Converting a Regulatory Compliance Nightmare of IMO2020 into a Global Leadership Opportunity

by Ananth Srinivasan, Vice President, V-TIC
Tuesday December 24, 2019

Millions of people around the world are ordering gifts for their loved ones this holiday season. Global shipping plays a key role in making sure that these gifts make their way from warehouses to stockings. But this holiday season will be different.

As ships with the latest Mattel toys and Nike shoes get loaded, thousands of people in our industry will be working round the clock to ensure that these ships reach their destinations. With the IMO2020 regulations, the entire fuel supply chain from refiners to shipowners will be affected. The new regulations call for a switch from 3.5% sulfur fuels to 0.5% sulfur fuels. This is a 85% decline in sulfur specifications. Fuel availability globally will be uncertain. Fuel quality assurance will be uncertain. Simply following ISO 8217 regulations might not guarantee that ships will be problem free with these new fuels. With less than 2 weeks to go, there is tremendous uncertainty in every part of the supply chain – from suppliers, charterers, to shipowners. But dealing with uncertainty is what we in the Oil and Gas and Marine industry do best.

There is no single 0.5% sulfur switch in a refinery that easily allows the refineries to produce these new fuels. Refiners and blenders will work overtime to get these 0.5% sulfur fuels ready.  From looking to change crude feed stocks to investing billions of dollars in refinery processing equipment, refiners and blending companies have chalked out several strategies to meet a global need of hundreds of millions of metric tonnes of fuels.  Charterers will have to ensure shipowners get access to fuel in different ports around the world. Shipowners in turn have already started their long process of cleaning their tanks and train their staff to be aware of the  complexities these new fuels will bring. These tireless efforts of the people in our industry will ensure that no stocking goes unfilled while trying to meet one of the most challenging regulatory demands of our times. And we take this responsibility seriously.

From Nigeria to Singapore, from the United States to Europe, our community will transform global fuel use onboard ships globally. It is hard to think of any other industry that has achieved this scale of regulatory transformation in recent times. An example would have been if plastic straws would have been replaced across all coffee shops, in every part of the world, on a certain date. What if it was mandatory to use solar panels across the world? Would people have willingly adopted a 60% increase in their costs? Another real-world examples of such monumental change are the self-regulated Paris Agreement for climate change and we know that there is still so much political anguish around these Paris accords.  Unfortunately, we have not seen such dramatic transformations in other industries very often.

On the contrary, we have continuously challenged ourselves to do better. Our industry is leading the way in a global push to a greener and safer world. While we acknowledge that we can do more, we have chosen to move to cleaner fuels knowing that our operating costs and complexities are increasing. We are willing to do this knowing that the next several months will be uncertain. Despite the accompanying adversity, we choose to lead.

These IMO 2020 regulations have also brought in tremendous innovation in the industry. From new ways to create fuels to innovative algorithms to test fuel quality, from new chemicals to reduce risk to Blockchain solutions to improve transparency, our industry's innovation and entrepreneurship will ensure that customers around the world will have more choices while simultaneously reducing their risk. Our industry has used this regulatory challenge as a tipping point and set an example of global leadership.

The little girl will wake up on Christmas Day to see all her gifts neatly wrapped and tucked into her stocking. Little will she know that you and your teams played the role of the invisible little elves to make it all happen. We continue to lead when no one is watching. We fuel dreams, that's what we do, and it's what we live for.