In a recent Risk Alert, Gilmark D’Mello outlined best practices across the Marine Bunker Value Chain, aimed at preventing operational issues and disputes.
The selection of marine fuel is influenced by both commercial and regulatory considerations, requiring vessels to carry multiple fuel grades, balancing costs with compliance.
While Heavy Fuel Oil (HFO) and Marine Diesel Oil (MDO) have traditionally formed the marine fuel mix, additional fuel grades have been introduced owing to the emission regulations implemented in the past two decades.
The advent of Emission Control Areas (ECAs) required 0.1% sulphur fuels, introducing Low Sulphur Marine Gas Oil (LSMGO) and Ultra Low Sulphur Fuel Oil (ULSFO), while the IMO 2020 Global Sulphur Cap limited the sulphur content to 0.5% introducing Very Low Sulphur Fuel Oil (VLSFO), except for vessels installed with scrubbers.
In May 2024, the latest version of the fuel quality standard ISO 8217:2024 expanded the categorisation of fuels, effectively creating distinct categories for residual fuels based on the sulphur limits, and including biofuel blends for both distillate and residual marine fuels.
The Marine Bunker Value Chain involves multiple stakeholders with competing interests, where lapses in diligence can quickly lead to operational disruption and contractual disputes.
Ensuring diligence and adhering to industry best practices at each of these stages is crucial in avoiding disputes between stakeholders.
The ISO 8217:2024 intends to address the shift in the marine fuel landscape, moving away from fuels sourced exclusively from traditional oil products derived from the processing of petroleum crude, towards fuels derived from synthetic and renewable feedstocks, as well as recycled and alternative sources.
The ISO 8217:2024 categorises fuel grades into four tables:
- Table 1 – Distillate and bio-distillate marine fuels (DM / DF grades)
- Table 2 – Residual marine fuels ≤ 0.50% sulphur (VLSFO / ULSFO)
- Table 3 – Bio-residual marine fuels (RF grades)
- Table 4 – Residual marine fuels > 0.50% sulphur (HSFO)
By streamlined categorisation of fuel grades and inclusion of clauses 5 to 10 in the tables, ISO 8217:2024 has strengthened the quality assurance of marine fuels, and it is therefore strongly advised to include the latest standard in Bunker Purchase Agreements and Charter Party Clauses.
The activities from the moment the need to supply bunkers arises until the fuel is consumed make up the Marine Bunker Value Chain, comprising of four key stages – Bunker Procurement, Bunkering, Fuel Analysis and Fuel Management.
The marine bunker value chain involves multiple stakeholders with competing interests, where lapses in diligence can quickly lead to operational disruption and contractual disputes.
Ensuring diligence and adhering to industry best practices at each of these stages is crucial in avoiding disputes between the stakeholders
1. Bunker Procurement
Bunkers are procured either as a one-off spot purchase agreement through a Bunker Confirmation Note or through a long-term supply contract concluded as a Bunker Supply Agreement. In a time charter, the Charterer is expected to procure fuel to the specification agreed within the Charter Party, in a quantity mutually agreed with the vessel and considering all relevant factors pertaining to the intended voyage.
The factors taken into consideration in determining the fuel specification and quantity for a voyage could typically include:
- Fuel required to safely perform the voyage
- Regulatory requirements
- Maximising cargo uplift
- Fuel availability and cost
Recommendations:
- Implement a robust fuel procurement protocol incorporating risk metrics in supplier selection.
- Ensure that the fuel specification and quality analysis agreed in the fuel procurement contract align with the terms in the Charter Party
2. Bunkering
Bunkering is performed through Ship-to-Ship, Truck-to-Ship, or Shore-to-Ship transfers. It is often the case that 3rd party physical suppliers are entrusted with the task of the ‘last mile’ delivery of the nominated fuel to the vessel, which introduces additional layers of competing interests within the bunker supply chain.
These competing interests can manifest in various forms, notably in disputes related to timely fuel delivery, as well as over the quantity and quality of the supplied fuel. These issues have the potential to escalate into costly claims, underscoring the importance of clear procedures and robust documentation around the bunkering operation.
The Safety Management System (SMS) should have procedures covering the following key aspects to ensure the safe receipt of the nominated bunker stem: Bunker Planning, Grade Verification, Quantity Verification and Fuel Sampling.
3. Quality Validation
Bunkers are contractually procured and supplied with ISO 8217 as the acceptance criteria for fuel quality. This ensures that the fuel delivered meets internationally recognised specifications and regulatory requirements, providing a benchmark for quality assurance in marine fuel procurement.
However, in recent years, chemical contaminants have been found in marine fuels, prompting the need for enhanced testing through pre-burn screening of fuels. It is pertinent to note that the supplied fuel must comply with all the clauses of ISO 8217, not merely the relevant table parameters.
Clause 5 of ISO 8217 requires the supplied fuel to be homogeneous and conform to limits set out in the relevant tables, and for it to be free of any materials, including added substances and chemical species, which could be harmful to personnel or adversely affect the safety and/or performance of the vessel.
If the fuel meets the ISO 8217 parameter limits, the presence of chemical contaminants by themselves cannot establish that the fuel is not compliant vis-à-vis Clause 5. While Clause 5 provides a wide safety net, invoking it requires machinery damage to have occurred, and establishing that the fuel was causative to the damage.
4. Fuel Management
A proactive approach, adhering to industry best practices in managing fuel storage, transfers, conditioning and consumption, is crucial not only for operational reliability, but also for meeting regulatory compliance. With the rapidly evolving regulatory landscape, new fuel grades introduced in the recent past and their behaviour in the operational environment are being analysed by industry bodies such as the International Council on Combustion Engines (CIMAC), providing guidelines in building operational knowledge for managing these fuels.
A fuel could be ‘on-spec’ to the ISO 8217 table parameters, but if the fuel is not diligently managed on board, operational issues with machinery can arise, causing vessel delays, stoppages and in certain cases, even regulatory non-compliance.
In a time charter, when an Owner claims for machinery damage attributed to the fuel, the defence would seek to ascertain whether everything that a prudent Owner would do was reasonably done to manage the fuel on board, and that any action or lack thereof was not causative of the claimed damage. Consequently, it is essential that the vessel’s staff ensure utmost diligence during storage, transfers, conditioning and consumption of the fuel.
By Gilmark D’Mello, Loss Prevention Executive at Steamship Mutual P&I Club