The U.S. Senate Energy and Natural Resources Committee on Tuesday (10 December) held a hearing to examine the upcoming implementation of the International Maritime Organization’s new global sulphur standard for marine fuels, which is set to take effect on January 1, 2020.
Senator Joe Manchin (D-WV), Ranking Member of the Senate Energy and Natural Resources Committee, highlighted IMO 2020 will benefit the U.S in his opening speech.
“It is generally agreed that the U.S. refining industry is uniquely positioned to benefit from IMO 2020. The investments have been made. Refineries are optimized. All of that supports goodpaying jobs and will help mitigate potential impacts to domestic and global fuel prices,” he said.
“There is still some disagreement over what those exact impacts will be. But I’m glad to see a consensus – or, at least something resembling a consensus – among many analysts that the impacts of IMO 2020 will be less than what was projected just a year ago.”
The hearing also featured testimony from the World Shipping Council, American Fuel and Petrochemical Manufacturers, ClearView Energy Partners, LLC and Boston Consulting Group – Center for Energy Impact.
The President and CEO of the World Shipping Council stressed the important of a level playing field in his testimony.
“The one thought that I would leave with you is that the single most important thing that governments around the world can do is to make it clear by words and action that they will require compliance with this new regulation,” said John Butler.
“Markets are already adjusting to the requirement for cleaner fuels, but markets function best when there are clear signals about what the demand will be.
“Any unnecessary uncertainty in the fuel markets will simply extend the time that it takes for supplies and prices to reach equilibrium. From the perspective of ocean carriers that will purchase this cleaner fuel, it is imperative that we have a level commercial playing field on which all participants are playing by the same rules.”
The Senior Vice President of Federal and Regulatory Affairs at American Fuel and Petrochemical Manufacturers (AFPM) noted the U.S. to be “well-positioned” in the production and supply of lower sulphur marine fuels to the global shipping fleet.
“AFPM supports maintaining an on-time and consistent adoption of IMO 2020. To continuing facilitating the transition to lower sulfur marine fuels worldwide, policy makers should consider enabling infrastructure to debottleneck light sweet crude oil production,” said Derrick Morgan.
“Finally, as with any regulatory program, policymakers should adopt clear guidance for details of regulatory structure and integrate learnings from other fuel programs. AFPM is confident that the U.S. government and industry is ready to meet this challenge.”
The Vice President of ClearView Energy Partners believes the shipping industry may be approaching the peak of the transition in 4Q2019 as ships convert from HSFO to low sulphur fuel to comply with IMO 2020.
“This is not to say that the change has been, or will be, easy. The maritime and refining industries have had to undertake vast preparation and considerable investment,” notes Neelesh Nerurkar.
“Reports of uncertain fuel quality and limited fuel availability could still point to challenges, especially in smaller ports and during the early months of implementation.
“That said, I would suggest that data thus far do not appear to validate the dramatic dislocations that some market observers predicted last year.”
The Senior Director of Boston Consulting Group – Center for Energy Impact, noted the fuel specification change on close to 4% of global oil demand to be a “significant challenge” for both refiners and ship owners.
“But it also provides useful learnings as the industry faces other energy transitions in the future, particularly as this one should be one of the easiest, with its clear standard and date set out plainly more than 3 years ago,” said Jamie Webster.
“Even now, less than 30 days before the switch, uncertainty on its impact continues and shows the scale of the challenge.
“Industries will need to communicate more with one another to better understand actions as well as impacts to those actions across sectors. Governments and policymakers will best serve their aims with consistent clarity on their policies.”
The Senate Committee on Energy and Natural Resources has legislative jurisdiction on matters related to energy resources and development, nuclear energy, Indian affairs, public lands and their renewable resources, surface mining, territories and insular possessions, and water resources.
The Coalition for American Energy Security (CAES) earlier issued a letter to the U.S. Senate Committee on Energy and Natural Resources Chairman Lisa Murkowski (R-AK) and Ranking Member Joe Manchin (D-WV) stating its full support of IMO 2020
Related: Coalition for American Energy Security in full support of IMO 2020
Photo credit: Architect of the Capitol
Published: 13 December, 2019