OPEC Sees 60% Compliance with 2020 Sulfur Cap on Bunker Fuel

by Ship & Bunker News Team
Wednesday November 8, 2017

Shipping should manage a 60% compliance rate with the 2020 0.5% sulfur cap, according to the latest World Oil Outlook from oil producers' organisation OPEC.

The 60% rate includes legitmate non-compliance vessel operators as well as those who are expected to ignore the new stipulation on bunker fuel.

"The reference case [used in the report] assumes 'compliance' of 60% in 2020 via a combination of legal non-compliance through FONAR requests, the potential use of waivers for vessels with existing commitments to install scrubbers, plus some level of non-enforcement or illegal non-compliance," the report said.

However, the report fully expects that "the rate of compliance to increase gradually in the post-2020 period".

Given that a widening price differential between high and low sulfur fuel oil is expected in the short term to medium term, the question of compliance will loom large for bunker and shipping companies.

When the 0.5% sulfur comes into force, players have said they fear an unlevel playing field as some operators may choose to flout the rules to gain a competitive advantage by loading the cheaper high sulfur fuel oil (HSFO).

The International Chamber of Shipping is to propose that the International Maritime Organisation bans the carriage of HSFO unless there is legitimate cause to do so.

However, the 60% compliance rate from OPEC is more or less in line with other estimates.

Alan Hayes, an analyst with oil price reporting agency Petroleum Argus, has put the non-compliance rate at around 12% of 2020 bunker demand but with legitimate exclusions included, that rate rises to 35% giving a compliance rate of 65%.