Key Considerations When Purchasing Biofuel Bunkers – Glander

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Biofuel key considerations for buy Glander Int Bunkering

We are sharing this enlightening article from Glander International Bunkering, a renowned name in the bunkering industry. The global bunker trading firm announced earlier this year its ISCC EU and ISCC PLUS certifications for biofuel operations in Norway and Geneva offices. This article delves into the intricacies of procuring biofuel bunkers, offering essential insights that resonate with the dynamic landscape of the maritime industry. By exploring critical aspects such as regulatory compliance, biofuel origin verification, pricing factors, and expert guidance, this article serves as a beacon of knowledge for stakeholders navigating the evolving terrain of sustainable marine energy solutions.

1 – Regulations

Biofuels have rapidly emerged as one of the most favored alternatives for marine energy in recent years as the shipping industry intensifies its focus on reducing greenhouse gas emissions.

The benefits of utilizing biofuels are evident: they seamlessly substitute conventional bunkers without requiring substantial modifications to ship engines or delivery systems. Moreover, they lead to net reductions in greenhouse gas emissions when evaluated across their complete lifecycle, especially when produced from second or third-generation sustainable feedstocks.

Presently, biofuels assist purchasers in meeting their Environmental, Social, and Governance (ESG) targets and are poised to become a primary solution for adhering to mandatory blend-in mandates stipulated by the FuelEU Maritime Regulation, which takes effect in 2025.

Buyers of marine bunkers can readily adopt these biofuels without the need for significant upfront investments or enduring long-term commitments.

Biofuel Volumes

The demand for these fuels has surged dramatically in recent months. Rotterdam witnessed sales of 791,000 metric tons of biofuel/marine fuel blends last year, marking a 163% increase from 2021. In parallel, Singapore inaugurated biofuel sales in 2022, selling a total of 140,000 metric tons of blended products.

The primary products in the Amsterdam-Rotterdam-Antwerp (ARA) region are B30 blends, while in Singapore, B24 blends predominate—indicating 30% and 24% biofuel content respectively, mixed with conventional marine fuel. These fuels are already available at various ports and are projected to witness further escalation in volumes in the years ahead.

Initially, these sales emerged through trial initiatives by shipping companies seeking to test the fuels in their engines on an experimental basis. However, a growing trend of routine sales is now observable.

An important distinction to highlight regarding biofuels within the marine fuel sector is that the term typically pertains to blends. These blends commonly encompass up to approximately 30% biofuel content, combined with Very Low Sulfur Fuel Oil (VLSFO), High Sulfur Fuel Oil (HSFO), or Marine Gas Oil (MGO). While higher proportions of biofuel content, including up to 100%, have demonstrated compatibility with conventional engines, their adoption remains infrequent for now.

Regulations driving biofuel uptake

Undoubtedly, one of the primary catalysts propelling the shipping industry towards carbon neutrality is the escalating and rapidly evolving landscape of regulatory mandates.

First and foremost, the International Maritime Organization (IMO) has firmly established a target of achieving net-zero greenhouse gas emissions from international shipping by the approaching year 2050. This objective encompasses interim benchmarks for the years 2030 and 2040, calling for absolute reductions of 20% and 70% respectively (striving for 30% and 80%). Additionally, the adoption of zero or nearly-zero emission fuels is expected to account for a minimum of 5% by 2030. Consequently, the shipping sector is compelled to act well before 2050 to meet these benchmarks. The ambitions of reducing absolute emissions necessitate a shift from conventional to alternative fuels.

Secondly, the Carbon Intensity Indicator (CII) regulations have been implemented. Commencing this year, all vessels exceeding 5,000 gross tons will be assigned a CII rating based on historical data submitted to the IMO. This rating is a computation of the vessel’s emitted CO2 per unit of cargo capacity per nautical mile.

The ratings, ranging from A to E, will be assigned annually, with A representing the highest efficiency. Ships receiving a D rating for three consecutive years or an E rating for a single year will be required to formulate a corrective action plan under their Ship Energy Efficiency Management Plan (SEEMP). This plan outlines strategies to enhance their performance and rating. Alternative fuels like biofuels are poised to exert a notably positive influence on these ratings.

Lastly, the IMO is poised to adopt further regulations, including a carbon emissions pricing mechanism and a green fuel standard, in the forthcoming years to expedite the transition.

Simultaneously, independent from the global decarbonization push steered by the IMO, the European Union (EU) has been pursuing its distinct regulatory agenda.

In the previous year, the EU reached a consensus to encompass shipping within the Union’s emissions trading system (ETS). Vessels surpassing 5,000 gross tons will be incorporated into the ETS, enveloping 100% of CO2 emissions from intra-EU voyages and 50% of emissions from journeys between EU ports and the rest of the world. In practical terms, this entails that all ships calling at European ports will fall within the purview of the EU ETS.

The system will be progressively introduced, commencing with 40% of emissions covered in 2024, escalating to 70% in 2025, and eventually encompassing 100% from 2026 onwards. Shipping companies will be mandated to procure a commensurate number of “EU Allowances” (each representing one tonne of CO2 emissions) to match their annual aggregate fleet emissions, subsequently delivering these allowances to the authorities annually.

Furthermore, Europe has instituted a distinct regulation named FuelEU Maritime, necessitating shipping companies to gradually incorporate renewable fuels in their bunker procurements to diminish the greenhouse gas intensity of the consumed fuel. Analogous to the ETS, this is a phased system encompassing ship size and geographical scope. Notably, the FuelEU Maritime not only addresses CO2 but also other greenhouse gases.

These regulatory impetuses constitute only the initial stage; further advancements can be anticipated from the IMO in the years ahead, while the United States and China may also establish their regulations if they find global frameworks inadequate.

As a result of these factors, the utilization of biofuels is primed for substantial incentives in the short term, as conventional fuel use becomes progressively constrained by regulatory expenses.

2 – Generation & Certifications

In addition to selecting the appropriate conventional fuel grade for blending, the origin of the biofuel constituent stands as a pivotal factor. Biofuels, such as Biodiesel or HVO, derive from a spectrum of biomass feedstocks, each possessing diverse environmental attributes.

These feedstock categories are classified into generations: first-generation biofuels originate from food crops cultivated on arable land, second-generation emanates from waste materials generated by industries like fish processing, and the third generation emerges from more advanced sources like algae.

Biofuel products derived from first-generation sources are increasingly met with disapproval from various quarters due to concerns over their consumption of arable land and their inability to yield substantial net reductions in greenhouse gas emissions. This is especially true when sourced from materials like palm oil, prompting the possibility of encountering legal restrictions in the impending years. Consequently, first-generation biofuels are categorized as ‘fossil’ according to IMO regulations and are not positioned to contribute to the decarbonization of the shipping sector.

Presently, the production of second-generation biofuels is undergoing significant expansion. However, the scalability of output faces limitations as it hinges on the availability of adequate waste feedstock. Furthermore, a multitude of industries, including aviation, are poised to compete fervently for access to these fuels in the near future. On the other hand, the widespread production of third-generation biofuels has yet to achieve notable traction.

A certified supply chain

Ensuring the authenticity of the biofuel origins presents another vital consideration, essential to confirming the legitimacy of emissions reductions without the risk of double-counting.

As an illustrative instance, Singapore’s regulatory bodies, in formulating their biofuel bunkering guidelines, have suggested that purchasers exclusively opt for biofuel blends that hold certification from the International Sustainability and Carbon Certification (ISCC).

ISCC certification guarantees alignment with globally acknowledged sustainability and traceability standards for biofuels. Thoroughly evaluating the sustainability merits of biofuel producers, corroborating adherence to production protocols, and maintaining transparency across the supply chain emerge as critical facets during biofuel procurement.

Moreover, the International Maritime Organization (IMO) has recently introduced guidelines pertaining to biofuels, delineating the parameters for sustainable biofuels and outlining reporting standards within the IMO Data Collection System.

Biofuel Quality Testing

While biofuels present an exemplary low-carbon alternative and drop-in fuel, certain parameters may appear less familiar to buyers accustomed solely to traditional fuels. The ISO 8217 tests, conventionally employed for assessing conventional bunkers, serve as an initial assessment of pertinent quality indicators in biofuel blends. However, fuel quality authority VPS additionally advocates for conducting tests to evaluate the following parameters:

  • Renewable content
  • Oxidation stability
  • Energy content
  • Cold flow properties
  • Corrosivity
  • Microbiological activity

Price considerations

The cost consideration varies considerably across different regions due to local regulations, availability, and the logistics of final delivery. In Europe, the demand for biofuels will be propelled by the FuelEU Maritime regulation, which mandates greenhouse gas reductions in shipping starting from 2025, potentially influencing biofuel prices. Currently, bunkering operations in countries like the Netherlands can enjoy subsidies that are applicable to biofuel bunker sales, significantly mitigating their overall costs. In contrast, the United States has yet to witness substantial growth in the marine biofuel market due to the absence of comparable incentives.

In Singapore, recent market analysis indicates that a B30-VLSFO blend commands a premium of 20-30% over VLSFO prices.

Ultimately, the majority of challenges related to purchasing biofuel bunkers can be circumvented by enlisting the assistance of an experienced marine fuels company during the procurement process. A company that possesses ISCC certification and a well-established presence can adeptly guide shipping companies through every phase of decision-making, encompassing quality assurance, emissions planning, and reporting, thereby providing buyers with a reassuring sense of confidence.

Source Glander International Bunkering