TAKING DECARBONISATION BY THE HORNS - SURVEYING BUNKERING OPTIONS IN THE YEAR OF THE OX
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www.bunkerspot.com Volume 18 Number 1 February/March 2021
TAKING DECARBONISATION
BY THE HORNS
SURVEYING BUNKERING OPTIONS
IN THE YEAR OF THE OX
INSIDE:
BUNKER CLAIMS
MARINE LUBRICANTS
PERFORMANCE OPTIMISATION
BUNKERING WITH AMMONIA
the bunkerspot new year survey 2021
20/21 vision
2020 was a year that many would prefer to forget – but
Bunkerspot nevertheless invited a selection of industry
players and commentators to reflect on some of the key
lessons of the past 12 months and consider what 2021
may have in store for bunkering
I
n the run-up to 2020, it was generally but Drewry’s Rahul Sharan felt that ‘the sions about extended and even more stricter
assumed that, for the bunkering commu- world has learnt to live with the COVID’ lockdowns, consumer demand will decrease,
nity, the big issue of the year would be the and the impact of the pandemic will being restricted to online solutions (at least
implementation of the International Maritime recede over the course of the year. that is what we are seeing here in Germany) -
Organization’s 0.50% global sulphur cap, BLUE Insight’s Adrian Tolson believed with knock-on effects for trade and shipping.’
with decarbonisation looming ever larger. that we will see ‘somewhat depressed levels Gavin Allwright of the International Windship
As it turned out, IMO 2020 and the energy of demand through the first half of the year Association (IWSA) cautioned: ‘We are still six
transition did feature prominently – but they with a likely strong recovery as the year fin- months away from any real phased return to
were overshadowed by a more immediate and ishes. Quite how strong that will be is anyone’s normal in Europe and the US, and with new
pressing global concern which affected every guess, but I would not be surprised to see strains possibly worldwide. There is a sig-
aspect of our lives: the COVID-19 pandemic. demand higher in 2021 than 2020 and per- nificant uptick in infections in Asia too. This
haps even higher than 2019.’ Looking further will likely continue to hamper activity, and
COVID-19 CONTINUES_________ ahead, Tolson speculated: ‘Deglobalisation will also slow newbuild vessel orders, etc. In
impacting bunker demand might be seen the medium term, I also expect that we will
For our New Year Survey opener, we asked by the end of this decade, but for the near also see the re-evaluation of trading patterns
our respondents if they believed that COVID- term shipping activity and bunker demand and reshoring to reduce supply chain risk.’
19 would continue to be a major factor will be on an upswing.’ Focusing on the likely Ludovic Gerard of Ayro also believed
for the bunker and shipping indus- impacts for the bunker market, he consid- that ‘it’ll take time to exit fully from
tries in 2021, and beyond. ered: ‘Europe and the Americas (having suf- COVID issues, in particular in Europe and
As one would expect, fered badly as result of COVID) should lead the Americas’, which will ‘have an impact on
almost everyone way back in terms of bunker demand. Least the volumes and shipping during the year’.
said Yes to developed countries (LDCs) with less access Nigel Draffin drilled down to what the ongo-
this; to vaccines will see economic activity return- ing COVID situation will mean for the dif-
ing more slowly – but they have never been ferent shipping sectors. The cruise lines
primary drivers of bunker demand so this have, of course, been hit particularly hard
will not change demand patterns.’ as a result of the restrictions on recreational
Marcus Eichstadt of travel and Draffin thought it unlikely that this
Hamburg HPC argued: sector will recover before 2022, while ‘bulk
‘Considering the shipping (both liquid and dry) will remain at
political dis- lower levels throughout the first half of 2021’.
cus- Edward Liu of Hill Dickinson argued: ‘As long
as the vaccine cannot be widely taken, it is
anticipated that the pandemic will continue
in the new year (at least the first half
year) and the restrictive meas-
ures on travelling will also
remain.’ He flagged
up how this
28 www.bunkerspot.com Bunkerspot February/March 2021
the bunkerspot new year survey 2021
has placed huge pressure on ships’ crew ease until the public health emergency is financial weakness. My understanding is
change programmes – and warned that behind us and staff, surveyors, inspec- that the fundamentals are strong so there
the ‘crew change crisis’ may ‘endanger the tors, charterers and owners can move is every reason to be believe that if the vac-
sustainability of the global supply chain’. freely around the fleet, shipyards and ports‘. cines work, then things will get better.’
Nicholas Woo of Birketts also expressed Gerard pointed out that the COVID-19 Williams cautioned that the vaccine (or even
deep concern over the plight of ships’ crews restrictions place an extra burden not only vaccines) will not be a panacea: ‘Immunisation
and urged: ‘All of us in shipping must focus on crew changes but also ‘the attendance isn’t a cure. COVID-19 will become endemic
our efforts and goodwill towards resolving of persons external to the ship’, which would – we will have to live with it forever. Public
this.’ But Woo also saw grounds for opti- include bunker surveying and testing person- health restrictions of one sort or another will
mism: ‘The vaccines should provide the light nel, and he expect this to remain the case ‘at become universal and indefinite. Changes to
at the end of the tunnel even if it will take up least during the first half’ of 2021. On the posi- commuting habits, international flying, the
to the end of the year to be fully distributed. tive side, he believed that some ‘good habits’ attraction of city dwelling, the hospitality and
Any impact should be seen in that context.’ have been introduced to ‘protect the crews services sector may never be undone. The
Monjasa’s Svend Stenberg Mølholt was onboard from “foreign” diseases such as flu’ global economy won’t go back to how it was
positive about the prospects for a vaccine, and he anticipated these could be retained before. Shipping however remains one of the
and the bunker market: ‘COVID-19 had a sig- even after the current crisis has receded. least-affected sectors so far – but if global
nificant impact on overall bunkers demand, Mølholt also felt that valuable lessons supply chains alter then shipping may too.
as global Gross Domestic Product (GDP) have been learned – for both now and the For example: if “just in time” supply chains
developed negatively in the context of the future: ‘Crew change, physical inspec- become “just in case” with in-built alternatives,
pandemic. That said, history has evidenced tions and onboard visitors will be met then shipping’s innate flexibility may work to
a clear link between GDP growth and traded with more controls to ensure a safe work- its advantage.’ He also suspected that ‘some
volumes at sea, where declines and increases ing environment onboard. This is likely of the corporate failures have been more
have impacted traded volumes at sea by a to continue and become best practice.’ to do with governance and pre-pandemic
factor of 5-7. This means a vaccine and poten- Tolson also felt we could expect to see ships’
tial consumer confidence and demand going crews demanding, and getting, ‘a better deal in
up, with impact GDP to grow again, which in the future’ as it has become increasingly clear ‘There can be no
turn will impact bunkers demand positively.’ that they are ‘essential workers’ and environ- lasting operational
Paul Millar of Bunker Credit Management mental, social and corporate governance (ESG)
Ltd also drew links between world trade, the is ‘a hot topic with investors and consumers’. ease until the public
vaccine roll-out and the bunker market, but
his conclusion was not so upbeat: ‘Shipping
Millar summed up the general mood: ‘Until
sufficient people are vaccinated, precau-
health emergency
activity and bunker demand fell in 2020 as tions are needed to stop further infections.’ is behind us and
a direct consequence of lockdowns and
a fall in global consumption. With the pan- COUNTING THE COST
staff, surveyors,
demic undefeated at this time, and actually OF COVID___________________ inspectors,
worse than ever in the US and UK in particu-
lar, plus the global vaccine rollout will be much While most news coverage around the world charterers and
slower than most people wanted or expected,
economic recovery in most markets will not
has focused on the efforts being made to
contain, and recover from, the pandemic, we
owners can move
become a reality for some time to come.’ are all aware that this year of lockdowns, go- freely around the
Having quizzed our respondents about slows and furloughed workforces has led to
COVID-19’s impact on global trade, ship- huge increases in government spending and fleet, shipyards and
ping activity and bunker demand, we asked national debts. So we invited our respondents ports’
them to give their impressions of how the to consider how long it might take for the global
pandemic had impacted the practical opera- economy to recover, and what implications
tions of shipping and bunkering, and whether this could have for shipping and bunkering.
they felt these changes could remain a fea- Corvus Energy’s Sean Puchalski made the
ture throughout 2021 and perhaps beyond. reasonable point that it is difficult to come up
Image © Shipping Strategy
Not surprisingly, the crew change crisis with a timescale for an economic recovery
was seen as the most pressing issue. until we know when the medical challenges
‘Restrictions on operations will continue will be overcome. ‘In the scenario where the
throughout 2021 but the impact will lessen as recently created vaccines are effective for
ports and operators adapt to the “new normal”,’ all variants of COVID-19 that arise,’ he said,
said Draffin. ‘There will be temporary changes ‘then the recovery is possible within 2022. If
to the in-port restrictions in response to any new variants elude the vaccines’ effective-
local surge in infections and there may be ness, then add another year to this timescale.’
new requirements on personnel having record Woo argued that: ‘If the vaccines prove
of negative tests and proof of inoculation.’ effective, then we should experience the
Mark Williams of Shipping Strategy said so called “K” shaped recovery. Our indus-
that ‘the crew change crisis rumbles on’, try [shipping] is the vital lifeblood of the world Mark Williams,
Shipping Strategy
and ‘there can be no lasting operational economy. This downturn is not because of
Bunkerspot February/March 2021 www.bunkerspot.com 29
the bunkerspot new year survey 2021
debt levels being exacerbated by COVID- energy solutions. ‘While there is a lot of pent ent shipping sectors with a succinct – and
19’ – but added that ‘it’s hard to generalise’. up demand in the economy, there is also a rather upbeat – summary: ‘The dry bulk
Liu commented: ‘The measures taken by significant amount of restructuring that will sector was heavily affected globally as the
governments in response to this emergency likely take place once the protective blan- lockdowns slowed down manufacturing and
are unprecedented, with much economic ket of subsidies and support are removed by construction activities. Everything is coming
activity subject to severe health restrictions developed world governments,‘ he argued. back to normal despite the fact that COVID
resulting in a major contraction of global GDP ‘So there will be significant disruption in trade is still very much prevalent. I think, by mid-
and trade. However, when the pandemic is flows and investment is likely to flow to less 2021, the business should be as usual.’
getting eased and even over, the demand for infrastructure constrained industry, possibly a Eichstadt painted a less rosy picture for the
maritime trade should be expected to recover.’ tighter squeeze on traditional freight and pas- cruise sector: ‘As long as there is no COVID
Draffin considered that ’there will be a senger service companies. The cruise indus- control, there won’t be any stable cruise tour-
negative impact on the global economy for at try will likely bounce back once the vaccine ism as it can break at any time again. Blue
least two to three years’, but he believed ‘this cruises without any ports are not economi-
will be more severe for the overall economy cal but just an investment to catch the trust
Image © Monjasa
than it will be for shipping which will recover of authorities and passengers. Only cruises
more quickly’. He added: ‘National econo- with capacity of more than 40% with national
mies will require economic stimulus from or international port calls will build up finan-
central governments but pressure on reve- cial reserves, but they are dependent on too
nue will restrict their freedom to act, espe- many factors (COVID control, national strate-
cially as the immediacy of the crisis recedes.’ gies, lock downs) to foresee an improvement.’
Focusing on the maritime world, he foresaw After observing that the shipping and bun-
‘further consolidation within shipping and bun- kering sectors had ‘proved to be remarka-
kering’ but believed ‘much of this will have its bly resilient in 2020’, Millar then looked at the
roots in problems which pre-date COVID-19’. marine fuel business in more depth: ‘Despite
‘As much as I would like to be a contrar- the clear drop in bunker volumes (in most
ian and say that we will all get over it very regions of the world), the bunker sector has
quickly, I am not a true believer in that,’ sighed carried on quite successfully. We have seen
Tolson. However, he did not think that the the departure of one major player (GP Global)
economic consequences will be as dire, or and the exit of others (either as a result of with-
deep-rooted, as some would have us believe: drawing from the market or being absorbed
‘Financial economics and trading patterns will Svend S. Mølholt, into a competitor). But generally speaking,
revert fairly quickly – and I don’t think that Monjasa whilst margins probably deteriorated for most
for most of us living in the leading economies players as the year progressed, the bunker
of the world, other than the loss of a favour- sector ended the year in reasonable condition.’
ite restaurant or a smaller business, we will However, Millar added: ‘The shipping sector
see much pain beyond the medium term. For ‘The transition to the did not fare that badly overall – tankers had an
this reason, I think the bunkering industry amazing H1, followed by a less-than-amazing
we know will be more or less back to its old 0.50% global sulphur H2; the liner sector far exceeded the expec-
normal by late 2021 or early 2022 – but that
is not to say there is no longer term impact.’
cap has been an tations of most analysts and dry bulk found
its feet once again. These are the core ship-
Indeed, Tolson felt that much of the long- overall success’ ping sectors so you can broadly conclude that
term effects on bunkering could be for the the larger shipping sectors coped well. The
better: ‘I think shipping and bunkering will sectors most affected come as no surprise to
likely see their biggest impact from the is more widely available, but could experi- anyone: until people feel safe again to travel
increased pressures generated, much less ence significant over-capacity going forward (i.e. post vaccination), the cruise ship market
as a result of the financial impacts of COVID with tighter margins as fewer passengers will have no customers. Until oil demand
but much more so due to pandemic lock- take cruises for the foreseeable future.’ And increases once again, the already weakened
down reflection of participants (suppliers, here’s why this could have consequences for offshore sector will suffer even more. There
buyers and intermediaries), regulators, tech- the energy transition: ‘If shipowners and finan- are some positive signs in the car carrier
nology providers and financiers of the indus- ciers have less money to spend or appetite for sector, but I would assume a patchy recovery.’
try. That is not to say we will not see some change,’ reasoned Allwright, ‘that is likely to
weaker suppliers or buyers go out of busi- impinge on other costly technology sectors. IMO 2020___________________
ness, but the real change is coming from Decarbonisation technologies that don’t have
those looking for a more transparent, more significant reductions in fuel cost will likely see Although COVID-19 has been the principal
efficient, less corrupt, financially stronger, less a slower uptake and this is being borne out focus of attention in 2020, the 0.50% global
GHG-emitting shipping and bunkering sector.’ through the uptick in interest in wind-assist sulphur cap has nevertheless been a big chal-
As a befits the Chairman of an association and primary wind this year as it secures a lenge for the bunkering community. According
that promotes wind propulsion, Allwright took significant percentage of fuel cost at zero for to a statement that the International Maritime
a long-term view and deftly mused how the the lifetime of the ship, just as more costly Organization (IMO) issued on 29 January,
fight-back from COVID could impact the ship- low emissions fuels are being considered. ‘ however, it was a challenge that the indus-
ping industry’s propensity to adopt cleaner Drewry’s Sharan focused on the differ- try managed ‘remarkably smoothly’ as there
30 www.bunkerspot.com Bunkerspot February/March 2021
the bunkerspot new year survey 2021
were only 55 recorded cases of very low sul- regulations at the state level: ‘The IMO pro- information sharing regimes for IMO 2020
phur fuel oil (VLSFO) unavailability through- duced detailed guidance in the lead up to (and indeed any IMO decarbonisation efforts
out the year. So we asked our respondents the introduction of the new regulations, too). While there is GISIS (the IMO’s Global
how they believed the switch-over to lower meaning that contracting states had a rela- Integrated Shipping Information System),
sulphur fuels had been managed. First, we tively good reference point for understand- this platform is not really viable if there is
asked them to hand in their report cards for ing their duties under IMO 2020 and best to be robust implementation and consist-
the authorities – the various regulatory bodies practices for monitoring and enforcement. ent enforcement from all contracting states.’
and the IMO itself – before then rating the ‘However, as specific enforcement meas- Liu said the remarkably low incidence of
preparedness of the suppliers and buyers. ures and policing are left to individual contract- VLSFO unavailability was probably a disap-
Mølholt offered a general answer which ing states, it was somewhat inevitable that there pointment to at least some shipping law-
covered all three: ‘The transition to the 0.50% would be variation between different states as yers, who may have been looking forward to
global sulphur cap has been an overall suc- to how the regulations were implemented and more legal disputes. He continued: ‘Quality
cess.’ He added: ‘As a supplier we see close what sanctions were applied. While many con- claims relating to bunkers are not a new phe-
to zero demand for HSFO from vessels without
scrubbers – inquiries which are dismissed by
our Trading and Compliance departments as ‘An important area to focus on moving
part of Monjasa’s internal IMO 2020 measures.
‘No matter if it is authorities or regula- forward will be improvement of the reporting
tors who are driving compliance to reg-
ulations or it is simply end customer
and information sharing regimes for IMO
demand for cleaner shipping, the transi- 2020 (and indeed any IMO decarbonisation
tion has been successful by and large.
‘All bunker communities have had access
efforts too)’
to sufficient data and material to enable a
smooth transition for their customers. The
– Joseph Malpas, HFW
customer experience therefore reflects the
level of homework done by the supplier.’
Focusing on the regulatory side, Tolson tracting states (including key shipping states nomenon. From a practical point of view, the
said: ‘The transition went very well from an such as Singapore) have clearly outlined their usual advice to owners to ensure that they
IMO point of view and was well managed.’ approach to enforcement of the regulations, have clean bunker tanks, avoid commingling
He continued: ‘I guess we can learn from there are other states (both contracting states of bunkers and to monitor sampling during
this that regulation when it’s welcomed by a and states who have not ratified MARPOL the supply applies. Time charterers arrang-
majority of the stakeholders works – for vari- Annex VI into their national law) who did not ing the supply of bunkers (or owners if deal-
ous reasons and various pressures no one release any information and so whose position ing direct with the suppliers) need to ensure
has openly ignored it and apparently the vast in relation to the regulations is far from clear. that they understand the supply contract and
majority are complying. Any problems have ‘There was also fluidity in the approach of have the time bar and sampling provisions
been dealt with (or so it appears) and all is a different states to exhaust gas cleaning sys- firmly in mind in order to preserve their rights
success.’ However, he also warned: ‘Perhaps tems (EGCS) or “scrubbers”, with several states of recourse against the supplier, if available.’
the only concern is that we have been lulled changing their position over the year in relation The majority of our respondents voted
into a false sense of security by what was, to the discharge of wash water within their ports. the suppliers’ per formance on IMO
in reality, a relatively easy transition for a ‘In light of this, I would say there has 2020 a success – and Woo argued said
lower sulphur fuel (yes, I know it was not that been a general lack of transparency in that the low incidence of reported dis-
simple!). Harder transitions are on the horizon.’ relation to IMO 2020 at the global level, putes was a testament to their efforts.
Draffin judged that: ‘Authorities had pre- with localised knowledge being crucial ‘I believe that apart from some initial hic-
pared as best as they could but whilst most had in order to successfully navigate individ- cups supply availability of all fuel grades
regulations and procedures in place, very few ual states’ approach to the regulations. has been good,’ said Draffin. ‘The availabil-
(outside of North Europe and North America) ‘That being said, COVID-19 has undoubt- ity of HSFO has been better than expected
had the resources available to enforce. The edly disrupted the monitoring and enforce- although some of the credit must go to
appearance of the pandemic has given them ment steps that contracting states may the ability of ship operators to adapt their
a genuine excuse for lack of enforcement but otherwise have taken – for example, in bunker planning to the actual availability.’
the reality is that even without COVID, there March 2020 the UK Maritime and Coastguard Gerard told us: ‘After a bit of tension on bunker
would have been very little enforcement.’ Agency suspended all routine Port State markets last winter, the situation smoothed.’
Williams argued: ‘The rules were applied Control inspections as part of its coronavi- He added that ‘there are also enough scrub-
to the wrong industr y, i.e. shipping, rus containment measures, including inspec- bers in operation nowadays’, which relieved
rather than the fuel producers. A govern- tions for monitoring compliance with IMO the pressure on VLSFO demand to a degree.
ment would not ban the consumption of 2020. As COVID-19 is eventually brought Tolson said that the suppliers have done
cocaine – but still leave it on sale’. However, under control around the world, we may well – but pointed out that there are many
he added that the rules were ‘smoothly therefore see renewed focus on compliance different players on the supply side of the
introduced by enforcement agencies’. with the regulations by contracting states. bunker industry. ‘Many suppliers that we
Joseph Malpas of HFW had concerns ‘An important area to focus on moving for- call suppliers are not really suppliers,’ he
over the global implementation of the IMO ward will be improvement of the reporting and explained, ‘but refiners, commodity traders
Bunkerspot February/March 2021 www.bunkerspot.com 31
the bunkerspot new year survey 2021
and blenders who responded to the eco- fuel availability issues in the first quarter foul of a coast guard or an insurer, is a pow-
nomically profitable challenge of making of 2020 – most notably demonstrated by erful motivation for even the least compliant’.
VLSFO and suppliers didn’t mess this up!’ the significant number of FONARs filed in Malpas drew on his own experiences of
Tolson felt that the transition was ‘simpler January and February recording instances in working clients over the year. ‘Shipowners
and better’ in some supply locations than Brazil, India, South Africa, Bangladesh, and we dealt with in general adopted a very cau-
others. ‘Clearly the bigger ports with greater Egypt (to name but a few), although num- tious approach,’ he recounted. ‘Those that
infrastructure and supply sources did better,’ bers dropped after that (probably due to a determined that their chosen method of
he continued. ‘I think some smaller locations lack of reporting in the wake of COVID-19). compliance was VLSFO started preparing
were caught a little short and certainly had Even then, FONARS will not always give a early for the fuel transition in anticipation of
more challenges. Ultimately it takes some full picture of fuel availability (as they do not the sulphur cap, including running down ves-
time (especially with the extra pandemic include those instances where ships have sels’ reserves of HSFO and carrying out tank
disruption) to develop the supply chain for had to wait for fuel to become available or cleaning (including with chemical additives
each port and establish “normal” demand divert to source IMO-2020 compliant fuel). as necessary), contract permitting of course.
patterns and “normal” prices for each loca- ‘In any event, as the demand for fuel ‘However, despite taking these steps, it
tion. I think we have all been surprised that dropped significantly due to the impact of could not prevent fuel quality and stability
some of the pre-2020 regional predictions COVID-19 from April onwards and (cheaper) issues arising from the use of new VLSFO
have not proven out: very few expected IMO 2020-compliant fuels became more blends, although the risk of these situations
Amsterdam-Rotterdam-Antwerp (ARA) to widely available (than otherwise would have getting worse was minimised by taking precau-
be the cheapest major bunkering port after been the case in an active shipping market), it tions such as onboard vigilance and a cautious
IMO 2020, yet it is – but then again perhaps is probably difficult to accurately evaluate the approach to sampling and testing new VLSFO.’
it won’t be after we end the COVID era?’ full level of compliance of the suppliers with the Malpas’ comments segued into the
Alessio Sbraga – another legal expert from requirements of IMO 2020-compliant fuels.’ next section of the survey, in which we
HFW who took part in our New Year survey Our respondents felt that shipowners had invited respondents to give their perspec-
– was generally positive about the suppli- generally done rather well in terms of adjust- tives on how the introduction of the new
ers’ performance and pointed out that (while ing their buying strategies to meet the IMO VLSFO blends has been handled – and
the end-of-year statistics were good) there 2020 requirements. However, some sug- whether the issue of fuel stability (which
were issues in the early part of the year. gested that while most shipowners were was reported to be a concern in the ini-
‘Even though the shipping market left it rel- comfortable buying the new fuel, they were tial change-over phase) has been resolved.
atively late to confirm its preferred method of not quite so at ease when it came to using it.
compliance (i.e. VLSFO), the supply market Draffin, for example, told us: ‘Ship operators VLSFO BLENDS______________
appears, on the face of it, to have reacted have managed this transition much better than
well to the demand for IMO 2020-compliant many expected. There have been some issues ‘These issues were discussed in depth in
fuels in terms of fuels supplied and availabil- with a lack of understanding of the opera- 2019, with guidance from CIMAC and the
ity,’ said Sbraga. ‘However, given the vary- tional requirements of using VLSFO (segre- JIP Guidance,’ said Draffin. ‘There are still
ing characteristics and properties of VLSFO gation, treatment and long-term storage).’ aspects of the behaviour of some VLSFO
coming onto the market, it was inevitable that Williams was of a similar opinion: ‘The blends for which the current standard and
there would still be issues over the consistency big corporates gamed it well in advance tests do not give sufficient protection for
and use of such fuels. Indeed, a sharp rise in and set up supply chains to ensure avail- the user. Whilst following best practice
disputes relating to fuel quality, stability and, ability. COVID-19 actually helped every- onboard will avoid most of the problems,
importantly, sulphur content was observed one else as it made the new recipe fuel there is a need for better test methods to
during the first and second quarters of 2020. easier to buy, though some owners I speak predict actual stability reserve and predict
Likewise, there to say that they have found it easy to buy realistic long term storage stability limits.’
were also but not so easy to use, especially blends.’ Sbraga gave us a quick recap of the issues
Tolson agreed that the bunker buyers were that arose at the start of 2020: ‘The use and
‘well prepared’ – and pointed out that this wasn’t supply of VLSFO has led to disputes over the
so surprising as ‘fear of losing power, or falling fuel quality and responsibility for ship engine
‘I believe that apart from some initial hiccups
supply availability of all fuel grades has been
good. The availability of HSFO has been better
than expected although some of the credit
must go to the ability of ship operators
to adapt their bunker planning to the
actual availability’
Nigel Draffin
32 www.bunkerspot.com Bunkerspot February/March 2021
the bunkerspot new year survey 2021
damage. Increased levels of aluminum and sili- ings, using HSFO with EGCS will make sense ‘Less predictable is the Hi5 spread. We
con particles (potentially indicative of catalytic for many operators in the short and medium are not likely to return to the spreads we saw
fines) and increased total sediment potential term. The current EGCS equipped fleet is con- in 2019 or anticipated for 2020. There is just
properties (which could result in sludge or lead centrated on the larger vessels and the HSFO not enough HSFO around as producers have
to stability issues) were observed consistently availability is concentrated in “hub” ports. The cut production or have been sanctioned and
in the first half of 2020. Issues with aluminum environmental aim of sulphur regulations is to VLSFO continues to be well supplied prov-
and silicon particles tended to be picked up reduce sulphur dioxide in the atmosphere – ing a positive return over the value of crude
through commercial testing, whereas cer- EGCS accomplishes this. The concern over – for a refining industry still trying to replace
tain organic compounds (causing sediment)
were not always picked up by ISO 8217
Table 2 parameter limits and more in-depth
(GC-MS) testing would have been required. ‘Nuclear is beset with issues around
‘Overall, however,’ continued Sbraga, ‘the
nature of fuel problems observed could have
public awareness and associated
been far more severe given the varying char- political intransigence, I am a convert
acteristics and properties of VLSFO coming
onto the market, so there would appear to
to the technology potential but the
be a relatively positive outlook, although vig- wider obstacles are challenging’
ilance in terms of the supply, use, testing
and sampling of fuel must be maintained.’ – Diane Gilpin, Smart Green Shipping Alliance
Tolson told us that the issues with sta-
bility were ‘relatively under control’, but
warned that: ‘As we transition out of the
COVID-19 VLSFO supply era into the post wash water is a different animal, it is something demand lost in other transportation sectors.’
COVID-19 supply era we may see some of that needs a sensible cost / benefit analysis as Williams did not expect scrubbers to have
these issues come to the fore again.’ He the introduction of the sulphur into the oceans a very long shelf life and – like Tolson – he
explained why: ‘I don’t think each supply is not the catastrophe that some claim whilst flagged up the role of the refiners. ‘Scrubbers
location has worked out the “normal” blend eliminating any additional source of ocean ensure demand for HSFO for at least as long
for VLSFO, and while experimentation con- acidification is a worthy aspiration and should as all the scrubbers last – say five years,’
tinues in the coming months and years qual- be a consideration (note that wash water is he said. ‘Thereafter, the refiners will pro-
ity issues – stability or otherwise – will rear a minute source of ocean acidification).’ duce enough HSFO only if they perceive a
their heads again. This is bunkering after all!’ Tolson agreed that HSFO will ‘still be impor- real market for it. HSFO often comes from
tant for as long as scrubbers continue to be less complex refineries that consume heav-
HSFO AND SCRUBBERS_______ installed on vessels and we see more ships ier crudes. These are the most fragile facil-
operating with scrubbers each year’. He ities in the decarbonising world – the first
While the sulphur cap precipitated a big cited as evidence DNV-GL stats which ‘show to go as they are the hardest to convert to
demand shift from HSFO to VLSFO at the 1,200+ more ships with scrubbers at the end renewables production and processing.’
start of the year, HSFO sales – in some of this year over 2019 despite a desperately Surveying bunker prices in 2020, Allwright
ports, at least – have since bounced back a low Hi5 spread’ (this is the price differen- believed: ‘The bounce back in HSFO was
bit, as more scrubber-fitted ships have made tial between HSFO and VLSFO, and the key quite likely as the delayed stream of scrubber
an appearance on the market. We there- factor in the economic case for scrubbers). It installations came on line as Chinese yards
fore asked our respondents if they believed is unlikely that the number of ships with scrub- completed orders. The spread between the
that HSFO will continue to be an impor- bers will go down, reasoned Tolson, ‘so per- fuels makes new orders less attractive and
tant (albeit no longer dominant) part of the haps we are heading to 20%+ of total bunker if that continues for any length of time then
bunker market for the next few years at least? demand from these vessels’. He continued: the decarbonisation imperative may adjust
Most agreed that there was life in HSFO ‘I don’t expect the Hi5 spread to go as high investment priorities away from these options.’
yet because – to quote Gerard – ‘shipown- as it was predicted (by me, yes!!) in 2019 and Mølholt considered that: ‘In the longer run, it
ers and operators want to get their expected this will dampen scrubber uptake. In addition, is likely that the quest for cleaner fuels will be
payback on the scrubber investments’. the world is still having a hard time accepting an upstream issue rather than a downstream
Eichstadt thought: ‘HFO will play its role for the concept of scrubber discharge into our issue. Meaning, in the longer run, scrubbers
the next years to come, as long as scrub- oceans.’ He concluded: ‘I think by the end of are likely to be phased out as new fuels enter
bers are not considered harmful for the this decade there will be fewer ships with scrub- the market. At the moment it seems that
marine environment.’ However, he consid- bers (and very few being installed) than now.’ scrubbers were a good investment for the first
ered that: ‘Open loop scrubbers without What will this mean for HSFO demand? period, but as the price gap is closing in, scrub-
any storage capacities of the filtrated sludge According to Tolson: ‘HSFO may easily ber investments are becoming less attractive,
need to be banned’. Eichstadt saw the con- be 25% of some ports’ supply, but this is also in the context of the longer term views.’
tinuing use of HFO and investments into of course the ports with bigger scrubbed Woo felt that ‘once the danger of the
scrubbers as ‘a bet on rising MGO prices ships calling. Smaller ports will simply not pandemic recedes’, the arguments about
and a cost-effective way to operate vessels’. have the product – but then they will not using scrubbers and HSFO ‘will probably
Draffin gave some more detail to the eco- have much potential demand. Nothing go back to the forefront of everyone’s atten-
nomic argument: ‘Even at modest price sav- changes much – this was all predictable. tion’. By contrast, Sharan judged that: ‘The
Bunkerspot February/March 2021 www.bunkerspot.com 33
the bunkerspot new year survey 2021
reliance on scrubbers has fizzled out now ferences over the years. On the plus side, all progress in 2020 towards a “greener” shipping
and there will be more reliance on LSFO.’ that no-flying helped to reduce our collective market and there are clear signs that tack-
Sbraga gave scrubbers a little more global carbon footprint substantially – and it ling climate change will be an operational and
time, but essentially felt that they – and was interesting to note how decarbonisation commercial priority going forward’. He con-
the HSFO – are not here to stay. ‘In the was one of the dominant themes for so many tinued: ‘IMO 2020 was the first step towards
short term,’ he conceded, ‘HSFO is likely of the conferences that we (and others) organ- this and the shipping community has demon-
to play its part in servicing the scrubber-fit- ised over the course of the year. It seemed that strated its willingness to implement the nec-
ted vessel market, but there could well be every week there would be at least one webi- essary infrastructure and practices required
a steady decline in demand for HSFO as nar devoted to the urgency of climate action. to achieve the fuel transition. On the interna-
VLSFO continues to dominate the market.
‘The position may have been different had
there been a consistent and pronounced large
bunker premium for VLSFO during 2020,’ he
‘The shipping community has demonstrated
continued. ‘However, with COVID-19 depress- its willingness to implement the necessary
ing demand for a sustained period and the
existence of a surplus of VLSFO, this led to infrastructure and practices required to
a significant narrowing of the bunker price
spread between VLSFO and HSFO and
achieve the fuel transition’
cancellations and deferrals of scrubber ret-
– Alessio Sbraga, HFW
rofit orders by prominent shipowners. So
despite the fact that there is a not insignificant
number of existing scrubber-fitted vessels
in the market, there are probably consider- So we asked our respondents if the shipping tional regulatory level, steps were taken at
ably less than what was expected, thereby industry made any progress in 2020 – either MEPC 75 to put in place the necessary frame-
impacting any growth in demand for HSFO. in terms of regulatory work at the IMO and work and technical and operational standards
‘Further, whilst there may be recent signs EC, or in practical implementation on ships? required to achieve significant reductions in
of widening bunker price spreads as the Puchalski could attest that Corvus Energy GHG emissions by 2030 (compared to the
world comes out of COVID-19’s shadow, has certainly played its part in speeding the 2008 levels). The biggest challenge for the
the likelihood is that it will be relatively short- electrification of the shipping world: ‘Despite shipping market in the coming years will be
lived in 2021. At best, it will only benefit COVID-19, we have seen 115 ships order how to implement this framework on a global
the existing scrubber-fitted vessel market energy storage systems this year. Although a scale and how this will fit in with regional ini-
(or newbuilds with scrubbers already on small number in the larger scheme of things, tiatives like the EU Emissions Trading Systsem
order) and even then this market is already this represents 12% year-on-year growth.’ (ETS) for which there is no easy answer.’
looking at a return on investment in a Mølholt was equally positive: ‘What has Tolson said that there has been ‘progress
longer timeframe than initially anticipated. been a great success in 2020 is how the for sure’, but added: ‘I think it’s probably unre-
‘GIven the IMO’s recent commitment to shipping community has come together alistic to expect all members of the shipping
taking affirmative steps to reduce green- and proved that collective efforts are pos- industry to take the lead in its own regulation.
house gas emissions and the carbon foot- sible to transition to a greener future in The industry has certainly got used to regu-
print of the shipping market, it is also likely shipping. With IMO and regulators sup- lations being imposed on it by port authori-
that existing scrubber-fitted vessels will porting this, the industry can make leaps.’ ties, class, governments and the IMO – likely
come even more under the magnifying glass Liu pointed out that not even a pandemic remaining fairly passive as decarbonisation
going forward which may, in turn, impact could stymie shipping’s collective will to act: progresses, reacting with each new stage.
HSFO demand in the short to medium term.’ ‘Notwithstanding the disruption caused by That is not to say some owners will not
COVID-19, including cancellation of the UN lead or should not lead (and experiment) as
DECARBONISATION Climate Change Conference in 2020, the ship- they are already doing but the vast major-
PROGRESS?_________________ ping industry remains committed to the com- ity will be reactive rather than engaged.’
plete decarbonisation of international maritime Tolson then picked out some of the positives
For the Bunkerspot team, the most startling transport, and the delivery of the ambitious of 2020: ‘The implementation of IMO 2020 and
feature of 2020 was the absence of live con- CO2 reduction targets already agreed by IMO regulatory framework around this and for sure
ferences, exhibitions and seminars. Given that Member States. In November 2020, the IMO the increased understanding of the size of the
Petrospot runs some of the biggest and best Marine Environment Protection Committee decarb task – shifting focus from sulphur to
events in the bunkering calendar, this left a (MEPC) approved and confirmed a package carbon and to other GHGs as areas of prob-
big hole in our lives (and we hoped that they of mandatory CO2 reduction measures that lem and focus. One of the major successes
were fondly missed by our regular attendees will be enforced across the existing global of this year was the intellectual (and Zoom)
too). Of course, we were quick to fill the void fleet, which will take effect by 2023. This is to time afforded by the pandemic for those oper-
with online ‘virtual’ versions of these events, demonstrate that IMO and the global shipping ating daily in the industry and other experts
which were all very well received by market. industry are firmly on track to meet the 2030 surrounding the industry to share ideas. This
But we didn’t get to meet each other face-to- CO2 reduction target which was agreed in 2018 has advanced the understanding of the prob-
face; and we didn’t get to fly to Panama, Las – a 40% efficiency improvement, as an aver- lem and requirements of decarbonisation
Palmas, Antwerp, Dubai or any of the other age across the world fleet, compared to 2008.’ and it bodes well for future solutions.’
exciting cities where Petrospot has held con- Sbraga believed there had ‘been significant Williams judged that: ‘Countries with
34 www.bunkerspot.com Bunkerspot February/March 2021the bunkerspot new year survey 2021
joined-up maritime/industrial clusters, like favoured option, the International Council on know they will have to change their practices
South Korea and Japan, have done better Clean Transportation (ICCT) figured out that and ultimately move away from fossil fuels
than others with a more services orienta- LNG does not contribute to a reduction of to alternative fuels and propulsion. We have
tion (e.g. the UK) on decarbonisation. Lots global warming as its methane slip (which seen a lot of action from the more progres-
of testbeds and prototypes are now opera- is a major reason for air pollution in the US sive part of the industry, for example within
tional. The regulators grasp that most of the shale gas industry) has a higher greenhouse the Getting to Zero Coalition. New pro-
innovation and investment has to come in the gas warming potential. Scrubbers cannot jects and initiatives pop up more and more
fuels not the ships. Shipping will decarbonise be considered as progress, because the often and I am confident that many players
as the world economy does, using the same use of fossil fuel does not solve the prob- will be way ahead of regulators and ben-
electrons or electron carriers (like hydro- lem of global warming and rising CO2 levels.’ efit hugely from the first mover advantage.’
gen or its derivatives) just at different scale.’ Draffin argued that we need a big push on Diane Gilpin of the Smart Green Shipping
Allwright believed that, while there has investment – and governments must step up. Alliance was forthright: ‘In light of the climate
been ‘some progress’, it has ‘not been at the ‘There have been small changes in require- emergency that humanity faces, the shipping
pace we need to meet even the lower ambi- ments and a small shift in emphasis,’ he said, industry must accelerate progress towards
tion targets’. He continued: ‘The IMO has ‘but the shipping sector has not and will not rapid, short term emissions reduction.
adopted proposals this year that will con- make any radical change until it makes finan- ‘We’ve seen the terrible economic, social
tinue that progress, which is welcome, but cial sense. This requires government action. and political impacts of an emergency with
that will unlikely lift that level significantly. If As most carbon reduction strategies will the COVID-19 crisis. We can learn from this.
this is perceived to be too slow and not deep require technology to make the transition, Catastrophic global pandemics had been
enough then we will see regional actors we need to be spending money on this now.’ anticipated for decades, are exacerbated
stepping in, and the EU has done just that Marie Cabbia Hubatova of Environmental by biodiversity breakdown but, as a global
with the EU ETS vote to include shipping. Defense Fund felt that more could have been society, we failed to heed the warnings.
‘Regarding movement in the practical done in 2020 on a practical level, but she was ‘Once we were in the catastrophic situa-
sense, we have seen a lot of R&D initiatives encouraged by the change in attitudes across tion unlimited funds were allocated to find-
and announcements of projects and a few the industry: ‘In the first half of 2020, the sector ing a vaccine and in under a year several
installations of alternative fuel systems. This was paralysed by the pandemic. That was true were produced. Typically, a vaccine takes 10
is to be welcomed, but there is still much both for actual ships as well as for regulators. years or more to reach market. When ques-
work to be done in embracing a hybrid “pro- At the IMO level, all climate talks were can- tioned about the safety of this rushed vac-
pulsion” model rather than simply a “fuel celled or postponed until late autumn. When cine a scientist involved said most of the 10
only” approach. If the latter is the industry these meetings finally happened, they were years is spent trying to fund the research.
approach going forward, then we are miss- rather disappointing. Delegates were unable to ‘The biggest challenge for technologies
ing a huge opportunity to decarbonise quickly agree on anything meaningful that would put that can drive down shipping’s emissions,
and deeply by linking wind-assist with opera- the sector on the pathway to decarbonisation. commensurate to the climate emergency,
tional and vessel optimisation, thus reducing The outcome of the meeting lacked so much arises from the fragmented structure of
the size and infrastructure requirement for the ambition that it didn’t even deliver on the the industry – who owns the responsibil-
new alternative, low emissions fuel roll out.’ target agreed in the Initial Strategy in 2018: ity? Everyone I know in shipping wants to
Some of our correspondents felt that we will to at least halve the sector’s emissions by do something but their particular business
have to up the pace considerably, and perhaps 2050. On the EU level, things look much isn’t structured to manage the innovation,
even change our focus, if we are to make a gen- more positive. The sector’s emissions from R&D funding necessary to make all the highly
uine impact on climate change. Gerard said eligible voyages are likely to be included promising technologies suitable for rapid
simply: ‘Not enough was done during the year.’ in the bloc’s Emission Trading System.
Eichstadt believed we have to concen- ‘Meanwhile, during 2020, the sense of
trate more on the shift away from fossil urgency of climate action has become wide-
fuels. ‘Even though LNG is a more and more spread across the industry. Stakeholders
‘During 2020, the sense of urgency of
climate action has become widespread
across the industry. Stakeholders know
they will have to change their practices
and ultimately move away from fossil
fuels to alternative fuels and propulsion’
Image © EDF
Marie Cabbia Hubatova,
Environmental Defense Fund
Bunkerspot February/March 2021 www.bunkerspot.com 35the bunkerspot new year survey 2021
roll-out. Funding R&D commensurate with larly in ports (which will soon be many) ment and/or vessel type), and LNG may have a
the Climate Emergency is 2021’s big task.’ with relatively cheap access to LNG’. role within that, in the longer term I think other
Gilpin was encouraged (as no doubt was Flagging up that LNG is ‘supported by major fuels will come to the fore, for example hydro-
Allwright) by the shipping industry’s burgeon- oil companies, producers and port authorities’, gen which both supermajors and blue chip
ing interest in wind propulsion and the impres- Tolson believed it ‘remains the shorter term shipping companies have recently backed.’
sive growth in IWSA membership. ‘2020 saw stop gap with perhaps limited GHG benefits but Eichstadt’s view was: ‘LNG demand will
a surge in installations from wind technologies with strong particulate matter (PM) benefits’. rise, as LNG meets different criteria such
and a leap in membership at the International He added: ‘BioLNG and SynLNG may play a as SOx, NOx and PM requirements and will
Windship Association including major ship longer term role but the jury is still out on these meet future NECA regulations. But overall, it
owners and class societies,’ said Gilpin. ‘From as a viable decarb solution.’ On the whole, he will not solve the problem of global warming.’
the 12 founding members to IWSA in 2014 saw the uptick in LNG bunkering as a ‘posi- Draffin cut to the chase: ‘The LNG sector
membership now stands at 130. The last 12 tive development – anyone who has inhaled is unlikely to exceed 15% of total marine
months has seen a 25% increase against 2019. the emissions of fuel oil will agree with that’. fuel demand and is, at best, just a transi-
‘There are now 11 oceangoing vessels For Malpas: ‘LNG is a proven marine fuel tion fuel towards genuine low carbon fuels.’
installed with wind-assist, 2 more pend- which can bring immediate reductions in a Allwright considered the growth in LNG
ing in Q1 – delayed due to COVID. IWSA vessel’s carbon dioxide, sulphur dioxide and bunkers ‘is likely as it is the only currently avail-
expects the number of large oceango- nitrogen oxide emissions. Coupled with the able alternative fuel that has been embraced
ing vessels will likely double in 2021/22.’ fact that LNG bunkering facilities are becom- by the industry to date’. Biofuel and LPG
ing available in more ports, it is a clear imme- are also options, he added, but ‘uptake
LNG BUNKERING_____________ diate choice as a low-carbon fuel, and I think seems to have been very limited to date.’
we can expect broader adoption of LNG as Focusing on what has become a cen-
While wind and solar power, batteries, fuel cells marine fuel across the industry, especially tral theme in the LNG debate, Allwright
and alternative fuels like methanol, ammonia in newbuild vessels, over the next decade. judged that: ‘The bridging question is a dif-
and hydrogen will become part of the energy ‘However, my view is that LNG as a marine ficult issue. If all of the upstream emissions
mix over the coming decades, many in the fuel is an interim solution, rather than a long- and risks are incorporated into the assess-
industry see LNG as a ‘bridging’ solution that term reality for the industry. Firstly, while LNG ment and a full lifecycle analysis is done to
shipping can use to lower its emissions while brings significant emissions reduction at the assess the impacts of the fuel then if that is a
the new technologies develop and mature. point of consumption, when looking at emis- positive environmental impact, using a short
Our respondents were divided on both sions across the entire LNG supply chain (from term methane impact criteria (say 20 or 25
LNG’s commercial prospects and its creden- ‘well to wake’) the picture is less attractive, years) then it should take its place as a key
tials as cleaner fuel. Among the most enthusi- with potential significant leakage of methane, fuel going forward. The use of LNG infra-
astic, Gerard said it is ‘very good and the unique which has a warming power about 28 times structure to carry zero-emissions fuel in the
transition and available solution today’, while greater than the equivalent amount of carbon future is a very important area that needs to
Puchalski described LNG as ‘an important dioxide. The overall benefit of LNG fuel for be confirmed in the way of cost and efficiency.’
transition fuel on the path to zero-emission’. decarbonisation is therefore an arguable point. Cabbia Hubatova felt there will be more
Williams argued that: ‘Infrastructure ‘It is also not clear that all industry actors LNG bunkering – but did not welcome the
spend, tax and fee incentives by govern- will be willing to make the significant financial prospect: ‘We could see more and more
ments, and ESG commitments almost investment required to install the infrastruc- LNG-powered ships in the next couple of
guarantee [more LNG bunkering], regard- ture needed to receive LNG fuel, especially years, but for the sake of the climate, that
less of whether it is actually only a stop- as there is no significant financial or com- trend will not continue for the whole decade.
gap until full decarbonisation is possible.’ mercial incentive to do so currently (Norway ‘LNG is not a solution that would help us
Tolson characterised LNG as ‘the anti- is notable for introducing a financial support decarbonise the sector,’ she warned. ‘In some
scrubber solution with better GHG out- scheme to grow LNG bunkering infrastructure, cases, LNG can be even more climate pollut-
comes’ which will be ‘installed on but this has not been replicated elsewhere).’ ing than MGO due to upstream methane leaks
many of the same types Malpas continued: ‘While I think we are head- as well as methane slip onboard. The transition
of vessels ing towards a “multi-fuel” future (depending on to zero-carbon shipping will not come without
par ticu- the requirements of the particular industry seg- a cost. Therefore, promoting LNG as a transi-
‘Very few expected ARA to be the
cheapest major bunkering port after IMO
2020, yet it is – but then again perhaps it
won’t be after we end the COVID era?’
Adrian Tolson, BLUE Insight
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