On October 27th local time in London, IMO decided that 0.5% of global sulfur limits would be effective from 2020 instead of 2025 after a postponed 5 years. It meant that regulations in Annex VI of International Convention for the Prevention of Pollution from Ships (MARPOL) which was passed in 2009, made it mandatory for all ships sailing beyond sulfur emissions control area (ECA) to use the fuel with sulfur content less than 0.5%.
Previously, the European Union had agreed to implement a 0.5% sulfur limit within 200 nautical miles of coastal areas among European Union member states.
Some countries and organizations had previously thought that if 0.5% global sulfur limit goes into force from 2020, the shipping industry is unlikely to get enough low-sulfur fuel. They said a five-year postponement could allow more oil refineries to upgrade their production to maximize the capacity of intermediate fraction. But IMO’s Marine Environment Protection Committee (MEPC) once hired an American consulting company to help do a survey on the availability of 0.5% sulfur fuel in the whole shipping industry in 2020, arguing that the market in 2020 would be able to meet the demand of low-sulfur fuel. According to the survey result of MEPC, it was predicted that ships sailing outside ECA areas would use fuel with 0.5% sulfur content, while ships within ECA areas would use fuel with 0.1% sulfur content. 3800 ships with a consumption of 36 million tons heavy oil and 12 million tons liquefied natural gas (LNG) would be equipped with exhaust gas cleaning devices in 2020. 39 million tons fuel with 0.1% sulfur content as well as 233 million tons fuel with less than 0.5% sulfur content would be used, and the annual fuel consumption of the whole shipping industry would be around 320 million tons.
Of course, even though there would be an adequate supply of low-sulfur fuel in 2020, it is another story in the economic sense. If the global sulfur limit could be effected in 2020 and fuel cost kept at a low level as present——oil prices had fallen sharply since 2015, fuel cost would be back to the peak of 2014 with a mandatory use of low-sulfur fuel. However, if oil prices would rise in 2020 as someone predicted, nearly $70/barrel, which is much less than the peak of 2014, then price differences between low-sulfur fuel and residual fuel would increase by $400/ton.
Denis Bonhomme, senior vice president of Asian business development in ENGIE Group, recently said that once the 0.5% global sulfur limit by 2020 had been approved, the LNG demand may surge in next 10-15 years, and LNG demand for marine fuel department may reach 30 million tons (mtpa) before 2025-2030. It would account for about 6% of total global LNG consumption.