IMO 2020 Sulphur Cap, SEA and Thailand
Thailand ready for IMO 2020 Sulphur Cap, but…
Like any other maritime nation, Thailand is steaming full ahead towards IMO 2020 Sulphur Cap (SC), and finds itself about ready for Jan 1 2020 deadline, investing into new FSUs and low sulfur fuel oil production. Like any other maritime nation, Thai approach to Sulphur Cap is stunningly one-sided. It’s mostly, about preparedness and capacities to produce and supply low sulfur fuels, plus potential gains for refineries, storages and bunker supply businesses.
One of Thai oil majors, Thai Oil Public Company Limited or Thaioil, a subsidiary of PTT Group and largest oil refinery in Thailand, is predicted to gain most, with some 60% of its’ production being distillates. Other majors, namely PTT GC, IRPC and BCP, are expected to boost their refinery production in the wake of refinery margin growth.
ExxonMobil was to start selling IMO 2020 compliant fuels in Laem Chabang, main port of Thailand, prior to the January 1, 2020, by the third quarter of 2019.
The largest operator in oil tanker and oil and petroleum storage in Thailand, PRIMA MARINE, revealed its’ plan to add eight FSU tankers of 300,000 dwt each, to its current fleet of seven FSUs, which accounts for 50% company’s profit, at present.
Exhaust Gas Scrubber Systems aren’t, so far, banned in Thailand ports and waters, and hopefully, will remain allowed for use. Maritime Port Authority in several countries banned the use of Exhaust Gas Scrubber System, providing no scientific evidence for its decision, nor inviting industry for consultation.
As of Aug 29, in South East Asia (SEA) region only Singapore and China banned scrubbers almost unconditionally, while the rest of Asia thought better of it, and didn’t, so far, indicate any such intentions.
There’s no clarity yet as to how exactly Thailand Maritime Authorities are going to enforce Sulphur Cap, what sanctions and punishments are they planning or proposing to implement, against Sulphur Cap violators. I believe, it’s a “wait and see” policy – the best policy under the circumstances. Not many States, so far, define and determine their future punitive practices, except some extremely enthusiastic followers and supporters of UN/IMO agendas, like say, Singapore.
… what Sulphur Cap Regulation really means?
It’s way too early to forecast, what’s in store for ships and shipowners, in year 2020, especially if we try to have a closer look at the whole Sulphur Cap scheme. Sulphur Cap Regulation is the first international regulation to hit all peoples and nations. Cost of everything will go up, simply because some 95% of world trade is carried out by ships. Cost of fuels, raw materials and production components will go up. Respectively, energy costs will go up. Construction costs will go up. Food costs will go up. Production costs will go up. People will spend more on energy bills and basic food, and therefore, buy less consumer goods (let alone expensive goods and services, such as medicine, houses and cars, cruise/tourism and leisure/hobby items), causing production reduction. Production reduction will trigger wages and workforce cuts. It’s a vicious circle, a snake eating its’ tail. Economy will be pushed into a reverse mode.
Thailand is heavily dependant on maritime shipping, both in imports and exports. Shipping disruptions, in worst scenarios, will disrupt nation’s everyday life and economy, with unpredictable consequences. The biggest headache with Sulphur Cap is, nobody knows, what negative impacts the change will bring in short, medium or long term periods.
Climate Change worldwide rally total failure in South East Asia
The best and most spectacular illustration of true Thai and other SEA nations stance on Climate Change “problem”, is perhaps, much-touted by mainstream media Climate Change worldwide rally on Sep 20 this year. Hundreds of thousands of children and teens marched through Western cities – some 310,000 in New York, some 350,000 throughout Australia, etc., on a Friday Climate Change Strike, being more than happy to skip school or college. Mainstream media of course, mentioned rallies in South East Asia, too. Some 300 Climate Change protesters were found and head-counted in New Delhi, and some 200 (200 according to local sources, 240 according to Reuters) in Bangkok. An embarrassing fact – the majority of Bangkok protesters were Westerners with their children. Hundreds of thousands in the West, and dozens in Asia – what can be more illustrative, than this awesome difference?
Sulphur Cap frustration
Problems meanwhile, arise with each passing day. Bunker suppliers, refineries, logistic companies, shipbuilders, insurers are either very concerned, or plain panicked. Even CEOs of major shipping companies lashed at IMO with harsh criticism. What did they expect, waking up when the house is already engulfed in fire?
The main and final SC strike will be landed on shipping not on Jan 1 2020, but in March, when ban on using all conventional fuels, globally, will come into force. The ship may use high-sulphur fuel only until she calls any port anywhere around the globe, even worse than that – the ship is violating SC, if bunker tanks are “dirty”, i.e. not cleansed and certified as clean. It means, that effectively, the ships can’t use old brands of fuel anywhere around the globe.
Thailand doesn’t depend on domestic shipping as heavily, as its’ neighbors, Indonesia, Malaysia, India and Philippines, do. Thailand domestic shipping is not as big and conspicuous as theirs, and because of it, if /when things come to worst, Thailand may suspend SC implementation in domestic shipping without much noise and public attention.
But it won’t solve the main problem of possible logistics and supply chains disruptions, and inevitable prices hikes. That SC preparedness, touted already by many nations, is in fact, nothing more than a scratch on the surface of the problem. It’s factually, a technical readiness to supply ships with low-sulphur fuels, and nothing more than that.
Does any government of any nation around the world have contingency plan in case of serious supply chains disruptions, including disruptions of supply of fuels for power plants, and food supplies?
The most potentially negative issue of Sulphur Cap is its’ global character. Nation may unilaterally waive SC in its’ domestic shipping, but waiving SC Regulation in international trade requires multinational response, at least on regional level.