Impact of IMO 2020 and COVID-19 on the World of Bunker
Blog Article - August 28, 2020
The impact of IMO 2020 and COVID-19 on the world of bunker was a key theme for my discussion along with a number of experts in a roundtable webinar hosted by S&P Global Platts LNG and the IBIA on 18 August, as part of the 'Middle East Bunker Fuel Virtual Conference'.
Moderator Daniel Colover from S&P Global Platts, managed discussions between experts Unni Einemo from the International Bunker Industry Association (IBIA), Robert Braithwaite from PetroChina International and myself.
When discussing the 10-year investment horizon ahead of us, we are faced with significant uncertainty as an industry. What we do know, is that there needs to be a parallel process looking at the best options for today as well as working collectively on developing the right fuels for tomorrow.
This is why we are seeing increased adoption of Liquefied Natural Gas (LNG) as a marine fuel for the ‘here and now’. LNG’s environmental benefits mean it has significant potential as a marine fuel, meeting the requirements of the IMO 2020 regulations. LNG is growing as a share of the bunkering market. Prices for LNG as a marine fuel have remained below the cost of other IMO-compliant marine fuels, which has supported growth in LNG bunker sales. The infrastructure is developing rapidly and activity around production, logistics and bunkering are gathering pace.
After the first wave of scrubber installations, further investment has slowed due to the sharp drop in the VLSFO-HSFO spread. This means that ship-owners who had planned larger scrubber programs that would allow them to continue burning HSFO, may reconsider this decision going forward.
We also discussed the merits of methanol and ammonia and the increasing role that biofuels could have in the clean energy mix, particularly if biofuels are produced sustainably as a ‘bridge fuel’. This type of ‘drop-in fuel’ does not require major engine re-configuration, which may mean cost advantages for ship owners and operators, where biofuels is competitively available.
Complexities will increase in the short to medium term but there is a role for us all to work together across the supply chain to help guide shipping companies through this transition. Different types of services and companies will continue to be needed, even if the landscape indeed changes, as it inevitably will. To develop thought leadership further, we need longer-term data series to evaluate the industry’s performance under the IMO 2020 regulations before we conclude the next steps of our journey towards 2050.