Annex V1 of the international convention for the prevention of pollution from ships "MARPOL" has limits on sulphur oxide and nitrogen oxide emissions from ship exhausts and prohibits deliberate emissions of these ozone depleting substances. The convention also delineates certain sulphur oxide emission control areas ("ECA's") where more stringent controls are in place.
Currently ECA arrears are in the Baltic sea, North Sea, and off North America and in the Caribbean sea.
Although Annex V1 came into force in May 2005 following a series of amendments, the new cap, effective from the 1st January 2015 was reduced from 4.5% mm, from the sulphur content of fuel oil and a cap of 0.10% mm in ECA. This may have a major impact on ship owners who are primarily responsible for complying with the convention. However, such responsibility is set against a background of time charter parties where charters provide the bunkers. Accordingly these charterers must provide bunkers who will comply with the sulphur content requirements and warrant to this effect in the charterparty whilst at the same time indemnifying owners for any losses and/or fines resulting from non-compliance.
There are three main methods of complying:
a) Low sulphur fuel with sulphur content below the cap; or
b) Heavy fuel oil with an exhaust gas clearing system known as a "scrubber"; or
c) Use of liquid natural gas.
The cost of which adaption to adopt will be predicated upon time spent in ECA's; however, the 0.1% sulphur content cap would doubtless cut across many existing time charterparties and this brings with it the potential for disputes between owner and charterers. The main issues that are anticipated are the cause of the vessels' limited capacity for carrying fuels that comply with ECA restrictions, the limited availability of ECA compliant bunkers and charterers requirement to avoid ECA's wherever possible.
It should be possible to deal with issues extant in new charterparties but as regards existing charterparties, charterers may be left with a vessel that cannot operate within an ECA without frequent refuelling and yet with no recourse against the owners for additional costs and inconvenience. Alternatively it may be an opportunity for owners to pressurise charterers to ensure that, if they want to trade in ECA areas, to contribute to the costs associated with refuelling and/or using more expensive low sulphur fuel which requires either tank adaptions or the installation of a scrubber. As well as the penalties for non-compliance with the very low sulphur content now allowed, it will not be difficult for a problem to arise as a result of the supply of specification fuel and/or improper sampling/testing and/or the contamination of fuel by previous fuel residues.
It follows that both owners and charterers should be careful to take into account there issues, particularly when entering into future charter parties. Existing charterparties should also be renegotiated in order to comply with Annex V1 of MARPOL.
Of further note is the future reduction of a global cap of sulphur dioxide emissions from 3.5% to 0.5% - due to come in force in 2020. This may sound tedious and mundane but it will have very severe practical effects on the industry and all parties to a marine adventure should be prepared to weather this inevitable future storm.