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Hong Kong sulphur cap: impacts and differences

In January this year I posted my view on the “then new” IMO global regulation affecting ships operating within published Emission Control Areas (ECAs) which reduced the allowable emitted sulphur content from 1% to no more than 0.1%. As expected, additional regulations are continuing to follow and will do so throughout the next decade, with the most recent being the bid to reduce air pollutants from Ocean Going Vessels (OGVs) berthed alongside in the city of Hong Kong by their Regional Advisory Council on the Environment, a Hong Kong sulphur cap.

Smog is a common sight in Hong Kong and, as CNN reported at the end of 2013, polluted days had increased that year alone by 28% to 303 days. Of course, it would be easy to blame the factories in China, but research indicates that up to 50% of pollution is actually locally produced and Gina McCarthy, US Environmental Protection Agency, was quick to point out that much of it comes from marine vessels and emissions from shipping.

In the English version of the Hong Kong Legislative Council Brief, released shortly after the initial formal announcement on 6 March 2015, the regulation was posed with the implementation date of 1 July 2015 and a promise of further details to be published in May 2015. Within this official document, reference was made to the likelihood of the new regulation affecting in the region of 30,000 vessels per annum (based on 2012 statistics).

The government bill is likely to require OGVs to switch to fuel with a maximum of 0.5% sulphur content while berthing and docked in Hong Kong port until around one hour prior to departure. And although it needs clarification, berth in this case is believed to mean “a place in the waters of Hong Kong at which a vessel is not underway” – so the rules should apply at anchor/buoys inside of port limits so it is not only container vessels that are in the frame. Fines in the region of $200k HK Dollars (approx. $26,000 USD or £17,000 GBP) and a 6 month imprisonment will be awarded for proven violations.

Worldmap for ECA FINAL

 

So what is the impact of this additional regulation on the shipping community?

Whereas the previous regulatory change enforced that heavy fuel has to be replaced with cleaner fuels – such as marine diesel and marine gas oil with 0.1% sulphur content (which are considerably more expensive), the Hong Kong regulation at 0.5% would appear to have a higher allowable sulphur content to the ECA and at berth regulations in Europe, which could give consideration to vessels holding 3 grades of fuel or perhaps those just taking a financial hit by carrying 2 grades (0.1% for ECA and normal FO for outside of ECAs). This has inherent problems for charterparty and co-mingling and a lack of bunker space could also arise as well as the need for additional administration, bunker surveys and fuel analysis.

The regulation itself is also different in that the rules are applicable one hour after arrival to one hour before departure – different to the regular ECA ruling where switch over must be complete and fuel run through before entry into an ECA and again not switched back until after leaving an ECA.

As with the ECA regulations, there are no means by which the fuel oil sulphur content can be altered on board, other than on board blending, for which there are currently no guidelines. Consequently, it is necessary to ensure that the fuel oils loaded meet the required limits and, in the case of the ECA compliant fuel oils, that compliance is not compromised by mixing with higher-sulphur fuel oils either in bunker tanks or in the transfer system. There are complications associated with dual storage; to cater for the storage of different grades of bunkers on board, and, as with ECA management, there will likely be a requirement for a sub-division of tanks and possibly the need for more frequent bunkering resulting in additional costs.

To add to the expense, there is already talk of the possibility of levies and surcharges on customers by international shipping lines to counter these additional costs for vessels calling at Hong Kong Port and the inevitable raised cost of shipping containers through the city. There are also concerns locally of a loss of some shipping lines to neighbouring ports and worries that Hong Kong could struggle to stay competitive with further calls for subsidies akin to those offered by Shenzen Port for emission reduction measures, totalling in excess of 300 million dollars last year.

As with the new IMO regulations, this space will be one to watch. Rumours are already rife that similar regulations to the Hong Kong sulphur cap are planned for the green berths in Singapore’s Jurong Port and there is also the commonly held belief that ECAs will continue developing into the future, with proposals for new areas including the Mediterranean Sea, Japanese coastal waters and the Norwegian coast to name but a few.

Queries about these changes should, in the first instance, be directed to Mr. W C Mok, Assistant Director of Environmental Protection (Air Policy) Hong Kong Tel: IDD + 852 3509 8618. As more information becomes available on general release in the coming weeks, I will certainly aim to update you on the detail.

Interesting times.

Karen Jacques, Director Asia Pacific