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Global sulphur cap will be early and costly, warns ICS

Global sulphur cap will be early and costly, warns ICS
Oil refineries should operate on the assumption that the global IMO 0.5% sulphur cap will enter force in 2020, not 2025, International Chamber of Shipping (ICS) vice chairman Esben Poulsson warned on Wednesday.

“Implementation of sulphur ECAs has so far gone smoother than expected. But with the introduction of a global cap – things are more uncertain. There are many ‘known unknowns’.
“Some refiners have assumed the limits will be deferred until 2025, because of the lack of refining capacity. But they lack an understanding of the politics of IMO. The EU has decided on sulphur limits regardless of the IMO decision, and nations such as the US are known to be vehemently opposed to any postponement by IMO.”
Despite Poulsson’s assertions, Stena ceo Carl-Johann Hagman argued implementation of the Northern Europe 0.1% sulphur cap was far from effortless. “The cap… breached the principle of common legislation, which is very damaging for a global industry,” he said.

“The other part was this was not cohesive with a wider transportation policy. Even though it was done under the guise of environmental issues, what we’ve seen is a relatively significant shift from sea to road as a consequence, and I think we’ve had much too short a time to adjust."
However, there was little argument that limiting sulphur would come at great cost.
“Basically all of our operations are in the North Sea ECA, apart from in the Irish Sea, and carry about 8m passengers and 5m lorries within that system,” said Hagman. “Despite that this cost us EUR50m (55.8m) a year, we have been able to move that cost to our customers.
“Now, we should reflect upon the fact that transportation costs from Northern Europe to Southern parts is now the same as an intercontinental transportation from, say, Japan to Rotterdam. So from a logistics point of view we have made parts of European industry so much less competitive.”
Poulsson concluded: “ICS has – tentatively – concluded that for better or worse, IMO is likely to decide on 2020, regardless of the level of availability. This does not mean compliant fuel will be unavailable – it will just be very expensive.”