Fri. Nov 15th, 2019

Far-reaching Waves

Shipping is a global industry that requires the vigilant watch of various international relations decisions. The daily shore-side decisions have extensive implications on global trade patterns, market fluctuations, consolidations, operational procedures at sea and overall costs.

Thus, combining technical, policy and diplomacy aspects together can create a comprehensive look into global forces that act as currents which continuously shape the maritime industry.

As countries who are member nations of the International Maritime Organization (IMO) ratify conventions, there is a considerable amount of navigation to be done to prepare the course for its entry into force.

For example, starting from 2020, ships must be compliant with the IMO’s sulphur cap fuel regulation which limits the amount of sulphur content in fuel to a maximum of 0.5 per cent, from the current 3.5 per cent, worldwide. This sulphur cap has pushed the maritime industry to innovate by installing exhaust gas cleaning systems (scrubbers) and dual fuel engines that can operate on liquified natural gas (LNG).

Alternatively, some ship owners are prepared to opt out of installing a scrubber and will remain compliant by burning low sulphur fuel oil (LSFO), which can come at a higher price (compared to using heavy fuel oil with a scrubber). The majority of ships are choosing the latter; however, this means there will be higher fuel costs associated with burning LSFO and these costs could be passed onto customers and forwarders.

Premier Hub Port | Ministry of Transport

Additionally, since most ship owners will burn low sulphur fuel oil, fuel refineries will have to prepare by shifting to buying lower sulphur based crude oil, called sweet crude oil instead of using sour crude oil with higher sulfur content. Refineries could also prepare by installing their own hydrocracker or coker units (upwards of $1 billion) to produce the low sulphur fuel oil required for the new demand.

It is interesting to look how the IMO’s 2020 sulphur cap can be further refined within territorial waters of individual nations.

Singapore is the world’s largest trans-shipment hub, second largest port by TEU volume, and busiest bunkering port. Each year, more than 130,000 ships call in Singapore and connect to 600 ports in more than 120 countries.

Singapore, a pragmatic and rule heavy country has recently announced a ban on open-loop scrubber wash water discharge in their port, meaning ships calling in the Port of Singapore will either need to switch to a compliant fuel (LSFO or LNG) or utilise closed loop scrubber systems – if fitted onboard.

This announcement comes at a strenuous time when many shipowners have already fitted open-loop scrubbers or are racing to complete installations before the end of this year. Singapore has spent $100 million on green port initiatives and is positioning itself to be the LSFO and LNG bunkering port for ships without scrubbers. Ships with open-loop scrubbers may choose to bunker elsewhere, but those ships with open-loop scrubbers that have to unload in the port will have to switch over to low sulphur fuel or should utilise shore power.

The process of switching from heavy fuel oil, used with an open-loop scrubber for compliance, to low sulphur fuel oil takes time. Usually there is a 48-hour fuel switching period with various operational procedures performed by the crew with settling tanks, boilers, purifiers and log book updates because of varying temperatures and viscosity differences between the fuel types.

If not done properly, switching to low sulphur fuel oil can cause a thermal shock to the system and can damage fuel values and other equipment. Ships that have an open-loop scrubber and did not install a hybrid scrubber system (open-loop and closed-loop option for wash water discharge) that call in multiple ports may not want to continuously perform fuel switch over procedures. Shipowners will have to update their operating procedures to find the best solution to be both compliant with the IMO and with the Maritime and Port Authority of Singapore.

Bukit Merah, Singapore | Chuttersnap/ Unsplash 

Shipowners with open-loop scrubbers are pressing for Singapore to explore scientific research before making the decision and are cautiously hoping that other countries do not ban open-loop wash water discharge from scrubbers as well. China has already followed suit by limiting open-loop scrubber wash water discharge in certain areas including some coastal ports, rivers and inland waterways.

China and Singapore have both heavily invested in the multi-billion dollar bunkering industry and the open-loop discharge ban by both countries could be an effort to show that those locations saw the opportunities for LSFO and LNG and will be the major bunkering hubs for the new 0.5 per cent global standard.

Additionally, the Port of Fujairah, located in the Middle East, is another major bunkering port that joins Singapore and China in a ban on open-loop scrubbers. It seems that the industry is working to remain compliant with IMO standards by operating open-loop scrubbers, but the major bunkering hubs are working to shift those ship owners away from relying on an alternative to LSFO.

The future of trade patterns, new ports and operating procedures are being shaped through diplomatic decisions, technical innovation and global conventions. Using a multi-disciplinary approach to explore the maritime industry involves looking at the various topics within international affairs with a saltwater lens to expose new challenges and opportunities.

Vanessa DiDomenico is currently pursuing a dual degree in law and diplomacy studying Maritime Law at Tulane University and International Affairs at The Fletcher School of Law and Diplomacy. As the Founder and CEO of Sea Strategy, LLC, she provides industry insight to maritime companies on regulatory affairs and compliance. She is a Goodwill Maritime Ambassador for the International Maritime Organization and a Fellow for the Institute for Global Maritime Studies. Vanessa holds a B.S. from Massachusetts Maritime Academy and a M.S from the State University of New York, Maritime College.

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The IAS Gazette is a news site run by undergraduates from the Singapore Institute of Management’s International Affairs Society (IAS). Founded in 2018, it traces its roots to The Capital, a now defunct bimonthly magazine previously under the IAS.

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