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The devil in the detail

2020 could see sharp increase in conflicts caused
by differences between commercial and MARPOL principles for determining sulphur ‘off-specs’.

When can a bunker fuel be said to meet

a specific sulphur limit? Unfortunately,

the answer to this fundamental question

is not straightforward. There is a misalignment between the sulphur verification procedure prescribed by the International Maritime Organization (IMO) and the one applied

in commercial contracts throughout the

marine fuel industry. This has been creating confusion and distress for bunker fuel buyers and sellers for years, resulting in friction and frequent disputes.

Disputes regarding sulphur ‘off-specs’, and MARPOL-related ‘Notes of Protest’ (NOPs) for fuels exceeding sulphur limits lodged by ships with their flag states, have mainly related to products for use within emission control areas (ECAs). They were particularly prevalent when the limits were 1.5% and later 1.00% sulphur; typically met by low sulphur fuel oil (LSFO) products that were blended to meet sulphur limits. There was a huge improvement in 2015, when the sulphur limit in ECAs dropped to 0.10%. By and large this has been met by using marine gasoil (MGO) which for the most part comes from a product pool that tends to be well within the upper 0.10% sulphur limit. Come 2020, however, the 0.50% sulphur limit is expected to reintroduce blending from a wide source of refinery streams on a much larger scale than what was seen to meet demand for LSFOs for the ECAs prior to 2015. Disputes regarding sulphur ‘off-specs’ and the associated sulphur NOPs could reach unprecedented levels.

 

When is a goal a goal?
In 2008, the 58th session of IMO’s Marine Environment Protection Committee (MEPC), adopted “Fuel Oil Verification Procedure for MARPOL Annex VI Fuel Oil Samples”. Why, you may ask, didn’t IMO simply agree to use the well-established principles for test result interpretation in ISO 4259, which is applied throughout the marine

fuel industry?


The reason for this is that there was a desire for the sulphur limits in MARPOL Annex VI to be treated as “absolute”, which led to a unique interpretation of otherwise universally accepted statistical variance in sulphur test results.“ISO 4259: Petroleum Products – Determination and Application of Precision Data in Relation to Methods of Test” recognises that no test method can measure absolute/true

value with 100% certainty. It provides the industry with a scientific

and statistically proven 95% confidence formula to work with in any form of measurement, recognising the limitation of each test method with regards to its accuracy. It is defined as 0.59xR where R stands for Reproducibility, indicating the inherent variation that occur in test results when tests are conducted on the same sample, using the

same test method, but in different laboratories.

 

Appendix VI in MARPOL Annex VI also uses 0.59xR but in a manner which disregards the inherent uncertainty of all test methods

in a bid to establish MARPOL sulphur limits as “absolute”.

To demonstrate the difference between the IMO and ISO 4259 approaches to sulphur verification, let’s look at a parable.

In football, we all agree that as long as a shot at goal enters

between the goalposts, we’re OK, it is on target.

 

In fuel testing terms, if the middle of the goal represents the ‘limit value’, the goalposts represent the 95% confidence limits. A test result between the goalposts is considered as meeting the limit value.

What the IMO’s sulphur verification procedure effectively does is to say that only the left half of the goal meets the limit value, results in the right half are no OK. It does this by requiring the average of two test results from the MARPOL sample, performed in the same laboratory, to be at or below the limit. If the average of the first two tests exceeds the limit, but is within the 95% confidence margin,

it requires a further two tests to be performed on the sample in

a different laboratory. The average of all four test results must not exceed the limit. The drawing below illustrates what this means for

a 0.10% and a 0.50% sulphur limit.

Implications
The most keenly felt implication of this misalignment is the fact that

a ship operator with a single test result from its own testing programme showing sulphur marginally exceeding a MARPOL limit is afraid of falling foul of MARPOL Annex VI sulphur limits. But if the ship operator raises a sulphur dispute with the supplier, they have no legitimate ‘off-spec’ claim case unless the test results exceeds the specified and limit and the 95% confidence margin.

A ship which has a sulphur test result indicating potential non-compliance may lodge a ‘Note of Protest’ (NOP) with its flag state with a copy of the bunker delivery note (BDN), and the analysis report.

The vast majority of such sulphur NOPs, historically over 80%,

tends to be for fuels with sulphur test results falling within the 95% confidence limits. It is important to note that such a test result does not prove that the fuel supplied was non-compliant, it is merely indicative of a potential sulphur limit breach, but it isn’t clear if that

is understood by the relevant authorities in flag and coastal states.

 

In 2014, experts at CIMAC published a paper illustrating that the Appendix VI to MARPOL approach not only fails in the task of measuring the ‘true value’, but by not adhering to the ISO 4259 process for assessing test results it can also result in a fuel oil being found non-compliant, in accordance with Annex VI when both the supplier’s and receiver’s test results meet the specification limit, where that is defined as a MARPOL Annex VI Regulation 14 sulphur value.

 

How, I hear you say. Let’s say you test a fuel which has a “true value” of 0.50% sulphur. If you tested it 100 times, the number of test results falling either side of 0.50%, but within the 95% confidence margin, should be the same. But it is quite possible that out of the first four, two tested at exactly 0.50% and two tested slightly above, while the remaining 96 tests gave an even distribution and a final average of exactly 0.50% sulphur. But if you looked only at the first four test results, your average would be slightly above 0.50% and it would fail
the MARPOL verification procedure. The devil really is in the detail on this issue.

 

The CIMAC paper recommended that the sulphur verification procedure in MARPOL Annex VI should be aligned with ISO 4259 to provide a more uniform, robust and reliable system. In 2015, building on the arguments in the CIMAC paper, IBIA proposed this to MEPC 68. It was, however resisted because of suspicion among member states that bunker suppliers would then be tempted to blend either exactly to the sulphur limit or even marginally above because of the “error margin” afforded under the 95% confidence limit.

 

Correct application of ISO 4259 The CIMAC paper, and IBIA’s proposal to MEPC 68 in 2015, explained that there is an important distinction in the application of the testing precision boundary in commercial application using ISO 4259, with different approaches for the supplier and for the recipient as to whether a specification limit has been met. Applying ISO 4259, the recipient (ship) can only consider that

a maximum specified limit value has been exceeded if their test result exceeds the limit plus 0.59R, or 95% confidence. For the supplier,

with a single test result, the approach is that in the case of a maximum specification limit, the specification limit has been met, with 95% confidence, if the test result is less than or equal to the specification limit minus 0.59R.

 

What this means is that if a supplier’s retained sample is tested, that test result must not exceed a maximum limit at all. They do not have the ‘luxury’ of applying the limit plus 0.59R.

If a supplier is using a blend target equal to the specified limit, there would be as many test results above the specified limit as below (50/50 chance), meaning that, for the supplier to be 95% confident that they do not exceed the limit, the supplier should blend to the limit minus 0.59R. These principles should suffice to ensure suppliers are careful not to blend too close to the sulphur limit, but in a competitive market place some may be tempted to blend to the actual limit rather than the limit minus 0.59R.

 

The question is: what harm would that do? As long as the sulphur test results fall within the 95% confidence limits, the regulation’s intended benefits of reducing harmful sulphur emissions are achieved. By and large, authorities in reality do not seek to crack down hard on marginal infractions, though practices with regards to penalising sulphur limit exceedances will vary between countries, as we have already seen in countries checking ships for ECA compliance.

 

IBIA efforts at IMO
With an eye on the potential explosion of sulphur disputes that may materialise in 2020, what should we do? If IBIA were to put in a new proposal for the IMO to adopt ISO 4259, there is a risk of scoring an own goal because many would simply dismiss it as a repeat of the attempt at MEPC 68 in 2015 which was not sufficiently supported.

So for now, IBIA is working on educating all parties to build a better understanding of these issues, playing the long game.

 

As part of this effort, on January 17 this year, IBIA put on a lunchtime presentation in the main hall at IMO’s London headquarters for delegations attending the fourth session of the Sub-Committee on Pollution Prevention and Response (PPR 4). IBIA took this opportunity raise awareness of the current differences between commercial and statutory approaches and the problems resulting from it. IBIA invited Tim Wilson, Principal Specialist on fuels at Lloyd’s Register, to do the presentation and worked closely with him on the content.

 

Among the key messages Wilson put across at PPR 4 was that sulphur inspection authorities need to be mindful of the current differences between commercial and statutory approaches, and to understand that all test methods use 4259 to define the confidence testing boundary.

 

He also suggested that NOPs should not include reports of ships’ single test results where the sulphur limit exceedance is within 95% confidence limits. This only causes anxiety for shipowners about potentially being non-compliant but gives them no commercial ‘off-spec’ case against the supplier. The key point to understand, Wilson said, is that inconsistency in testing procedures could result in wrong indictments of ships and/or suppliers. By raising awareness of how the discrepancies between the regulation and commercial practices are causing a lot of pain for no gain, IBIA hopes this will help member states understand the issues and take a common sense approach when it comes to enforcement of MARPOL sulphur limits.

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