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Decoding IMO 2020: Key Terms & Definitions

IMO, MGO, VLSFO... Oh my!  As if there weren't enough acronyms to remember in logistics already, IMO 2020 is chock-full of abbreviations and new terms.  We put together this quick guide of key terms, acronyms, and definitions to make understanding the new maritime fuel regulations a bit easier. 
 
 

IMO 2020 Key Terms & Definitions

 

International Maritime Organization (IMO): The International Maritime Organization is the United Nations agency that sets the global standards for the safety, security and environmental performance of international shipping. Their primary purpose is to develop and maintain a comprehensive regulatory framework for shipping that is fair, effective and universal. 

IMO 2020:  Also called "Sulfur 2020", the IMO has mandated that from January 1, 2020, the limit for sulfur in fuel oil used on board ships operating outside of designated emission control areas will be reduced to 0.5% m/m (mass by mass). This will significantly reduce the amount of sulfur oxides emanating from ships and should have major health and environmental benefits for the world, particularly for populations living close to ports and coasts.  IMO 2020 also includes a carriage ban, which bars carriers without scrubbers from having heavy fuel oil on board.  View the IMO's Sulfur 2020 FAQ sheet here.  

Emission Control Areas (ECA): While the IMO 2020 regulations will limit sulfur content in marine fuel globally to less than 0.5%, there are actually existing regulations requiring even stricter sulfur rules in protected areas.  Since January 1, 2015, in accordance with Annex VI of the MARPOL Conventions, ship emissions must contain no more than 0.1% sulfur in protected Emission Control Areas including: the Baltic Sea area, the North Sea area, the North American area (covering designated coastal areas off the US and Canada), and the US Caribbean Sea area (around Puerto Rico and the US Virgin Islands).  There are additional areas in Europe and Asia that also require lower sulfur and nitrous oxide emissions. 

Global Emission Control Areas


Image result for emission control areas
Source: ScienceDirect

 

Greenhouse Gas (GHG): Gases that trap heat in the atmosphere are called greenhouse gases. These include carbon dioxide, methane, nitrous oxide, and fluorinated gases.  Each type of gas affects the atmosphere differently depending on 1) how much of it is in the atmosphere, 2) how long it stays in the atmosphere, and 3) how strongly it absorbs energy (stronger = bigger impact).  The EPA has a nice overview of greenhouse gases here, if you're looking for more information.

Sulfur Oxide (SOx): Sulfur oxides are a group of gaseous and particulate air pollutants.  When ship engines burn fuel containing sulfur, they release SOx emissions into the atmosphere, which are toxic to the human respiratory system. Exposure to SOx can cause asthma in children and older adults. Long term exposure can irritate heart disease and has been linked with increased mortality and morbidity.  Sulfur oxides react with other substances in the air to form acid rain, which accelerates the decay of building materials and paints, damages forests and crops, changes the makeup of soil, and makes lakes acidic and unsuitable for fish.  Learn more about SOx here on ScienceDirect

Nitrous Oxide (NOx / N2O): Nitrous oxide is a greenhouse gas that is emitted when fossle fuels are burned.  According to the U.S. EPA, nitrous oxide can stay in the atmosphere for an average of 114 years and the impact of 1 pound of N2O on warming the atmosphere is almost 300 times that of 1 pound of carbon dioxide.  Around 40 percent of total N2O emissions globally come from human activities.

Exhaust Gas Cleaning Systems (EGCS) / Scrubbers: Commonly referred to as "scrubbers," exhaust gas cleaning systems (EGCS) are an abatement technology that removes sulfur oxides from ship's engine and boiler exhaust gasses.  There are 3 main types of EGCS: open-loop, where seawater is used for scrubbing, treated and then discharged back into the sea; closed-loop, where freshwater treated with an alkaline chemical such as caustic soda is used for neutralization and scrubbing, and then re-circulated; and hybrid systems, which can operate in both open- and closed-loop modes.

 

Marine Fuel Terms

There are tons of marine fuel types (and just as many acronyms to go along with them), but without getting too in-the-weeds, let's review the basics and general terminology you'll come across as you learn more about IMO.

Bunker: The term “bunker” has historical origins which date back to the Industrial Revolution. The very first steamships were powered by burning coal, which was stored onboard in a container called a “bunker”.  Over the years, the word “bunker” became synonymous with “fuel” and the term has stuck – So when you see the word “bunker”, think “fuel”.

Bunkering: Bunkering is the supplying of fuel for use by ships, including the logistics of loading fuel and distributing it among available bunker tanks.

Bunker Surcharge / Bunker Adjustment Factor (BAF): A bunker surcharge is a variable fee aligned with the movement oil prices. This fee is typically separate from the base freight rate and traditionally was adjusted quarterly.  However, IMO 2020 will see many carriers updating their bunker surcharges on a monthly basis as a result of volatile market conditions caused by the new fuel regulations. Carriers refer to their bunker surcharges differently, here are the most common acronyms:

  • Bunker Adjustment Factor (BAF)
  • Bunker Charge Mechanism (BRC)
  • ONE Bunker Surcharge (OBS)
  • Marine Fuel Recovery (MFR)

Emergency Bunker Surcharge (EBS): A last-minute fee that occurs when actual market fuel prices are higher than what was originally anticipated by carriers. EBS fees vary according to fuel prices, type of container being moved and the trade lane that the freight is moving in. Carriers may choose to only implement EBS fees on certain lanes, whichever are most affected by the increasing cost of fuel.

 

 

Types of Marine Fuels

Marine fuels used in the shipping industry tend to fall into three classes: Residual (heavy) fuel oils, distillate fuel oils, or intermediate fuel oils — which are blends of residual and distillate fuels.

Residual fuels traditionally used for vessel bunkering are the "bottom of the barrel" of fuels so-to-speak.  IMO 2020 regulations will see a shift in usage away from residual fuel oils towards low-sulfur blended intermediate fuels and lighter, more refined grades. 

Now let's explore each fuel type, and the related terms you'll see throughout IMO 2020 discussions: 

Residual Fuels / Heavy Fuel Oil (HFO): Also called residual marine fuel oil (RMG), residual or heavy fuel oil is what is left over after lighter fuels and hydrocarbons are distilled away in refinery operations. The term "heavy fuel oil" is used to describe fuels that have a particularly high viscosity and density. HFO is one of the most widely used marine fuels and nearly all medium- and low-speed marine diesel engines are designed to run on it. HFO accounts for almost 14% of global sulfur emissions in the atmosphere.

Distillate Fuels:  Distillate fuels are one of the petroleum fractions produced during the distillation of crude oil.  Distillate fuels are lighter in nature and more refined than residual fuels.  Marine gasoil and distillate marine fuel oil are types of distillate fuels.

Marine Gasoil (MGO) / Distillate Marine (DM/DMA/DMZ) Fuel Oil:  MGO is similar to diesel fuel, but has a higher density. Marine gasoil is one of the highest quality (and subsequently most expensive) distillates supplied for marine use and it meets the IMO regulations having sulfur content under 0.1%.  This means that MGO is a type of ultra low-sulfur fuel oil (ULSFO).  When converting from fuel oil to MGO, it must be ensured that the engine technology is compatible, or else mechanical breakdowns and poor engine performance can occur.

Intermediate Fuel Oil (IFO): Blends of residual fuel oil and distillates called intermediate fuel oils are made by oil producers to meet the variety of fuel specifications and quality levels needed throughout the shipping industry.  The most commonly used blends are IFO 380 and IFO 180.

Marine Diesel Oil (MDO/DMB): Marine diesel oil is type of intermediate fuel oil that is a blend of distillates with very low heavy fuel oil content. MDO typically has a lower cetane index than marine gasoil, but a higher density. 

Marine fuels are also classified by their sulfur content

Marine Fuel Max Sulfur Content
High-sulfur fuel oil (HSFO)  3.5% 
Low-sulfur fuel oil (LSFO) 0.5%
Ultra low-sulfur fuel oil (ULSFO) 0.1%

 

High-Sulfur Fuel Oil (HSFO): Marine fuels with a maximum sulfur content around 3.5% are considered high-sulfur fuel oils. 

Low-Sulfur Fuel Oil (LSFO): Heavy fuel oils that have been desulfurized or blended to be above 0.1% sulfur content but meeting the 0.5% limit are referred to as low-sulfur fuel oils. IFO 180 and and IFO 380 are common LSFO options.  Before IMO 2020 goes into effect, the max sulfur content of LSFOs is technically 1.0% but will be limited to 0.5% come January.

Ultra Low-Sulfur Fuel Oil (ULSFO)Very Low-Sulfur Fuel Oil (VLSFO): ULSFO is fuel oil that contains 0.1% or less sulfur.  While ULSFO could be made by heavily desulfurizing HFO, that process can be exorbitantly expensive, so ULSFO usually refers to marine gasoil.

If your thirst for knowledge on marine fuels has yet to be quenched, you can also check out this comprehensive guide covering everything you need to know about marine fuels from the fuel titan, Chevron.   

 

Alternative Fuels

As interest in sustainable shipping grows, so too will interest and investment in environmentally friendly fuels.  Here are some of the major alternative fuels that are being considered for marine use:

Liquefied Natural Gas (LNG): Composed of around 95% methane, LNG is the cleanest fossil fuel. When burned, it doesn't emit soot, dust or fumes and instead turns into water and CO2LNG releases 30-50% less CO2 emissions than other fossil fuels. For transport, it must be cooled to -160°C and moved in thermally insulated tanks. LNG has one of the lowest prices of the marine fuels, but underdeveloped infrastructure means it is not readily available. While global LNG infrastructure is still in its infancy, around 21 million tons per annum (MTPA) of LNG liquefaction capacity is expected to come online in the United States in 2019.

Liquefied Bio Gas (LBG): LBG is another methane-based natural gas fuel, but is produced from biogas derived from organic waste instead of from traditional refinery operations. It is 100% renewable and produces very little CO2 emissions. LBG also needs to be cryogenically frozen for transport.  

Methanol (MeOH): Methanol, a methyl alcohol, can be produced either from reforming natural gas or renewably through synthesizing biomass. Methanol is a clear, water-soluble, biodegradable fluid that is clean-burning and meets the new IMO 2020 emissions standards. It is also easier to handle than LPG and can be stored at ambient temperatures. Only minor modifications are needed for current infrastructure to run on methanol, and the cost of newbuild ships or converting ships to methanol is less expensive than other alternatives. 

Compressed Natural Gas (CNG):  CNG is an alternative to gasoline that is made by compressing natural gas to less than 1% of its volume at standard atmospheric pressure. Just like LNG, CNG is primarily made up of methane and is a safe, clean fuel.  CNG is primarily used for fueling cars, trucks, and busses, and there are approximately 500 public CNG fueling stations in the US.  American interest in this alternative fuel is growing at a rate of 3.7% per year, while globally the rate is much higher at 30.6% per year. 

Hydrogen Fuel Cells (H2): Hydrogen fuel cells are like batteries that convert hydrogen into energy.  Hydrogen used to power the fuel cells can be produced either from natural gas or renewably through electrolysis.  Hydrogen fuel cells are a possible solution for ocean going vessels, however, the technology faces several challenges including space requirements, cost and infrastructure.  Norway is leading the charge in exploring how this technology can be scaled to power passenger and cargo ships. 

Hydrotreated Vegetable Oil (HVO): HVO is a biofuel produced from waste cooking oils, fats, and vegetable oil.  HVO is a renewable biodiesel with dramatically low emissions.  HVO can be used as a direct replacement for traditional diesel with little to no changes to existing engines and infrastructure.  It can also be blended with marine gasoil or used on its own. 

Liquefied Petroleum Gas (LPG): LPG is liquefied propane/butane hydrocarbon gas primarily used for heating appliances, cooling, and some vehicles (autogas). The main market for LPG is feedstock for the chemical industry. LPG is being considered as an alternative to LNG, however LPG emits more CO2 and NOx than LNG and its prices can be even more volatile.  Unfortunately for LPG, most marine engines are not compatible to run LPG without massive investment and the global supply infrastructure is not adequately developed.

Learn more about alternative marine fuels in this scientific article from Elsevier's Biomass and Bioenergy

 

Stay tuned for more IMO 2020 facts

And there you have it, all of the major IMO 2020 terms and acronyms explained in one place!  

Over the next few weeks, we'll be doing a deep dive on IMO 2020 and its impact on the shipping industry, as well as exploring the alternative fuels and new sustainable shipping technologies.

Make sure to subscribe to our Market Updates e-Newsletter so that you don't miss an update!

Did we miss anything?  If there are any other IMO 2020 terms that you're confused about, send me a note at kellie.lynch@worldshipping.com and I'll be happy to add them!

 

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