The head of a Chinese news agency describes China’s reaction to IMO 2020 compliance – offer a tax rebate to rapidly expand low sulphur fuel oil production
Xinde Marine News chief executive Gary Chen was speaking to UK and Chinese shipping representatives at the UK-China Maritime Services Exchange forum held during London International Shipping Week (LISW).
“Most Chinese shipowners and operators do not regard the scrubber as an efficient solution as they (scrubbers) lower utilisation and require extra energy and maintenance,” Mr Chen said.
He noted that the preferred option to comply with IMO 2020 among Chinese shipowners and operators is to burn low sulphur fuel.
“Currently, the supply of low sulphur fuel oil in China is very low,” Mr Chen revealed before noting that China has the world’s largest fleet (in numbers), the world’s largest port infrastructure and the third-largest refinery capacity in the world – all state-controlled.
“I can tell you that China’s largest oil refiner, Sinopec, just held a press conference and said it will produce 10M tonnes of low sulphur fuel oil by 2020, and it will be producing 50M tonnes by 2023. China’s other large refiner, China Petroleum & Chemical Corp also announced it had converted nine refineries to produce low sulphur fuel oil,” said Mr Chen.
This rapid shift in low sulphur fuel oil production is fully supported by the Chinese Government. “The Chinese Government is holding a press conference in October to announce that low sulphur marine oil refiners will be given a tax rebate. This will be the opportunity needed to allow Chinese suppliers to offer low sulphur marine fuel at competitive prices on and after 1 January 2020.”
The rapid expansion in China’s low sulphur fuel oil capacity to produce the security of supply for its fleet, and the competitive edge for its fleet from the low price derived from the tax rebate falls into line with the Chinese state’s other initiative around marine pollution.
Earlier in the presentation, Mr Chen listed some of the changes that had already taken place in China, and how these would affect foreign shipping. The first is that on 1 January 2019, the Chinese Government released new regulations on areas that were made emission control areas and subject to new regulations on burning high sulphur fuel.
These regulations extend the ultra-low sulphur region. “In the Yangtze River, vessels have to use ultra-low sulphur content marine fuel oil of 0.1% sulphur content and are being encouraged to use shore power,” Mr Chen told the delegates of the UK-China Maritime Services Exchange forum.
“The Chinese Government has also prohibited the discharge of water from open-loop scrubbers,” he said.
Find out more about China’s IMO 2020 plans and the impact on the global fleet at the Asian Sulphur Cap 2020 Conference.