Oil major BP Plc expects more than 90 percent of the world's shipping fleet will comply with new regulations slashing sulfur levels ships are allowed to burn starting 2020, a company executive said on Tuesday.
Coming International Maritime Organization (IMO) rules will cut the amount of sulfur emissions that ships worldwide are allowed from 3.5 percent to 0.5 percent by 2020.
"Potential non-compliance is a significant issue that the market has been contending with," Jason Breslaw, who leads BP's distillate trading origination across the Americas, said at an industry conference in New Orleans.
Breslaw said BP expects only about 9 percent of the industry is likely to be non-compliant as the rule takes effect. The compliance level has significant implications for demand for high-sulfur fuel oil; BP's estimates fall well short of other analyst estimates of about 30 percent non-compliance.
The IMO has said there would be no delays or exceptions to the coming rules, whether or not the industry takes the steps it needs to comply, and warned that all parties face consequences if they do not play their part.
Energy consultancy Wood Mackenzie estimates about 30 percent non-compliance, said Alan Gelder, vice president of refining, chemicals
and oil markets
"At the moment nobody is really doing anything ... with a number of the shippers playing chicken with the regulator, does the regulator blink? We don't know," Gelder told Reuters.
One way ships can comply with coming standards is to retrofit vessels with costly scrubbers, which can reduce sulfur emissions even if ships continue to burn dirty fuel.
But there are significant concerns with this process as well, industry participants said.
The cost of installing scrubbers is about $3 million to $10 million, said Anil Rajguru, vice president of process safety at Fluor Corp.
"Right now less than 500 ships have scrubbers. We're talking more like 50,000 and it could take more than a decade before scrubbers are fitted on (all) the vessels," Rajguru said.
(Reporting by Devika Krishna Kumar; Editing by David Gregorio)