ECA

In January 2015 new international regulations came into force that reduced the permitted sulfur content in ships “bunker” fuel in Northern European and North American coastal regions. So far, international shipping companies and cruise lines have been responding to these rules primarily by switching to marine gasoil (MGO), burning lower-sulfur fuel oil, or sticking with higher-sulfur fuel oil and adding “scrubbers” to capture most of the sulfur being emitted by their ships’ engines. More recently, though, some of the shipping sector’s biggest players have unveiled plans to boost the use of liquefied natural gas (LNG) as a bunker fuel, figuring that LNG bunkering will not only help them meet existing regulations but the tougher rules likely to be implemented over the next few years. Today, we begin a short series on the opportunities and challenges associated with shifting ships from fuel oil to LNG.

Fuel oil demand has been declining for years on dry land – under attack by regulators anxious to reduce sulfur emissions. New international regulations introduced in January of this year are designed to further reduce sulfur emissions from ship engines burning marine fuel oil (“bunkers”)  at sea. The new regulations have had an immediate impact on the market for 1% sulfur fuel oil. Most affected ship owners are now using more marine gasoil in coastal zones. Today we examine how the new regulations have impacted fuel oil markets.

In January 2015 new international regulations came into force that reduced the permitted sulfur content in ships “bunker” fuel in Northern European and North American coastal regions. The change has required vessels travelling in those zones to use more expensive fuels or install scrubbers to remove sulfur. The changeover was expected to cause a sharp increase in shipping costs but as we discuss in today’s blog, so far the impact has been far less painful than expected, at least so far.