When the IMO's 0.5 per cent global sulphur cap enters into force in 2020 there is likely to be a major redistribution of low sulphur fuels as cargo to the benefit of the product tanker fleet. That’s the view of Bomin Group’s global head of bunker operations Jan Christensen.
“The switch to a distillates-based world will also have a significant impact on marine energy infrastructure,” he argues. “With increased demand it’s likely that hubs will need to build larger refineries and terminals, and there will also need to be a reconfiguration of storage tanks to hold clean products rather than fuel oil, as well as adapting pipelines to take middle distillates to coastal bunkering terminals.”
A consequence of any refinery capacity deficit he says is likely to be the use of Aframaxes or Suezmaxes for floating storage of surplus fuel oil until it can be blended.
A consequence of any refinery capacity deficit he says is likely to be the use of Aframaxes or Suezmaxes for floating storage of surplus fuel oil until it can be blended.
There is sizeable variation between the current appraisals of the availability of ‘traditional’ distillates. The official IMO availability study, led by CE Delft, believes that the growth of refining unit expansions will be sufficient to meet the projected increase in distillates, hence the 2020 implementation date. However, a rival study by Ensys and Navigistics, on behalf of the International Petroleum Industry Environmental Conservation Association (IPIECA) and BIMCO reached the opposite conclusion, and estimated that 60 – 75 per cent of additional capacity beyond what already exists will need to be built.
“Accordingly, refiners will be incentivised to create a range of blends,” says Mr Christensen. These are likely to include vacuum gasoil, or low sulphur heavy fuel oil with a low sulphur blendstock added in where it’s available, such as South America.
The lack of global infrastructure and bunkering standards for LNG is well documented, which doesn’t make it a viable short-term option, he adds.
The lack of global infrastructure and bunkering standards for LNG is well documented, which doesn’t make it a viable short-term option, he adds. “In relation to scrubbers, the significant upfront capital expenditure required to install the technology, and the shortage of yard space for retrofitting will limit uptake. This means that the vast majority of ship owners – including tankers – will switch to burning distillates and distillate blends to ensure compliance.”
Marine gasoil sales in Singapore - the world’s largest bunkering hub - have grown nearly six-fold in the last three years to hit a record of 1.14 million tonnes in 2016 according to the Maritime and Port Authority of Singapore (MPA). We’ve been an MPA approved supplier since 1988, and have seen this development first hand. “Another sign of the times is S&P Global Platts will shortly launch new low-sulphur marine gasoil and diesel oil prices,” says Mr Christensen.
“There is no crystal ball that will tell us exactly where the market is heading. However, there are clear indicators...”
“There is no crystal ball that will tell us exactly where the market is heading. However, there are clear indicators of what we can expect with the impact of regulations, changes to the make up of the fuel mix, and the consensus that crude prices will increase to levels higher than the lows of the past few years,” he concludes.
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