Scrubber Uptake Adding to Refiners' Uncertainty Over ECA Bunker Demand

IBIA CEO Peter Hall says strong scrubber uptake could "leave refiners uncertain about investing to meet the new demands of the marine market."

Peter Hall, CEO of the International Bunker Industry Association (IBIA), says the uncertainty over how many vessels will adopt scrubber technology for their Emissions Control Area (ECA) compliance strategy is adding further complications for refiners trying to determine what quantity of different types of fuel will be required by marine when the eventual 0.5 percent global sulfur cap comes into force.

When the global cap comes into force, it is expected that operators will make a mass shift to distillate fuel for compliance, with refiners' initial uncertainty stemming from the fact that the global cap may come into force in either 2020 or 2025.

Without knowing how many vessels will have scrubbers - meaning they can continue to use HFO for compliance instead of switching to distillate - there is now the additional uncertainty over exactly what the increase in MGO, and decrease in HFO demand, will be.

"The implementation may also accelerate scrubbing technology take-up, which may leave refiners uncertain about investing to meet the new demands of the marine market if the uptake of scrubbing is strong," said Hall earlier this month at 14th Asia Pacific Maritime 2016 Conference in Singapore.

As previously reported by Ship & Bunker, the International Maritime Organization (IMO) is conducting a fuel availability study to assess when the implementation of a 0.50 percent global sulfur cap will be. 

"Possible implications of a global cap in 2020 could see non-compliance... as distillate prices for marine and inland markets get pushed up because of more demand," said Hall, noting that compliance with current sulfur limit requirements are achieved through use of distillates like MGO, scrubbers, and the use of alternative fuels.

Proper enforcement policies will be essential in ensuring the transition to stricter sulfur content limits are completed smoothly, explained Hall, who warned against using a "one-size fits all" type of enforcement policy.

"Unless there is effective enforcement, any policy change will not take effect," said Hall, adding "an enforcement policy where a higher penalty is applied in cases of gross negligence is advocated, [rather than] cases of inadvertent management."

In July, Ship & Bunker reported that Wärtsilä Corporation's President and CEO Bjorn Rosengren said he believes that many ship operators will choose to use scrubbers to meet the 0.5 percent global sulfur cap for marine fuel when it comes into force in 2020 or 2025.