A fuel sea change for cruise lines

With IMO regulations requiring cruise ships to burn fuel with a sulphur limit of 0.5% by 2020, switching to cleaner fuels is a priority for operators. For the bunker industry, it represents a considerable challenge. In fact, Trevor Harrison, acting chief executive at the International Bunker Industry Association (IBIA), believes there are significant changes on the horizon.

“The bunker industry is engaged predominantly in the buying and selling of residual fuel oil, a high-value, low-profit margin product that is difficult to handle and use,” he explains.

“Producers would rather not have it available to sell in the first place because it has a lower value than the crude oil from which it originates, and buyers only buy it because it makes economic sense to do so.”

Inevitable change for shipping

Harrison thinks mounting pressure on the shipping industry to become more environmentally friendly could result in changes in the future.

“This model may be approaching its twilight years, with environmental pressures leading ship operators to turn increasingly to distillate fuels, and eventually LNG and other alternatives,” he says.

Increasingly strict environmental legislation is one of the greatest difficulties facing the bunker and shipping industries.

“The biggest challenge is uncertainty,” explains Harrison. “Since the revisions to MARPOL Annex VI were agreed in 2008, there has been a clear timetable for the progressive lowering of SOx emissions from ships, but there has not been a clear path for suppliers and consumers to follow. This has led to a wait-and-see attitude on both sides.”

To move forward, Harrison believes the industry must accept that change is inevitable. Will the solution be a move to burning distillates and LNG or will it be the widespread adoption of scrubbers coupled with the continuing use of high-sulphur oil?

“Change will come and resistance is futile,” he says. “The political pressures within the International Maritime Organization (IMO) and at national level to pursue environmentally sensitive policies will not yield to commercial interests – the pressures are simply too powerful.”

The adoption of scrubbers and LNG are finally starting to become a reality, but Harrison thinks both solutions will be insufficient to meet the Annex VI target of 1 January 2020, which means that after 2020, most ships will have to burn low-sulphur gasoil or a blend of gasoil and fuel oil with a combined sulphur content of under 0.5%.

“This will be expensive, but ultimately the consumer will pay, so perhaps we in the bunker industry should not worry unduly, provided the rules are applied fairly,” he says.

One element of the supply and demand process could resolve itself. “Newer refineries will be looking to produce less residual fuel oil, so the supply and demand balance could be resolved neatly, with the remaining available fuel oil being used by ships fitted with exhaust gas scrubbers,” says Harrison. “However, it is hard to see a clear transitional path from today’s patterns of consumption to those that will prevail in the 2030s, and this is inhibiting innovative investment on the part of both supplier and consumer.”

An experienced perspective

A barrister by profession, Harrison spent the majority of his career as head of legal at Tramp Oil & Marine, one of the largest bunker traders. He now works primarily as a maritime arbitrator, commercial mediator and freelance legal consultant. After becoming a non-executive director of the IBIA in 2009, he took on the role of temporary chief executive in 2011.

“I expected the role to occupy me for one day a week for three or four months, but I spend an average of two-and-a-half days a week and am about to start month 13,” he says. “However, the recruitment process is well under way and I look forward to handing over to a new permanent chief executive within the next couple of months.”

During his 30-year career within the bunker industry, Harrison has witnessed many changes.

“I’ve been surprised by how much has changed in terms of speed of use and ease of communication, and there are vast amounts of information now readily available to buyers and sellers alike,” he says.

“Individuals are now better educated and informed than 30 years ago. A particular feature of my time in the industry has been the steady withdrawal of oil majors from bunker trading, with the void filled largely by a small number of large bunker traders. Conversely, 30 years ago, most bunkers were purchased on a spot basis as a result of negotiations between a human buyer and a human seller, and that remains the case today; the bunker industry is still a very personal business.”

Bunkering hopes

Attracting new members has been one of the IBIA’s key objectives in recent years, and this will remain a priority for an incoming chief executive.

“Having said that, I am not aware of any sector with an interest in the bunker industry that is not represented among the current membership,” says Harrison. “Perhaps we just need to try harder to attract those who, at present, question the value of membership. The more members we have, the more authority we possess, and the better resourced we are to represent the industry and service members’ needs.”

Harrison is also keen to emphasise the benefits of membership for cruise operators. The IBIA is a pan-industry body, representing buyers, sellers, producers, consumers, advisers, consultants and others who have an interest in bunkering. It acts as a forum for discussion of matters of interest, and is a representative of the industry at the IMO and in dealings with national governments, the EU, environmental groups and trade bodies.

“The IBIA is the voice of the bunker industry and cruise ships use bunkers so we look to represent the interests of the cruise industry,” says Harrison. “The more cruise operators we have as active members, the better placed the IBIA will be to represent them.”

A long-cherished ambition for the IBIA is to establish a set of bunker industry qualifications, which would raise the standards of competence and expertise across the sector.

“We attract participants from a wide range of commercial and technical backgrounds, and it would be to everyone’s advantage if there was a readily available qualifications path so that those looking to pursue a career in the industry were able to show that they possessed objectively assessed skills, knowledge and competence.”

Harrison would like to see the IBIA continue to grow in size and standing.

“As an association, we have existed for only 20 years, and in that time we have done a great deal to raise the profile and reputation of the bunker business, and increase outsiders’ awareness of the industry overall,” he explains.

“In the next 20 years, I would like to see the further development of our education and qualifications programmes, an increase in membership across all segments of the industry, growth in the nature and depth of the resources and facilities we offer members, and the ability to deploy more time and energy in lobbying governments and international organisations.”

Harrison believes that if the IBIA can achieve these goals, it can help the bunker industry, including those in the cruise sector, to become more highly valued and understood.