Russia could delay local adoption of 0.50% sulphur cap

Russia is considering a delay to the local adoption of the 0.50% sulphur cap to be introduced globally from January 1st 2020.

Energy Minister Alexander Novak said in response to questions sent by Bloomberg that Russia’s energy and transportation ministries were looking to postpone the introduction of a 0.50% cap for vessels operating within the country, and within four other former Soviet republics, until 2024,

The motive appears to be economic rather than one of any problems in supply. Novak said that the new rules would “lead to a sharp hike in the price of fuel for the river fleet and river-sea vessels, which operate mainly in Russia’s territorial waters”, adding that the energy and transportation ministries were looking “to prevent a higher financial pressure on the nation’s shipowners”. He emphasized that Russia would comply with IMO 2020 standards in international waters.

The potential delay would affect the five-member Eurasian Economic Union, which consists of Kazakhstan, Kyrgyzstan, Belarus and Armenia, of which only Russia and Kazakhstan are coastal states.

A spokeswoman for the IMO said she was not aware of the organization receiving any communication on Russia considering a delay in the adoption of the sulphur cap locally. She noted that the enforcement of the regulation was down to signatory countries — of which Russia is one — rather than the IMO itself. There is an audit mechanism under which a non-complying country could be issued with a “corrective action plan,” but punitive measures are not included.

The IMO’s 0.5% sulphur limit applies to all ships, including those on domestic voyages solely within the waters of a signatory country.

Other countries, including Indonesia, have pondered a delay in introducing the cap for local traffic (although it later changed its mind and pledged to follow the 2020 requirements), but Russia is the most significant player so far, not least because it is a significant producer and refiner of crude. A delay in Russia would be indicative of the strain that both shipping and refining industries face in conforming to the new rules.

The nation’s refinery industry “currently does not have the technical expertise and capacities to produce the necessary volumes of low-sulphur fuel oil,” the Russian Association of Marine and River Bunker Suppliers said in an October letter to the Energy Ministry. “As of now, the oil companies practically don’t produce low-sulphur shipping fuel fully-compliant with the new regulations, especially when it comes to viscosity,” it said.

Russia’s second-largest oil producer Lukoil started output of IMO-compliant fuel this month at its Volgograd refinery. Gazprom Neft, the oil unit of natural gas giant Gazprom, anticipates a full conversion to 0.50%-compliant products by 2024. Russia’s largest producer, Rosneft, has said that it hopes to reach full adoption “in the next several years.”