Ignoring the cap

Malcolm Latarche
Malcolm Latarche

13 April 2017


A lot has been said and written over the choices of complying with the 2020 sulphur cap but one option has received less attention than it might merit. Given the uncertainty over whether refiners will produce sufficient compliant residual fuel at affordable prices, shipowners are faced with the option of installing a scrubber or switching to distillates – but again available quantity is an obstacle since distillates currently account for just a quarter of the overall industry requirements and a quadrupling of demand would mean competing with shore-based users. So far very few shipowners have revealed their plans – most probably because they haven’t yet formulated a strategy for something which is very rapidly approaching. This week at the Fujairah Bunkering and Fuel Oil Forum (FUJCON) a poll of delegates showed what most delegates thought shipowners would opt for. Apparently 35% felt shippers would switch to distillates, 23% thought low-sulphur fuel would be the answer, while scrubbers and LNG were at the bottom, with a mere 7% and 1% respectively answering that those two were viable solutions. That leaves 34% unaccounted for; except for the fact that those delegates believed shipowners would simply ignore the rules and would not comply with the regulation. It is true that when the European SECAs were first introduced, a number of ships did indeed continue as before with their owners believing paying any fine was a cheaper option. The 2020 rules do allow for some leniency if suitable fuel is not available and of course if there is no low sulphur fuel and the ship does not have a scrubber or a dual-fuel engine then there is no option available. That might upset owners that have paid a premium to secure what little low-sulphur fuel was available or who have paid out for a scrubber but while they can claim the moral high ground, are those that put their faith in the refining sector to supply compliant fuels really in the wrong? And more to the point will there be the will to punish the transgressors to the extent that the whole of world trade grinds to a halt? They are interesting questions and ones which regulators and shipowners should be thinking about. Of course it will be the lawyers – as usual - that will profit most if such a situation actually arises, no doubt that profession is even now honing the arguments they will use whatever side they are taking.