Version: July 2023
The IMO 2020 regulation was implemented to reduce the sulphur pollution produced by shipping, which was estimated to be 13% of the world’s SOx emissions prior to 2020. SOx emissions, or sulfur oxides emissions, refer to gases that are released into the atmosphere when a substance containing sulfur, such as fossil fuel, is burned.
The IMO mandates a reduction in the sulfur content of ships’ fuel oil from 3.5% to 0.5% starting January 1, 2020. This regulation aims to reduce sulfur emissions and improve air quality. In response to this regulation, the shipping industry has largely adopted Very Low Sulphur Fuel Oil (VLSFO) as a compliant fuel.
IMO 2020 has successfully reduced sulfur emissions from shipping, with a study by NASA showing a significant decline in ship tracks (polluted clouds that trail vessels) in the year following the regulation’s implementation. The VLSFO market size was valued at USD 48.6 billion in 2022 and is anticipated to expand at a CAGR of 19% between 2023 and 2032. The shift towards VLSFO aligns with the industry’s focus on environmental sustainability and has created opportunities for refineries, suppliers, and traders.
Potential for Malaysia
Malaysia has the potential to benefit economically from IMO 2020 and VLSFO. The country’s major ports, such as Port Klang and Tanjung Pelepas, supply about 4 million metric tons of marine fuels to ships. Malaysia’s Transport Minister has reassured shipping lines that sufficient low sulfur fuel oil will be available to meet their demands. With about 5 million metric tons of storage and blending facilities in Westports Bunkering Services in Port Klang, Vitol in Tanjung Bin, and Port of Tanjung Langsat in Johor, Malaysia is well-positioned to meet the growing demand for VLSFO.
Malaysia’s strategic location and well-developed port infrastructure provide trade opportunities in the VLSFO market. Approved ship-to-ship activities in Tanjung Pelepas, Malacca, and Kuala Linggi are expected to supplement any additional demands for LSFO in the shipping industry. Furthermore, Malaysia’s readiness to supply VLSFO can attract more shipping lines to its ports, boosting the country’s maritime trade.
Risks
Global Warming: While IMO 2020 addresses sulfur pollution, it inadvertently contributes to global warming. The reduction of sulfur oxide emissions decreases the volume of sulfate aerosols in the atmosphere, reducing their cooling effect and potentially leading to higher temperatures.
Increase Black Carbon: Black carbon is a type of air pollution that is harmful to both human health and the environment. It is produced from the incomplete combustion of fossil fuels and biomass. The study, conducted by the German research institute WTZ Roßlau, found that these new hybrid fuels with 0.50% sulphur content contained a high proportion of aromatic compounds, ranging from 70% to 95%. This resulted in increased black carbon emissions in a range of 10% to 85% compared to heavy fuel oil (HFO) and in a range of 67% to 145% compared to Distillate Marine Fuel (DMA).
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