What is IMO 2020?

The main type of "bunker" oil for ships is heavy fuel oil, derived as a residue from crude oil distillation. Crude oil contains sulphur which, following combustion in the engine, ends up in ship emissions. Sulphur oxides ("SOx") are known pollutants which can lead to acid rain and can cause harm to human health.

The International Maritime Organization ("IMO"), the United Nations agency tasked with setting global standards for safety, security and environmental performance in global shipping, under the International Convention for the Prevention of Pollution from Ships ("MARPOL Convention"), first adopted provisions to reduce SOx emissions from ships in 2005 under Annex VI of the MARPOL Convention ("ANNEX VI").

ANNEX VI imposes limits on the main air pollutants contained in ships exhaust gas, including SOx and nitrous oxides (NOx), and it prohibits deliberate emissions of ozone depleting substances. In 2008, the IMO's Marine Environment Protection Committee ("MEPC"), adopted amendments to revise ANNEX VI to lower the global limit on allowable sulphur content in fuel oil to 0.5 percent mass by mass (m/m) down from 3.5 percent m/m.

The revisions relating to SOx (hereafter referred to as "IMO 2020") came into force on 1 January 2020 and apply to all ships whether they are on international or domestic voyages within the waters of a party to ANNEX VI. For those areas designated as Emission Control Areas ("ECAs") under ANNEX IV (i.e. the Baltic Sea area; the North Sea area; the North American area (covering designated coastal areas off the United States and Canada); and the United States Caribbean Sea area (around Puerto Rico and the United States Virgin Islands))1 the SOx limits were reduced to 0.10 percent/m/m, from 1 January 2015 ("ECA Regulations").

An additional carriage ban which prohibits ships from carrying fuel that contains a SOx content greater than 0.5 percent for combustion purposes for propulsion or operation on board a ship unless the ship has an approved exhaust gas cleaning system ("scrubber") fitted, came into force on 1 March 2020. According to IMO, this ban was intended as an additional measure to support consistent implementation and compliance and provide a means for effective enforcement by port states.

Compliance with IMO 2020

IMO 2020 was expected to have wide reaching consequences on the shipping industry, impacting vessel operators, refineries, and even the global oil markets.

Compliance efforts across the shipping industry have been fragmented throughout the industry with key industry players favouring different solutions including the use of low sulphur fuel oil or LNG as bunkering fuel to installation of scrubbers. Each of these solutions come with their own set of issues as outlined below:



1 Details of the ECAs are available here: https://www.imo.org/en/OurWork/Environment/Pages/Emission-Control-Areas-(ECAs)-designatedunder-regulation-13-of-MARPOL-Annex-VI-(NOx-emission-control).aspx

2 "New marine fuel rules to boost diesel prices for at least a year: analysts" Reuters (11 June 2019) available at https://www.reuters.com/article/us-imoshipping-usa-refiners/new-marine-fuel-rules-to-boost-diesel-prices-for-at-least-a-year-analysts-idUSKCN1TB2CJ

3 "IMO 2020: Low sulphur fuel prices surge, discount to MGO vanishes", Seatime Maritime News (7 January 2020) available at https://www.seatrade-maritime.com/bunkering/imo-2020-low-sulphur-fuel-prices-surge-discount-mgo-vanishes

4 NOTE: There are some crude oils sweet enough to produce a residual fuel oil of around 0.5% sulphur directly from a refinery's crude distillation unit; whereas in some cases fuel oil may be de-sulphurized using hydrogen or other catalysts to produce the cleaner grade.

5 NOTE: On 23 August 2019, the Secretariat of IMO issued the Joint Industry Guidance on the Supply and Use of 0.50% Sulphur Marine Fuel which provides a primer on key fuel properties for VLSFOs which includes information on cold flow properties, stability, viscosity, acid number, flashpoint, ignition quality etc., as well as an analysis of fuel compatibility issues the test methods currently available for evaluating fuel quality. This is the first step in standardizing the specifications for VLSFOs.

To read the full article click here

Visit us at mayerbrown.com

Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe – Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

© Copyright 2020. The Mayer Brown Practices. All rights reserved.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.