Availability of HFO After 2020 in Bunkering Ports

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Dr-R.-Vis-CEO-of-Viswa-Lab1.jpgThere has been some concern that from 1.1.2020, high sulfur fuel will not be readily available since the overwhelming portion of bunker fuel will be low sulfur products and that refineries and major oil companies may not be able to even bring the high sulfur product into the market. Please find comments from some of the major industry players on this matter.

Oliver Jouny, General Manager of Total Marine Global Solutions says “In the key hubs the demand will be there and we will continue to offer both 0.5% and the higher sulfur products after 2020.”

Shell Marine in their brochure IMO 2020: What’s Next ? says “Shell is developing a variety of fuel product offerings to the shipping industry that include marine gasoil (MGO) and low sulfur fuel oil (LSFO) supply in key bunker ports; high sulfur fuel oil (HSFO) supply for ships with on-board scrubbers; and liquefied natural gas.”

Iain White, Global Marketing Manager for ExxonMobil Marine Fuels and lubricants similarly mentions in an interview that “from 2020, shipping and fuel suppliers will be working in a multi-fuel market.”

Another interesting observation from IHS Markit in their documentNew Low-Sulfur Requirements for Marine Bunker Fuels Causing Scramble for Refiners and Shippers” which states IHS Markit estimates that 20,000 ships account for around 80% of Heavy Fuel Oil bunker fuel usage. Currently only about 360 ships have installed scrubbers. Based on price spreads between Low sulfur bunker fuel and high sulfur fuel oil during the scramble period (2020,2021), it will be economic for many of them to install scrubbers.

The challenge with the bunker fuel quality change (from 3.5% to 0.5%) is the disposal of high sulfur residual fuel – not the production of low sulfur bunker fuel. A sizable portion of today’s fuel oil will be pushed into lower priced tiers, notably oil fired power generation plants. The largest refinery margin disruption and its impact will be maximum during 2020 and 2021 during which period HIS market expects unprecedented light – heavy price spread. During these years, pricing for high sulfur fuel oil will have to be near thermal parity with coal in the power market, a very low price relative to today’s fuel oil price (almost one fourth). As shipowners install scrubbers due to the incentive of price differential, the price spreads will moderate within a few years.”

Dr. Vis
President
Viswa Lab

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