By Akanimo Sampson
As the deadline is gradually drawing near for the shipping industry to clean up its act on reducing air pollution, Viva Energy appears to be bracing up to give the industry some relief.
From this coming January, vessels across the world will be required to use low-sulphur fuel oil. The sulphur content in oil is be capped at 0.5 per cent by the International Maritime Organisation (IMO).
Insiders say that is down from the current level of 3.5 per cent sulphur in fuel oil used by ships. The global shipping industry contributes 8 per cent of the world’s carbon emissions, which is around the same size as Germany’s emissions footprint.
The new regulations are designed to halve that figure by 2050.
To this end, Viva Energy, one of the four oil refineries in Australia is said to be capable of producing low-sulphur marine fuel.
The company aims to be one of Australia’s most respected energy companies, demonstrating through its commitment to safety, care for the environment, and its support for the communities in which it operates through partnerships with organisations such as the Cathy Freeman Foundation.
On its website, Viva Energy said, “We’re building a company that is driven by our people. Our culture reflects the passion, pride and personality of the employees and contractors that choose to work here. Together we are committed to building Australia’s energy future.’’
Already, the company has started manufacturing the fuel at its Geelong plant in Victoria and testing it with customers. General manager, Thys Heyns said it was too early to speculate on how much the cleaner fuel will cost.
According to him, “As a refiner in Australia, we are a very small portion of the global market. The international market determines what the prices are and that’s the price we can sell our product because of competitive pressure. Will it be more expensive than high-sulphur fuel? Yes — because there’s more processing and higher value components go into it. But it’s really unclear how much that’ll be.’’
While the transition to cleaner marine fuel was expected to drive up the cost of diesel in the short term, the extent of the rise will however, depend on how much low-sulphur fuel was made available internationally.
Oil traders have been snapping up storage tanks in the shipping hub of Singapore, anticipating a spike in low-sulphur prices.
Shipping lines are adopting a range of measures to comply with the IMO’s new regulations. ANL, which operates in Australia, is modifying some of its vessels using exhaust gas cleaning systems, also known as scrubbers.
ANL Chief Operating Officer, Shane Walden, said buying-in more expensive low-sulphur fuel would translate to higher sea freight costs globally, adding, “We’re expecting that the price will be somewhere between $200 and $250 a tonne higher than high-sulphur fuel.’’
Continuing, Walden said, “In addition to that, any areas where we cannot on-board low-sulphur fuel we’ll be forced to burn diesel. We’re expecting the price of diesel to be even higher than the low-sulphur fuel.’’
As major shipping lines such as Maersk and MSC have estimated the annual cost of complying with these new requirements will be north of $2.00 billion a year, companies will recover costs via a new fuel surcharge mechanism.
The Freight and Trade Alliance said it is working with Australian regulators to validate the true cost of compliance. The alliance said the switch to low-sulphur fuel will have a long-term impact on freight costs and how freight charges are structured.
The Managing Director of NT Export and Livestock Services (NTXLS), Nick Thorne, whose company operates vessels Barkly Pearl and Diamantina, said there was a lot of uncertainty about how the switch would play-out for the industry.
“This could have impacts down the line for cattle producers, but it’s pretty early to say because it hasn’t started yet. I think it’ll make the charter fees for carriers more expensive, and initially there will be less places for shippers to bunker at — where ships fuel up,’’ he said.
According to him, one of his ships used marine gasoil (MJO) which will not be affected by the new low-sulphur cap. But, most livestock vessels will need to make the switch.
While Thorne said the Barkly uses MJO and as such largely unaffected, but the Diamantina runs on an intermediate fuel oil. “We’ll look to see if we convert her to use MJO, we’ll just have to do our sums … because the market rate for MJO, you’d imagine, will climb, and that’s going to affect our operations and expenses,’’ he added.
