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IMO Hails ‘Extremely Smooth’ IMO 2020 Transition

Barry Parker
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February 1, 2021

Some observers have compared IMO2020- the restrictions on sulfur in marine fuels which took effect on Jan 1, 2020 -with the Y2K drama of two decades back.

During the Y2K runup, there was much consternation and fears that all computers would stop running, shutting down commerce and everything else. Fast forward to the end of 2019, with great concerns that vessels could not source compliant fuel, or worse- that various blends would gum up cylinders in vessel engines.

The year 2020 saw a whole host of problems for the maritime business sectors, but fuel problems were not at the top of the league tables; fuel matters paled in comparison to more serious issues that arose. Like the computer non-crisis 20 years prior, maritime businesses had time to anticipate and prepare. 

The International Maritime Organization (IMO), which had lowered the sulfur upper limit in marine fuels to 0.5% (from the previous 3.5%) , noted- 13 months into IMO2020 in a just issued press release, “One year on, indications are that the transition has been extremely smooth, a testament to the preparations of all stakeholders prior to the new rules entering into force.”

In a release from the IMO, Mr. Roel Hoenders, Head of Air Pollution and Energy Efficiency, provided summary statistics. He noted that: “Through 2020, just 55 cases of 0.50% compliant fuel being unavailable had been reported in IMO’s Global Integrated Shipping Information System (GISIS).”

For back of the envelope analysts like me, I take Mr. Hoenders’ mention of 60,000 impacted vessels (on international ocean-going legs), and take a conservative 12 voyages/ vessel/ year, getting 720,000 voyages. Supposing that bunkers are purchased on half of these, then dividing 55 cases by 360,000 vessel fuel fill-ups yields an almost infinitesimal 0.0152778 % (yes less than 2/100s of a percent) where there were availability problems. 

Many of these ships switched from using heavy fuels to “Very Low Sulfur Fuel Oils” (VLFSO)- new IMO2020 compliant blends created by refiners to meet maritime demand. Fuel quality concerns, a big topic on the conference circuit in late 2019 and well into 2020, seemed not to have materialized in a big way. The IMO says: “Through 2020, and into 2021 to date, IMO has not received any reports of safety issues linked to VLSFO.”

But nevertheless, concerns about the new blends have been top of mind at the IMO. During 2020, an IMO correspondence group considered fuel oil safety issues (issues such as flashpoints are considered in the SOLAS convention) and the need for mandating requirements to ensure that marine fuels meet the required quality standards (detailed in the MARPOL convention). The report of the working group (MSC 102/6) is available through the IMODOCS website. They note that: “It will be discussed at the next session of IMO’s Maritime Safety Committee (MSC), MSC 103 in May 2021.”

Prior to that, the eighth session of the IMO’s Sub-Committee on Prevention of Pollution from Ships (PPR 8) will further consider VLSFO fuel quality issues, including possible effects on black carbon emissions. This will be a remote meeting- scheduled for 22 to 26 March 2021.

In its press release, the IMO did mention scrubbers- an accepted alternative method of meeting sulfur limits. Pre-IMO 2020, shipowners had touted a financial advantage, with quick payoffs, for the circa $2 million – $3 million capital investment cost of scrubber installation (enabling them to burn lower priced heavy fuels).

As the cost differential of VLSFO over heavy fuel (“the spread”) shrank during 2020 (from 2019 levels around $250/ton, down to levels below $50/ton in mid 2020), payoff times lengthened. By early 2021, the scrubber investments were looking a little better (with shorter payoff times) with spreads in major fueling centers reported to be  widening out to $100/ton.

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