NrgEdge Editor

Sharing content and articles for users
Last Updated: February 1, 2017
1 view
Shipping
image

What can the IMO do make sure that the 0.50% sulphur limit is implemented in an effective, fair and safe manner globally? Discussions at the January session of the IMO’s Sub-Committee on Pollution Prevention and Response (PPR 4) gave us some signals on the thinking and the ideas we may expect to hear more about in the discussions that lie ahead of us.

What emerged from PPR 4 is just the start of this work, as explained in our article “IMO’s work on 0.50% sulphur limit implementation gets underway”.

Under the surface of that outcome are a number of ideas, and opposing views, on the nature of the challenge ahead and how to address it.

The question the International Maritime Organization must try and find and answer to between now and 2020 is how to ensure the transition from the global 3.50% sulphur limit to the 0.50% limit is successful.

There seems to be different schools of thought regarding the challenges ahead.

One the one hand we have “hardliners” who will not accept any excuses or suggestions for smoothing the transition that in any way may fall short of full, strict global implementation and compliance with the new sulphur regime from day one.

On the other hand are those who are concerned about the ability of refiners in their country to provide sufficient low sulphur fuels for both shipping and other sectors in 2020, often the same countries that told the 70th session of the Marine Environment Protection Committee (MEPC 70) that they would rather delay the 0.50% sulphur limit to 2025. They may be looking for some form of regional or country-by-country differentiation in implementation.

In between these two ends of the spectrum are IBIA and other industry organisations represented at IMO, and several countries. IBIA told PPR 4: “We all know what we need to strive for, namely for the entire global fleet to use either low sulphur fuels or technologies that achieve equivalent emissions reductions from the start of 2020.” But IBIA and others told PPR that even if everybody do their utmost to comply in 2020, it seems prudent to put in place contingency measures to deal with potential problem areas. On the one hand, we should avoid penalising ships due to genuine shortages of compliant fuels, and on the other, avoid a situation where it pays to avoid complying because of lacking checks and balances.

The “hardliners” tend to play down any potential problems such the risk of initial regional shortages of compliant fuels, because you can transport products from one region to another. They are also unwilling to acknowledge that the transition may be challenging from a supply standpoint because the IMO study which MEPC 70 based its decision on said availability will be there. They also argue that the transition won’t be sudden because we have three years to prepare and get the products in place. They often highlight that the transition to the 0.10% sulphur limit in emission control areas (ECAs) went well, which should give us confidence that introducing the 0.50% will also be plain sailing, including the introduction of new fuel blends.

The only point everybody seems to agree on is that we need measures in place to make sure ships will be compelled to comply, because without it there is a risk that non-compliance will create significant commercial distortion and an uneven playing field.

Concrete suggestions

During discussions at PPR 4, a few concrete suggestions came up.

Two papers submitted to PPR 4 proposed making it an offense for a ship to carry high sulphur fuel oil (HSFO) in its fuel tanks unless that ship has a certified scrubber or approved exemption.

One suggestion that came up took that idea a step further, namely to implement a ban both on the carriage and sales of HSFO to ships without scrubbers or valid exemptions from the start of 2020, to make the MARPOL Annex VI regulation as simple as possible to implement and enforce. Included in this idea was that suppliers would be required to see evidence that the ship has an approved scrubber or exemption (e.g. check the ship’s IAPP certificate) before being allowed to sell HSFO to any ship.

Some think a HSFO carriage prohibition won’t be necessary, however, because strict enforcement by port state control officers (PSCO), including document checks and fuel sampling, will be enough to prevent ships without scrubbers from carrying and using HSFO.

Another suggestion that came up was that bunker ports can put out official information to IMO ahead of 2020 about whether they will be able to supply compliant fuel or not, so owners can plan their fuel purchasing so as not to be caught out without ability to buy compliant fuel.

One concrete idea put forward by IBIA and IPIECA in papers submitted to PPR 4 was to allow ships awaiting scrubber installations exemption from full compliance with the 0.50% sulphur limit for a limited period. Allowing this, though with strict caveats such as still having to observe the ECA requirements and use low sulphur fuels while in port or close to shore, could alleviate installation bottlenecks and ease demand pressure on 0.50% sulphur fuels at the start of 2020. This proposal was, however, widely objected to, including by shipping industry organisations out of fear it would interfere with a level playing field.

There is one aspect that there is wide agreement on, however, which is the need for developing a draft standard format for reporting non-availability as provided in regulation 18.2.4 of MARPOL Annex VI that may be used to provide evidence if a ship is unable to obtain compliant fuel. This was among the proposals in IBIA’s submissions both to MEPC 70 and PPR 4.

Other suggestions made by IBIA and others, relating to making use of existing IMO tools for reporting and information sharing, were not discussed at PPR 4, and remain in the “idea bank” for now. We can probably expect several other deposits into this “idea bank” at upcoming IMO meetings, but first MEPC 71 has to approve the initial scope outlined at PPR 4. Then the work can begin on identifying and building consensus on the ideas that can help ensuring the world is adequately prepared to successfully implement the 0.50% sulphur limit.

Report by Unni Einemo

3
1 0

Something interesting to share?
Join NrgEdge and create your own NrgBuzz today

Latest NrgBuzz

High Oil Prices and Indonesia’s Ban on Oil Palm Exports

Supply chains are currently in crisis. They have been for a long time now, ever since the start of the Covid-19 pandemic reshaped the way the world works. Stressed shipping networks and operational blockages – coupled with China’s insistence on a Covid-zero policy – means that cargo tanker rates are at an all-time high and that there just aren’t enough of them. McDonalds and KFCs in Asia are running out of French fries to sell, not because there aren’t enough potatoes in Idaho, but because there aren’t enough ships to deliver them to Japan or to Singapore from Los Angeles. The war in Ukraine has placed a particular emphasis on food supply chains by disrupting global wheat and sunflower oil supply chains and kicking off distressingly high levels of food price inflation across North Africa, the Middle East and Asia. It was against this backdrop that Indonesia announced a complete ban on palm oil exports. That nuclear option shocked the markets, set off a potential new supply chain crisis and has particular implications on future of crude oil pricing and biofuels in Asia.  

A brief recap. Like most of Asia, Indonesia has been grappling with food price inflation as consequence of Covid-19. Like most of Asia, Indonesia has been attempting to control this through a combination of shielding its most vulnerable citizens through continued subsidies while attempting to optimise supply chains. Like most of Asia, Indonesia hasn’t been to control the market at all, because uncoordinated attempts across a wide spectrum of countries to achieve a similar level of individual protectionism is self-defeating.

Cooking oil is a major product of sensitive importance in Indonesia, and one that it is self-sufficient in as a result of its status as the world’s largest palm oil producer. So large is Indonesia in that regard that its excess palm oil production has been directed to increasingly higher biodiesel mandates, with a B40 mandate – diesel containing 40% of palm material – originally schedule for full implementation this year. But as palm oil prices started rising to all-time highs at the beginning of January, cooking oil started becoming scarcer in Indonesia. The government blamed hoarding and – wary of the Ramadan period and domestic unrest – implemented a Domestic Market Obligation on palm oil refineries, directing them to devote 20% of projected exports for domestic use. Increasingly stricter terms for the DMO continued over February and March, only for an abrupt U-turn in mid-March that removed the DMO completely. But as the war in Ukraine drove prices even further, Indonesia shocked the market by announcing an total ban on palm oil exports in late April. Chaotically, the ban was first clarified to be palm olein only (straight refining cooking oil), but then flip-flopped into a total ban of crude palm oil as well. Markets went haywire, prices jumped to historical highs and Indonesia’s trading partners reacted with alarm.

Joko Widodo has said that the ban will be indefinite until domestic cooking oil prices ‘moderate’. With the global situation as it is, ‘moderate’ is unlikely to be achieved until the end of 2022 at least, if ‘moderate’ is taken to be the previous level of palm oil prices – roughly half of current pricing. Logistically, Indonesia cannot hold out on the ban for more than two months. Only a third of Indonesia’s monthly palm oil production is consumed domestically; the rest is exported. An indefinite ban means that not only fill storage tanks up beyond capacity and estates forced to let fruit rot, but Indonesia will be missing out on crucial revenue from its crude palm oil export tax. Which is used to fund its biodiesel subsidies.

And that’s where the implications on oil come in. Indonesia’s ham-fisted attempt at protectionism has dire implications on biofuels policies in Asia. Palm oil prices within Indonesia might sink as long as surplus volumes can’t make it beyond the borders, but international palm oil prices will remain high as consuming countries pivot to producers like Malaysia, Thailand, Papua New Guinea, West Africa and Latin America. That in turn, threatens the biodiesel mandates in Thailand and Malaysia. The Thai government has already expressed concern over palm-led food price inflation and associated pressure on its (subsidised) biodiesel programme, launching efforts to mitigate the worst effects. Malaysia – which has a more direct approach to subsidised fuels – is also feeling the pinch. Thailand’s move to B10 and Malaysia’s move to B20 is now in jeopardy; in fact, Thailand has regressed its national mandate from B7 to B5. And the reason is that the differential between the bio- and the diesel portion of the biodiesel is now so disparate that subsidy regimes break down. It would be far cheaper – for the government, the tax-payers and consumers – to use straight diesel instead of biodiesel, as evidenced by Thailand’s reversal in mandates.

That, in turn, has implications on crude pricing. While OPEC+ is stubbornly sticking to its gentle approach to managing global crude supply, the stunning rebound in Asian demand has already kept the consumption side tight to match that supply. Crude prices above US$100/b are a recipe for demand destruction, and Asian economies have been preparing for this by looking at alternatives; biofuels for example. In the past four years, Indonesia has converted some of its oil refineries into biodiesel plants; in China, stricter crude import quotas are paving the way for China to clamp down on its status of a fuels exporter in favour of self-sustainability. But what happens when crude prices are high, but the prices of alternatives are higher? That is the case for palm oil now, where the gasoil-palm spread is now triple the previous average.

Part of this situation is due to market dynamics. Part of it is due to geopolitical effects. But part of it is also due to Indonesia’s knee-jerk reaction. Supply disruption at the level of a blanket ban is always seismic and kicks off a chain of unintended consequences; see the OPEC oil shocks of the 70s. Indonesia’s palm oil export ban is almost at that level. ‘Indefinite’ is a vague term and offers no consolation to markets looking for direction. Damage will be done, even if the ban lasts a month. But the longer it lasts – Indonesian general elections are due in February 2024 – the more serious the consequences could be. And the more the oil and refining industry in Asia will have to think about their preconceived notions of the future of oil in the region.

End of Article

Get timely updates about latest developments in oil & gas delivered to your inbox. Join our email list and get your targeted content regularly for free or follow-us on LinkedIn.

Market Outlook:

  • Crude price trading range: Brent – US$110-1113/b, WTI – US$105-110/b
  • As the war in Ukraine becomes increasingly entrenched, the pressure on global crude prices as Russian energy exports remain curtailed; OPEC+ is offering little hope to consumers of displaced Russian crude, with no indication that it is ready to drastically increase supply beyond its current gentle approach
  • In the US, the so-called NOPEC bill is moving ahead, paving the way for the US to sue the OPEC+ group under antitrust rules for market manipulation, setting up a tense next few months as international geopolitics and trade relations are re-evaluated

No alt text provided for this image

Learn more about this course

May, 09 2022
Importance of Construction Supply Online Shop

An online shop is a type of e-commerce website where the products are typically marketed over the internet. The online sale of goods and services is a type of electronic commerce, or "e-commerce". The construction supply online shop makes it all the more convenient for customers to get what they need when they want it. The construction supply industry is on the rise, but finding the right supplier can be difficult. This is where an online store comes in handy.

Nowadays, everyone is shopping online - from groceries to clothes. And it's no different for construction supplies. With an online store, you can find all your supplies in one place and have them delivered to your doorstep. Construction supply online shops are a great way to find all the construction supplies you need. They also offer a wide variety of products from different suppliers, making it easier for customers to find what they're looking for. A construction supply online shop is essential for any construction company. They are the primary point of contact for the customers and they provide them with all the goods they need.

Most construction supply companies have an online shop where customers can purchase everything they need for their project, but some still prefer to use brick-and-mortar stores instead, so it’s important to sell both in your store.

Construction supply is an essential part of any construction site too. Construction supply shops are usually limited to the geographic area where they are located. This is because, in order for construction supplies to be delivered on time, they must be close to the construction site that ordered them. But with modern technology and internet connectivity, it has become possible for people to purchase their construction supplies online and have them shipped right to their doorstep. Online stores such as Supply House offer a wide variety of products that can help you find what you need without having to drive around town looking for it.

May, 07 2022
Reasons to Quit Smoking and Start Vaping

Only the most enthusiastic dry herb advocates will, in any case, contend that smoking has never been proven to cause lung cancer. In case we are being reasonable, we would all agree that smoking anything isn't great for your health wellbeing. When you consume herbs, it combusts at more than 1000 °C and produces more than 100 cancer-causing agents. Over the long run, this causes the development of tar in the lungs and will conceivably prompt chronic bronchitis. Vaporizers take care of this problem which can be found in a good       online vaporizer store.



Rather than consuming dry herbs, vaporizers work by warming them to a point where it is sufficiently hot to evaporate the active ingredients. In particular, the temperatures from vaping are sufficiently cool to stay away from the actual burning of the plant matter which contains the cancer-causing agents. Accordingly, people who vape either dry herbs or e-fluids are less likely to be exposed to the toxins that are found in smoke. 



Vaping produces less smell and is more discreet. 



Every individual who has smoked joints realizes that the smell can now and then draw in the undesirable attention of meddling neighbors! When you smoke, the mixtures and the plant matter are emanated as a part of the thick smoke; this is the thing that creates the smell. 



Vaping herbs actually creates a scent, obviously. Nonetheless, the plant matter stays in the oven. Thus, the little from vaping tends to not stick to the wall and clothes due to there being no real smoke. A decent dry herb vaporizer makes it simpler to enjoy your herbs when you're out and about, however, you don't want everyone to know what you're doing! 



Further to creating almost no smell, vaporizers, for example, the Relax or Pax look so smooth that you can pull a vape out in the open and those 'not in the know' won't perceive what they are.

May, 05 2022