Maritime industry professionals warned at Seatrade Conference in Dubai that new IMO regulations could increase operating costs ‘overnight’ – experts are confident increases can be shared between owners and operators
Maritime professionals attending Seatrade Maritime Middle East 2016 (SMME), have been discussing the ramifications of the new International Maritime Organization (IMO) 0.5% sulphur cap which comes into force in 2020 and could push the price of fuel used to operate ships (bunker prices), by more than US$200 a tonne – a 70% increase.
Essentially from January 2020, the IMO’s Marine Environmental Protection Committee will limit the global cap on sulphur content for marine fuels to 0.5%, representing a significant cut from the 3.5% global limit currently in place. To comply, the world’s shipping fleets will need to either change to a cleaner fuel such as Liquefied Natural Gas (LNG), or install some sort of sulphur reduction process.
“If fuel costs increase by as much as US$200 per tonne, then a proportion of those costs are going to be passed on and there could be trickle down to the consumer, especially in countries heavily reliant on imports by sea such as the UAE. It will depend largely on just how much additional expense owners and operators are willing to shoulder between them,” said Emma Howell, Group Marketing Manager, Seatrade.
According to Stavroula Betsakou, head of tanker research at Howe Robinson Partners, either way the new regulation is not all gloom and doom for the tanker sector.
“The new bunker fuel is likely to be blended by a limited number of refineries which would create opportunities for tanker owners. There’s lots of implementation elements that still need to be decided and some of them relate to exemptions, maybe the IMO will grant exemptions when you can’t find the right quality, a compliant fuel when and where you need it.
“There will be increased demand for tankers to ship compliant fuel blends to areas where they are needed, to correct those regional imbalances.
“But regardless of what type of fuel refiners eventually settle on to meet the new emission requirements, it will be more expensive than current bunker prices. In terms of the price, we could be looking at an extra US$200 a tonne, or even more, overnight. This would equate to around a 70% increase on the current bunker price of approximately US$280 per tonne,” she said.
Betsakou believes the higher bunker prices might not be faced solely by tanker owners as traditional hikes have, but also shared with charterers.
“The IMO 2020 is the first time that the bunkers’ cost is going to go up without oil prices being up, it’s just a quality premium rather than an oil price related premium. Assuming we don’t massively overbuild the market, which I don’t think we will, then there is a much better basis for that extra cost to be shared [by ship owners and charterers], she said.
SMME which closes today (Wednesday 2 November) at the Dubai World Trade Centre, was officially inaugurated by HE Sultan Ahmed bin Sulayem, Group Chairman & CEO of DP World and Chairman Dubai Maritime City Authority (DMCA) in the presence of HE Troels Lund Poulsen, Minister of Business and Growth, Royal Danish Consulate General and Chris Hayman, Chairman, Seatrade and senior government officials and leaders of the regional and international maritime industry.
A number of important announcements were made onsite this year, including Jawar Al Khaleej Shipping (JAK), a leading specialist services supplier to the offshore oil and gas sector in the Gulf, which signed an agreement with Damen Shipyards Group, for the supply of three vessels, one Fast Crew Supplier and two ASD Tugs.
Safwa Marine LLC (a subsidiary of Abu Dhabi Shipbuilding PJSC), and Jalboot Marine Network LLC (part of Emirates Consortium LLC), have signed a Memorandum of Understanding to build 40 passenger luxury marine transportation vessels in Abu Dhabi,
Dammam Shipyard, part of Al Blagha Holding Group, signed a Memorandum of Understanding (MoU) and strategic partnership with KDU World Wide Technical Services FZC. Abu Dhabi Ship Building signed a (MoU) with Top Oilfield to form a specialised team to cater the Oil and Gas industry.
Another highlight of the three-day event was the opening of the 61st annual International Ship Suppliers & Services Association (ISSA) Convention, which has partnered with the UAE National Ship Suppliers Association (UNSSA) to deliver a one-of-a-kind event for maritime industry professionals.
Held under the patronage of HH Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, Crown Prince of Dubai, SMME, the biennial event, now in its eighth edition, was expecting more than 7,000 attendees from 66 different countries, over the course of the event.