As Cajun says, "all it takes is time and money", and I would add, a little joined up thinking by politicians.
Take atmospheric sulphur; about a third comes from fossil fuels. Land based regulation is well advanced and now its the turn of the marine industry; the first legislation came into force in May this year.
The legislation proposes to reduce atmspheric sulphur by limiting the sulphur in fuels.
LSFO (Low Sulphur Fuel Oil) includes diesel, Marine Gas Oil and some of the distillates.
The definition according to MARPOL which established its first sulphur emission control area as the Baltic, is fuel with less than 1.5% sulphur, the global limit is 4.5%.
Heavy Fuel Oil (HFO) is widely used.
A couple of years back it was $180 a ton and the industry was wondering if they would get back to $135 a ton of a year or two before that. Today it is $260 a ton, for any HFO.
With MARPOL we now need both 4.5% HFO and LSHFO i.e. 1.5% HFO.
We currently have around 6.5MT of LSHFO and need 17-20MT by 2007.
So far so good but HFO is produced from refinery "waste" the residue blended with distillates so how do you increase production?
The two sources of LSHFO are residue from low sulphur crude refining or residue desulphurisation (RDS). Whatever the source, they are going to sell at the same price.
SO: to be effective the legislators need the refiners to invest in RDS but the high sulphur crude refiners are saying "why invest in RDS and compete at a lower margin with the low sulphur crude refiners who have no added costs? If we have to do something with 4.5% residue we'd rather invest in crackers and convert it all to distillate fuel, its more profitable"
Fine, so now the marine fuel instead of jumping $65 a ton (the expected premium for LSHFO) will probably climb much more due to the competion for the continuing supply of 6.5Mt in a 17-20MT market(assuming the low sulphur crude refiners don't also convert to distillates) and the losers in the marine industry will compete with land users for the diesels and distillates at a price somewhat above the current $519 a ton for MGO.
Now since HFO at $135 a ton represented 70-80% of the operating costs of a ship, what do you think a $520 (plus) a ton fuel cost is going to do to freight rates?
It is important that we have low sulphur targets but what price will we pay, rather, what price will we pay more than we ought to pay? According to one major oil company they don't think the legislators have even thought about how to ensure the supply of LSHFO that they need to achieve their legislative objectives.
Incidentally, most HFO is already below 4.5% so the global cap will make no change.
Most fuel in the Baltic is already below 0.5% sulphur but, because of the supply problem and making the LSHFO go further, 0.5% LSHFO will be blended with 4.5% HFO to make 1.5% HFO .... are you with that? it means that in the first declared low sulphur region the atmospheric sulphur will actually increase significantly.
Of course the legislation will change and the limit will reduce to 0.75% or even 0.5% and more low sulphur regions will be declared but legislating the targets isn't going to secure the necessary fuel supplies.
Any one got a solution?
By the way, in my paper today the French want to start work on the first Fusion reactor and Greenpeace is opposed.
Are we in the twilight zone or what?
JMW