IMO 2020 a major shake-up for oil and shipping

London - Tougher rules on sulphur emissions from ships will come into effect next year in the biggest shake-up for the oil and shipping industries for decades.

From January 2020, United Nations shipping agency the International Maritime Organization (IMO) will ban ships from using fuels with a sulphur content above 0.5%, compared with 3.5% now. The regulations are aimed at improving human health by reducing air pollution. Only ships fitted with sulphur-cleaning devices known as scrubbers will be allowed to continue burning high-sulphur fuel. Ship owners can also opt for other sources of cleaner fuel such as liquefied natural gas (LNG). Failure to comply with the global regulations will result in fines or vessels being detained and in some jurisdictions the risk of imprisonment, which could affect vital requirements such as insurance cover. Enforcement will be policed by flag and port states rather than the IMO and industry officials are still unsure about whether there will be full compliance when it kicks in. Refineries separately face significant costs to adapt to the new fuel specifications.

Oil majors including BP (BP.L) and Royal Dutch Shell (RDSa.AS) have announced they are producing very low sulphur fuels that meet the 0.5% requirements. While major fuel bunkering ports such as Singapore, Fujairah in the United Arab Emirates and Rotterdam in the Netherlands have compliant-fuel supplies, analysts and shipping firms are still unclear what will happen at smaller ports given the need for ships to plan their sailing routes.