Platt’s Conference Looks At Global Bunker Scenario

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The 12th annual Platt’s Bunker and Residual Fuel Oil Conference took place on June 25th and 26th in Houston. Some impressions gathered and information collected from the conference is listed below.

  1. Crude Oil Prices: There was almost a consensus that the crude oil prices will be fluctuating between $55 and $65 per barrel and not likely to cross $70 for several years.  Right now, in the US alone, there are 4,000 shale wells  available.  If crude price hits $60/barrel these wells can be commissioned very quickly.  Realizing this, OPEC countries have decided to hang on to the market share even if the prices go down.  They are not  going to cut production since they know it will not result in an increase in oil prices.  Additionally, natural gas availability in the US and the untapped potential of natural gas from China, Argentina etc. are simply huge.  There is going to be no dearth for at least another century.  The net result of plentiful availability is a reduction in the volatility of crude prices and therefore bunker prices.
  1. Scrubbers: Fitting scrubbers is not an automatic choice or default solution.  Several filters have to be applied such as the age of the vessel, time spent in ECA areas and most importantly the differential cost between high sulfur and low sulfur fuels.  Even after applying all the filters, it is estimated that at least 16,000 ships will be candidates for scrubbers.
  1. LNG as Fuel: LNG is very attractive in the US where gas prices are really low.  In Europe, gas prices are high and scrubbers appear to be a more attractive choice.
  1. Heavy Fuel oil Surplus: Come 2020, at least 135 million MT of distillate fuel will be needed.  There will be a high surplus of heavy fuels. Many refineries are putting up coking plants to use up surplus heavy fuel.  Coking plants are less expensive and easy to operate and, right now, more profitable than hydrocracking which is another technology to deal with the surplus heavy fuel.  However, if everyone goes for a coking plant, one wonders what will happen to the surplus coke that will be available.
  1. Emission Control Areas: Whether ECA zones increase or not, ECA style zones are beginning to increase.  Hong Kong and Southern part of China and Australia have announced certain steps towards Emission reduction.  Gulf of Mexico is also expected to come up with ECA or ECA style measures by next year.  As ECA areas increase, ships are forced to spend more time in ECA areas. The viability of a scrubber project is closely associated to the time spent in ECA areas by the vessel.

The above gives a gist of what the experts expressed at the Platt’s Bunker and Residual Fuel Oil Conference.

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