Bunkering after IMO 2020: VLSFO, MGO, and the sulphur cap

On 1 January 2020 the sulphur limit for marine fuel outside emission control areas fell from 3.5 percent to 0.5 percent, and the largest single fuel market on earth changed overnight. Every ship that burned residual fuel had to answer one question: comply, or fit a scrubber and keep burning the old stuff.

The 0.5 percent line

The cap comes from MARPOL Annex VI, the International Maritime Organization convention that governs air emissions from ships. Before 2020, most ocean-going vessels ran on high sulphur fuel oil at up to 3.5 percent sulphur. Inside the designated Emission Control Areas around North America and the North and Baltic Seas, a tighter 0.1 percent limit had already applied since 2015. What 2020 did was pull the open-ocean number down to 0.5 percent, everywhere, for everyone.

Shipowners were left with three practical routes to compliance. Switch to a fuel that already sits below 0.5 percent. Install an exhaust gas cleaning system, a scrubber, and carry on burning cheap high sulphur fuel while washing the sulphur out of the exhaust. Or move to an alternative such as LNG. The choice was rarely about ideology. It was a capital decision measured against the price gap between compliant and non-compliant fuel.

VLSFO, HSFO, and MGO

Very low sulphur fuel oil, blended to sit at or below the 0.5 percent line, became the new default and now moves the bulk of the compliant fleet. Marine gasoil, a distillate at or below 0.1 percent, is cleaner still and is what a ship burns inside an emission control area or when it has no compliant residual tank. High sulphur fuel oil did not vanish. Scrubber-fitted ships still buy it at a discount, and the gap between that discount and the VLSFO price, the spread the market calls the Hi-5, is now a number traders watch every day.

• HSFO: residual fuel up to 3.5 percent sulphur, for scrubber-fitted vessels outside emission control areas.
• VLSFO: a 0.5 percent blend, the workhorse of the compliant fleet.
• MGO: a distillate at 0.1 percent, burned in control areas and by ships without a compliant residual tank.

One line in a treaty moved more barrels that year than any price signal of the decade.

Supplying fuel at the quay

Bunkering is the physical act of getting that fuel into the ship: by barge alongside at anchor, by pipeline at the berth, or ship to ship at a designated anchorage. Singapore, Rotterdam, and Fujairah remain the great hubs, and the volumes are enormous. Quantity is measured by mass, a sample is drawn and sealed in front of both crews, and the fuel is bought against the ISO 8217 marine fuel standard. The bunker delivery note records what was pumped, but the sealed sample is what settles an argument later.

Where bunkering stands now

Five years on, the cap is routine and the operational headache has moved to quality. VLSFO is a blend, and blends from different suppliers do not always mix cleanly in a tank. Compatibility and stability, catalytic fines that can score an engine, and cold-flow behaviour are now the things a good operator manages before they manage price. The rule reshaped the market once. Running a cargo through it well is a daily discipline.