Written by: Stephen George
The regulation affects the majority of global waters and is a fundamental shift in fuel production that moves marine bunker fuel from by-product status to an on-purpose, on-specification fuel. The IMO's decision presents challenges and opportunities, both for the shipping industry and the oil industry.
The shipping industry today is running over capacity and operating with historically low margins and freight rates. In addition, shippers are facing a complex array of other regulatory issues, such as ballast water controls, future CO2 emissions targets, mandatory stack monitoring and insurability. Shippers are convinced that scrubbers, along with the sludge retention and disposal, are not affordable. They expect compliant fuels to be made available, moving the challenge from the shippers to the refiners.
Refiners are battling many different issues, which make focusing on the new IMO regulation challenging. They are wrestling with the impact the regulation will have on their profitability, and what they can realistically achieve by 2020. There will be winners as well as losers in the struggle to reconfigure operations.