Energy Newsletter - November 2019

The IMO and the Price of Gas or The Impact of the International Maritime Organisation’s Sulphur 2020 Limit for Marine Fuel Oil on the Price of Gas -

The main bunker fuel for ships is High Sulphur Fuel Oil (HSFO, with sulphur up to 3.5% m/m (mass by mass)). This will all change on 1 January 2020 when the IMO’s regulation to reduce the limit for sulphur content in fuel oil used in ships to 0.5% m/m comes into effect. The reduction to the sulphur content limit is predicted to lead to a massive drop in the consumption of HSFO, which in turn, we surmise will impact the price of piped natural gas in Asia and its competitiveness against LNG.

Background to IMO 2020 Sulphur Limit

The International Maritime Organisation (“IMO”) is a specialised agency of the United Nations, responsible for the safety, security and environmental performance of international shipping. The International Convention for the Prevention of Pollution from Ships (“MARPOL”), developed by the IMO, aims to preserve the marine environment by minimising pollution of the oceans and seas. MARPOL Annex VI (Prevention of Air Pollution from Ships), which sets limits on sulphur oxide and nitrogen oxide emissions from ship exhausts and prohibits deliberate emissions of ozone depleting substances was adopted in 1997, entered into force on 19 May 2005 and was revised in October 2008.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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