Time to look forward to 2020

Malcolm Latarche
Malcolm Latarche
ShipInsight

09 January 2019


As the turning of the year fades and 2019 gets fully underway, it is time for ensuring preparations for complying with the 2020 global cap on sulphur coming into effect on 1 January next year are well in hand and disseminated to appropriate departments in owners’ and managers’ offices.

There will definitely be a need for more communication between superintendents and commercial staff on how to prepare the ship for 2020 while not impacting too much if at all on its operational capabilities.

Forward

Although the big day is still a year away, there are important aspects to consider immediately and in some cases this may involve checking back into the past for terms in documents signed months or years ago. The most important thing is to ensure that on 1 January 2020, no non-compliant fuel is left on the vessel unless of course the ship is equipped with a scrubber.

Obviously in the case of a vessel operated by the owner for his own account whether in the liner or spot trades, the onus for ensuring bunkers are of the appropriate type and that bunker tanks have been cleaned sufficiently well for no contamination to take place is upon the owner. However, the situation for time chartered vessels may be quite different.

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Under the bunkering clause in most time charter parties there is a requirement for the quantity and type of bunkers on delivery and redelivery to be ‘about the same’. The NYPE 2015 charter party also puts an onus on charterers to ensure that at all times vessels have sufficient quantities of compliant fuel when operating in ECAs. It does not though currently contain any provisions as to what should happen outside of ECAs after the new cap comes into effect.

In November last year, BIMCO approved two new bunker clauses intended to address future situations once the 2020 cap becomes effective on 1 January next year. The first clause – The Global Marine Fuel Sulphur Clause for Time Charter Parties – address the situation for vessels intended to be operating after the deadline and is one that owners, charterers and brokers should be adopting for such future business.

The second clause deals with the transitional period from the end of 2019 to the beginning of 2020 and focuses on cooperation between owners and charterers to minimise quantities of non-compliant fuel on board by 31 December 2019. It states that any remaining non-compliant fuel on board after 1 January 2020 has to be removed no later than re-delivery or 1 March 2020 – whichever comes first. It also states that removal of non-compliant fuel must be done at the charterers’ cost, while tank cleaning must be done at the cost of the shipowners. Again this is a clause that all those involved in negotiating and fixing ships should bear in mind depending on the length of the fixture. It could be quite easy to fall into the trap of fixing a vessel with a regular customer on basis ‘same as last’.

That clause is suited to vessels fixed this year but there may be no compulsion on charterers to alter the wording of pre-existing charter parties that will come to an end towards the deadline date. Some of the charter parties currently operating would have been signed well before the IMO’s decision to opt for a 2020 date for the global sulphur cap was taken and could not have foreseen it. Others agreed after the IMO decision may have a clause dealing with the possibility but even many of those fixtures would have been concluded before the IMO decided that carriage of non-compliant fuel on board vessels would become illegal.

Because of problems with poor quality fuels and blended supplies, a great many owners have been careful in recent years to set out very precise details of the bunkers that charterers must provide. Except for fuels for use in ECAs, those specifications will mostly be rendered obsolete by the new 2020 requirements. It is therefore imperative that shipowners begin to discuss with charterers what will need to be done to ensure that a ship is not redelivered with large quantities of non-compliant fuel. Even if there is agreement on this point, some thought will need to be given to what extent the bunkering capacity of the ship can be reduced in the latter stages of the charter period to allow for tanks to be prepared for compliant fuels after the deadline.

As well as the commercial consequences, there are many technical aspects that must be addressed. In any situation where drastic changes are made to regulations some ship operators will be more prepared than others and the better the preparation, the less chance there is of falling foul of enforcement processes.

With the 2020 sulphur limit, shipowners have been presented with a target that can be attained in various ways with each having technical changes that are very different from the alternatives. There has been a lot of advice that has been made available but some of it may have been overlooked as owners struggle with the bigger picture of which choice makes the most economic sense for them.

Assistance from the IMO has come but some may say a little late and not universally publicised. At MEPC 73 in late 2018, the IMO approved MEPC.1/Circ.878 containing guidance for developing a non-mandatory plan for ships to consistently implement the 0.50% sulphur limit by the 1 January 2020 compliance date. The circular suggests that flag states should disseminate the information to shipowners but how effective that has been is difficult to judge. Some shipowners have taken the information and acted upon it but others seem unaware or its existence.

At just 13 pages, it is not a long document and it does not go deep into technical requirements, but it does provide a very good outline for an implementation plan. It covers such matters as conducting a risk assessment and mitigation plan on the impact of new fuels; modifications of the fuel oil system and tank cleaning (as needed); fuel oil capacity and segregation capability; procurement of compliant fuel; fuel oil changeover and documentation and reporting.

Finding advice of some of the factors mentioned may mean resorting to class societies, engine makers or engineering specialists and consultants if the owner does not have the capability in house. Some of the factors such as how pumps and boilers will cope with new fuels, what changes to tank configurations are needed and whether fuel heating arrangements for HFO need to be retained if distillates are the chosen option for compliance.

Many of the factors that need to be considered in developing an implementation plan are still to be decided themselves. Things such as compatibility of different new fuel types can only be judged once the fuels become available and appropriate tests have been conducted. In the meantime, for those interested in developing an implementation plan, the IMO circular is available here (Adam please insert link to the document I have sent separately). A lot of the preliminary work can be undertaken immediately and the rest added as the information becomes available.

ShipInsight will be returning to developments throughout the year as more details and information become available but we would also like to invite any owner or operator interested in sharing their views and experience in developing implementation to contact us so that we can provide a platform for a wider audience.