As of 1 January 2015, vessels operating in an Emission Control Area (ECA) can no longer use fuel with a sulphur content exceeding 0.10 per cent by weight, unless an approved exhaust gas cleaning system is installed.
The regulatory changes are part of the increasingly stricter air emission limits enforced through MARPOL Annex VI and have been advertised to the shipping industry for a long time. Nevertheless, the ECA sulphur cap drop from 1.00 per cent to 0.10 per cent entering into force on 1 January 2015 is expected to have quite an impact on shipping in terms of technical, operational and financial challenges.
The majority of Gard’s Members and clients are expected to meet the new sulphur emission limits in the shorter term by changing to a compliant low sulphur fuel prior to entering an ECA. Concerns have been expressed as to the possible lack of availability of compliant fuel and Members and clients will need to plan ahead accordingly. Marine gas oil (MGO) and marine diesel oil (MDO) at or below 0.10 per cent sulphur is likely to be the most commonly available low sulphur fuel, but other and new grades of marine fuel with a maximum 0.10 per cent sulphur content may be viable and economical options in some ports. This document refers to these fuels as ‘hybrid fuels’ although some suppliers may list these as ‘hybrid ultra-low sulphur fuel oils (ULSFO)’. However, a difficulty faced by operators is that there are no published ISO specifications for some of these new fuel grades.
It is well known that heavy fuel oil (HFO) compared with low sulphur distillate fuels have very different properties and can create operational challenges. For instance, a change-over between two different fuel types can put machinery equipment at risk, and in a worst case scenario involving loss of power, it could jeopardise the safety of the vessel and its crew. There will also be a financial impact resulting from the requirement to buy more expensive low sulphur fuel.
Prepare for compliance
When preparing to trade in ECAs on or after 1 January 2015, a compliance strategy should be developed based on each vessel’s trading pattern, machinery configuration, and available alternatives for compliance. For those planning to comply by switching between high and low sulphur fuels, the following key elements should be part of an effective compliance strategy:
Gard has received a number of enquiries relating to the new requirements entering into force on 1 January 2015. The sections below aim to provide answers to the most frequently asked questions and serve as background information and guidance to Members and clients still in the process of establishing an effective ECA compliance strategy.
1. Regulatory background
1.1 International Convention for the Prevention of Pollution from Vessels (MARPOL)
MARPOL Annex VI Regulation 14 places a current global cap on the sulphur content of fuel oil at 3.50 per cent and a 1.00 per cent cap in the ECAs. The cap on the sulphur content of fuel is to be further lowered to 0.10 per cent in January 2015 for operations inside ECAs. For operations outside ECAs the global cap of 3.50 per cent will be reduced to 0.50 per cent in 2020 (or 2025 depending on a review in 2018 to determine availability of compliant fuel). The figure below gives an overview of the scope of the regulation.
As at 1 January 2015 the relevant ECAs are: the Baltic Sea area as defined in Annex I of MARPOL; the North Sea area as defined by Annex V of MARPOL; and the North American area and the United States Caribbean Sea areas as defined in Appendix VII of Annex VI of MARPOL.
Notably, MARPOL contains a "no more favourable treatment” clause ensuring that no advantage is to be gained from registering a vessel in a state that has not ratified the convention. The requirements therefore apply both to vessels flagged in a signatory state and to vessels of other states (irrespective of their signatory status) when operating in waters under the jurisdiction of the signatory state. IMOs webpage “Status of Conventions” provides an overview of the current signatory states.
The EU Directive (1999/32/EC) covering the sulphur content of marine fuels was amended in 2012 (2012/33/EC) to bring the EC legislation in line with MARPOL Annex VI on the requirement for the use of low sulphur fuels. Hence, the requirement for the use of fuel with a maximum 0.10 per cent sulphur content in ECAs from 1 January 2015 is identical to MARPOL Annex VI.
In addition, the EU Directive requires vessels while at berth in EU ports, including ports outside the ECAs, to burn fuel with a sulphur content not exceeding 0.10 per cent. Turkey enforces similar requirements in their ports although it is not a member of the EU. More information can be found in our Gard Alerts “Fines for burning non-compliant fuel in EU ports” and “Turkey – New requirements for fuel oil sulphur content.”
1.3 California, United States (US)
Vessels operating in Californian waters, which is part of the North American ECA, have since 1 January 2014 been required to burn only fuels of distillate grades (marine gas oil or marine diesel oil) with sulphur levels at or below 0.10 per cent, see also our Gard alert “California low sulphur fuel changes 1 January 2014.” It is also worth noting that the California OGV Fuel Regulation contains no provisions for use of alternative emission control technologies (scrubbers) to achieve the required sulphur emission levels.
Vessels operating in Californian waters on and after 1 January 2015 must therefore comply with both the California OGV Fuel Regulation and the MARPOL ECA requirements. The California Air Resources Board’s Marine Notice 2014-1 provides guidance that will allow vessels to comply with the California OGV Fuel Regulation when they are complying with the North American ECA MARPOL regulation using alternative emission control technologies or non-distillate low sulphur fuels.
2. ECA compliance options
The three preferable methods for complying with the maritime sulphur emission requirements are: low sulphur fuel, heavy fuel oil (HFO) and scrubbers for exhaust gas cleaning, and liquid natural gas (LNG) as the fuel. Which solution an owner opts for will depend on a range of factors including the amount of time spent in ECAs and the vessel’s machinery configuration, fuel consumption, and age. It appears, however, that the majority of owners will meet the new sulphur limits by switching to fuels such as MGO and hybrid fuel with maximum 0.10 per cent sulphur.
For vessels that spend a large proportion of their time operating in ECAs, for example ro-ro and cruise/passenger vessels, one of the alternative arrangements to low sulphur fuels, such as abatement technologies/scrubbers, may be preferable even where these incur significantly higher investment costs. When the global sulphur cap drops to 0.50 per cent in 2020, however, such alternative arrangements are expected to become more attractive also for other types of vessels since there is much uncertainty surrounding future fuel prices, in particular the price of MGO.
3. Switching between high and low sulphur fuels
3.1 Effects of low sulphur fuel on the operation
Because many vessels’ machinery systems were not designed to operate on low sulphur fuels, difficulties can arise, both during the fuel change-over process and during sustained operation. Difficulties arising when switching between HFO and MGO primarily stem from the effects of the low sulphur and low viscosity characteristics of the MGO on machinery systems designed for HFO. Factors to consider are:
Our previous article “Marpol Annex VI - Solving the low sulphur issue“ and Loss Prevention Circular No.06-06 “Marpol Annex VI – Challenges in operating on low sulphur fuel” may also be of interest even if the maximum sulphur content of marine fuels used in ECAs was 1.50 per cent at the time of publication.
3.2 Issues to consider when selecting new low sulphur hybrid fuel grades
New grades of marine fuel with a maximum 0.10 per cent sulphur content may be viable and economical options in some ports. This document refers to these fuels as ‘hybrid fuels’ although some suppliers may list these as ‘hybrid ultra-low sulphur fuel oils (ULSFO)’.
One of the advertised key advantages of some of the new low sulphur hybrid fuels is that they have higher viscosity and better lubricity than MGO and therefore ease the change-over process. However, due to the additional processing necessary to reduce the sulphur to the required low levels, these fuels could have more challenging cold flow characteristics. With higher pour point, cloud point and cold filter plugging point (CFPP), some hybrid fuels may also require heating.
A critical factor when selecting hybrid fuels is that no published ISO 8217 specifications exist for these new products and although preparations for approved specifications are in progress, these are not expected to be ready in the near future. Pending publishing of formal ISO 8217 specifications for the new hybrid fuels with maximum 0.10 per cent sulphur, owners and operators should always:
It is also important when bunkering and consuming these types of fuels to carefully evaluate their specifications/analyses to ensure that the vessel’s fuel system is able to safely handle the fuel. Seek advice from your designated fuel oil analysis laboratory and pay particular attention to the following issues:
See also Veritas Petroleum Services’ (VPS) circular “Getting ready for hybrid fuels” dated 8 December 2014. We are grateful to VPS for their kind permission to reproduce the document.
3.3 Written procedures for fuel change-over
There are no changes to the regulatory requirement concerning the need to demonstrate a written procedure showing how the fuel oil change-over is to be done and logbook recordings at each change-over (MARPOL Annex VI Regulation 14.6). See also our Loss Prevention Circular No.15-09 “Low sulphur fuel changeover”.
Existing fuel change-over procedures should, however, be reviewed and amended to reflect the use of new types of low sulphur fuels. And since issues related to the change-over between HFO and low sulphur fuels are unique to each vessel and its condition, it will be important to:
Even with the required fuel on board, a mistimed, improperly executed or unrecorded change-over will result in violations within an ECA.
4. Bunker deliveries
There are no specific changes to the regulatory requirement concerning bunker deliveries (MARPOL Annex VI Regulation 18). In order for flag state and port state control (PSC) authorities to monitor compliance with the regulations, bunker delivery notes (BDNs) and representative samples of the fuel oil delivered must be obtained and retained on board. Some important issues to remember:
PSC officers may not only request the MARPOL sample to establish that compliant fuel has been delivered but may also take samples from the feed or returning line of the engine to establish that compliant fuel is in use.
Our Loss Prevention Circular 05-11 “Bunker Sampling” explains the procedures for taking and handling samples and our articles “Bunker Contracts” contains useful information as to responsibilities and issues regarding contracts for the supply of bunkers.
5. Owners' and charterers' responsibilities for compliance
Compliance with MARPOL Annex VI is the responsibility of the vessel owner. But the time charterer is usually obliged to purchase the bunkers pursuant to various forms of charterparty clauses. Typically a bunker clause will refer to a specific grade of fuel that meets ISO 8217 specifications and MARPOL Appendix VI requirements. However, since liability for non-compliance will often be directed towards owners, it will be of utmost importance to secure a proper indemnity regime in case charterers fail to provide compliant fuel.
BIMCO published a charterparty clause in 2005 that is intended to balance the rights and responsibilities of owners and charterers and we refer to our article “New BIMCO bunker fuel sulphur content clause” for details. In summary, the clause states that charterers must supply fuels of such specifications and grades that permit the vessel, at all times, to comply with the maximum sulphur content requirements of any emission control zone. If the charterers have done so, the owners undertake that the vessel will comply with the regulations 14 and 18 of MARPOL Annex VI, i.e. that the vessel is able to and will burn fuel of the permissible sulphur level.
With a number of issues arising from the stricter sulphur emission limits enforced in 2015, it is even more important than before to adopt the recommended ISO 8217:2010 or 2012 specifications. From the charterer’s perspective it is also important that specifications are back to back when the vessel is sub-time chartered. The wording of charterparties should also include correct fuel qualities and address the necessary allocation of responsibilities in respect of the new sulphur regulations, e.g. when:
Our article “Marpol Annex VI – New risks and challenges for owners and charterers” looks at some of the challenges of compliance and potential consequences of non-compliance with MARPOL Annex VI.
6. Enforcement by ECA countries
There is currently no uniform standard for how the various authorities will ensure that no vessel can sail into the ECAs without changing from high to low sulphur fuel. There is no uniform standard for sanctions in case of violations either. Some of our Members and clients have therefore expressed concern about the consequences of possible “unfair enforcement” of the new requirements.
Recent media reports indicate that some owners and operators may be prepared to ignore the new requirements. They consider the chances of being caught as so small that the large savings on fuel costs make the risk of a fine worth taking. Gard does not agree. We endorse BIMCO’s comments below: “It would be grossly unfair if the authorities overseeing one ECA were failing to ensure that all vessels were complying with the requirements. The non-compliant would profit from the lack of enforcement, while the operators who were working ‘by the book’ would suffer.”
ECA countries are taking different approaches to monitoring and enforcement. Some authorities have already announced a strengthening of their “normal efforts” to ensure compliance and will continue to check bunker delivery notes, logbook entries and samples (e.g. the United States). Others plan to develop and use new technology such as air surveillance and remote "sniffers” to measure sulphur emissions (e.g. Denmark). Many organisations like BIMCO and the ICS are therefore calling on the governments of the ECA countries to exercise robust enforcement of applicable sulphur limits to ensure a continued level playing field for vessels operating in ECAs.
7. Fuel oil non-availability
It has been recognised by the relevant regulators that there is some uncertainty as to whether bunker suppliers will be able to meet future demand for low sulphur fuel in the main bunker ports world-wide; and that despite owners’ and operators’ best efforts it may not always be possible to procure compliant fuel prior to entering an ECA. To avoid that a subsequent violation results in penalties or other control measures being imposed on the vessel, it will be of utmost importance that owners or operators:
Detailed guidance on how to demonstrate that it was not possible to purchase compliant fuel prior to entering an ECA can be found in:
8. Common non-compliances and their potential consequences
Stricter sulphur emission requirements have already been in force for some time in the ECAs and certain geographic areas such as California. Experience shows that authorities’ notices are commonly issued for record keeping violations and for fuel change-over that has taken place too far into the ECA or Californian waters.
Gard was recently involved in a case in California where the sulphur level of the MGO in the vessel’s fuel system was measured and found to be slightly above the required 0.10 per cent in Californian waters. In this specific case the investigation identified “a lack of proper tank cleaning prior to bunkering MGO” as the most likely cause for the non-compliance. The bunker delivery note specified compliant fuel, but remaining high sulphur fuel in the tank had put the MGO out of compliance before use.
Lack of proper crew training and awareness is often the root cause of ECA violations. Our Gard Alert “USCG detains vessel for failure to use low sulphur fuel oil in the North American ECA” describes a case where the vessel had compliant fuel onboard, but failed to use it while operating in the ECA because the Master and Chief Engineer were not familiar with current ECA regulations.
Members and clients need to be fully aware of the increasingly stricter air emission control measures being introduced around the world and prepare their vessels and crew for compliance. Although the stringency and consistency of the enforcement after 1 January 2015 is still uncertain, the consequences of non-compliance could be serious. In the event that a vessel does not have compliant fuel onboard, and the operator cannot demonstrate that best efforts have been made to obtain compliant fuel, authorities may require a deviation from the intended voyage, de-bunkering and replacement of fuel, causing delay and additional costs. Violations may also result in fines being levied against the vessel. And if history with respect to MARPOL Annex I serves as an example, penalties will increase if the industry is slow to comply.
Under Rule 47.1.c, pollution fines are covered only if they arise from an “accidental escape or discharge” of a pollutant from the vessel. Depending on the circumstances, Members and clients should be aware that fines for flue gas sulphur emissions exceeding the limits imposed by regulatory requirements may not be considered “accidental”. Our article “Marpol Annex VI – New risks and challenges for owners and charterers” further explains how Gard’s P&I and Defence cover respond to the risks associated with MARPOL Annex VI.
Ignoring the new requirements to reduce operating costs and remain competitive is not a viable option – not for the environment and not for the prudent owner or operator.