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The regulation of fuels and lubrication on ships

Regulation overview

Regulation overview

The shipping world has become almost obsessed with the issue of fuel since the IMO decided in 2016 to reduce the global limit of sulphur permitted in fuels to 0.5% with effect from 1 January 2020 and followed up this long-standing rule change by adopting an ambitious plan to reduce shipping’s carbon emissions to zero over the next 50 years.

The 2020 changes introduced many new regulations and even made the carriage of non-compliant fuel illegal under normal circumstances except as cargo or as fuel if the ship is fitted with a scrubber.

Although the rules are now changing on an international level, it is true to say that ships have long been permitted to choose whichever fuels they wish to operate with provided that they have the backing of the flag state. That permission generally has less to do with the fuel itself (unless it is very controversial) but more to do with safety issues such as storage of the fuel on board, bunkering controls and the like.

Most regulation that does exist around fuels and lubricants is aimed at prevention of pollution or controlling emissions rather than being concerned with the product itself. The exception to this is the limit that has existed in SOLAS for some time that marine fuels should have a minimum flashpoint of 60°C.

There are related aspects in SOLAS concerning the fuel system, as might be expected. Fuel quality is always a case of caveat emptor but there are ISO standards which, so long as they are stipulated as part of the purchase contract, will afford the shipowner a degree of protection against damage caused to the engine or the quality of the fuel provided as well as being a defence against possible pollution claims for contravention of MARPOL Annex VI regulations.

Poor blending of fuels and deliberate doctoring by suppliers or their contractors is an issue that surfaces all too frequently. The ship operator will have some redress through legal action and in some cases the authorities in the state where the fuel was supplied will be prepared to take action. In major bunkering hubs, this is necessary to ensure confidence among ship operators.

Pollution by bunker fuels

On an international level, the IMO deals with various aspects of fuel in both the MARPOL and SOLAS conventions as well as the International Convention on Civil Liability for Bunker Oil Pollution Damage 2001 – ordinarily referred to as the Bunker Convention and in effect from 2008.

Under the Bunker Convention ships over 1,000gt registered in a state that has ratified the convention must carry a certificate certifying that the ship has insurance or other financial security to cover the liability of the owner for pollution damage. The convention defines the owner in such a way as to include others, such as managers, bareboat charterers, operators and beneficial owners.

The US is not a party to the convention but under the Oil Pollution Act of 1990 (OPA 90), ships above 300gt operating in US waters are obliged to be covered by insurance and will be issued a Certificate of Financial Responsibility (COFR) to prove the fact. Individual nations, states in the US and regional bodies are permitted to make regulations concerning fuels used within their jurisdiction with the EU’s ban on fuels with sulphur levels above 0.1% being used in ports being a prime example.

One current area of concern is the Arctic where there are moves in numerous bodies including the IMO and the EU to ban the use of HFO.

Preventing pollution

The financial liability for accidental pollution is more than adequately covered by the Bunker Convention and national legislation such as OPA 90. No ship operator plans to pollute by dumping bunkers at sea and pollution by bunker fuel has generally been a result of accidental damage to the ship compounded by location of fuel storage tanks.

Once it was common for fuel to be stored in the double bottom spaces, but this is a vulnerability that has been addressed.

Regulation of fuel systems on board ships now begins with the design stages and the size and location of fuel tanks. A regulation on oil fuel tank protection was adopted in 2004 and entered into force on 1 January 2007. The regulation applies to all ships delivered on or after 1 August 2010 with a total oil fuel capacity of 600m3 and above. It includes requirements for the protected location of the fuel tanks and performance standards for accidental oil fuel outflow.

A maximum capacity limit of 2,500m3 per oil fuel tank is included in the regulation, and flag states are obliged to consider general safety aspects, including the need for maintenance and inspection of wing and double-bottom tanks or spaces, when approving the design and construction of ships in accordance with the regulation.

Taking into account that this regulation has now been in place for 15 years and that the average life of a ship is around 25 years, it can be seen that the accidental loss of fuel is now much less of a risk and is lessening with each year that passes. Pollution is not only a result of fuel leakage into the sea but also is an inevitable result of the combustion process. All fuels containing hydrocarbons, whether they are mineral oil based or from any other source, will produce carbon dioxide (CO2). This is because the chemistry of combustion means that the carbon in the fuel will combine with oxygen in the air when combustion occurs resulting in the exhaust gas containing some levels of both CO (carbon monoxide) and CO2.

Reducing CO2 emissions

Although cited by environmentalists as the root cause of climate change, CO2 is not generally considered as a pollutant and is an essential element in growth of all forms of vegetation around the globe. As a major user of oil fuels, the shipping industry has been demonised by environmentalists although in truth the industry produces only around 2-3% of all manmade CO2 which in turn accounts for only around 6% of all sources of the gas.

Thus, it can be shown that shipping’s contribution is less than 0.2% of all CO2 and since CO2 in total only accounts for 0.04% of the atmosphere it means that shipping’s contribution is below 1ppm.

As things stand the only control of CO2 from ships is that caused as a result of complying with the IMO’s Energy Efficiency Design Index (EEDI) regulations however, that may soon change. The EEDI rules, which limit the amount of CO2 an individual new ship design is allowed to produce, are based on a complex formula aimed at measuring the work done.

This involves the carrying capacity of the vessel, its intended speed and the power of the ship’s main and auxiliary engines. It is the only example of a global industry being regulated.

The rules provide for the output of ships to be reduced against a base level established in 2011. The extent of reduction depends upon the order or build date of the ship and falls in steps of 10%. The first reduction was under Phase 1 in 2015, the second under Phase 2 was  in 202o and the third under Phase 3 in 2025 although for some ship sizes and types this has been brought forward to 2022.

Under EEDI, not all ship types are subject to the exact same formula with due allowance being made for the varying power demands of different ship types. In addition, the lowest deadweight at which the rules apply is different for each ship type and there is also a sliding scale applied to ships of each type below certain deadweights, recognising the fact that some part of the power will be used for essential items (navigation, habitation and control requirements) which will consume a higher percentage of the overall power requirement in smaller ships than in larger vessels.

The EEDI rules applying to specific ship types are not actually fixed in stone but have been amended from time to time as new technologies emerge and flaws in the formulae themselves identified. Any changes are not retrospective so ships which were built to an earlier version retain the EEDI rating calculated at the time – unless they undergo conversion or major changes. This makes using the EEDI as a decision support tool for charters extremely difficult when comparing ships of different ages.

Despite the EEDI rules already limiting individual ships’ CO2 production, demands for shipping to be included in the Paris Agreement controls on CO2 production have grown and at MEPC 72 this ambition was recognised. Although there are as yet no new regulations beyond the current amended EEDI rules, MEPC agreed a strategy that envisages for the first time a reduction in total GHG emissions from international shipping which, it says, should peak as soon as possible and to reduce the total annual GHG emissions by at least 50% by 2050 compared to 2008, while, at the same time, pursuing efforts towards phasing them out entirely.

One of the measures is a possible new Phase 4 of EEDI which could add a further reduction to the limited bringing forward of Phase 3. Other options to be considered will be a speed restriction on ships and requirements to improve the efficiency of existing vessels.

Demands for speed restrictions on ships are made frequently by environmental NGOs and the matter was debated at MEPC 74 in May 2019. The delegates at that meeting heard conflicting views on the efficacy of slow steaming as a real means of reducing CO2 emissions and no speed limit regulation was decided upon. The matter was however referred to a working group that will further examine the issue. Even if a speed limit is eventually seen as something desirable by the IMO, the rule making processes would mean it would be 2022 at the earliest before any limit was enforced.

Greenhouse gases beyond CO2

With regard to the GHG roadmap, it is recognised that in order to achieve the declared ambitions, step changes in technology will be required and presumably means to meet the ambitions will need to be available before further regulation is made.

It should also be noted that the IMO refers frequently to greenhouse gases and does not limit the term to CO2 alone. That would mean that fuels such as LNG and LPG, both of which produce quantities of CO2, cannot feature in a zero-carbon future. If taken to the extreme, it would also make hydrogen suspect, since the scientists behind the Intergovernmental Panel on Climate Change (IPCC) recognise the forcing effect of water vapour on global warming. It is of course possible for water vapour to be condensed back to liquid form and possibly even used on board as fresh water but it is a factor that will need to be considered.

With particular regard to LNG which is seen as a cleaner fuel than oil, methane slip where unburnt fuel escapes to the atmosphere is considered a problem as methane has a global warming equivalent some 25 times that of CO2.

Sulphur levels

Sulphur levels

Just as CO2 is formed by the combustion process, so burning fuel containing nitrogen and sulphur in air will produce NOx and SOx. Although NOx emissions can be reduced by a number of means, SOx is purely a function of the sulphur content of the fuel being used.

In May 2005 when MARPOL Annex VI came into effect, the global limit on allowable sulphur content in fuel was set at 4.5% reducing to 3.5% from 2012. Lower levels apply in emission control areas with the lowest level of 0.1% having been in force from the beginning of 2015. A new global level of 0.5% outside of ECAs came into effect in 2020 following a decision taken at the MEPC in 2016.

At the time when the sulphur level rules were being formulated, scrubbing technology was at an embryonic stage and, many believed, unlikely to be an economic alternative to low-sulphur fuels. This has since been proven to be a false assumption and scrubber technology is now an accepted means of meeting SOx emission rules.

Even though the recent drop in fuel prices has extended the payback period for scrubber installations they are still seen as attractive propositions for many operators. The IMO has accepted that because ships trade internationally there may be occasions when fuel with the required sulphur content for trading in ECAs or even globally may not be available. MARPOL Annex VI regulation 18.2 provides for such a situation and allows whatever fuel available to be used so long as the ship owner has made efforts to attempt to obtain the required fuel oil and can show so.

Determining 2020 as the date for the global cap on sulphur was not without controversy but although it has been accepted by the shipping industry, there are many who believe that the rules will be widely flouted. Shipowners that plan to fully comply with the rules regardless of cost believe that their efforts will be undermined by ‘cheats’ who continue to use fuels outside of the new rules and called for measures to prevent this from happening.

At MEPC 72 in April 2018, the IMO approved draft amendments to regulation 14 of MARPOL Annex VI and the form of the Supplement to the IAPP Certificate concerning

prohibition on the carriage of noncompliant fuel oil for combustion purposes for propulsion or operation on board a ship, with a view to adoption at MEPC 73. The change was duly adopted and effectively bans any ship not fitted with a scrubber from having any fuel with a sulphur content above 0.5% on board except as cargo. The exemption for all vessels in case of non-availability of fuel is still be available.

IGF Code

IGF Code

After more than a century of using oil as fuel for ships, it is not surprising that most regulation covers oils either as fuels or as lubricants. The only other fuel commonly in use today is LNG and until recently it was not really covered by any international regulation.

Although still a relatively small fraction of the world fleet, the number of ships using LNG as fuel is increasing. The majority of such ships are still LNG carriers where the gas is not loaded as fuel but is provided by the boil-off from the cargo, but they will soon be outnumbered by other vessel types.

The catalyst for change was the adoption at MSC 95 in June 2015 of the International Code of Safety for ships using gases or other low flashpoint fuels (IGF Code) as this allowed for universal rules rather than the use of flag state dispensation as was previously the case. The IGF Code covers bunkering procedures as well as the storage and use of LNG as fuel onboard.

Adoption of the IGF Code involved amendments to SOLAS chapter II-1 (Construction – Structure, subdivision and stability, machinery and electrical installations) that included amendments to Part F Alternative design and arrangements, to provide a methodology for alternative design and arrangements for machinery, electrical installations and low-flashpoint fuel storage and distribution systems; and a new Part G Ships using low flashpoint fuels, to add new regulations to require ships constructed after 1 January 2017 to comply with the requirements of the code. There are related amendments to chapter II-2 and Appendix (Certificates).

The IGF Code contains mandatory provisions for the arrangement, installation, control and monitoring of machinery, equipment and systems using low-flashpoint fuels, focusing initially on LNG. It addresses all areas that need special consideration for the use of low-flashpoint fuels, taking a goal-based approach, with goals and functional requirements specified for each section forming the basis for the design, construction and operation of ships using this type of fuel.

The IMO has also adopted related amendments to the STCW Code to include new mandatory minimum requirements for the training and qualifications of personnel on ships subject to the Code. The amendments also came into force date on 1 January 2017, in line with the SOLAS amendments related to the IGF Code.

It is anticipated that as the use of alternative fuels grows, specific requirements cover fuels such as hydrogen, ethane, ammonia and LPG will need to be added to the IGF Code in order to avoid flag states needing to make their own rules as used to be the case with LNG.

Recording fuel and lube use

Recording fuel and lube use

In its attempts to control pollution by oil, IMO regulations not only deal with practical matters but also cover the administrative aspects by the mandatory use of Oil Record Books. The Oil Record Book (ORB) is supposed to detail the management of all fuel and other oil

on board and the fuel consumption and disposal of waste oils and used consumables such as filters that will by their very nature be contaminated with oil waste.

Maintaining the ORB accurately is essential for ships if they are to avoid PSC intervention and prosecution. The vast fines and custodial sentences meted out by US courts and other legal authorities are rarely direct punishment for illegal discharges – discharges outside territorial waters would not be actionable – but false record keeping since the ORB is considered as a legal document.

In addition to the international conventions, there are also a number of regional regulations concerning emissions which are influenced by fuel choice. Probably the most well-known are the EU’s directive on using ultra low-sulphur fuel in ports and the California Air Resources Board requirement for ships to switch from heavy fuel oil to low-sulphur marine distillate fuel before entering ‘Regulated California Waters’.

Monitoring, Reporting and Verification (MRV)

Monitoring, Reporting and Verification (MRV)

The MRV regulations are the regulator’s response to the accusation that shipping is not doing enough to reduce its CO2 emissions. There are in fact two sets of rules, one from the EU which introduced the measures both as a spur to the IMO to speed up regulation of CO2 emissions and also as  a prelude to possible EU market-based measures aimed at CO2.

Under EU MRV regulation rules which came into effect on 1 January 2018, ships of 5,000gt and above will be required to monitor the CO2 emissions, make an annual report of those emissions to an approved third party verifier and for the verified reports to be submitted to appropriate authorities where they will be aggregated. Each member state in the EEA has a national accreditation body and it is they which must appoint and list the recognised bodies for that flag state.

The information gathered will then be used to determine future efficiency regulation and also very likely to be used as grounds for including shipping into some market-based measure that will raise money to supposedly offset the effect of those emissions.

The EU regime applies only to ships planning to make calls to ports in the EEA – effectively any EU member state plus Iceland and Norway. The governing rules are laid out in Regulation (EU) 2015/757 which is supplemented by Regulation (EU) 2016/2072 (accreditation and appointment of verifiers) and Regulation (EU) 2016/1927 (requirement for monitoring plans).

It is important to read all of the regulations together because shipowners need to follow designated pathways to making reports and must have a documented plan in place that will need to be followed. The January 2018 date is in fact the second of two deadlines in the EU regulation as the requirement for an approved plan for the company to be in place was set for August 2017.

EU and EEA shipowners will have been made aware of the requirements by flag states but for ships registered in other countries the owners may have been unaware of the exact requirements especially the fact that the verifier must have been approved by one of the member states of the EEA.

IMO reporting rules

Unlike the EU, which has made no secret of the fact that the collection of data is intended to bring shipping into an ETS, the IMO’s rules to gather information on CO2 emissions are at present merely an attempt to quantify exact figures. What may evolve thereafter will be a matter for national delegations to the IMO to decide and that looks to eb a very contentious debate.

The rules governing IMO data also cover only ships above 5,000gt and they are to be found in chapter 4 of MARPOL Annex VI under Regulation 22A. In addition, new appendices have been developed outlining ‘Information to be submitted to the IMO, including ‘Ship Fuel oil Consumption Database’ (Appendix IX), and ‘Form of Statement of Compliance – Fuel Oil Consumption Reporting’ (Appendix X). These rules came into effect from March 2018 and the first reporting period was for the full year 2019.

The data that is collected under the IMO regime is reported to flag states which will aggregate it and submit the data for the flag to the IMO for inclusion into an IMO database. The data to be submitted includes the fuel consumption data (by fuel type and in metric tonnes), as well as distance travelled and time at sea, from berth to berth.

There are other consequences of the IMO rules that will affect all shipowners including those which are subject to the EU regulations. All shipowners had to ensure that by 31 December 2018, the Ship Energy Efficiency Management Plan (SEEMP) onboard each of their vessels had been amended to include the methodologies that will be used for collecting the required data and reporting that data to the flag state.

MRV regulation – Gathering facts

Shipowners are required to have a reporting plan that detail how their system will operate and what records and documentation need to be kept. For each ship this will include fuel consumption and other parameters, such as distance, time at sea and quantity of cargo carried. The quantity of cargo carried is included because the EU ETS (Emission Trading System) that the owners may have to participate in is about the amount of work done by cargo and distance which is in contrast to the IMO’s simpler variant which just records distance.

The monitoring plan is required to describe the vessel and its installed combustion machinery and to provide information in a complete and transparent manner. What kind of fuel will be used and which of the provided methods for the determination of fuel oil consumption for monitoring and reporting CO2 emissions or other relevant information is chosen.

There are four available methods for determining consumption; Bunker fuel delivery note (BDN) and periodic stocktakes of fuel tanks, Bunker fuel tank monitoring on board, Flow meters for applicable combustion processes and finally Direct CO2 emission measurements using calibrated equipment. It is permissible to use a combination to improve accuracy. Shipowners need to consider how to measure emissions which may involve purchasing and installing emission monitoring systems some of which can simultaneously measure and record other exhaust emissions such as NOx and SOx.

BDNs and FONARs

BDNs and FONARs

Bunker delivery notes (BDNs)

As a consequence of the initial belief by the IMO when regulation fuel sulphur content that no SOx reduction technology would be available and therefore no emission measurement necessary, the control system decided upon to prove compliance revolved around the declared sulphur content being shown on bunker delivery notes.

The notes are backed up by samples to be used only for official investigations into alleged breaches of the SOx regulations. The IMO has published guidelines for the sampling procedure which would be familiar to most ships where there is a practice of fuel sampling laid down for quality purposes.

The format of bunkering delivery notes is laid down in Annex VI and most official bodies will want to see the documents in the accepted format. Bunker suppliers in states that are party to Annex VI are required to provide the documents in the accepted format but in states that are not, there is no such requirement.

It is usual for shipowners, when ordering bunkers, to at least insert clauses to the effect that the fuel oil supply process is to be in accordance with the requirements of Annex VI and with specified maximum sulphur content appropriate to the particular intended future area of operation.

MARPOL Annex VI Regulation 18.5 requires the following items, as a minimum, to be detailed on a Bunker Delivery Note:

  • Name and IMO Number of receiving ship
  • Port
  • Date of commencement of delivery
  • Name, address and telephone number of marine fuel oil supplier
  • Product name
  • Quantity in metric tonnes
  • Density at 15˚C (kg/m3)
  • Sulphur content (% m/m)
  • A declaration signed and certified by the fuel oil supplier’s representative that the fuel oil supplied is in conformity with the applicable paragraph of

regulation 14.1 or 14.4 and regulation 18.3 of Annex VI.

Fuel oil non-availability report (FONAR)

When discussing the implementation of the 2020 sulphur global cap, MEPC 74 also discussed many of the other issues relating to 2020 changes including the suitability and safety issues of compatibility of different compliant fuel types and their long-term stability. The meeting also tackled other issues such as noncompliance and availability of compliant fuel.

Under Resolution MEPC.320(74) entitled 2019 GUIDELINES FOR CONSISTENT IMPLEMENTATION OF THE 0.50% SULPHUR LIMIT UNDER MARPOL ANNEX VI, the IMO has set out some non-mandatory proposals for ensuring consistent implementation and provided further details of action to be taken in case of nonavailability of compliant fuel.

This will entail the completion of a ‘fuel oil non-availability report’ (FONAR) explaining the circumstances and intended action that has to be advised to the flag state.

Completion of a FONAR does not guarantee immunity to a ship using non-compliant fuel but is merely an explanation of why it was necessary to do so. It remains a noncompliance situation for a ship to arrive at its next port with fuel oil of more than 0.50% sulphur content if no scrubber is installed on board.

A circular agreed at MEPC to be issued outlines a number of possible scenarios which the port state, flag state and ship can agree to apply in such circumstances. This ranges from requiring de-bunkering at the port to keeping the non-compliant fuel onboard until next port in a controlled manner. The guidelines do not pre-judge what control actions a port state may take in such circumstances, and it cannot be ruled out that some port states may still penalise ships for arriving with non-compliant fuel onboard in any case. This is similar to the guidance issued by the IMO for noncompliance with the 2004 ballast convention

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