Low Sulphur RegulationLow Sulphur Regulation

September 2014CSG / CBG

“K” Line

Index

• What is “Low Sulphur Fuel”?• Environment – New Sulphur regulations• “ECA” & regulations related to ECA• Impact to our industry

What is “Low Sulphur Fuel”??

Low Sulphur Fuel is…..........Low Sulphur Fuel is…..........““Gas oil” which eliminate Sulphur content Gas oil” which eliminate Sulphur content drastically in petroleum refining process and drastically in petroleum refining process and reduce the effects on the environment.reduce the effects on the environment.

Public opinion for“Low Suphur Fuel usage” is heating up through the entire world during recent years. since Sulphur originate toxic gas, and have negative effects.

New regulation are coming up…New regulation are coming up…

New Sulphur Regulation-1The higher sulphur content, the worse the impact on environment when consume Marine fuel.

Require the rules which aimed to preserve the environment to be complied with ships in the world.

New Sulphur Regulation-2

International regulations for marine transportation were established by International Maritime

Organization (IMO).

IMO established new sulphur regulation to release less Sulphur Oxide(Sox) in ECA in accordance with MARPOL IV.

MARPOL IV & ECA

““MARPOL IV”MARPOL IV”International regulation for the prevention of pollution from ships to minimize pollution of the sea, including dumping, oil and exhaust pollution. ECA(Emission Control Area)ECA(Emission Control Area) Area which severely controled SOx(Sulphur Oxide) emission from ship designated ｂ y MARPOL IV.

Special sea area “ECA” is………

Emission Control Area (ECA)

Source ： NK HP, Wikipedia

In Europe,Baltic Sea and North Sea area

In North America,1.200 nautical miles from coasts of the US and Canada area. 2.US Caribbean Sea area (Region of Puerto Rico and US Virgin Islands )

Establishment of new sulphur regulation

aa 3.5%

MARPOL Annex Ⅵ (Sulfur Oxides (SOx) Regulation)

Sulfur Limit In the following sea areas, vessels are required to use the fuel which are specifiedthe maximum sulfur content.

1st Jan. 2012

1st Jan. 2020 or 2025* Depending on the outcome of a review, to be concluded in 2018.

4.5% 3.5% 0.5%

1.5% 1.0% 0.1%

4.5%

4.5%

3.5%

3.5%

1.0% 0.1%

1.0% 0.1%

Outside an ECA established to limit SOx and PM emissions( ECA : Emission Control Areas )

Inside an ECA established to limit SOx and PM( Baltic Sea and North Sea area )

Inside an ECA established to limit SOx, NOx and PM( 200 nautical miles from coasts of the North American and Canada area )

Inside an ECA established to limit SOx, NOx and PM( United States Caribbean Sea area )

PresentLimit

1st July. 2010

1st Aug. 2012

1st Jan. 2014

1st Jan. 2015

Establishment of new sulphur regulation

aa 3.5%

MARPOL Annex Ⅵ (Sulfur Oxides (SOx) Regulation)

Sulfur Limit In the following sea areas, vessels are required to use the fuel which are specifiedthe maximum sulfur content.

1st Jan. 2012

1st Jan. 2020 or 2025* Depending on the outcome of a review, to be concluded in 2018.

4.5% 3.5% 0.5%

1.5% 1.0% 0.1%

4.5%

4.5%

3.5%

3.5%

1.0% 0.1%

1.0% 0.1%

Outside an ECA established to limit SOx and PM emissions( ECA : Emission Control Areas )

Inside an ECA established to limit SOx and PM( Baltic Sea and North Sea area )

Inside an ECA established to limit SOx, NOx and PM( 200 nautical miles from coasts of the North American and Canada area )

Inside an ECA established to limit SOx, NOx and PM( United States Caribbean Sea area )

PresentLimit

1st July. 2010

1st Aug. 2012

1st Jan. 2014

1st Jan. 2015

- From 1st Jan. 2015 new regulation come into force in the Emission Control Areas (ECA).- Ships must use fuel with maximum allowed Sulphur content of 0.1% in the ECA.

Fuel segment

LSDO/GO Sulphur content of under 0.1%LSFO Sulphur content of 0.1% under 1% HSFO → Sulphur content of 1% under 3.5%

LSDO/GO have to be used from 1st/Jan 2015 in ECA

DO(Diesel oil) is composed of the same material as Gas(Oil).DO(Diesel oil) is composed of the same material as Gas(Oil).AppellationGeneral GO DOISO DMX or DMA DMBJIS 軽油 A重油

Inspection for LSDO/GO Proper Usage

EPA(Environmental Protection Bureau) check Fuel sampling or fuel order statement or log data in this vessel So no way to escape from the rule !

If off-spec fuel is used...... We will be penalized and/or port calling will be rejected

Fuel Cost Increase !!

LSDO/GO (sulphur contents under 0/1%) is much more expensive than other fuel

““K” Line face huge increase of operating cost!K” Line face huge increase of operating cost!

More additional cost…When vessels are built in the past, they were not designed to accommodate such LSDO/GO

To meet new regulation, “K”Line (and all To meet new regulation, “K”Line (and all shipping lines) have to modify fuel tank of our shipping lines) have to modify fuel tank of our vessels vessels

Conclusion – “Necessity of new surcharge”

• In order to meet the requirement to protect our environment, we have to seek customer’s understanding on how shipping lines have to face huge additional cost

• New surcharge to cope with such challenging additional cost is inevitable

• “K”Line will release announcement soon.