IRISL Struggling to Comply With IMO’s Low-Sulphur Regulations

EghtesadOnline: Iran's shipping fleet requires at least 40,000 tons of low-sulphur fuels per month to comply with the International Maritime Organization’s new regulations demanding a 0.5% global sulphur cap for marine fuels, managing director of the Islamic Republic of Iran Shipping Lines (IRISL) said.

News ID: ۷۴۹۷۴۹

19 February 2020

“The National Iranian Oil Company has met 75% of the IMO’s demand in the past two months,” Mohammad Reza Modarres Khiabani was quoted as saying by IRNA.

To fulfill the rest (10,000 tons), IRISL has resorted to alternatives, one of which is blending mazut with low-sulphur diesel that is economically open to question, Financial Tribune reported.

From January 1 the IMO’s low sulphur regulation came into effect. All sea-going vessels worldwide have to comply and reduce their sulphur emissions by 85%.

Under the new global guidelines, ships are obliged to use marine fuel with a sulphur content of no more than 0.5% against the current limit of 3.5% to reduce sulphur oxide pollution, particularly for populations living near coastal regions.

Shazand Refinery in Arak, Markazi Province, is the only company that is producing the low-sulphur petroleum product.

“Transferring this fuel from Arak to the southern ports, namely Hormozgan Province's Shahid Rajaee Port (1,300 km away) has imposed extra cost on IRISL,” he noted, stressing that if the fuel is produced in refineries in the south additional costs will be avoided.

According to Yahya Ziaee, secretary general of Iranian Shipowners' Association, 70% of basic goods such as rice, corn and oil seeds are imported by sea and the government’s wrong policies (not producing the fuel in southern refineries) are piling pressure on shipping companies that will definitely push up inflation rates.

Financial Pressure

“If shipping companies are forced to buy fuel from foreign firms, carrying goods to the country will apparently cost more and end users will have to foot the bill,” Ziaee said.

Moreover, foreign ships too will avoid Iranian ports simply because they will not be able to buy the IMO-mandated low sulphur fuel.

Regarding rumors on social media about NIOC’s decision to offer low-sulphur fuel on Iran Energy Exchange (IRENEX), he said so long as demand outweighs supply that would be a wrong decision.

In related news, Mohammad Rastad, head of the Ports and Maritime Organization of Iran, said Shazand Refinery cannot meet the new demand of Iran's shipping flee alone and Nouri Petrochemical Company in southern Bushehr Province will start producing low-sulphur fuel from next month.

Machinery and equipment in the plant are being upgraded to cut current sulphur levels in mazut and diesel from 3.5% to 0.5%.

The company has invested $120 million to build a (heavy end) refinery in which sulfur in mazut and diesel will be reduced to less than 0.5%.

IRISL owns 46 vessels and four chartered ships, with 96,383 TEU (20-foot equivalent unit) and 58,032 TEU capacity, respectively. Its share of the global shipping market is a meager 0.7%.

The company’s global ranking, based on freight handling capacity, improved from 23rd in fiscal 2015-16 to 13th last year (2018-19).