The IMO 2020 bunker regulation is designed to reduce GHG (Green House Gas) emissions from commercial shipping lines, which account for nearly 90% of sulphur oxide and dioxide emissions internationally. The regulation reduces the sulphur cap for maritime fuel from 3.5% to 0.5%, effective January 1, 2020. With full compliance, this regulation will reduce global maritime shipping emissions by 80%.

Though the regulations are an important step towards reducing environmental and health concerns such as acid rain, crop failures, and respiratory illnesses, the new cap on sulphur emissions is murking up the water for the global shipping community.

IMO 2020 is the most drastic fuel regulation change the maritime industry has undergone, impacting nearly every aspect of the maritime supply chain. So, what effect will this have on the buyers and sellers of marine freight?

In order to comply with these new regulations, vessel owners and operators must either:

  1. Invest in scrubber systems to reduce emissions while continuing to burn High Sulphur Fuel Oil (HSFO)
  2. Switch to burning more expensive Low Sulphur Fuel Oil (LSFO, or VLSFO)

Regardless of consumption strategy, all parties responsible for operating sea voyages will inevitably face myriad operational challenges, each with substantial financial and risk implications. In order to lower costs and mitigate risk, industry participants must efficiently track and optimize business decisions in pursuit of compliance.

Looking for more information on the regulation? Download Veson’s IMO 2020 Infographic.

To help navigate this change, Veson has identified three core tenets to optimize IMO 2020 compliance: planning, execution, and results.

1. Planning

Strategic planning is a key part of successfully navigating IMO 2020, as well as other regulatory and market changes that may arise in the future. The accommodation of new regulatory requirements into voyage planning requires enhanced visibility into vessel, port, and fuel zone data in order to properly manage consumption to meet compliance while maintaining your bottom line.

In order to fix the most cost-effective business in an IMO 2020 world, charterers need to make side-by-side comparisons of varying voyage estimates in real time, with the ability to track and project bunker consumption berth to berth for both non-scrubber and scrubber fitted vessels. In order to do this, charterers must also have visibility into the varying requirements within different ECA zones and ports, as this will determine the most cost-effective voyage route as well as what type(s) of fuel can be burned while traveling through various regions. Stricter regulatory requirements will result in the need for more granular tracking of ROBs per tank in order to plan when and where to refuel during the voyage.

As new kinds of low-sulphur fuel grades enter the market, charterers will likely have to accommodate multiple fuel types and grades simultaneously, creating more complexity around bunker management. Factors such as compatibility, viscosity, and sulphur content among different fuel grades determine whether fuels can be mixed, or if tank cleaning is required when switching between fuels. Though it remains to be seen how the development of more sustainable fuel grades will affect the industry, all parties involved in the operation of voyages will need to integrate and automate workflows in order to effectively track consumption and reduce costs.

2. Execution

Efficiently tracking and monitoring bunker consumption while executing a voyage is a top concern for ship operators as the regulatory landscape continues to change. Operators need visibility into their inventory, costs, vessel performance, scrubber utilization, and overall P&L in order to execute voyages in a compliant and cost-effective manner. Access to real-time data both pre- and post-fixture provides operators with this visibility.

As changes arise, operators need to analyze the options available, determine the best option, and account for the change(s) in financials and reporting. The ability to track all elements of the actualized voyage in one place and in real time is crucial for operators to make swift and strategic decisions that preserve profit margins.

3. Results

Given IMO 2020’s cost and risk implications, it is crucial for industry participants to meticulously track financials and analyze how bunker expenses effect P&L. However, siloed accounting processes present risks of their own, such as data entry errors, extensive effort and overhead for period close, and wasted time spent making duplicate entries. Industry participants need the ability to automatically pull data from pre- and post-fixture activities as well as digitally integrate with third party accounting systems in order to be efficient. Furthermore, if charterers and operators can automatically evaluate the opportunity costs of different voyage estimates and bunker management options to see how these decisions effect the bottom line, they are empowered to make more proactive and profitable decisions.

Capturing bunker consumption data over time allows industry participants to perform historical analysis on trends such as fuel costs over time, total or average bunker costs by vessel type, fuel types per tank, total fuel types on board over time, and more. Visualizing this historical data and benchmarking performance over time yields insights that drive better informed, more strategic decision making going forward.

Fueling a Competitive Advantage

While regulations are often seen as burdens that shake up the industry, they also offer an opportunity to pinpoint new needs and new footholds in the market to establish a competitive advantage. Without the proper tools to capture and analyze data derived from IMO 2020, there is a high risk of missed market opportunities and operational inefficiencies.

In the face of change, those who are proactive can adapt and thrive, while those who are reactive tend to fall behind. Utilizing technology to integrate and automate all maritime workflows, from chartering to operations and through to financials, and even connecting to external systems, creates one center of data to ensure profitable decision making.

A Digital Solution for IMO 2020

Market-leading maritime organizations have recognized the need for innovative technology to address these challenges and rely on Veson Nautical’s Veson IMOS Platform (VIP) to reach compliance with minimal overhead.

While IMO 2020 is one of the most disruptive regulations, this is not the first time that the regulatory landscape in the maritime industry has altered its course. Historically, Veson Nautical has prioritized providing proactive digital solutions to the maritime industry that solve the most pressing problems in the market. With IMO 2020 simply being the most recent change, the Veson IMOS Platform (VIP) is already well equipped to navigate regulatory compliance as an industry-driven solution that considers diverse needs and real-life applications.

VIP users can define multiple vessel fuel types and grades, track ROBs by tank, view bunker requirements for all ECA zones and ports, and instantly see how bunker consumption is affecting P&L. In addition, Veson Nautical has released new tools to manage scrubber usage and deliver instant notifications about changing scrubber requirements by geographic location.

The full IMO 2020 Solution provides comprehensive consumption management options for both non-scrubber and scrubber-fitted vessels. The solution is easy to use, with no re-training on tools or workflows required for current VIP users.

Preparing for IMO 2020 and beyond can appear daunting, however, Veson IMOS Platform turns this time of change into an opportunity to gain a competitive advantage through operational efficiency.

Learn more about how Veson’s digital solution enables industry participants to reach compliance with minimal overhead by watching a recording of our webinar, A Digital Solution for IMO 2020.