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Hong Kong mulls stricter maritime air emissions regulation

0.5% sulphur marine fuel regulation may be extended to all vessels from 1 January 2019 onwards.

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A new regulation for reducing maritime air pollution is being considered by the Legislative Council at Hong Kong; if approved, it will take effect on 1 January 2019, according to the Environment Protection Department (EPD).

The new regulation seeks to extend the mandatory use of 0.5% sulphur limit fuel to all vessels (including Ocean Going Vessels and non-Ocean Going Vessels) within the waters of Hong Kong, irrespective of whether they are sailing or berthing.

Since July 2015, the Hong Kong government has mandated the use of 0.5% sulphur limit marine fuel for Ocean Going Vessels (OGVs) while at berth.

The proposed regulation includes the consumption of low-sulphur marine fuel (sulphur content not exceeding 0.5%), liquefied natural gas or any other fuel approved by the Director of Environmental Protection, which has the same requirements as set out in the current “Fuel at Berth” regulation for OGVs.

The type of vessels affected by the proposed regulation are mainly OGVs that are using heavy fuel oil (with an average sulphur content of 2.6%), says the EPD.

Other non-OGVs (including river trade and local vessels) normally use locally supplied marine light diesel with a sulphur content not exceeding 0.05% and therefore are not affected by the proposed regulation.

“When the Regulation comes into effect, OGVs that are using heavy fuel oil are required to switch to compliant fuel before entering Hong Kong waters,” said a note from EPD.

“The owner and master of an OGV are required to record the date and time of fuel switching and keep the relevant records for three years.

“If an OGV uses technology that can achieve the same or less emission of sulphur dioxide (SO2) when compared with using low-sulphur marine fuel, the OGV may be exempted from using compliant fuel.”

When the regulation comes into effect, except for specified vessel types as set out in the regulation, the master and owner concerned of any vessel using non-compliant fuel within the waters of Hong Kong will be liable to a maximum fine of $200,000 and imprisonment for six months.

Shipmasters and ship owners of OGVs who fail to record or keep the required particulars will also be liable to a maximum fine of $50,000 and imprisonment for three months.

Published: 13 July, 2018
 

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Bunker Fuel

Gibson report: Mediterranean ECA to impact bunker prices and tanker trade

Current bunker demand in the Mediterranean is estimated at around 21.5 million tonnes, with >50% consisting of 0.5% VLSFO but demand for VLSFO in the region is expected to fall once ECA is in effect.

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RESIZED Shaah Shahidh on Unsplash

E.A. Gibson Shipbrokers Ltd (Gibson) recently released a Tanker Market report on the impact of Mediterranean Sea becoming an emissions control area (ECA) next May on tanker trades: 

The shipping markets are no stranger to emissions control areas (ECAs), following the establishment of ECAs in the United States, Baltic and Northern Europe. From the 1st of May 2025, the entire Mediterranean Sea will become an ECA, with the maximum sulphur content of fuel burned on board falling from 0.5% to 0.1%, unless fitted with an exhaust gas cleaning system (scrubber) capable of reducing stack emissions to this level. 

Following previous ECA introductions and IMO2020, refineries and bunker suppliers have shown they can adapt to the necessary changes in demand, however, there will be implications, both in terms of bunker prices and commodity flows in and out of the region.

Current bunker demand in the Mediterranean is estimated at around 21.5 million tonnes, with >50% consisting of 0.5% VLSFO. Come May next year, demand for VLSFO in the region is expected to fall, with ships that do stem the grade doing so to burn once outside the ECA. 

According to data from Marine and Energy Consulting Ltd, demand for VLSFO could fall to around 6 million tonnes/year, shifting to 0.1% MGO and ULSFO. In theory, HSFO demand should remain steady as ships fitted with scrubbers continue to burn high sulphur grades. However, with some scrubber systems unable to “scrub down” HSFO to 0.1%, it remains to be seen how many Owners will be forced to switch to other grades.

Ships trading in the region will therefore face higher costs, unless they are using a scrubber. For the year to date in Gibraltar, 0.1% MGO has averaged $798/tonne vs. $590/tonne for VLSFO (+35%) which should translate into higher freight rates, and for tankers, likely higher Worldscale flat rates in due course.

The ECA also has implications for the flow of refined products within, in and out of the region. A decline in demand for VLSFO is inevitable, which should facilitate export arbitrages from the region, most likely to East of Suez. At the same time, the Mediterranean should see its structural deficit of gasoil increase, with cargoes being imported from the US and Middle East. Trading of compliant grades across the region should also get a boost, at the expense of movements of VLSFO cargoes.

Overall, this suggests a modest shift from dirty to clean tankers for regional moves, although larger dirty tankers are likely to see some benefit from exporting surplus fuel oil to Asia. Bunker demand in the region will also be impacted (albeit to a lesser degree) by the upcoming FuelEU legislation which mandates a 2% reduction in the greenhouse gas intensity (GHG) from 1st of January 2025. Whilst the initial impact will be small, some demand will be shifted from conventional bunker fuels to greener alternatives.

The full Tanker Market Report can be found here

 

Photo credit: Shaah Shahidh on Unsplash
Published 17 October 2024

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Bunker Fuel

SIBCON 2024: Oldendorff, Peninsula discuss uptake of traditional bunker fuels, risk management

‘The majority of the orderbook today, in all segments, is not dual fuel mainly due to costs. We cannot run away from that,’ shared the Director of Bunkers at Oldendorff Carriers.

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Jens Oldendorff

Representatives of bulk shipowner Oldendorff Carriers GmbH & Co. KG. and bunkering firm Peninsula, amongst others, met at the Fuel Oil Markets - Projections and Supply Chain Resilience panel discussion session during the 23rd Singapore International Bunkering Conference and Exhibition (SIBCON 2024).

Topics discussed included the increased uptake of traditional marine fuels and importance of robust risk management.

Jens Maul Jørgensen, Director of Bunkers, Oldendorff Carriers GmbH & Co. KG, noted the dry bulk segment to be welcoming more than a thousand newbuildings within the next three years. Data from shipyards have indicated most of these vessels, especially the bigger ones, having scrubbers onboard.

“The majority of the orderbook today, in all segments, is not dual fuel mainly due to costs. We cannot run away from that; the vessel need fuel to sail,” he explained.

Meanwhile, areas such as the Amsterdam–Rotterdam–Antwerp (ARA) region have seen even more high sulphur fuel oil (HSFO) than LSFO supplied every month, which shows demand for traditional HSFO to be increasing. 

New Emission Control Areas (ECAs) such as the Mediterranean Sea ECA taking effect from 1 May 2025 will also mean more consumption of low sulphur bunker products.

Jørgensen, who is responsible for purchase bunker fuels for approximately 750 bulk carriers, next highlighted the importance of managing proper exposure control due to fluctuating oil prices.

“If we don't hedge, we speculate. We must make sure that the prices are safe as nobody can predict what is going on in six months. Being in a open position will be a big risk, especially in this market, so proper exposure control is the key.”

Kenny Peninsula

Kenny MacLean, Chief Operating Officer, Peninsula agreed with Jørgensen approach towards managing risk.

“It's the same story, but we're buying bulk, and so it's progressively even more important. I think the bunker industry in general has had a bit of a checkered past with companies that haven't paid too much attention to their risk management,” shared MacLean.

“That's something that Peninsula is absolutely laser focused on. So obviously, all our purchases are hedged and that's of critical importance. 

“Other areas that are super important is making sure that you're getting economies of scale out of the purchases as well. But really, it's that hedging, derivatives, price risk management side that’s of critical importance in our industry in general.”

Concurring with Jørgensen’s observation of high consumption of low sulphur bunker products such as marine gas oil (MGO) within ECAs, MacLean added the similar regions have also been driving the increased use of biofuels. 

“What we try to do is have a very diverse customer base, and our supply decisions are pretty much based around aggregating that customer demand by being a bit more customer centric and really getting into our customers and asking, ‘What are the solutions that you're going to need?’” he said.

“It's our job as a bunker supplier to aggregate that fuel together and make sure that we can make it available in the right place at the right time, otherwise, you're going to be left just with a few very large bunkering hubs around the world. 

“It's incumbent upon bunker suppliers like Peninsula to make sure that if it's in the Mediterranean we've got the full range of products available so that when Jens knocks and says, ‘Actually, I'd quite like some biofuel guys’ we are there with the solutions ready and available.”

 

Photo credit: Manifold Times
Published: 17 October 2024

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ECA

FOBAS: Update on Mediterranean Sulphur Oxides Emission Control Area (ECA-SOx)

FOBAS reminded ship operators that on 1 May, MARPOL Annex VI has been updated with addition of regulation 14.3.5 referring to Mediterranean Emission Control Areas, officially came into force on the same date.

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Lloyd’s Register Fuel Oil Bunkering Analysis and Advisory Service (FOBAS) on Tuesday (7 May) released a bulletin reminding ship operators that on 1 May, MARPOL Annex VI has been updated with addition of regulation 14.3.5 referring to Mediterranean Emission Control Areas:

This bulletin serves as a reminder to ship operators that on 1st of May 2024, MARPOL Annex VI has been updated with addition of regulation 14.3.5 referring to Mediterranean Emission Control Areas, officially came into force on aforementioned date. This confirms that ships operating in Mediterranean Sea need to comply with regulation 14.4 of MARPOL Annex VI i.e., the sulphur content of the fuel used onboard ships operating in emission control area shall not exceed 0.10% m/m (unless ship is using a sulphur oxides abatement technology such as exhaust gas scrubbers).

Currently, ships are exempt from this requirement until 1st May 2025 as per regulation 14.7 of MARPOL Annex VI which states that during the first 12 months of any amendment to the specified emission control area, ships operating in that area are exempt from the requirements of paragraph 4, 5 and 6 of regulation 14.

This may mean a significant change for many ships and could also affect the types of fuel available at certain ports so it will be essential to carefully plan for this change in advance of 1st May 2025.

Appendix VII of MARPOL Annex VI has also been updated with paragraph 4 which outlines the area and exact coordinates of the new Mediterranean emission control area as per following;

In respect of the application of regulation 14.4, the Mediterranean Sea Emission Control Area for Sulphur Oxides and Particulate Matter includes all waters bounded by the coasts of Europe, Africa and Asia, and is described by the following coordinates:

  1. the western entrance to the Straits of Gibraltar, defined as a line joining the extremities of Cap Trafalgar, Spain (36°11'.00 N, 6°02'.00 W) and Cape Spartel, Morocco (35°48'.00 N, 5°55'.00 W);
  2. the Strait of Canakkale, defined as a line joining Mehmetcik Burnu (40°03'N, 26°11'E) and Kumkale Burnu (40°01'.00 N, 26°12'.00 E); and
  3. the northern entrance to the Suez Canal excluding the area enclosed by geodesic lines connecting points 1-4 with the following coordinates:

Screenshot 2024 05 08 at 12.57.46 PM

Photo credit: Louis Reed from Unsplash
Published: 8 May 2024

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