DCN AUGUST Edition 2019

MARITIME LAW
IMO 2020 global sulphur cap
and the Australian context
Nic van der Reyden and Naraya Lamart of HFW examine the implications
of IMO fuel sulphur content rules
A 2008 AMENDMENT TO ANNEX VI
of the International Convention for the
Prevention of Pollution from Ships 1973 as
modified by the Protocol of 1978 (together
MARPOL) saw the International Maritime
Organization adopt a new global cap for
sulphur content in ship’s fuel oil of 0.5%,
which is to come into force on January
1, 2020. This is a significant reduction
from the previous cap of 3.5% and will
be implemented in Australia through the
Protection of the Sea (Prevention of Pollution
from Ships) Act 1983.
As the implementation date draws near,
the shipping world is still grappling with
some of the implications.
SUPPLY - IS THERE ENOUGH AND HOW
MUCH WILL IT COST?
Perhaps the most frequently discussed issue
is whether there is going to be sufficient
supply of low sulphur fuel oil, particularly
in more remote regions, which would
include Australia, due to Australia’s limited
refining capacity and reliance on imported
LSFO. It is also unclear whether refineries
are prepared to prioritise production of
LSFO and indeed whether they have the
capacity to deal with production and
storage as well as the logistical capabilities
to deliver LSFO to ports and terminals
around Australia.
Local operators have been stockpiling
LSFO to supply domestic vessels but many
in the industry are questioning whether
there will be enough LSFO to supply both
vessels operating in Australia and those
departing on international voyages. When
considering Australia’s present freight task
and its predicted growth in the next five
years there is a justifiable concern as to
whether there will be enough LSFO to meet
demand on January 1, 2020 and in the
years to come.
The increase in the cost of feedstock
that refineries use to produce LSFO as well
as supply constraints will no doubt have
an impact upon fuel pricing. Some predict
this will increase the cost of fuel by $200+
per tonne, which, of course, will increase
the price of transporting goods by sea.
For a country such as Australia, where
Nic van der Reyden, partner, HFW
52 August 2019
thedcn.com.au