ECA ComplianceThe facts, the options, the solutions

IBIA Annual Convention, Hamburg 2014

“Transforming shipping and bunkering through intelligent fuel management systems”

Alok SHARMA

Agenda

Context:Known and unknown

What to expect on Fuel Quality when the regulations change?

What is the planned enforcement regime in US and EU?

What does “Continuous Compliance”mean?

Key elements of good compliance Management solution

The landscape has been and will change significantly in future

ENVIRONMENTAL REGULATIONS

HIGH CRUDE PRICES

HIGH BUNKERPRICES

NEW LOW SULPHUR FUELS

MORE INVESTMENTS(Buyers and Suppliers)

LOW DEMANDSLOW STEAMING

SWITCH TODISTILLATES

IMPROVED INDUSTRY IMAGE

CLEAN ENVIRONMENT

Emissions Regulations on the horizon

2015 2016 2018 2020 2025

0.1% ECA

Sulphur Limit

EEDIPhase 1

Nox tier IIIfor newbuilds

EU CO2 MRV

Additional ECAS Established

OperationalRequirements

On Co2

Global CO2 MRV

EEDI Phase 2

0.5% EU Sulphur Cap

All EU Waters: EEZ (200NM)

0.5% global sulphur cap

(2020/2025)*Date 180 pending review

by end 2018 latest

EEDI phase 3

BC and VOCregulation

RegulatoryUnknowns

The timetable for thedevelopment of Nox/Sox regs

New ECA’s – Japan,Hong Kong, Mediterranean,Singapore, New Zealand ??

In port regulations –particularly US

Enforcement Regimes and Penalties

- US EPA (FONARs)

Regulations for use ofLNG as bunkers

CO2 Regulations(Greenhouse Gas emissions)

ECA Compliance key factors

Emission Control Regulations

ContinuousCompliance

Enforcement

Variable fuelquality

Change in Regulation has a direct impact on fuel quality

Legislative change has a knock on effecton quality of product available.

Data shows a direct correlationbetween legislative change and increasednumber of off spec fuels.

Issues usually witnessed immediatelybefore, during & after a significantlegislative change.

01

02

03

Impact of Regulation on Quality of Fuel

ECA Compliancekey factors

Emission Control Regulations

ContinuousCompliance

Enforcement

Variable fuelquality

• 1.00% until December 2014 and 0.10% as from January 2015 for SECAs

• 3,50% as of June 2014 and 0,50% as of January 2020

• 0,10% sulphur content for ships at berth and 1,50% for passenger ships on

• regular service (maintained outside SECAs) including cruise ships

• strengthening of monitoring of compliance and enforcement to reach environmental objectives while preserving shipping market sustainability

• Member States should notify the provisions on penalties to the Commission

Directive 2012/33/EC adopted in Nov. 2012, transposed by Member

States 18 June 2014

Emphasis on Implementation by MS through binding guidelines

(Implementing Acts to be adopted by the end of 2014) –

EU Policy Framework

Consequences of infractions

What are the legal consequences of non- compliance by ships being considered

• Administrative fines: 15 Member States

• Criminal penalties: 8 Member States

• Ship Detention: 15 Member States

• Denial of entry to ports: 4 Member States

EU Member states are discussing

level of penalties

US Enforcement isbeginning to lead the way

US EPA steps up ECA enforcement efforts

Focus to date been on checking the

relevant documentation, such As

the bunker delivery note and the

ship’s log of fuel changeover

Timing and procedures.

Taking fuel samples from ships to

test for compliance with the

relevant sulphur

The EPA has also been

experimenting with flyovers, whereby

a plane files through a ship’s plume

and measures the sulphur dioxide

(SO2) to carbon dioxide (CO2) ratio

to calculate the fuel sulphur content

Ship detention is ‘aneffective Sanction’6th October 2014 13:17 GMT

How complianceis checked today?

By inspectors: Documentation, Statutory Samples and ad hoc on board Sampling and Analysis, or continuous monitoring data for ships using EAMs

By the Commission: yearly, based on Reporting by MSs each 30 June

And after1/1/2015?

By inspectors: Additional Criteria -mandatory frequency for on board sampling fixed by the EU harmonisedtargeting and monitoring tool (in progress)

By the Commission: Electronic Reporting by MSs can be virtually checked real-time, more exchange of information MS

EU : Electronic reporting requirements are to be expected

MonitoringPlan

BunkerDelivery Note

TankSounding

FlowMeters

EmissionMeasurement

AnnualEmissionReport

Verification

CentralDatabase

In EU: MRV approach relies on monitoring vessels trading to/from EU

The European Commission's Proposal for Monitoring,Reporting and Verification (MRV) of CO2 Emissions from Ships

ECA Compliance– key factors

Emission Control Regulations

ContinuousCompliance

Enforcement

Variable fuelquality

ProcurementDrivers

Demand

Projection

Buying

Strategy

Supplier

Management

Hedging

Ship

Performance

Buyer

Performance(Benchmarks)

KeyProcurement

Drivers

Compliance

Vessel

Bunker Department

Fleet Management

TechnicalDepartment

Finance

INTERNAL

EXTERNAL

SURVEYORS

A lot of moving parts in the processwhich is fine when things go smooth

MKT PRICEPROVIDERS

SHIP AGENTS

LABORATORIES

SUPPLIERS/TRADERS/BROKERS

RegulationDepartment

REGULATOR

Continuous compliance monitoring mechanism should have three pillars

ACCURACY ENFORCEABILITY TRANSPARENCY

The data collectedshould reflect asclosely as possiblethe real emissionsof the ship.

Practical and robustenforcement can onlybe guaranteed if emissions data iseasy to collect, survey and verify.

The procedure for data verification should be simple and rapid.

Transparency would lead to better decisions and could possibly improveenergy efficiency

Port State Control activity

Source : Practical Options for Emissions monitoring Transport Environment, 2014

TRACK ALERT CONTROL

Vessel entry, exit ,and ECA steaming

Auto log switchoverpositions

Auto record of ECAFuel BDN and Labs

Statutory Reporting(TBC)

Store SEEMP’s ,BDN and other docs

Ensure that ship andshore are alerted onevery change in statusof ECA Fuel

Allow Vessel/ Voyage/Region specific“safe zones” to allowfor difference in switchover

Ensure that companyprocedures are followed

Log ECA fuelconsumptions andmeasure againstbaseline

Ensure ECA cost isbuilt into YieldCalculations and BAF

Calculate Voyage“Compliance Cost”to highlight CSR

Continuous Compliance – salient points

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