Russia has had limited success in upgrading its refineries to produce 0.5% sulphur marine fuel oil and is contemplating allowing the domestic fleet to burn higher sulphur fuel oil until 2024, while exporting domestically produced low sulphur fuel
Under IMO 2020, enforcement is undertaken by the signatories. Russia is a signatory of IMO 2020, but may choose not to audit vessels in Russian-controlled waters. This would include its huge inland waterways fleet and the deepsea fleet sailing in Russian-controlled waters including Kazakhstan, Kyrgyzstan, Belarus and Armenia. The move would be in stark contrast to the efforts of the state-owned tanker company Sovcomflot which is developing a fleet of LNG-powered low environmental impact tankers. Sovcomflot has also signed up to the Global Maritime Forum’s Getting to Zero initiative aimed at developing and deploying "commercially viable deepsea zero-emissions vessels" by the end of the next decade.
Russia is a major producer and exporter of high sulphur fuel oil (HSFO). So far only one Russian oil producer, Lukoil, has the ability to produce VLSFO that complies with the IMO 2020 0.5% sulphur marine fuel regulations. Lukoil announced earlier this month that it is now producing VLSFO from its Volgograd refinery. According to news service Bloomberg, Russia’s largest producer of marine fuel oil, Rosneft, will not be capable of producing VLSFO for several years and Gazprom Neft will not be able to produce VLSFO from its upgraded facilities until 2024. In reply to a question from Bloomberg, Russian energy minister Alexander Novac said Russia may delay domestic implementation of IMO 2020 within Russian-controlled waters until 2024.
The failure of Russian oil companies to upgrade refinery facilities in time for IMO 2020 is disconcerting for the bunker fuel market and the implications for compliance with the 1 January 2020 date for high sulphur fuel burning compliance and for the 1 March 2020 ban on the carriage of high sulphur fuel oil. Russia is one of the largest producers of high sulphur fuel oil. So far in the first nine months of 2019, Russia has produced 33.2M tonnes of marine fuel oil with a sulphur content between 2.5% and 3.5%. 22.8M tonnes was exported.
The failure of the Russian oil companies to adapt to IMO 2020 is in stark contrast to the other centrally controlled economy – China. The Chinese Government has ordered the production of sufficient quantities of VLSFO for its own use.
Should Russia go through with their threats to delay IMO 2020, it will create a deep rift within IMO and call into question the viability of the organisation to regulate its members.
Hear more about the impact of IMO 2020 at the 2019 Tanker Shipping & Trade Conference, Exhibition and Awards. Voting is also now open for the Awards. See the nomination here.