Lack of low sulphur bunker to halt coastal shipping operations on east coast

Coastal shipping operations along India’s eastern coast will come to a halt this week due to lack of availability of low sulphur fuel oil- which ships are mandated to use as per a new global rule that came into force from January 1 to cut emissions.

The new rule means that the global limit for sulphur in fuel oil used on board ships has been reduced to 0.5 per cent m/m (mass by mass) from the earlier 3.5 per cent.

Ship fuel or bunkers account for as much as 40 per cent of the operating cost of a vessel.

The looming crisis was discussed at a meeting called by the Government with ship owners, PSU oil refiners and the Director General of shipping on January 9.

Bunker suppliers say that east coast require about 30,000 tons of low sulphur fuel oil a month to meet the requirement of coastal ships plying on local routes. The situation on the West coast is relatively better due to the availability of the fuel in Kandla and Cochin for most coastal ships.

Ships plying in international waters are not affected by the fuel scarcity because they can lift bunkers in Singapore, Colombo or from the Gulf region during stop overs.

Reason for the crises

Oil refiners have been blamed for starting production of low sulphur fuel oil late.

A bunker supplier said: “They should have been ready with the product in adequate quantities by December 1 to meet the demand. The first lot of the product were sold by refiners such as Indian Oil Corporation and Hindustan Petroleum Corporation in the open market and then when the DG Shipping pushed them to supply to coastal ships, they made some priority rules that gave first preference to supply to ships they have chartered to transport their own crude and petroleum products, followed by coastal vessels/Indian flag ships and then to other vessels. This prioritisation should have been done prior to start of sales.”

He said, east coast does not have the volumes to accommodate the bunker requirements of all coastal ships. “The refiners are only catering to their own use vessels. So, there is not much of product they can allot to coastal ships on the East coast,” he said.

“Whatever they produced is finished and virtually there is no supply and they want us to operate vessels. I don’t know how,” the shipping company executive said.

The not-so-workable option

During the January 9 meeting, the Government advised ship operators to use diesel oil till the situation improved. But, ship owners say that this was not a workable and sustainable option.

“That is not a workable and sustainable solution because diesel oil is costing 87,000 a ton today. At least, we know we will not be using diesel oil and as soon as we exhaust our low sulphur fuel oil stock, we have no option other than to stop operating ships,” the shipping company executive mentioned earlier said.

“Each coastal vessel typically consumes as much as 25 tons of bunker a day. Already from normal fuel oil, which was costing 30,000 a ton, we had to move to low sulphur fuel oil priced at 55,000 a ton and that also is not available and now they want us to use 87,000 a ton diesel oil,” the executive said.

That aside, there are technical issues related to use of diesel oil on the ships’ engine.

A stoppage of operations will also hit India’s efforts to promote container transhipment business from Indian ports.

Once, exporters and importers realise that lack of low sulphur fuel oil on the east coast will hamper feeder shipping services, they will again shift back to Colombo and Singapore for their transhipment needs.

“Then, it will be very difficult to bring them back to India. After all the effort we have made to bring them here, we are going to lose transhipment business again to foreign ports,” the executive added.