Maritime Consultancy 20|20 Marine Energy has stated that fears of a distillate shortage and lack of marine fuels matching the 0.5% sulphur emissions limit when the new regulations are implemented within the shipping industry could be misguided.
The International Maritime Organization’s (IMO) 0.5% global sulphur cap is expected to enter into force in 2020 or 2025, raising some industry concern that distillate fuel with a low sulphur content will be difficult to obtain due to the high demand and expense of it.
However, the widespread concern regarding the availability of the product to meet these demands may be misguided according to 20|20 Marine Energy. Adrian Tolson, Senior Partner, 20|20 Marine Energy, suggests there is evidence from refinery upgrades in the Middle East and India to suggest otherwise. In addition, the anticipated increase in the uptake of scrubbers as the price differential between distillates and Heavy Fuel Oil becomes even greater also indicates that concerns surrounding distillate shortages are unwarranted.
The Hydrocarbon Processing Market Data Report 2016 states the Middle East will add approximately 1.5 MMbpd of new refining capacity by 2020 in order to meet the ever-growing demand for distillates. And in March 2016, India’s largest state-owned refiner Indian Oil Corp (IOC) said it had earmarked $26 billion for a five to seven year investment programme to expand and upgrade its existing refineries.
In terms of scrubbers, 20|20 Marine Energy suggests that the price of distillates will increase following the 0.5% global sulphur cap, refiners to create a market for heavy fuel oil (HFO) which will decline further and hence make investing in scrubber technology for use with HFO a more viable option.
In addition, 20|20 Marine Energy also believes that diesel use within the automotive and land-based industries may also decline, freeing up surplus product that could be directed to shipping.
Mr Tolson commented: “The world is starting to end its love affair with diesel. The United States and Asia are more committed to the gasoline/hybrid model, as well as the electric route, and even Europe is showing less of an appetite. There have also been signs that diesel is no longer as popular with the power generation industry, primarily due to CO2 emissions, and at the same time, alternative land power sources, such as solar energy and liquefied natural gas (LNG) are gathering momentum. However, refineries have been planning for diesel usage to continue at a predictable rate, and given this anticipated decline in certain markets, there will be surplus product that can be diverted to vessels within the shipping industry.”
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