News

Shipowners Look to MGO for US ECA Compliance

Source: OceanIntelligence

January 8th 2015

Shipowners are choosing marine gas oil (MGO) over “boutique“ ultra-low sulphur fuel oil material to fuel vessels sailing in US emissions control areas (ECAs), a report suggests.

As of New Year’s Day, vessels navigating through ECAs around the world must burn fuel with a sulphur content no higher than 0.10%. The new regulation has left several shipowners and operators to use the more costly MGO as an alternative. Other compliance options include the use of liquefied natural gas (LNG) as a marine fuel, installing emissions abatement technology or using ultra-low sulphur fuel oil.

Almost all customers are buying MGO. There’s little to no 0.1%S dirty oil demand.

US market sources, however, told energy news provider Platts that “boutique” ultra-low sulphur fuel oil material is less expensive than MGO but also “unfamiliar and potentially risky“.

“You have to do modifications to the vessels to be able to handle the product,” an East Coast trader was quoted as saying, adding that there is a high likelihood of high and ultra-low sulphur fuels mixing in tanks and pipes. “So there’s a big risk of being non-compliant when the fuel hits the engine.”

Companies such as Chemoil, Atlantic Gulf Bunkering, Shell and Peninsula are offering MGO alternatives, typically created by blending ultra-low sulphur heating oil (ULSD) with residual fuel oil, low sulphur straight-run fuel oil, VGO or some other material, according to Platts. However, the firms’ products often differ when it comes to viscosity, API gravity, acidity and even sulphur.

“Over the last few weeks [suppliers] have said they will carry this new low-sulphur product and then when we ask for pricing and delivery dates for inquiries they say they have nothing available,” a Houston-based marine fuel trader said.

A US Atlantic Coast supplier added: “Almost all customers are buying MGO. There’s little to no 0.1%S dirty oil demand.” The supplier added that it would cost each ship upward of $1 million to clean tanks, add equipment and more for ships to take a 0.1%S dirty fuel.

“The savings in a 0.1%S fuel is around $30-$40/per metric ton (pmt). It’s not worth the investment at this time. At this point, every shipowner is looking at historically cheap bunker fuel. Even MGO is cheaper than high-sulphur bunker fuel from just last year.”