Bleaker outlook for Pakistani oil refineries.

 
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Byline: Shabbir Kazmi

According to media reports, tougher rules on sulphur emissions from ships will come into effect next year in the biggest shake-up for the oil and shipping industries for decades. International Maritime Organization (IMO) will ban ships from using fuels with sulphur content above 0.5%, existing limit is 3.5%. The regulations are aimed at improving human health by reducing air pollution.

Only ships fitted with sulphur cleaning devices known as scrubbers will be allowed to continue burning high-sulphur fuel. Ship owners can also opt for other sources of cleaner fuel such as liquefied natural gas (LNG). Failure to comply with the global regulations will result in fines or vessels being detained and in some jurisdictions the risk of imprisonment, which could affect vital requirements such as insurance cover. Enforcement will be policed by flag and port states rather than the IMO and industry officials are still unsure about whether there will be full compliance when it kicks in. Refineries are expected to face significant hike in costs to produce fuel of new specifications.

A quick review of producers indicate that leading oil majors i.e. BP and Royal Dutch Shell are already producing very low sulphur fuels that meet the 0.5% requirements. While major fuel bunkering ports such as Singapore, Fujairah in the United Arab Emirates and Rotterdam in the Netherlands have compliant-fuel supplies. However, analysts and shipping firms are still unclear what will happen at smaller ports given the need for ships to plan their sailing routes.

It remains unclear what impact there will be with mixing very low sulphur fuels of 0.5% together, which at this stage have not been fully tested on ship engines. One of the risks is that the level of sediment created could damage engines at sea. While guidance has been issued on avoiding mixing different fuel batches, the issue continues to raise worries especially after a major problem with bunker fuel contamination in 2018.

There is still a question over whether jurisdictions and ports could restrict the use of certain types of scrubbers due to uncertainty over the effects of the waste water that gets pumped into the sea. Earlier this year ten environmental groups called on the IMO to impose an immediate ban on the use of scrubbers. Users of the devices argue that there is no conclusive scientific research showing that discharges from open loop scrubbers - which wash out sulphur - cause...

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