LAST week's Singapore International Bunkering Conference and Exhibition (SIBCON) covered many aspects of the marine fuel business, but in reality, only one big issue dominated the two days. That issue was, of course, the impending global 0.5 per cent cap on sulphur in fuel.
Some speakers tried hard to switch the focus to reducing the industry's carbon footprint, but for most ship operators, the priority was and will remain this: How to cope with the impending major regulatory change.
So did the many high-level speakers at the conference give us a better idea of what is going to happen come January 2020?
Well, yes they did. Probably nobody came away thinking they had all the answers, but overall, a fairly consistent view of view what is going to happen emerged, and it is that there will be a significant price to pay.
From recent statements, this seems to be a bit a surprise to some within the shipper community, but the best guess appears to be that, on average, the cost of container shipping will increase by US$160 per TEU (20-foot equivalent unit). This additional cost will be incurred quite soon, and it will not, of course, be possible to change from heavy fuel oils (HFO) to compliant fuels at the stroke of midnight on Dec 31, 2019.
The transition could take months, except for ships that have had scrubbers fitted and will be able to continue to use HFO. For the rest, it will be case of trying to ensure that all HFO is used up ahead of the deadline and tanks are cleaned out to avoid contamination.
The options available to ship operators are now well known, but it is significant that choices will be available, which just two or three years ago had seemed impossible.
Very low sulphur fuel oil (VLSFO) will be on offer to operators at prices higher than standard residual HFO, but lower than the prices for distillates such as marine gas oil (MGO). All oil majors have been working on VLSFOs; Shell released a list of available compliant fuels at last week's conference.
Lower-priced VLSFO could be a mixed blessing for the industry. It makes life more complicated. Ship-owners are already worrying about compatibility issues arising if VLSFOs are lifted from different sources.
Experts in demand
When life gets complicated, experts tend to be in demand. Among the industry gurus at SIBCON was Adrian Tolson, a bunker industry veteran and now senior partner at maritime consultancy 20|20 Marine Energy. In a statement released just before the conference, he predicted that as margins continue to dwindle, suppliers need to look ahead - not only to a post-2020 world, but also beyond, as the industry's fuel requirements to deliver sulphur compliance converges with regulatory pressure and targets to reduce greenhouse gases from shipping.
He also asserted that suppliers need to "utilise developments in technology and access to data and intelligence to create sophisticated, and relevant models for the future marine energy supply chain".
He pushed the point by urging physical suppliers to break away from the traditional model of solely delivering huge quantities of commodity in traditional large bunkering hubs and making small margins as way of staying in business and making a living. This is a negative downward spiral that will lead to insolvency, he said.
Even the current trend of looking for niche higher-margin markets will be challenged, and are not solutions to even medium-term sustainability.
Any windfall profits for physical suppliers post 2020 will be short-lived, with the main beneficiaries being the large commodity players, which will lead to a quick return to declining margins.
They must understand that the marine-energy supply chain is fundamentally transforming, and they need to not just stay ahead of the curve, but also show leadership by driving it, as opportunities can be had for those who "lift their heads and be visionary".
So should physical suppliers suddenly turn into marine-fuel consultants?
Mr Tolson believes so.
"There is a real opportunity for the creation of a future fuels company that combines a strategic consultancy offering with a physical supply of products to meet 2020 sulphur-compliance needs, underpinned by investment in new sources of clean energy that deliver against the shipping industry's future sustainability challenges.
And on top of this, they need to understand and identify technology and other advanced solutions such as blockchain - already in the market - which can be integrated into the energy-supply and procurement process to improve efficiencies and ensure transparency and ethical practices.
Ultimately, fuel suppliers have an important role to play, but they need to be bold and adapt now, and implement the obvious changes to business models that are required.
But I wonder: Can most physical suppliers really make those sorts of changes in mindset?
Companies that really know what they are doing and can deliver bunkers safely and efficiently are still going to be needed. And, one way or another, the shipping industry will still have to pay somebody to undertake the increasingly technically complicated business of actually putting fuel into a ship. Doing that after Jan 1, 2020 with a plethora of incompatible fuels to deliver is likely to be a sufficient challenge.