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DNV: Clarifications on the IMO DCS/CII and EU MRV/ETS, use of bio bunker fuel

DNV releases a statutory news summarising some important clarifications on the EU MRV, IMO DCS and EU ETS including on cargo and bunker sampling as well as biofuels.

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Classification society DNV on Thursday (21 November) released a statutory news summarising some important clarifications on the EU MRV, IMO DCS and EU ETS. The following are excerpts from the article:

The 2023 EU MRV and IMO DCS reporting period will soon come to an end, whilst the EU ETS regulations are coming into effect from the start of the new year. As we approach year-end, this news summarizes some important clarifications on the EU MRV, IMO DCS and EU ETS.

Below is a summary of updates and clarifications on:

  • IMO DCS/CII
  • EU MRV:
  1. ISM company mandate for ETS
  2. Partial emissions report
  3. Cargo and bunker sampling
  4. Leisure stops (relevant for cruise ships only)
  5. Dry-docking and emissions
  6. Biofuels

IMO DCS/CII

The Carbon Intensity Indicator (CII) is a measure of how efficiently a ship can transport goods or passengers and is given in grams of CO2 emitted per cargo-carrying capacity and nautical mile, based on reported IMO DCS data. The ship is then given an annual rating ranging from A to E, where the rating thresholds will become increasingly stringent towards 2030. For ships that achieve a D rating for three consecutive years or an E rating in a single year, a Corrective Action Plan (CAP) needs to be developed (and approved) as part of the Ship Energy Efficiency Management Plan (SEEMP) Part III, before the DCS Statement of Compliance can be issued. This functionality will be available in DNV's SEEMP Part III tool from 1 January 2024:

IMO DCS1 1 770x254 tcm8 251674

Upon receiving the uploaded DCS data in early 2024, DNV will inform its customers via email for ships having a CII E rating (where urgent action is needed). Furthermore, our customers will receive a notification of the ship rating during the submission process.

Required and attained CII calculation after change of DWT/GT during 2023

As outlined in MEPC.348(78), permanent alterations to a vessel’s deadweight (DWT) and/or gross tonnage (GT) can be implemented as a measure within SEEMP Part III or as a CAP to enhance the ship’s operational carbon intensity performance. For vessels that underwent changes in DWT and/or GT after 1 January 2023, a new methodology for calculating attained and required CII will apply:

a. For changes listed in the SEEMP Part III or the CAP:

The required CII is calculated based on the original DWT/GT*. For the year of the conversion, the attained CII is calculated and verified based on the average DWT or GT value weighted on distance travelled before and after conversion. For subsequent years, the attained CII is based on the new DWT/GT.

b. For changes not listed in the SEEMP Part III or the CAP:

For the year of the conversion, the required CII and attained CII are calculated and verified based on the average DWT or GT value weighted on distance travelled before and after conversion. For subsequent years, the required CII and attained CII are based on the new DWT/GT.

EU MRV/ETS

Firstly, a brief recap of the revised EU MRV regulations:

Table EU MRV ETS 770x225 UDATED tcm8 251677

ISM company mandate for ETS

As announced in our news from 17 November (see "References" below), the EC has adopted an implementing regulation detailing which company is responsible for monitoring and reporting GHG emissions and surrendering emission allowances. The default responsible entity is the registered owner. The responsibility can be shifted to the ship manager – i.e. the ISM company – only if an agreement between the registered owner and the ISM company explicitly states this shift in responsibility.

In the event that the shipowner delegates the EU ETS obligation to a shipping company, the shipping company shall provide its administering authority with a document clearly indicating that it has been duly mandated by the shipowner to comply with the ETS obligations. DNV has prepared a template for such an agreement, available free of charge for our customers in Fleet Status on Veracity:

ISM company mandate 770x150 tcm8 251675

In addition to the above, in the updated MRV MP online form our customers will find the same document template and can populate it with relevant data. The functionality is available under the “Important information for ISM companies” button found on the “Administrative data” tab.

The mandate document shall be duly filled out and signed by both the shipowner and the shipping company. It should be provided upon MRV MP submission in THETIS MRV portal to your MRV verifier and made available to the administering authority.

Partial emissions report

The issuance of the partial emissions report was also mentioned on our news from 17 November, but a few clarifications need to be added: from 5 June 2023, the revised MRV regulation requires that upon change of company, a partial MRV emissions report (ER) is to be submitted for verification. The verified partial MRV ER should be submitted to the administering authority, flag state authorities of the Member State, the European Commission and to the new company as close as practical to the day of change of company and no later than three months thereafter. The verified data covering the previous company’s responsibility period should form a part of the MRV ER that will be submitted by the company responsible at the end of the reporting year.

However, the previous company’s emissions for a vessel which has been taken over by a company will not be a part of the aggregated emissions data at the company level for the new company. Therefore, the company taking over the ship will not be liable to surrender allowances for the period when the vessel was under the previous management or ownership. Nevertheless, the current owner/manager still needs to request the verified aggregated MRV data for the previous company’s period to fulfil MRV obligations at the end of the year. This data, combined with the log abstract data, will form a full-year MRV ER.

Taking into consideration that changes have only been recently implemented in THETIS-MRV and an administering authority must be first assigned to the companies to fulfil the obligations of the MRV Regulation Article 11.2, DNV will support verification of partial MRV ER from January 2024. Submission and verification of 2023 partial MRV ERs will also be enabled.

Cargo and bunker sampling

For some time, with the public attention on verified emissions data rising and the EU ETS soon effective, regulators and accreditation bodies have been increasing the stringency of formal verification requirements. This means that DNV is now required to review documents on reported bunkering and cargo data, including evidence for reported bunkering and reported MRV-relevant cargo figures per emissions report. This ensures the MRV ERs will have the required quality considering the increasing relevance of verified emissions data. Additional information is available in Fleet Status on Veracity:

Cargo and bunker sampling 770x149 tcm8 251672

Biofuels

The different regulations have different approaches on how to deal with biofuels, summarized in the following:

Table EU MRV ETS 770x225 UDATED tcm8 251677 1

When aggregated and put side-by-side, total carbon emission from the use of biofuel will vary substantially between the three schemes. EU MRV emissions data is the basis for determination of total emission of GHG to be reported under the EU ETS Directive. However, by applying a CO2 factor of zero for biofuel fraction of fuel used, the ETS-relevant emission is reduced. For CII, a completely different set of rules is applied, focusing on the life cycle’s emissions of fuel. Different criteria for the application of the methodology as described above should be noted and consulted with the fuel supplier before the fuel purchase, with the aim to claim benefits from the use of biofuel in GHG reporting.

Further information on how to report the use of biofuels is available on the OVD resources page. If guidance is needed on how to update the SEEMP Part II and the MRV Monitoring Plan in relation to the use of biofuel, we invite you to contact our DATE experts.

Note: The full statutory news can be found here.

Photo credit: Venti Views on Unsplash / DNV
Published: 26 December, 2023

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Alternative Fuels

Argus Media Q&A: Aviation may pull feeds away from marine, says BV

Biofuel feedstocks could be routed away from marine fuels to meet demand from the aviation sector if the latter is willing to pay higher prices associated with sustainable aviation fuel, says Bureau Veritas.

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Biofuel feedstocks could be routed away from marine fuels to meet demand from the aviation sector if the latter is willing to pay higher prices associated with sustainable aviation fuel (SAF), Bureau Veritas (BV) Marine & Offshore's global market leader for sustainable shipping Julien Boulland told Argus. Edited highlights follow:

19 July 2024

Marine biodiesel has been the largest alternative fuel uptake, with over 1mn t sold in Rotterdam and Singapore last year. But with Argus assessments showing premiums above $225/t to VLSFO dob ARA, how do you see marine biodiesel demand in the medium- to long-term?

Shipowners and ship operators have to run an individual cost-analysis on whether the premiums could be offset by potential savings under EU emissions trading system (ETS) and FuelEU Maritime regulations, as well as any future regulations such as the International Maritime Organisation (IMO) economic pricing mechanism.

In terms of emissions, biofuels still emit CO2 on a tank-to-wake basis, but less on a well-to-wake basis compared to their fossil equivalents. This will also vary depending on the feedstock for the biofuel as well as the production process.

Under the current IMO regulations for energy efficiency, including the Ship Energy Management Plan (SEEMP) and its requirements for fuel reporting (DCS), there might be some indirect commercial benefits for owners, too. For example, a better CII (Carbon Intensity Indicator) score may make a vessel more appealing to charterers and help its owner secure more favourable rates.

There are also other factors to consider, such as Scope 3 emissions rights, which can influence demand, as we currently see from voluntary demand from cargo owners seeking those documents.

But this will also have a geographic impact on demand, as larger container liner companies usually utilise the east-west route and they might prefer to opt for bunkering the marine biodiesel blend in Singapore due to lower prices.

What are the risks associated with bunkering marine biodiesel in relation to conventional ship engines? How significant is the recent FOBAS report that implied a correlation between the use of "unidentified" biofuels and engine pump injector damage?

We have supported our shipowner clients in numerous pilots to trial biofuels such as fatty acid methyl ester (Fame) and hydrotreated vegetable oil (HVO) in variable blends.

Overall, these trials have gone smoothly, but we have learned a few things along the way.

Firstly, engines do not need to be modified, but since biofuels have slightly different physical properties, it is necessary to find the right engine adjustments. A very good knowledge of the fuel properties is key in determining the right adjustments, and the new revision of ISO 8217 on marine fuel specifications is crucial in supporting this process. Another key finding is the importance of receiving full information on fuel characteristics from the supplier. Finally, BV plays a key role in ensuring full fuel certification on several aspects, including sustainability and physical properties.

Used cooking oil (UCO) can also feed into SAF and with potentially greater refining margins. Do you think some feedstocks will be pulled away from marine?

When it comes to methanol, we believed marine would take up more of the feedstock compared with the chemicals industry due to greater willingness to pay larger premiums.

But with biofuels, it seems to be the other way around where aviation could end up pulling biofuel feedstocks away from maritime. In terms of fuel consumption, the marine and aviation industries are comparable but if aviation are willing to pay more, then it will likely get more of the feedstocks required to produce SAF.

What are the implications of the new ISO specifications, what are the key takeaways for marine biodiesel uptake?

More has to be done, but now we have parameters for assessing biofuel blend specifications.

It was very well accepted by the industry, and now operators and shipowners have a standard to rely on. 

But it doesn't resolve the question around feedstock cross-industry competition. However, it does also open the door for off-spec Fame residue blends to become ISO-certified — depending on further testing.

With IMO aiming for "global regulations for a global market", how do you see conflicts between different regulations affecting the market?

We are closely following the IMO development process for a global economic pricing mechanism.

IMO has assigned a working group of technical experts to look at this mechanism from an apolitical perspective.

In terms of potential regulatory conflicts, we have the example of the Netherlands, where the Dutch emission authority requires the delivery of Proof of Sustainability (PoS) certificates for applying to the scheme of Dutch renewable tickets (HBE-G) which can be traded, but this PoS cannot be used for other purposes, such as the EU ETS. To circumvent this hiccup, we may see the development of new digital certificates, such as an accompanying ISCC-certified Proof of Compliance (PoC).

By Hussein Al-Khalisy

Related: FOBAS announces publication of ISO 8217:2024 marine fuel specifications and FAQs

 

Photo credit and source: Argus Media
Published: 23 July, 2024

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Bunker Fuel

ENGINE on Fuel Switch Snapshot: HSFO remains cheapest across hubs

Brent’s steep fall brings VLSFO down; Singapore premiums over Rotterdam narrow; EU to impose tariffs on Chinese biodiesel imports.

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ENGINE on Fuel Switch Snapshot: HSFO remains cheapest across hubs

Once a week, bunker intelligence platform ENGINE will publish a snapshot of alternative and conventional bunker fuel prices in the world’s two biggest bunkering hubs. The following is the latest snapshot:

22 July 2024

  • Brent's steep fall brings VLSFO down
  • Singapore premiums over Rotterdam narrow
  • EU to impose tariffs on Chinese biodiesel imports

A sharp drop of $2.40/bbl ($18/mt) in front-month Brent futures has pushed down conventional fuel prices for yet another week. 

Bio-blend prices have also declined amid decreases in both bio- and conventional fuel components. 

Rotterdam’s VLSFO-equivalent LNG benchmark has bucked the downward trend and inched up by $3/mt in the past week.

LNG bunker fuel is priced $16/mt higher than VLSFO in Singapore, making VLSFO the cheaper option for dual-fuel vessels bunkering there. Conversely, LNG is the more cost-effective choice for dual-fuel ships bunkering in Rotterdam.

The ARA’s B24-VLSFO UCOME price premium over Singapore’s has widened from $19/mt to $32/mt as Singapore’s price has dropped.

VLSFO

VLSFO demand has improved slightly in the ARA in the past week, following slow activity the week before, a trader said. This seems to have prevented Rotterdam’s VLSFO benchmark from following Brent's significant decline.

Singapore’s VLSFO benchmark has tracked more of the crude benchmark's price drop, slipping by $14/mt in the past week. Most suppliers recommend lead times of up to 14 days for VLSFO in the port, but some can manage deliveries within five days.

When factoring in estimated EUA costs, Rotterdam’s VLSFO price has declined by $7-9/mt, while Singapore’s price has fallen by $16/mt.

Biofuels

Singapore’s B24-VLSFO UCOME price has declined by $7/mt in the past week, while its B24-LSMGO UCOME price has fallen by $9/mt. The two bio-bunker benchmarks have declined amid declining values for pure VLSFO ($4/mt) and LSMGO ($9/mt).

On Friday, the European Commission announced that it will impose provisional duties of up to 36.4% on biodiesel imports from China. PRIMA said “the EU anti-dumping results and its associated duties (ADDs) have effectively killed off Chinese biodiesel trading prospects into Europe”.

A lack of EU demand for Chinese biodiesel could result in more Chinese UCOME being exported to meet demand in countries like Singapore, sources say.

Rotterdam’s B30-VLSFO HBE price has declined by $8/mt in the past week, while its B30-LSMGO HBE price has dropped by a greater $14/mt. A $32/mt drop in the ARA POMEME price assessed by PRIMA Markets has pulled both benchmarks lower.

Biofuel price premiums over pure conventional fuels in Rotterdam are $189/mt for B30-VLSFO HBE blends and $136/mt for B30-LSMGO HBE blends. These premiums have narrowed by $9-12/mt in the past week.

The EU’s provisional duties on Chinese biodiesel imports could tighten availability of bio feedstocks for bio-bunker blending across Europe.

LNG

Rotterdam’s LNG bunker price has risen by $22/mt to $652/mt in the past week. The price rise has tracked an increase in the front-month NYMEX Dutch TTF Natural Gas contract.

The upward trend can be attributed to supply concerns at the Freeport LNG export terminal on the US Gulf Coast, a major source of European LNG supply. Some 5.4% of Europe's total LNG imports last year came from Freeport LNG.

Several LNG cargoes from Freeport LNG were held back from being exported by supply disruptions caused by Hurricane Beryl. This has contributed to push Rotterdam's LNG price higher in the past week.

Singapore's LNG bunker price has decreased by $11/mt, driven by a falling NYMEX Japan/Korea Marker (JKM) price.

The JKM price increased some in the middle of last week due to active deals to meet summer demand, before falling amid ample supply and high inventory levels, according to a report by the Japan Organization for Metals and Energy Security (JOGMEC).

By Konica Bhatt

 

Photo credit and source: ENGINE
Published: 23 July 2024

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Bunker Fuel

Island Oil records USD 29.0 million net profit in FY 2023, second-best year in 30-year history

Total comprehensive income for FY 2023 was USD 32.5 million, down 25% from USD 43.2 million in FY 2022, showed financial figures.

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Island Oil and Island Petroleum receive ISCC EU certification for bio bunker fuels

Editor’s note: Manifold Times on Tuesday (16 July) released a report detailing financial figures of Island Oil Holdings calculated under guidelines from international ESG reporting standards that also assesses the cost of non-financial items such as emissions, social contributions, etc.

The report has been updated on Friday (19 July) with figures based on the entity’s actual financial results calculated using standard accounting practices.

Cyprus-based Island Oil (Holdings) Limited, which principal activities include marine fuel trading and physical bunkering operations, recorded its second-best year in its 30-year history for the financial year ended 31 December 2023.

The group posted net profit of USD 29.0 million in FY 2023, a 29% decrease over net profit of USD 41.0 million in FY 2022.

Total comprehensive income for FY 2023 was USD 32.5 million, down 25% from USD 43.2 million in FY 2022.

Revenue was USD 1.40 billion in FY 2023, 23% lower from revenue of USD 1.82 billion in FY 2022.

“The Group’s development to date, financial results and position as presented in the consolidated financial statements, are considered satisfactory,” stated Chrysostomos S. Papavassiliou, Chief Executive Officer/Chairman of the Board of Directors.

“The bunkering industry has become very competitive, and the Group has developed its pricing policy accordingly in an effort to further penetrate the market.”

Papavassiliou acknowledged an imperative for sustainable practices in the industry and noted the Group is poised to implement an ESG and decarbonisation strategy.

“This ambitious initiative aligns with our dedication to environmental stewardship and underscores our role in contributing to a low-carbon future. We are also committed to environmental responsibility in our operations, aiming to enhance our energy efficiency and decrease our Greenhouse Gas (GHG) emissions,” he shared.

“The Group recognises the maritime industry’s ongoing transition to alternative fuels, driven by international and EU regulations, including the EU Emissions Trading System (EU ETS). Proactively responding to this shift, the Group has obtained in 2023 the International Sustainability and Carbon Certification (ISCC EU) as recognised biofuel traders, enabling the Group to engage in the trading of marine biofuels.”

In 2023, two subsidiary companies of the Group obtained the International Sustainability and Carbon Certification (ISCC EU), as recognised Traders of biofuels. In particular, Island Oil Limited, the Group’s marine fuels trading arm, has attained certification as Trader of biofuels.

Additionally, Island Petroleum Limited, which offers physical supply of marine fuels, has achieved the same certification, as Trader with Storage of biofuels.

The Group is also involved in two projects funded by its Research and Innovation Fund including a pilot initiative on using biomethane as a drop-in marine biofuel.

“This pilot initiative aims to demonstrate an up to 80% reduction in lifecycle GHG emissions using BioMethane as a marine biofuel. Leveraging innovative technologies, the team has established a virtual gas grid with a mobile biogas Upgrading, Storage, and Refueling Unit (USRU),” the company said in the report.

“Successful evaluation would lead to scaling up the model, integrating local biogas production, BioMethane upgrading, and utilisation in PetroNav Ship Management’s fleet,” it said. PetroNav Ship Management is one of the Group’s subsidiaries.

Related: Island Oil and Island Petroleum receive ISCC EU certification for bio bunker fuels
Related: Island Oil eyes Korean market with new Seoul office
Related: Island Oil continues expansion into Chinese markets with new Hong Kong trading office

 

Photo credit: Island Oil
Published: 23 July 2024

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