Shippers Fear Engine Failures as Industry is Forced to Upgrade its Fuel
(Bloomberg) -- Add oil tankers breaking down at sea to the list of things shipping companies are worrying about as they brace for a once-in-a-generation overhaul to the kind of fuel the industry must consume.
From Jan. 1, 2020, the vast majority of the world’s merchant fleet will have to use fuel containing no more than 0.5 percent sulfur, down from 3.5 percent in most parts of the world today. The change is expected to upend both shipping and refining industries, with analysts forecasting higher oil prices, slower-sailing ships, and some observers even warning of risks to world trade.
Now more and more of the world’s largest shipping companies and trade groups, already mindful of spiraling costs, are saying there’s a safety risk too. Their primary worry is the lack of a single fuel type that complies with the rules. Since refineries across the world are coming up with different solutions to meet the sulfur-reduction target, owners say their ships’ engines could be damaged by inadvertently mixing incompatible products.
"This is of course a concern, and the marine fuels that can be used when the 2020 regulation is implemented are believed to be more unstable and contain other compounds than what is the case today," said Harald Fotland, Chief Operating Officer at Odfjell SE, one of the world’s largest shippers of chemicals. "Therefore, we have to be even more cautious in selecting fuels."
After years of deliberating, the 2020 start date for the new rules was set in October 2016 by the International Maritime Organization, the United Nations’ shipping agency. Vessels must lower sulfur emissions. Those with exhaust-gas cleaning systems that remove the pollutant will be able to keep burning existing products that are cheaper, but the equipment is expensive and takes up cargo space.
The International Association of Independent Tanker Owners, the largest trade group for operators of ships moving everything from oil to gas to chemicals, is among those concerned.
While individual fuels may not be problematic, mixes could be dangerous, according to Dragos Rauta, technical director at the trade group better known as Intertanko.
“The way the different products work together can produce instability of fuel which can create sediments that can damage the pumps and engines eventually,” he said.
The issues could ultimately stop a ship’s engine, something that would be particularly dangerous in bad weather in busy shipping lanes close to land, according to Rauta.
Shipowners say extensive -- and more frequent -- testing will need to take place to ensure fuels are trusted, but that would take time and money at a time when fuel bills may well be rising anyway.
"This fuel oil will be sold under a specification which in theory should be okay but it appears there may be impurities in them, and these are damaging to our engines," said Flemming Carlsen, Chief Operating Officer of d’Amico International Shipping SA, which runs a fleet of 57 vessels. “We would need to be content that the analysis has proven that this bunker fuel is okay to burn in the main engine.”
There’s also uncertainty about whether there will be enough blended fuel to go round. Some smaller ports may not have access to it, meaning companies including d’Amico will have to use a combination of diesel-like products and low-sulfur fuel oil on their journeys, taking care to ensure the two aren’t mixed.
The IMO’s rules are meant to curb a pollutant that has been linked to environmental issues like acid rain and health concerns including asthma. Shipping groups already complained about the non-standard nature of fuels, and their costs are expected to spiral. A.P. Moller-Maersk A/S, the worlds biggest container shipping line, anticipates a $2 billion increase in its annual fuel bill.
The IMO is in the process of producing guidelines to help the shipping industry with risk assessment and mitigation as well as procurement of compliant fuel, a spokesman said. There should be no risk from compliant fuels, he said.
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