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China adopts new shipping controls

The Asian giant is to follow the rest of the world in maritime emissions regulations

China's extension of its emission control areas to its entire coastline, starting from January 2019, exemplifies the pressure facing the global shipping fleet, bunkering industry, oil and gas majors, and fuel-testing agencies as they face imminent low-sulphur regulations.

China's new controls, which were announced in mid-2018, bring its waters up to date with the regulations already applying in European Emission Control Areas (ECAs). As such, they look like setting a benchmark in a region that has not exactly been in a hurry to impose emissions restrictions on its waters. Beijing's regulations set a sulphur content limit of 0.5pc and will affect all vessels sailing within 12 nautical miles of the coast as well as when berthing. Shippers operating in the new coastal zones will probably have to carry dual fuels to comply with the regulations, reports energy consultant Wood Mackenzie.

Although the 12-mile limit is much softer than the 200-mile boundaries imposed in some European ECAs, the regulations are highly significant because of the huge role that China plays in international shipping. And Beijing has said it will lower the emissions limits further from 2020, just as low-sulphur fuels become obligatory around the world.

In the wider world, it is far from certain that the maritime industry in general is ready for this transformational shift to low-emission propulsion, as the recent bout of contaminated fuels has shown all too starkly. A round of litigation and compensation claims will run their course during 2019 as shipowners seek redress over fuels bunkered in the Houston area that affected about 100 vessels, even to the extent of seizing up engines in mid-ocean.

The incidences put pressure on the industry to guarantee the provision of sufficient high-quality, low-sulphur fuel for the global fleet. As a member of the International Bunker Industry Association, Unni Einemo, noted in Platts' Bunkerworld in October, the industry is already fearful about the quality of 0.50pc blends. "Many have predicted that contamination cases like the one seen in the US Gulf and beyond during the spring and summer of 2018 are going to get much more frequent due to blending to ensure sulphur limit compliance," she warned. As Einemo points out, there may be thousands of unspecified potential contaminants capable of compromising the integrity of bunker fuels.

650,000 barrels—amount of high-sulphur fuel consumed annually by maritime traffic on China's inland waterways

In the case of the contaminated products, testing laboratories have identified the problematic fuel as most likely being high sulphur sold as an RMG380 grade under the ISO 8217 specifications. Technically speaking, this is typically the 2005, 2010 or 2012 edition of the standard. Alarmingly, the inability of the laboratories to identify exactly the cause of the problem highlights deficiencies in the fuel-testing process. According to the IBIA, the only long-term solution is the development of "globally consistent methods and protocols."

Until this happens, there's a heavy burden on suppliers including the bunkering industry. Under the regulations all suppliers have a duty to ensure their cargoes meet the ISO 8217 standard, obviously before they're bunkered. This is because it is impractical to expect the ship operator to ensure the integrity of the fuel. Under the IMO's Clause 5.2, the product must be "free from any material at a concentration that causes the fuel to be unacceptable for use in accordance with Clause 1." Further, the offending material cannot be present "at a concentration that is harmful to personnel, jeopardises the safety of the ship, or adversely affects the performance of the machinery."

However few expect that issues with bunker fuels will end as of January 2020. According to Platts, there's wide-spread concern in the shipping and bunker industries that some of the new, low-emission blends will prove incompatible if they are brought into contact with each other, accidentally or otherwise. As the global technical manager for marine fuel services at France's Bureau Veritas, Charlotte Rojgaard, told the energy consultancy: "Compatibility is a known issue. It exists today and will exist after 2020. VLSFOs [very low sulphur fuel oils] will need to be handled with similar care to [fuels] today."

Or perhaps with greater care. It is expected that the new blends will be supplied in two main types—paraffinic and aromatic. According to Rojgaard, the former fuels will have a higher pour point that will require them to be heated in colder climates. "Mixing a paraffinic and an aromatic product is not a very good idea as you run the risk of an incompatible product," she warns. The same risk applies when mixing two of the current high-sulphur fuels.

As the deadline nears, oil companies have been developing tomorrow's fuels as fast as they can. ExxonMobil, for one, is confident all of its VLSFO blends will be compatible with each other. The major has already started converting heavy fuel oil into 2020-compliant marine fuel at its new $2bn refinery at Antwerp and pumping it out at a rate of 50,000 barrels a day. ExxonMobil is also expanding a plant in Rotterdam earmarked to upgrade heavier hydrocarbon by-products into ultra-low sulphur diesel.

Similarly, BP has said its marine fuel will meet the requirements of ISO 8217. To help ship-owners through the teething period, BP will make its fuels available during 2019. These include high-sulphur fuel oil for ships fitted with scrubbers, VLSFO with a maximum sulphur content of 0.50pc and MGO with a maximum sulphur content of 0.10pc mandated for areas with the cleanest regulations such as the Norwegian fjords.

Encouragingly, the curse of cat fines could be nearing an end. A by-product of catalysts used in the refining process, cat fines should be less prevalent in VLSFO blends because, explains Platt, they are less viscous and dense than today's fuels, a common cause of the contamination.

Whatever the reason behind the contaminant fuel loaded at Houston and elsewhere—similar issues were reported by ships lifting bunker fuel in Panama and Singapore as late as July—the episode puts pressure on the bunkering industry to maintain the highest possible standards of quality control. According to the subsequent investigation by the IBIA, there is also the possibility that the problems stemmed from cross-contamination due to a new product cargo being loaded into multi-purpose storage tanks that were not properly emptied and cleared beforehand. On the bright side, the IBIA has not found any evidence of malpractice or negligence by specific companies. And the trade body is convinced that the contamination cases "are completely unrelated to low sulphur fuel oil blending."

Some bunker ports are not taking any chances. In October, Singapore, which mandated the use of mass flow meters in 2017 for bunker fuel sales from barges to vessels, will require ahead of the 2020 deadline that the meters are also used for transfers from oil terminals. The new rules will apply from mid-2019. Not only will the meters measure accurately the quantities of fuel transferred, they could help intercept contaminated fuel.

The Houston incidents have however galvanised the fuel-testing industry into even more action than before. Reflecting the IBIA's insistence on "globally consistent methods and protocols", Bureau Veritas, has proposed a new testing programme known as VeriFuel that aims to "set the future benchmark in marine fuel testing." Under the proposals, VeriFuel experts would be deployed in the field rather than limited to the laboratory where they would check the integrity of the product on the suppliers' premises before it is lifted.

In the longer term, the industry expects the 2020 standards to get even tougher as the IMO and environmental authorities continue to chase the targets set in Paris. That may be the case in China as Beijing continues to enforce its cleaner-air campaign. According to some experts, the government may further tighten the sulphur limit to less than 0.1pc.

The latest round of regulations also applies to the country's vast inland waterways that see huge volumes of maritime traffic. According to Wood Mackenzie, nearly two thirds of China's demand for bunker fuel is consumed in these rivers. Thus high sulphur fuel oil-powered vessels will be banned on inland waters from January 2019 unless they are fitted with scrubbers or other sulphur-reducing technology. Simultaneously, a new and unified specification for diesel known as China VI will be made compulsory for the maritime industry, even though it is more expensive than the high-sulphur fuel most commonly used.

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