by Lloyd's List
15 October 2024 (Lloyd's List) - COMPLIANCE options relating to the upcoming FuelEU Maritime legislation are taking their final shape. With less than three months before the rules take effect, shipping companies are eyeing methods such as biofuel bunkering and pooling with over-compliant ships to avoid penalties.
A vessel that burns 2,000 tonnes of conventional bunker fuel in 2025 in EU trading will incur a penalty of between €117,000 and €124,000, according to estimates by multiple FuelEU calculators.
To avoid paying this penalty, a shipping company will have various compliance options. The most popular option will be biofuel-blended bunkering, owing to the relatively higher availability of biodiesel at bunkering hubs.
A vessel burning 2,000 tonnes of conventional fuel in 2025 would require 89 tonnes of biodiesel to comply with FuelEU, according to Portugal-based software provider BetterSea’s calculator. That volume of biodiesel would cost €107,000, based on a biodiesel price of €1,200 per tonne, BetterSea’s calculation shows.
The calculation suggests biofuel bunkering would be a cheaper compliance option than paying a penalty.
Biofuel prices vary significantly between ports, depending on demand and supply. The price of a 20% biodiesel/80% very low sulphur fuel oil blend in Rotterdam averaged $713 per tonne in the first half of 2024, while that of a 24% biodiesel/76% VLSFO in Spain’s Algeciras averaged $1,004 in the same period, according to price reporting agency Argus Media. A Dutch subsidy makes biodiesel cheaper in Dutch ports.
However, not all vessels trade at ports with biodiesel availability, which means they need to find another compliance method. BetterSea’s calculator suggests pooling is the cheapest method for compliance for a vessel burning 2,000 tonnes of conventional fuels, because pooling would cost €62,000.
Not all ships can comply with FuelEU by using pooling, because that method requires over-achieving vessels to burn alternative fuels to sell surplus to others.
Shipping companies with dual-fuel vessels will most likely prioritise pooling their non-compliant vessels with alternative fuel-powered ones.
“Internal pooling is a logical first step for companies that generate compliance surplus, and it should be preferred, when possible, to achieve the most cost-efficient compliance,” said BetterSea co-founder Maximilian Schroer.
“It is usually the case that such companies still have excess compliance surplus, which they opt to sell on an external marketplace, thus generate additional revenues and obtain planning security,” Schroer added.
In a rare example of transparency in FuelEU compliance, Nordic bio-gas supplier Gasum and Finland-based ferry operator Wasaline announced they would form a FuelEU pool next year, using surplus compliance from Wasaline’s dual-fuel LNG ferry Aurora Botnia (IMO: 9878319). Gasum will manage the pool and supply the vessel with mass-balanced bio-gas.
Pooling offerings
Several startups and consultancies have been pitching their FuelEU compliance services to shipping companies in the past year.
Norway-based FuelEU software provider Prosmar aims to act as an interface between companies that will make bilateral agreements and form compliance pools. Prosmar will charge its customers for the use of its platform as well as a commission on bilateral transactions.
The firm also aims to bring transparency to FuelEU compliance by providing the sector with robust price discovery on compliance options such as pooling.
“The prices are driven by the bid ask spread on the platform and therefore present an interesting transactional opportunity in both directions and a hedge on biofuel spreads,” said Prosmar chief executive Ali Jourabchi.
Prosmar has multiple clients committed into its platform with a combined dwt in the millions of tonnes, with most of them from dry bulk and tanker segments, Jourabchi said.
BetterSea also aims to act as a facilitator for external and internal FuelEU pools by offering end-to-end software.
Other firms such as Finland’s Ahti Climate will offer third-party FuelEU pool management. Ahti Climate aims to have more than 100 vessels in its FuelEU pool, along with dual-fuel LNG and methanol vessels, according to chief executive Risto-Juhani Kariranta.
