The key concern is the availability of ultra-low sulphur fuel or distillates to meet fuel consumption demands by the global fleet of vessels, industry players said at a VPS Marine Fuel Management Seminar held in Singapore last Friday.
The IMO is enforcing a 0.50% limit on fuel sulphur content globally on 1 January 2020, with a review in 2018 to decide if this deadline can be extended to 2025. Simon Neo, executive director at Singapore-based Piroj International, said that even if the deadline is extended to 2025, the issue of availability may still not be resolved.
The enforcement of the 2020 or 2025 sulphur regulation would mean a need for 80-90m metric tonnes of residual fuel to be replaced with distillates, or marine gas oil (MGO).
The need for higher margins has prompted oil majors to crack crude oil further so as to yield a larger volume of higher value products such as jet fuel, naphtha and gasoline, leaving the bottom of the barrel’s residual fuel with less volume and poorer quality, according to Neo.
To make matters worse, MGO prices are currently close to $300 per metric tonne more expensive that the already expensive high-sulphur 380 cst grade priced at around $600 per metric tonne.
Neo added that the shipping industry may also need to “fight with” landbased users of distillates, potentially pointing to a hike in distillate prices. “The question is, will the market see a new technology that can solve the distillate supply issue?” Neo questioned.
Ahead of the global 2020 regulation, IMO will impose a fuel sulphur content limit of 0.10% in Emission Control Areas (ECAs) by 1 January 2015, but this deadline is not expected to have a major impact on shipping.
“The 2015 regulatory impact is not as significant as the 2020 impact,” said Tim Wilkins, regional manager of Intertanko. “There remains serious concerns over the availability of distillate fuels (by 2020) on top of the various operational procedures required to deal with the fuel change.”
The ECAs currently enforce a fuel sulphur content cap of 1.00%. By 2015 in ECAs, the marine fuel market will be looking at a fuel supply shift of an estimated 40-45m metric tonnes of the 1.00% low-sulphur fuel to the required 0.10% sulphur distillates.
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