The IMO’s coming sulfur cap will shake up the global mix of marine fuels, pushing shipowners away from high sulfur fuel oil (HSFO) and towards IMO-compliant marine fuels like marine gasoil (MGO) and low sulfur fuel oil (LSFO).
LSFO in particular has been of interest from the bunker industry due to its status as a relatively new marine fuel. In a recent blog post, we highlighted issues surrounding several US patents that concern the blending of hydrocarbons to create IMO-compliant LSFO. In this post, we look at another concern with LSFO: Compatibility.
Compatibility refers to the ability to mix different marine fuels together. There is not a single recipe for IMO-compliant LSFO. Instead, blenders and refiners create LSFO through a mix of streams from across the refining process that vary depending on the producer. With LSFO production spread throughout the globe, there will accordingly be immeasurable streams and blends of compliant LSFO.
How these different fuel oils react when mixed together is a pressing concern among shipowners looking to adhere to the coming sulfur cap. Mixing incompatible LSFOs together can result in a reaction that produces deposits that can damage engines and leave vessels stranded. Compatibility with different bunkers currently affects less than half of 1 percent of fuel oil deliveries, but issues will increase considerably with new LSFO fuel blends.
While some bunker producers, most notably ExxonMobil, have said their low sulfur bunker fuels will be compatible across the globe, there is no guarantee these fuels will be compatible with other complaint fuels. Unless buying from a single provider at ports across the world, LSFO consumers are likely to consume different grades of compliant marine fuel oil. This increases the possibility of compatibility issues.
In vessels with multiple fuel tanks, compatibility concerns are unlikely to be an issue if shipowners are meticulous about keeping different fuels isolated and conducting relevant maintenance upon switching fuel grades. For older vessels and for those vessels with a less advantageous configuration of its ship tank, LSFO compatibility issues will be harder to avoid. There is also a lot that is out of the hands of shipowners. Piping and tanks used by bunker providers may carry trace amounts of LSFO if not appropriately managed. Even these trace amounts combined with another stream of fuel oil could result in compatibility issues.
Which fuel a shipowner purchases after the IMO’s 2020 cap goes into effect will largely depend on pricing and availability. But a prominent shipping consultant recently told ClipperData that shipowners are likely to use MGO at the outset of IMO 2020 because it does not have the compatibility issues associated with LSFOs. The source said shipowners will largely pursue a wait-and-see approach before moving towards LSFO.
Another source - this time a shipowner - told ClipperData that if there was ever a time shipowners would pay a premium to ensure fuel safety, IMO 2020 is that time. These interviews recently appeared in ClipperData’s Beyond 2020 report, our monthly overview of industry trends in the buildup to IMO 2020.