FUELS AND LUBES
LIVING WITH IMO 2020:
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rior to January 1 this year, the question highest on the agenda for most shipowners was what steps to take to prepare for the new IMO global limit on sulfur in marine fuels of 0.5% for ships operating outside of Emission Control Areas compared with the earlier 3.5% (inside ECAs the limit is 0.1%). They had three basic choices: wait and hope that the new fuels would be available and pay the possibly higher price, make the considerable investment of installing an exhaust gas scrubber and continue burning 3.5% sulfur, or make the leap to burning liquefied natural gas as fuel, posing its own set of issues relating to investment cost and fuel availability. So, who got it right? One owner that took the route of opting to
24 Marine Log // April 2020
burn compliant fuel was tanker giant Euronav. Prior to the IMO 2020 implementation date bought up large stocks of ultra low sulfur diesel and stored them afloat on its 442,470 dwt ULCC Europa, which it positioned off Singapore. In a September 2019 briefing, Euronav said that it had, at that time, bought 420,000 metric tons of compliant fuel oil (0.5% sulfur and 0.1% sulfur). The average price the company paid for VLSFO $447 per metric ton versus $400 per metric ton HSFO during the purchase period. How did that pan out? In a note to its 2019 financial report published March 31, Euronav said that the low sulfur fuel oil it purchased last year in anticipation of IMO 2020 price volatility and which had not yet been consumed, would be subject to a mark to market valuation at the end of the first quarter and will lead
to a write down as the current market is significantly below the acquisition cost. In other words, compliant fuel has, thus far, been more available and more affordable than most people in the industry had anticipated. Does this mean that companies that installed scrubbers or switched to LNG made the wrong bet? The roulette wheel is still spinning. The price differential between VLSFO and HFSO has recently been narrowing—meaning that it takes longer to pay back the capital and installation costs of scrubbers, around $2.5 million a pop for tankers, out of savings. But the last few weeks have shown that oil, and thus fuel, prices can be extremely volatile. Additionally, proponents of scrubbers can point to evidence showing that they remove even
Photo Credit: Shutterstock/ VladSV
WHAT’S CHANGED?
