The revolution in marine fuel regulations and digital technology were hot topics at this year’s CMA Shipping event in Stamford, Connecticut.
Speakers, attendees, sponsors and exhibitors were discussing how this revolution has the power to reshape every aspect of the global shipping industry - from ship management to chartering, financing to law, port operations…and beyond.
We had a chance to catch up with Kevin Cote, Marine Technical Sales Manager for Innospec. In our conversation, we discussed the technical aspects of different fuels post January 1st, 2020, in addition to availability and compatibility of different blends, the importance of using additives and chemicals, and what shipowners can do to prepare for 2020 compliance.
Watch the video now or read the transcript below.
Roxy Kashfi: What do you see in the future for IMO 2020 fuels - do you see any issues, problems, or opportunities?
Kevin Cote: It seems everyone has an opinion these days on where the future is going to be - what fuels are going to be available, and where.
We see some compatibility and stability issues forthcoming, similar to what happened to the on road and land base several years ago when they brought the sulphur regulations down. We started to see a lot of compatibility and stability issues, and sludging in the tanks. With that said, there is big speculation on exactly what those fuels are going to look like.
We recently obtained some samples from a shipping company and we're looking at various blends - some of those are distillate-based, other are more of a residual-based. One can look at the samples and see that some are very light, like a diesel oil, and some are very dark, like a heavy oil.
Moving forward, everyone believes there will be some issues. Hence, some people are looking at possibly using chemicals or additives moving forward to treat those.
RK: Are there quality concerns with regards to these new fuels? Are there any uncertainties with regards to what these fuels will look like?
KC: I mentioned the compatibility and stability issues moving forward. When you look at a refinery level, they're going to move most of their streams where the higher-margin products are going to be.
So, those are going to be with the distillates, there will probably be fewer residual fuels moving into the marine market - only for those customers who have abatement technology installed - scrubbers.
Many of the smaller ports may not be able to carry the multiple brands and availability of the fuels that are available now, so the ship owners are going to have to look a lot harder at their bunker procedures - what they're going to lift, where they're going to lift.
Even now we have seen some issues with compatibility as many of the major oil companies are coming up with their own blends and their own in-house testing to see which streams coming out of the refinery are going to be compatible with one another.
A couple of the big companies have mentioned that all their streams out of the refinery will be compatible, but I don't think that you can say that with 100% certainty because many of the streams are a function of the crude slate that's being used and the refining process. You have hydro-treating, you have visbreaking, you have hydro-cracking going on.
The more that these fuels are processed, the greater potential they will have to be unstable as there is potential for the structure of the asphaltene molecules will be damaged. Those must be re-stabilised with additives in the field, either through the blenders or on-board the ship.
Moving forward, we expect to see issues and some uncertainty for the next few years as the market settles out, as additional people install scrubbers, so maybe the demand for high-sulphur fuel will go up a little bit. And again, there is uncertainty around the price spreads around the fuels, whether those are going to open-up more or whether that will be like about $200 per metric tonne.
RK: What do you think about the ISO 8217 standard of testing, is it still relevant?
KC: In a nutshell, the ISO 8217 fuel spec is still relevant. However, there is a lot of uncertainty. Has the spec kept up with the fuels that have been coming to the market? No. So the IMO has requested that ISO re-evaluate that specification and come up with what they call a compatibility matrix.
There is a working group within the ISO committee for ISO 8217, and they are looking at the different crude slates and what the types of fuels will be out there and what type of blends will it be. Will those be distillate-based, or will those be more residual-based, and they are working on various compatibility tests.
As of now, there is a relatively new test called Turbiscan. This looks at what they call the reserve stability number, and if the number is below five, then it's a green light. If it's between five and ten, it's a yellow light. If it's above ten, then it's a red light. This gives you an indication on how stable that fuel is to form sludge, or for those asphaltene molecules to fall out of solution.
With that said, there are a couple of other stability tests that various people use at a refinery level, at a blending level, a P test, an S test. They are looking at TSP (Total Sediment Potential), and there is also one called a hot filtration test. They do more of a visual test on board the ship.
So, they're trying to come up with maybe one or two stability tests to incorporate moving forward that everybody can use, instead of the refiners using one test, guys on the ship doing another test, and the blenders using a third test.
They're coming up with some new procedures, and they're hoping to have a compatibility matrix by 2022 where based upon where I am getting my fuel from, if it's more than an 80% distillate for example, and I’m trying to blend it with another product that I'm lifting somewhere else in the world, it will either be a green light, a yellow light, or a red light.
That's ongoing at the ISO level within a working group, with the recommendation of the IMO.
RK: That sounds very interesting. Could you give us a brief overview of what Innospec Fuel Specialities does?
KC: Innospec has been around for several decades now. The company is a formation of several chemical companies that have merged over the years. They renamed themselves Innospec Fuel Specialities after a merger in early 2000 I think; the merger was between Starion and Octel Chemicals. We are in various facets and have about 1900 employees around 23 countries.
We are the fuel experts, we know what we are talking about when it comes to this. We cover from well to wheel. We have people which call on the drilling companies, the refineries, the pipelines, the terminal operators, and all the way to the end users. We have our additives in the passenger car market, within the aviation industry, within the power industry - and I happen to be responsible for the marine industry in the Americas.
We are plugged in at various organisations at the IMO level, ISO, SEMAC, ASTM, and SAE. We have an unparallel research and technology group behind us supporting the marine industry, and we manufacture all our marine products in Europe between Ellesmere Port, UK, and Herne, Germany, and Vernon, France. We bring everything into the Americas, to Houston, and distribute out of there.
We are mid-sized, publicly traded on the NASDAQ, with a global reach.
RK: And what do you think the global outlook is going to look like for 2020 fuels, and the availability of these fuels?
KC: I know that some of the oil majors have come out and said they are IMO 2020 compliant for 0.50% fuel - in specific ports such as Rotterdam, Antwerp, Singapore, Fujairah. But globally, there are customers trading not on a regular route, so the larger containership companies, they're going to have to really look at managing their bunker supplies.
What are they going to lift, and where are they going to lift, because not all suppliers are created equal, not all blends are going to be compatible with one another, or some are going to be more stable than others. In your major ports you're not going to have issues getting compliant fuel or a MOD or an MGO - the 0.1% fuel.
But those that are buying in outlaying ports, such as Africa or parts of Asia, outside of the Hong Kongs, the Singapores and the Shanghais, you're going to have potential issues on what's available where.
The smaller ports are not going to be able to carry the multiple brands and the multiple grades that they presently do, starting January 1st, 2020. So, they may have to do some due diligence moving forward.
RK: What do you think that ship owners are going to have to do now that 2020 is almost upon us. How can they prepare, what do you think they need to look out for?
VC: It's all about preparation. Put in your due diligence. The IMO has recommended that vessel owners work on a ship implementation plan (SIP) moving forward, which has several sections to it.
You're going to want to look at how you segregate your tanks. How are you going to bunker? How are you going to treat your bunker on board with additives? How are you going to operate your purifiers and separators? What types of testing methods are you going to use moving forward? There are some additional testing procedures that need to be put in place, such as the Turbiscan, looking at the reserve stability number.
If you're burning MGO, as the sulphur content has been coming down over years, you're going to want to look at lubricity now, and testing your distillates to make sure you’re not having any premature pump failures and injector clogging. That's one part.
The most important thing that I can tell people? Know your suppliers, deal with reputable companies, and develop a risk mitigation strategy - whatever that looks like for your company.
Some people are using additives on a regular basis to mitigate sludge, improve stability and increase the compatibility between different bunker streams, other people are carrying products on board in case they lift from a port and they do have a concern that the test comes back with a stability issue, they can introduce the additive to the product on board.
And other people are using it for tank cleaning, which is another option which has opened up. Those tanks that are presently carrying the highest sulphur fuel oil, need to be prepared to receive the compliant fuel, so that if they do get tested by a flag state or a port state, and they come up with higher than a 0.50 level, they can get fines.
That's a whole other issue of enforcement.
Tank cleaning is critical, and I will be doing a couple of presentations on Wednesday and Thursday to talk about the use of additives as a tank cleaning option with at least 50-75% savings, versus manually going in and cleaning tanks.
So that's probably the most important thing, look at your tank cleaning procedures and prepare those tanks.
For those vessels not getting scrubbers installed, to be able to receive a compliant fuel, sometime in the fourth quarter, because you are going to want to burn through at least one load of fuel in that tank - compliant fuel - prior to January 1st so that any remaining sulphur or sediment that is in the bottom of the tank will be removed and mitigated moving forward.
So, it's a combination of the SIP, which I highly recommend people work on because if you do your due diligence and you do happen to get tested after January 1st and there is a slight violation, I think the enforcement authorities will look at you in a better light if you have all your documentation in place.
Showing that you tried to do your due diligence to prepare for IMO 2020 and have all your proper documentation in place, might mean authorities would be a little more lenient in the first 3-6 months of 2020.
Finally, crew training, probably the most important thing, and looking at your standard operating procedures on board - as we just mentioned.
Moving forward, it's all about preparation.