low-sulphur fuel.
For the global limit the implementation date will be decided by the International Maritime Organisation in 2018. Notwithstanding their decision the 0.5% limit will apply in European Waters from 2020. Also, note that the global limit will not replace the 0.1% limit of ECAs.
2. How is MGO and low sulphur fuel different from normal bunker?
The difference between the low sulphur fuels (MGO & LSFO) and regular fuel (HFO) lies in the sulphur levels allowed in each type of fuel: MGO (Marine Gas Oil) has a limit of 0,1% sulphur LSFO (Low Sulphur Oil) has a limit of 1% HFO has a limit of 3,5%.
3. I’ve heard that scrubbers are cheaper and will do the trick, why aren’t you using them instead of the more expensive fuel?
Scrubbers (abatement systems) are a compliant, technical approach to the regulations. Scrubber technology is considered to be fairly immature in shipping. In line with our continuous effort to explore new technology, WWL is conducting a pilot project on board one of our vessels in order to evaluate the design, technical, operational, safety, environmental and regulatory matters related to scrubber installations.
Four of the post-panamax HERO vessels that are to be delivered to WWL 2015-2016 will be equipped with scrubbers. However, this is not a solution that is suitable for all vessels. Retrofitting scrubbers on a vessel has been likened to open-heart surgery; it is a highly complicated process and is also very costly.
4. Why should I as a shipper/customer be concerned with if and how my ocean transport provider complies with of sulphur regulations?
The change in the ECA regulations poses an unprecedented challenge to the shipping industry, with big cost implications. If there are no proper enforcement mechanisms in place, the temptation to cheat can be huge. The importance of a level playing field is clear for the shipping industry. But also for shippers, a lack of enforcement poses a major business risk:
- You want to make sure you are getting what you are paying for. What if a supplier can levy a Sulphur Regulation Charge and then decide to stick to HFO and pocket the difference?
- If your ocean transport supplier is not in compliance with regulations and gets stopped, the vessel will be delayed or even impounded, with corresponding delays to product delivery, associated costs and negative end-customer experience. A vessel caught in violation of sulphur regulations will receive a lot of media attention as to its name and cargo; a brand risk for your company.
- You require compliance with regulations in your contracts; if a supplier is found cheating they have breached the contract and you may have to change supplier, with associated supply chain disruptions and uncertainty until you have a new solution in place. Add to that the workload and poor negotiating position associated with a forced procurement situation.
5. We heard that there are new Ultra Low Sulphur Fuel Oils (ULSFOs) coming onto the market that are much cheaper than MGO. Why don’t you use them?
WWL is well aware of these fuels, and has been working with amongst others Exxon to conduct the sea trials of its new ‘HDME50’ fuel. It is a new kind of refinery product for the marine market that is similar in operational characteristics to HFO yet with very low sulphur levels.
However, to date the fuel is essentially at the same price at the point of delivery to the vessel as MGO and is only available in very limited locations and quantities. Additionally it adds operational complexity because it cannot be mixed with other fuels.
The launch of this fuel has prompted other oil companies to follow. We believe competition might help make this a more viable choice and are keeping the situation under close review.