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Benchmarking IMO 2020

By Barry Parker “One of the biggest shake-ups in the and are current prices for future dates.” duced essentially anywhere. Tightening pliant VLSFO in Asia – Singapore, Thai- product markets is right around the cor- These wind currents will depend on ac- the standard to 0.5% sulfur dramatically land and Hong Kong – and in continental ner — the IMO 2020 regulation bans tual availabilities. changes the picture. Europe (ARA) and the Mediterranean. high sulfur fuel oil (HSFO) from the The oil majors, though mum on their Scrubber uptake will mean some of They expect that sales of compliant fuels bunker pool. Although the shipping and speci? c re? nery con? gurations in the the supplied IFO can stay as 3.5% but would begin in Q3 2019. Supporting that re? ning industries have been preparing face of changed requirements, are now the majority of fuel will need to be 0.5% projection, ExxonMobil also announced for the new rules for several years, there beginning to assuage the concerns about from 2020 on, unless and until scrub- a massive upgrade of its Singapore re? n- have been fears of shortfalls when the actual availability of VLSFO. Like any bers become widely accepted. EnSys ery complex, predicated heavily on the rules come into effect.” So says the Inter- new product roll-out, supplies will be and marine partner Navigistics project at needs to produce low sulfur fuels for the national Energy Agency (IEA – a part of available at major bunkering hubs and least 3.5 mb/d of HS IFO will need to maritime industry.

Organization for Economic Cooperation the invariable discussions of haves and be switched to 0.5% fuel to achieve full For its part, Shell was projecting that and Development), in its just-released have-nots will place outports in the compliance in 2020. We project supply VLSFO supplies would be available in

Oil 2019 report. “might have” basket. will be a mix of 0.5% distillate and HFO the U.S. Gulf (New Orleans and Hous-

There are multiple ways for ship op- products, potentially more distillate ini- ton), Freeport, Bahamas, and in North erators to cope with the new rules which ‘Re? ning’ the Supply Outlook tially because of fuel incompatibility Europe (ARA and Danish Strait) as well push down maximum permitted sulfur Consultants EnSys, based in Houston concerns trending to more IFO over time as in the Med. Farther to the east, loca- levels in fuels from the current 3.5% (which, along with Boston-based Navi- as this is lower cost.” tions are set to include Fujairah, Hong (in effect in most geographical regions) gistics, has been a leading investigator of Separately, an early March 2019 an- Kong and of course, Singapore. down to 0.5%. They can install “scrub- the IMO 2020 related issues) explained, nouncement from BP, quoting the Global Tallett described regional implications bers” and continue to purchase high “We analyze marine fuels supply and Head of BP Marine, Eddie Gauci, said, of shipping’s interaction with the re? n- sulfur fuel, they can consume very ex- the impacts of the IMO 2020 Rule by “We have undertaken a comprehensive ery system, “From a re? ning perspec- pensive marine gasoil (with typical sul- simulating and projecting the total glob- test campaign, conducting shipboard tri- tive, 0.5% marine fuel, be it distillate fur levels at or below the 0.5%), or they al petroleum ‘liquids’ supply/re? ning/ als of our new very low sulfur fuel oil. or IFO, requires low sulfur blendstocks can consume low sulfur blends – a new transport/demand system. This approach Following the success of these sea trials, which must come from either low sulfur category of fuels emerging now. LNG is captures all the interactions in the sys- and working closely with our customers, crude streams and/or signi? cant re? nery another low sulfur alternative – though tem and means all the numbers have to we believe we now have a robust com- processing centered on ‘cracking’, such uptake by shipowners has been limited. add up.” EnSys President, Martin Tallett, mercial offer.” as via the coking process, plus desulfur-

The uncertainties about fuel avail- explained, “What has become apparent To that end, BP will have their new low ization. EnSys projects the effects of this ability are focused on the short-term, in a series of recent assessments is that sulfur blend available at ARA, Panama, will be to substantially concentrate 0.5% meaning 2020 and perhaps further out the IMO Rule will have a major impact Seattle (on the USWC), Singapore (the fuel supply geographically. Two thirds into next year. The IEA, in their report, on regional marine fuels supply/demand world’s largest bunkering entrepôt), of the total low-sulfur marine fuel supply suggest that “Demand for HSFO (high- balances. Under the 3.5% sulfur stan- Hong Kong, China, Australia/ New Zea- (0.1% ECA fuel plus 0.5% marine distil- sulphur marine fuel oil), the main vessel dard, IFO was the lowest quality liquid land and Oman. late and IFO) will come from just eleven fuel since the 1960s, will fall from 3.5 fuel produced by re? neries and so was Meanwhile, ExxonMobil announced countries and much of the balance from mb/d to 1.4 mb/d in just one year.” The the easiest to supply and could be pro- in 2018 that it would be supplying com- a further twenty-? ve or so.” Tallett con-

IEA also calculated that by end 2020, tinued, “The USA is expected to have the scrubber ? tted vessels (approximately largest supply surplus and export poten-

Ocean Freight Exchange 4,000 units, mainly on larger ships) will tial, followed by China and Russia. Con-

A slightly different take on fuel availability, with a decidedly info-centric approach, be consuming 700 kb/d of HSFO. versely, we – and other analysts – project comes from Ocean Freight Exchange, a vessel chartering platform, utilizing advanced

Europe will be in de? cit on 0.1%/0.5% statistical modeling, online at Its CEO, John Hahn, said, “Right Bun-

Follow the Money supply; also, and critically, the Paci? c ker is our bunker delivery optimization platform which increases turns for the bunker

From a ? nancial standpoint, the voy- region that includes Singapore, although tanker and reduces waiting time for both the bunker tanker and the vessel. We don’t age has already been treacherous. Chris increasing intake into Asia of US low do procurement, but only focus on the delivery.”

Hudson, from commodities specialist sulfur crude plus new re? ning projects

When asked about port selections, he said, “We believe that the desired fuels will be

Freight Investor Services (FIS), wrote should limit the de? cit there. For bun- available in all of the major bunkering ports, including Singapore, Fujairah, Rotter- that, “It’s fair to conclude that the market kers markets, these changes have signi? - dam, Antwerp, Shanghai, Ningbo-Zhoushan, Hong Kong, Gibraltar, Panama, Houston is still unsure of how to prepare ? nan- cant implications for setting up supply and LA/Long Beach. For more niche routes, vessel operators may adjust where they cially for the changes.” arrangements and for substantial chang- bunker, but it won’t be a big deal.”

In late March, 2019, less than 10 es in the logistics of supplying 0.1 and

He acknowledged some of the dif? culties that may lie ahead: “By adding more grades, months until the new rules came into 0.5% marine fuels into the 800+ coastal less tankers in service due to tank cleaning, ‘spec’ problems like water content, quan- effect, FIS wrote, “The market is pric- ports worldwide that will need them.” tity shortages and other complexities, the logistics and delivery of bunkers will be- ing the difference between the HSFO come more dif? cult than it already is. We hear that maritime lawyers are excited for and VLSFO at around $185-200/ton, yet A Look Ahead: Uncharted Waters the many claims to come.” these values can change like the wind There are many uncertainties about 24 Maritime Reporter & Engineering News • JUNE 2019

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