The ocean shipping industry has long served as a veritable ‘garbage dump’ for the global refining industry. The dregs of the refining process, the residual high-sulfur fuel oil (HSFO) left at the bottom of the barrel when all the good stuff is sold off – that’s what ocean-going ships have been burning as fuel.
The IMO 2020 rule, effective January 1, 2020, will bar vessels from using HSFO unless they have an exhaust gas scrubber installed. Fuel and emission sulfur content will be capped at 0.5 percent.
Over the past few years, as the global cap on fuel sulfur content drew ever nearer, a common question at shipping industry cocktail parties, generally met with a bemused shrug, has been, “Where is all this crap going to go if we don’t burn it?” Refineries will still be creating HSFO as a byproduct of their production process, even after ship operators are driven away from buying it by environmental regulations....MUCH MORE
“It [residual fuel oil] will have to go somewhere and the price is going to provide an incentive for vessel owners and refiners to do something about it. The problem is that they will not do enough about it by January 1, 2020.”The world is about to find out where all of this unwanted HSFO will end up. The question was addressed by Andrew Lipow, president of Houston-based energy consultancy Lipow Oil Associates, during an investor presentation by Ardmore Shipping (NYSE: ASC) in New York on May 30. His predictions implied unintended consequences that should make tanker transportation more costly in certain vessel categories.
Andrew Lipow, Lipow Oil Associates
“There are three markets for residual fuel,” said Lipow. “There’s the utility market, but if you look around the world, a lot of utilities are moving away from it, especially in the U.S. There is road construction, for asphalt, which competes with cement, which is more expensive but longer lasting, and the asphalt market is growing at quite a small rate. And then there is the marine fuel market.”
He estimated that for every 100 barrels of crude oil processed around the world, four barrels of HSFO are created. In the U.S., it’s two barrels for every 100. “The refiners just want to get rid of it,” he said....
See also May 24's "Shipping: 2020 Low Sulfur Fuel Requirements Will Disrupt Oil/Refined Markets Up to Five Years".
We've had many, many posts on the impending change, here are a few of note:
June 2018
Shipping: The New Low Sulfur Rules Will Have A Huge Impact On the Oil Business (shipping and world economy too)
April 2018
"Rich Rewards Await Top Oil Refiners as Ships Make Low Sulphur Switch Fuel":
This is a pretty big deal that's been on the horizon* for a while but hasn't gotten much notice outside the shipping industry and the specialist press until recently
June 2018
Top Norwegian Oil Analyst Quitting DNB to Pursue 2020 Low Sulphur Fuel Rule Riches
