Understanding IMO 2020 | Glossary Of Terms

The international maritime industry is flooded with jargon. It can make the evolving landscape – especially as it pertains to the impending IMO 2020 sulfur regulations – a confusing challenge to navigate. Equip yourself with the best, most complete information so that, as a shipper, you can make informed strategic choices.

Organized by theme, we collected a list of commonly used acronyms and abbreviations and explained exactly what they mean in the context of the marine industry.

Marine Shipping Operational Terms

BAF: BUNKER ADJUSTMENT FACTOR

A fuel surcharge passed from ocean carriers to shippers on a per-container basis that protects the carrier from fuel price fluctuations and variability across trade lanes. BAF is often interchangeable with BRC (Bunker Recovery Charge).

FEU: FORTY-FOOT EQUIVALENT UNIT

One of the two most prevalent standardized containers hauled in the commercial maritime industry that measures volume in terms of forty-foot long units. Depending on vessel capacity, the number of FEUs held on board varies. One 40 foot-container is equivalent to a FEU.

TEU: TWENTY-FOOT EQUIVALENT UNIT

Another common standardized container type hauled in the commercial maritime industry that measures volume in twenty-foot long units. Like FEUs (see above), the number of TEUs held onboard varies based on vessel capacity. One 20-foot container is equivalent to a TEU, and two TEUs is equivalent to one FEU.

Terms About the Marine Regulatory Environment

ECA/SECA: EMISSION CONTROL AREAS/SULFUR EMISSION CONTROL AREAS

Sea regions where more stringent controls are implemented to limit the amount of airborne container ship emissions when transporting goods on the open seas. ECAs and SECAs can be designated for particulate matter, nitrous oxide, and/or sulfur oxide, all of which are types of emissions let off by ocean vessels.  The fuel consumed within ECAs and SECAs can be accounted for with a separate surcharge, but this varies by BAF.

IMO: INTERNATIONAL MARITIME ORGANIZATION

The United Nations’ regulatory body responsible for monitoring the safety, security, and environmental performance of global maritime shipping. IMO enforcement measures cover all realms of global container shipping to ensure the world’s most efficient method of getting goods to market is done effectively.

Maritime Emissions-Related Terms

EGCS: EXHAUST GAS CLEANING SYSTEM

Commonly referred to as a scrubber, EGCS is a mechanism installed onboard marine vessels that cleans harmful sulfur oxides from exhaust gases. Open, closed, and hybrid are the three most common types of scrubbers, and are utilized to achieve compliance in ECA/SECA regions. High-sulfur fuel usage will see significant declines unless scrubber adoption significantly grows across fleets.

S: SULFUR

A component naturally found in crude oil that also resides in refined products utilized in commercial transportation. Sulfur oxides contribute to air pollution.

SOX: SULFUR OXIDE

A chemical compound created through the reaction of sulfur molecules in petroleum products and oxygen molecules after the fuel is consumed and exhaust is emitted.

Units of Measure

METRIC TON

The most common unit of bunker fuel sales. Marine fuel grades have different densities, leading to different conversion factors between metric tons and barrels of fuel.

MMBD: MILLION BARRELS PER DAY

A common measure of oil and refined product production, inventory, trade etc. Barrels are used as the unit of measure in the energy industry. One barrel is equal to 42 U.S. gallons.

M/M: PERCENTAGE BY MASS

Used as the measure for sulfur content in marine bunker fuels. New IMO regulations beginning in 2020 will cap the sulfur content in marine fuels to 0.5 percent by mass.

Fuel Type Definitions

HSFO: HIGH SULFUR FUEL OIL (3.5 PERCENT SULFUR)

Will be a non-compliant fuel after January 1, 2020 according to the IMO’s updated sulfur limit. Scrubbers can be installed across commercial maritime fleets to remove sulfur from its exhaust to make it a compliant fuel. HSFO is a broad category for high-sulfur fuels that is comprised of IFO 380, IFO 180, etc. with differences in viscosity and density by fuel type.

IFO 380: INTERMEDIATE FUEL OIL (3.5 PERCENT SULFUR)

Current conventional high-sulfur fuel oil with a maximum viscosity of 380 centistokes and 3.5 percent sulfur content by mass. IFO 380 is a specific type of HSFO and tends to be one of the cheapest marine fuels on the market.

LNG: LIQUIFIED NATURAL GAS

Naturally has low NOx and SOx emissions, making it compliant with the IMO’s new sulfur cap. LNG bunkering infrastructure will be far less prevalent than other fuel types. The investment required to retrofit a vessel for LNG – in addition to its higher cost – will likely limit its initial usage.

LSMGO: LOW SULFUR MARINE GAS OIL (0.1 PERCENT SULFUR)

A version of MGO with sulfur content less than or equal to 0.1 percent by mass.

MGO: MARINE GAS OIL

A marine fuel comprised exclusively of distillates that closely compares to the chemical composition of diesel and heating oil. MGO is advantageous as an available and tried-and-true product with little potential for disruption on vessels compared to newer fuel formulations.

VLSFO: VERY LOW SULFUR FUEL OIL (0.5 PERCENT SULFUR)

A new fuel option widely available in 2020 that is created through a blend of other fuel types to achieve compliance with the IMO sulfur cap. VLSFO will likely be the most attractive fuel type as the price differential between VLSFO and MGO will incentivize a demand shift.

When making strategic decisions, be confident in your understanding of the industry’s language. Fuel continues to take center stage regarding the upcoming sulfur cap, emphasizing the importance of understanding fuel market dynamics ahead of one of the most significant changes to conventional fuel, ever.