As more sustainable marine fuels enter the markets, buyers will need an even broader range of information than ever for purchasing decisions, said Sandi Ennor, president and chief executive officer of marine fuel brokerage Transparensea.
Information beyond price — like guarantees on fuel specifications, origin, physical availability and sustainability credentials — are becoming even more important, Ennor told Argus.
These added levels of responsibility for fuel purchasers may come as quite a surprise to some, given that many do not even view fuel as a strategic issue despite it being shipping companies' largest operating expense. But given the operational and reputational risks shippers face, Ennor said it makes sense for them to scrutinize the processes around how their fuels go to market and ensure they are getting the full and accurate picture.
Volumes of these new fuels will initially be very small and more expensive, but most buyers are unaware of the margin traders are making in reselling the fuels, which will likely include several middlemen within the process. "Current practices are the equivalent of using a credit card and not knowing what the APR fees are, but on a much larger scale," Ennor said.
Logistics will also be a larger concern with renewable marine fuels. If a supplier claims to have biofuels available in a certain port, customers need to understand whether that is purely on paper or if the fuel will actually be there — with the right volume and specification, she said.
The responsibility will also be on the fuel buyers to ensure that the emission reductions delivered will meet regulatory requirements, and that the origin or composition of the fuel does not compromise any other sustainability commitments within the customer or charterers' supply chains.
The industry should also acknowledge that environmental targets are likely to be met through "imperfect" tactics such as blending fuel and offsetting emissions, she said.
The expansion of the EU emission trading system (ETS) to shipping is likely to stimulate demand for low-carbon transition fuels like biofuels and bio-LNG for ships traveling to and from Europe via the US. Despite the shipping volumes coming through locations such as the Gulf of Mexico, New York and Houston, as well as independent initiatives to reduce port emissions, the US' national renewables rules do not include the maritime markets.
Most incentives are still restricted to California and even these could be argued to be insufficient to meet the scale of the challenge. Continuing with this fragmented, state-by-state approach could cause a shift in shipping hubs, Ennor said.
