Mind the Cap
Mind the Cap: How to avoid future fuel risk – is your definitive guide to the legal and insurance implications of the International Maritime Organization’s global sulphur cap (IMO 2020) and who is liable for ensuring compliance.
This report addresses some of the ‘big unknowns’ surrounding the move to low sulphur fuels: such as enforcement, policing and punishment; insured and non-insured risk; and who will bear responsibility in terms of non-compliance.
- Risk element – who is to blame for IMO 2020 non-compliance and what are the consequences?
- Non-compliance and insurance cover – as well as incurring heavy fines, non-compliant vessels risk being declared unseaworthy and losing insurance cover outright, how can this be avoided?
- Lloyd’s List Intelligence fuel forecasts – which IMO 2020 solution is most economically viable given a range of long term fuel price scenarios?
- Scenario modelling – what would happen if US President Donald Trump undermines IMO 2020 through a mandate of non-enforcement, and rolls back the North American Emission Control Areas (ECAs) established in 2010?
- Timeline: ‘D Day’ – if ship operators do not have an IMO 2020 compliance plan in place by January 2019, they will likely be too late. What should be done by when?
The risk of future fuels and IMO 2020 non-compliance
Chapter 1. Legal risk: Avoiding disputes
1.1 BIMCO Compliance clause
1.2 BIMCO Transition clause
1.3 BIMCO Scrubber clause
1.4 BIMCO Bunkering clauses
1.5 Fuel contamination
1.6 Market-led contract changes
1.7 Compliance enforcement
1.8 Documenting compliance
Chapter 2. Insurance risk: Who is to blame for non-compliance?
2.1 Regulatory position from 2020
2.2 Penalties for breaching the cap
2.3 Hull cover
2.4 Non-availability of Low Sulphur Fuel Oil
2.5 Bunker claims
Case study 1: The risk of cat fines
Case study 2: The risk of abatement technology
Chapter 3. D-Day: Enforcement regimes
3.1 The UNCLOS solution
3.2 The importance of words and definitions
3.3 A tighter global inspection regime
3.4 Enforcement regimes
3.5 Enforcement: learning from experience
3.6 Compliant and Responsible bunkering
Chapter 4. The pushback: Consequences of delay
4.1 Availability and enforcement
4.2 Compliant fuel safety
4.3 China jumps ahead of the world
Chapter 5. The other ‘D’ Day: January 1, 2019
5.1 Scrubber window closes
5.2 Low sulphur fuel option
5.3 Fuel price volatility
5.4 Buy compliant fuel now
5.5 Ship implementation plans
5.6 Deliberate non-compliance
Timeline: compliance on 1 January 2020
Chapter 6. Cost of compliance: Mitigating the impact of fuel price volatility
6.1 Price spreads
6.2 Refiners to profit
6.3 Upstream to suffer
Chapter 7. Supply side: Delivering on the Future Fuels promise
7.1 Fuel uncertainty 7.2 Heavy fuel oil availability
7.3 Alternative fuel availability
Chapter 8. Lloyd’s List Intelligence fuel forecasts
8.2 Scenario modelling – Reference oil price
8.3 Scenario modelling – Low oil price
8.4 Scenario modelling – Reference oil price
Chapter 9. Scenario modelling: The ‘Trump effect’
9.1 Shipping on a collision course
9.2 Competition for fuel
9.3 End of the North American Emission Control Area?
Research documents, including Lloyd’s List archive
Managing editor: Helen Kelly
Authors: Richard Clayton, Craig Eason, Mark Fuechec, David Osler, Eric Watkins, Rodrigo Amaral and Anastassios Adamopoulos
Research: Anna Mittler
Design: Kapusniak Design