IMO 2020- THE BIGGEST REDUCTION IN SULFUR CAP EMISSION | LOTUS Containers

IMO 2020- THE BIGGEST REDUCTION IN SULFUR CAP EMISSION | LOTUS Containers

One of the most intriguing things that shook the entire shipping lines and freight forwarding companies is the imposition of new regulation by IMO (International Maritime Organization) intended to reduce sulfur emission to 0.5 wt% (weight percent). Shipping industries have seen confronting with various changes made in history and have successfully coped up whole nine yards. But IMO 2020 has embanked shippers and maritime professionals to a different corner.

What is IMO 2020?

IMO 2020 is the regulation made by the International Maritime Organization to limit the sulfur content from 3.5 wt% to 0.5 wt% in fuel oil in order to reduce the amount of sulfur oxides emission in air and ocean causing major health and environmental issues.

As per new law, ships with 5000 or above gross tonnage of loaded goods in shipping containers will have to collect and submit the consumption data of every type of fuel they use. This is to ensure the quality and sulfur content of the fuel used by the shippers and carrier companies.

History of Sulfur CapIMO 2020 is not an ‘all of a sudden’ regulation. The history of sulfur cap dates back to 2004. If we go back to the previous IMO unfolding, the first regulation was made in the year 2004 when sulfur emission was made mandatory to reduce to 4.5 wt %. Addressing the need for more reduction, it was later decreased to 3.5wt% in the year 2012. But there wasn’t much impact seen

so the decision was made to put a cap on sulfur emission by reducing it to 0.5 wt%. The decision to make it 0.5 wt% was taken a way back in the year 2008 but it took 8 years more for the approval. The IMO 2020 was finally ratified in the 70th session of MEPC (Maritime Environment Protection committee) meeting that was held in 2016.

The urge of IMO 2020The IMO 2020 stands on the pillars of MARPOL- i.e, ‘Prevention of Marine Pollution’ by ships in seawater. The Bunker fuel used by the Maritime industry for the transportation of ship is of the lowest grade containing a high amount of sulfur content combined with refined products such as Maritime Gas Oil, Maritime Diesel Oil, and Intermediate Fuel Oil, etc. This heavy fuel oil contains a high content of 3.5 wt% of sulfur and burning of such low-grade oil produces a massive amount of sulfur oxides. It further reacts with oceanic water and oxygen in presence of other chemicals to produces harmful sulfuric acid and inorganic aerosol as a byproduct. The overall emission of sulfuric oxides and the formation of sulfuric acids have major impacts on the environment as well human.     

Did you know, one vessel emits sulfur equal to 50 million cars in a day?

In an inspection, it was found that the sixteen worst condition vessels that should have been repaired contributed to as much pollution as all the cars in the world.

Sulfur being an ozone-depleting gas deteriorates the ozone layer causing harmful rays to enter the earth’s atmosphere.

The emitted oxides of sulfur presents in the atmosphere take part in cloud formation which leads to acid rain.

It does not just harm the environment but also cause human to suffer from major health issues like Lung cancer, asthma, skin disease, skin cancer, heart stroke, and other pulmonary diseases.

These data and facts are far than enough to tell the urge of IMO 2020 and why it took such a fierce action against the shipping companies. The decision might seem to be against the shipping companies, it is focused towards the whole of mankind.

How will it affect the shippers and maritime professionals?

Seeing the complexities of such a big amendment, most of the shipping companies did not think that the law will come into enforcement so early. Even the regulation was ratified on October 28, 2016, shipping companies did not get their ducks in a row assuming that executing such a big decision is not a piece of cake. But now they are left with no other option than to comply with that. Obeying such a compelling amendment may become very challenging and may also bring the doom day to several shippers.

Let’s see how it will affect shippers across the worldHigh cost of installing exhaust scrubber system-

Non-compliance to IMO 2020 and continuing with HSFO (High Sulfur Fuel Oil) will be completely treated as an illegal offense from March 1st, 2020 onwards. Exhaust scrubber is one option amongst others that can be installed in ships to clean exhaust gases with water. Ships with a scrubber can use HSFO as it hinders SOx emission and hence can benefit from the lowest price of HSFO. But this is contradictory relating to the highest cost of exhaust scrubber installation. It can cost up to $6-12 million for the installation and maintenance of the exhaust scrubber system per ship. A shipping company with 200 to 300 ships will have to end up paying a lot in just installation & its maintenance of the exhaust cleaner system.

Higher billing in switching to ULSFOThe majority of the shippers find switching to ULSFO (Ultra-Low Sulfur Fuel Oil) as another option to comply with IMO 2020 regulation. Though it is a good option, using Low Sulfur Fuel Oil will add $10-15 as additional costs to the freight shipping companies. This is because of the limitation of the available refiner. The same breed of fuel from the same refiner in two different locations will just mess up the things. For this, the tank should be fully emptied before a different type of ULSFO is filled in the bunker. This requires systematic planning by technicians and shippers to ensure safety. Increased complications ultimately lead to price increment.

The higher cost of LNG and other fuelsSwitching to Liquefied Natural Gas (methane with some amount of ethane) is another good option that shippers can opt to comply with IMO 2020. But over the past few months, LNG prices in the various country has steep over 70 percent causing great concerns to shipping companies across the world. With so many shippers switching to LNG and other fuel have tremendously spiked up the demand leading to supply shortage and hiked price. The earlier used engines and the boiler will need to be modified as well for the consumption of LNG and other fuel which will enhance the operational cost up to $20-30 million per ship.

Extra added costThese are the basic cost, but apart from these, the ship owners will also have to cope up with other cost and investment such as Training of staff members  Cleaning tank for LSFO Arranging Storage space for LNG onboard ships Make arrangements for bunkers Pipelines modification to avoid contamination of fuel Engine and boiler modification to burn LNG Fuel  Compliance with documents and paper works Though the regulation will hamper the shipping companies and it may take a year or more than that to get over its impact, the regulation will showcase a broader view of cleaner ocean freight shipping in upcoming years.