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The reduction of the MARPOL Annex VI global fuel sulphur cap to 0.5% will come into force on 1 January 2020. Shipowners have some very difficult and important decisions to make on how to comply with these stringent requirements.

Changes have long been driven by a combination of economics and environmental compliance. This is likely to remain true when considering the 2020 global sulphur cap. There are several options open to shipowners, with the majority currently opting for distillates, perhaps keeping one eye on the development of cheaper hybrid fuels, blends or compliant residual fuels. The choice will come down to what is right for the vessel and what is economically viable.

Options

Speaking broadly, there are five options available to a shipowner that allow compliance with the 2020 global sulphur cap:

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There are pros and cons with each, mostly concerning fuel availability, onboard fuel management, capex and opex and maintenance requirements. It is not a simple choice and the decision on what method of compliance is best depends on a number of factors, such as vessel type, trading area and indeed its expected remaining life.

The proportion of time spent within emission control areas (ECA) should be considered as well as the impact of changing over fuels when entering/leaving these areas. The 0.1% sulphur cap currently in operation within the ECAs will remain in force and it is possible that new ECAs may emerge in coming years.

In some cases, it would be disadvantageous to limit a vessel to one method of compliance. The best solution might be multi-fuel, such as the ability to burn both LNG and distillates or perhaps EGCS and hydrogen fuel cells.

Contractual Impacts

The challenges are not all just technical. Time charterparties will require particularly close attention but many aspects of all charterparties will also need to be reviewed, with more challenges anticipated for vessels already in long-term charterparties that span the enforcement date of 1 January 2020. 

 

The sulphur cap is coming and shipowners have to act now. North can help Members make informed decisions on options for compliance and address the potential contractual and charterparty pitfalls that come with these new rules.