Total, ZEG Joint Venture To Develop Chinese LSFO Market

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Total has signed a deal with ZEG to develop Chinese LSFO market as IMO 2020 looms, reports Platts.

Joint venture agreement

France’s Total has inked an joint venture agreement with Chinese state-owned Zhejiang Energy Group or ZEG. This joint venture aims to accelerate the supply and delivery of low sulfur marine fuels in Zhoushan, China.

“This new partnership is fully aligned with our strategy to support and supply our shipping customers wherever they go,” said Philippe Charleux, senior VP Lubricants & Specialties of Total.

“Providing them with low sulfur fuels fully compliant with IMO regulation in China will further contribute to the transition towards a sustainable shipping industry,” he added.

What is in the agreement?

The agreement follows a memorandum of understanding concluded by Total and ZEG in April to explore opportunities in the supply and distribution of energy in China.

Total China Investment will hold a 49% share in the new company while Zhejiang Zheneng Petroleum New Energy will hold the remaining, it said.

Global sulphur regulation

The IMO will cap global sulfur content in marine fuels at 0.5% starting January 1, 2020, from 3.5% currently. This applies outside the designated emission control areas where the limit is already 0.1%.

Shipowners will be forced to either switch to cleaner, more expensive fuels or install scrubbers.

LSFO demand gathers pace

LSFO is already set to be the chief marine fuel choice as IMO 2020 nears. Its consumption is already gathering pace in key bunkering hubs.

  • In Singapore, the world’s largest bunkering port, for example, volumes of 380 CST HSFO dipped 9.8% year on year in September, latest data from the MPA showed.
  • China’s LSFO demand is also expected to accelerate due to its implementation of stricter rules. 
  • Many of the country’s initiatives to curb pollutants from shipping come as part of its ‘blue sky’ defense action plan and ahead of IMO 2020.

ECA expansion

The Ministry of Transport announced in December, the expansion of the ECAs to China’s entire coastline from January 1, compared to the initial area covering 

  • Yangtze Delta, 
  • Pearl River Delta and 
  • Bohai Rim 

applied to vessels sailing within 12 nautical miles of the coast.

The new policy 

According to the ministry’s announcement,

  • Large vessels are now required to burn 0.5% sulfur bunker fuels
  • smaller ones have to consume 10 ppm sulfur bunkers, in line with the National Phase 5 & 6 emissions, when they are in inland waterway.

The new policy also requires all ocean-going vessels to use bunker fuel with 0.1% sulfur when they are entering inland waterways areas in China, starting January 1, 2020.

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Source: Platts

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