The enforcement of the new IMO regulation has created high uncertainty among industry stakeholders on whether there will be sufficient availability of 3.5% sulfhur and 0.5% sulfur bunker fuels beyond the 1st January 2020. In the meantime, the UK-based supplier Crown Oil has highlighted a less discussed issue related with the fuel availability after the enforcement of the new regulation.
According to Crown Oil, a main challenge arising from the IMO 2020 is that none of the stakeholders – fuel suppliers, fuel traders, distributors and buyers – are aware of about how much oil will be required and therefore companies do not know how much they should produce and move to the ports. This creates a mismatch between supply and demand says the Managing Director of Crown Oil, Matt Greensmith.
Lack of transparency creates a big issue for suppliers and distributors since they are not aware about how much quantity of which product will be required at any given time and place. This will be a bigger issue during the transitional period. As a result, in some cases suppliers and distributors may not be in position to efficiently organise their logistics and meet the actual demand while in other cases they may oversupply and face additional storage and logistics expenses.
Furthermore, suppliers will need to also deal with the logistics of swapping the HSFO with LSFO as well as the safe disposal of the 3.5% sulfur fuel. This may not only consume resources for suppliers and distributors but also the process, if not done properly, might be harmful for all parties concerned and the environment.
Finally, as other industry stakeholders have done before, Crown Oil makes a special note on fuel quality and suggests buyers to consider more advanced fuel testing practices. In case that the fuel supplied is found not to meet the IMO regulations, buyers should make sure that their supplier can take out the old fuel, clean the fuel tanks properly and replace with compliant fuel.
As we are moving closer to 1st January 2020 that the 0.5% sulfur cap will apply the industry needs to deal with those uncertainties or someone will need to pay the extra cost.