Ports and Shipping - Fuel trends.

Byline: S. Kamal Hayder Kazmi

International experts revealed that the developments in the maritime fuel industry have become crucial for operators and cargo owners as fuel consumption accounts for a large share of the total voyage costs and can constitute a significant portion of the total transportation costs. For the shipping industry, it is not surprising then that fuel costs, and consequently oil prices, are among the main drivers of the implementation of new technology. Shipping will be forced to reduce emissions by regulations.

It was expected that in the Sulphur Emission Control Areas (SECAs), which are North America, the Baltic Sea, the North Sea and the English Channel, the required sulphur content of fuel will be reduced from 1.5 percent to 1 percent starting July 1, 2010, and to 0.1 percent starting January 1, 2015. Worldwide, they also predicted that the highest permitted sulphur content of fuel will decline from 4.5 percent to 3.5 percent beginning January 1, 2012, and to 0.5 percent beginning January 1, 2020. Fuel grades in use on vessels fitted with sulphur scrubbers will still be permitted. Furthermore, increased environmental focus in today's market and the simultaneous need for the shipping industry to become more accountable for its environmental footprint are influencing the decisions that shipping has to make in terms of fuel type selection.

The growing scarcity and high price of oil will favour the use of renewable fuels. The IMO's purpose is to reduce emissions to air from ships, and ship owners must comply in one way or the other. To a very great extent, the experts also urged that the variation in fuel oil prices is correlated to the movement of oil prices. If they compare the projections with current prices, they revealed that the forecasted price is consistent with current levels that have been sustained since late 2009. However, they believed that the price ranges between $400 per tonne and $1,550 per tonne ($10.6 to 41.4 per MMBtu). Prices have been as low as $170 per tonne ($4.5/ MMBtu) as March 2009, with an average that month of $350 per tonne ($9.35/MMBtu).

Moreover, Marine Gas Oil (MGO) with 0.1 percent sulphur or less is readily available and shares more or less the same properties as the diesel fuel used for high-speed diesel engines. MGO does not require any extra volume for storage tanks, and adjusting the engine to MGO requires in most cases only small investment...

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