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Regulating the future

The wide variety of economic and legislative environments found across the Caribbean are posing a challenge to authorities enforcing IMO 2020 rules. As John Rickards reports, they are also making long-term developments in the industry hard to predict

Past the technical practicalities faced by ship operators in terms of IMO 2020 fuel specs and behaviour, the two biggest unknowns going into the year remained production, storage and distribution across all fuel types and consistent enforcement of the regulations. It would be wrong to suggest that the myriad states of the Caribbean represent the perfect storm in both respects. Similar challenges are faced in some regions of Africa and South East Asia but the region can certainly be seen as a bellwether for all the complexities of such a significant regulatory change.

Local production ranges from newer, high-end refineries concentrated mostly on gasoline to smaller, older refineries built with one eye on shoreside oil power generation and in some places financially struggling. In the case of Petrotrin, the refinery has shut down due to spiralling costs. While reasonably easy access to lower-sulphur South American crude is a bonus, local very low sulphur fuel oil (VLSFO) production capability can be spotty. Port storage is a similar picture.
In some places there has been investment in new tanks able to handle the addition of IMO 2020-compliant fuels alongside others. But there are also storage facilities that have been targeted for upgrades or replacement for years but still struggle on. Given the investment by the big Caribbean cruise lines in scrubbers, not to mention the remaining power generation market, HSFO seems set to remain a feature.


The regulatory picture is, if anything, even more complex.


Enforcement of the new rules across the region falls to the port state control officers of the Caribbean MOU, but at the time of writing only seven of the MOU’s 19 members have the relevant IMO 2020 regulations written into domestic legislation, even though twelve are signatories to MARPOL Annex VI. Jamaica left it until very late last year to join the club of those with domestic legalisation in place that allows it to enforce the 0.50% sulphur limit. Inspection rates are limited by officer numbers, which in many of the smaller island nations can be very low indeed – there is only a single PSCO in some member states, and by tight equipment budgets and limited numbers of fuel testing facilities to verify compliance.


It would be ridiculous to think that the Caribbean is going to become a haven of non-compliance and operators dodging sulphur rules, of course, but it’s certainly a region whose complexities represent a challenge. Jodi Barrow is the secretary general of the Caribbean MOU on Port State Control, and the person best placed to understand those complexities. World Bunkering spoke to her about the situation as it currently stands.


WB: Only seven CMOU members of the twelve MARPOL signatories have written the new rules into domestic law. Are you aware of any moves in the others to bring their own laws in line with the regulations?
JB: Yes, others have indicated that they are working with their governments to have the laws enacted.


WB: And are you as the regional PSC body able to do anything to encourage them to do so?
JB: We bring the matter to the attention of the Ministers of Transport whenever we can as well to the IMO to see if they can assist. Unfortunately, the legislative process within the Caribbean is very slow and with many other pressing issues, maritime legislation has a tendency to stall.


WB: In those signatory states without domestic law in place, you’re not able to carry out inspections. If your inspectors in those states have reason to think a particular vessel isn’t compliant in terms of fuel, what options – if any – do they have? Can they notify destination ports within the MOU if those destinations are in states where inspection will be possible?
JB: Yes, they do this currently with all Conventions that they are not able to inspect on, for example BWM. In some cases, the CMOU is advised and we circulate this information not only to our member states, but other MOUs too, especially the Vina del Mar Agreement, in case the vessel will be stopping at one of their ports.


WB: On a wider level, is there any degree of intelligence-sharing within the MOU between signatory and non-signatory states regarding vessel operator practice? Is there anything – practical or legal – stopping inspectors in a state where the IMO 2020 limits aren’t in force notifying a port of destination where it is that a given ship loaded non-compliant fuel?
JB: The PSCOs often communicate among each other and will notify other states of their concern.


WB: I know there were fears beforehand that operators of smaller vessels were either less aware or less interested in the IMO 2020 rule changes. How receptive do you think they’ve been to the new sulphur cap?
JB: I believe that this would mainly be the vessels between the 400gt and 500gt under our small vessel codes due to the engine size. I believe that the numbers of these vessels are small but we continue to work with them when they advise us of any issues.


WB: How tricky is it as a PSC body when a major regulatory shift like this comes along to juggle the requirements and constraints of so many members, different domestic legal frameworks, budgetary or manpower constraints particularly in the smaller nations? Is there anything you’d hope to see in this regard to make the job of ensuring compliance easier for you over the coming months?
JB: Is it very difficult because in many cases your hands are tied if the domestic legislation is not in place. In addition, there are resource constraints for example with having testing equipment readily available. Also, we would like to see an online resource area that our PSCOs could get real time data to check on the availability of low-sulphur fuel which can be used to assess the FONARs when presented.


If the remaining signatory states eventually add the new sulphur regulations to domestic law, the enforcement environment should at least get a little simpler, but on the other challenges faced by the region’s PSCOs, it remains to be seen how things will shake out.


One Caribbean state that was very keen to promote itself as being IMO 2020-ready before the deadline – despite the legislation backing it coming in only narrowly under the wire – is Jamaica.


Speaking at the ICBC conference in September, the country’s transport minister Robert Montague said: “Jamaica’s geographical position and its development of infrastructure to attract transshipment activities mean the country attracts more shipping traffic than warranted by our trade alone. Of course, a major challenge for the bunkering industry in Jamaica will be the provision of compliant fuel to meet the demands of the ships that operate locally and those that either trade at our ports, or will proceed to the bunkering stations in the country through simple short diversions from their transits proximate to Jamaica. I am confident, however, that [the event] is set to address compliance solutions as Jamaica advances its capabilities to becoming a bunkering nation. At the same time, I have been advised by our local refinery that compliant fuel will be available in Jamaica.”


Petrojam certainly backed up that sentiment, promising relatively early to have 0.50% sulphur fuel ready for supply from the start of the year, and that all the necessary infrastructure would be in place to ensure that the addition of the new fuel type would happen seamlessly.


Similarly, on the southern periphery of the Caribbean, Suriname’s state-run oil company Staatsolie – which also owns Trinidadian bunkering firm Ventrin – has taken to the IMO 2020 changes calmly. The company’s regular bunker fuel has a sulphur content of only 0.7% anyway, so meeting the cap hasn’t involved some of the complications experienced elsewhere. The company began testing VLSFO mixtures that met the specs in November 2018, before launching a test programme from May until November last year on board two of the company’s contracted vessels as well as those of a second party, as well as conducting ongoing fuel quality testing with VeriFuel.


“We advocate for a clean environment,” Staatsolie said in the late summer. “Furthermore, the implementation of this program also stimulates us to work on improving the quality of our product.”


It added: “For us, complying with IMO regulations will not only generate more international recognition, customer loyalty and market share, but also increase sales… Awareness has been given to Suriname and our company and attention has been paid to the product. More foreign companies also know that their ships can make a stop-over during transit to purchase our quality fuel.”


Given the availability of US shale gas and the creaking power generation plant of some of the island states, investment in LNG infrastructure, shoreside first, bunkering second, has been mooted across the region for some years.


The Jamaican government revealed in August that it’s planning on modernising and updating the country’s Petroleum (Downstream Activities) Act to cover Jamaica’s emerging LNG industry.


Science, Energy and Technology Minister Fayval Williams, speaking at a bond-signing ceremony involving gas company New Fortress Energy, a key player in the country’s gas power generation sector, said the changes to the law would involve receipt, storage, processing and distribution of LNG, adding that “the legislation will also deal with the licensing, construction, and operation of natural gas terminals and transportation”.


“The objectives of the new legislation will be to encourage private investments in the long-term financing and timely development of natural gas for Jamaica,” she added. “Diversified fuel choices in Jamaica promote competition in the downstream natural gas sector, prescribe the required standards for the natural gas sector, ensure the protection and safety of consumers and the public, and ensure that regulation of the sector is transparent, rational and predictable.”


While the picture continues to look promising in Jamaica, another potential gas hub of times gone by has become something of a mess.


In the run up to the 2017 general election in the Bahamas, the then-government was in the final stages of inking a deal with New Fortress Energy (NFE) to import LNG for power generation for state electricity firm Bahamas Power and Light via a new LNG plant at Clifton Pier, amid talks of a new era of gas usage in the Bahamas with all that that entails. BPL’s own upper management spoke about the possibilities of LNG bunkering in New Providence. However, the subsequent change in government meant that the deal stalled, and the new administration eventually, a year later, chose Shell as its preferred bidder for the new plant.

There’s no gas plant there yet. However, by all accounts, Shell has been doing its best to make it happen. BPL, struggling with power generation shortfalls, the need to consider financial implications, and then the massive damage caused by Hurricane Dorian last summer has demurred. Meanwhile the 132 MW Clifton Pier plant project was completed by Wartsila in December, consisting of seven dual-fuel marine engines running on HFO rather than LNG.


Speaking in the summer, BPL’s chairman Dr Donovan Moxey said that the Bahamas could have an LNG facility by the end of 2021 as the development of one would constitute the third phase of BPL’s plan to turn its fortunes around and end the regular blackouts affecting New Providence and elsewhere. The Clifton Pier plant is to be followed by a second, 90 MW facility. He said that it would be run by Shell. Presumably the oil major would also be responsible for importing LNG.


Given the delays involved in getting the first plant up and running this looks very much like a case of wait and see. With its cruise line customers already investing heavily in gas propulsion as well as scrubbers, the Bahamas would seem like an ideal environment to develop a gas bunkering industry. But while the Wartsila engines used for power generation can certainly run on gas, the development of a gas hub or bunkering in the islands will probably be on a more modest scale than originally envisaged.


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