Business

Argus Media viewpoint: European marine fuels to feel diesel crunch

Russian oil products ban will affect Europe’s diesel supply most acutely, with the continent still relying on Russia for as much as 52% of its diesel imports in November.

Published

2 years ago

December 22, 2022

Admin

European marine fuels markets are set for a shake-up in 2023 when EU sanctions on Russian oil products come into effect, as a likely middle distillate supply crunch is being met with mixed demand signals.

21 December 2022

From 5 February all remaining imports of Russian oil products must be halted in the EU — after crude sanctions already took effect on 5 December — as part of the EU's sixth package of sanctions against Russia in response to the country's invasion of Ukraine.

The ban will affect Europe's diesel supply most acutely, with the continent still relying on Russia for as much as 52pc of its diesel imports in November. But it will have a knock-on effect on supply of marine gasoil (MGO) too, with the shortfall likely to push diesel margins up early in the year and incentivise refiners to produce as much road diesel as possible at the expense of other gasoils, such as MGO.

Reduced MGO availabilities are already being recorded in Europe's delivered bunker markets, with some refiners already reported to have issued bunker suppliers with warnings of possible shortages in 2023.

This anticipated drop in supply could be offset by steady availabilities of marine fuel oil grades. High-sulphur fuel oil (HSFO) with 3.5pc sulphur remains well-supplied in Europe and prices have remained broadly dampened in recent months, even though Russia has traditionally constituted the lead exporter of that product to Europe. Russian HSFO supplies to Europe were curtailed in August by EU coal sanctions, because heavy fuel oil is shipped under the same EU customs code. But falling Russian imports have been balanced by increased shipments from Saudi Arabia, Greece and the UAE.

Very-low sulphur fuel oil (VLSFO) supplies are also likely to buoyed into 2023 by strong production in Europe and the Mideast Gulf. The start-up of KPC's new 615,000 b/d Al-Zour refinery will increase global VLSFO supply by as much as 10mn-12mn t/yr, which will either contribute to European stocks or displace European supply on its key arbitrage route to Asia-Pacific.

Supply of marine fuel oils will also depend on European refineries' crude slates, and it remains to be seen how the continent will adjust without Russian Urals crude. Alternative medium-sour grades from the Mideast Gulf or Norway — the second phase of the Johan Sverdrup field started production in December — could support residual fuel oil output, but conversely, in the event of stiff competition for those grades, Europe could move to a lighter sweeter slate, cutting residual fuel yields.

Demand signals

Bunkering demand from containerships could decrease in 2023. The global shipping industry is at the mercy of recessionary pressures — economic slowdowns typically restrict the chartering and movement of goods along international shipping lines. International container trades makes up the fourth largest shipping sector by tonne-miles — a measure of how far freight travels — after tanker, bulk and dry cargoes, with the biggest share trading along the main east-west routes.

But this could be partially offset by stronger demand for other large shipping segments. Sanctions on Russian oil will push Europe to look further afield for supplies, which is already being reflected in sharp rises in clean-tanker freight rates as tonne-miles surge. That is likely to continue into 2023 and support bunker demand from tankers.

Recent statistics from Rotterdam show increased sales across all marine fuel grades in the third quarter of 2022, but economic headwinds could strengthen in coming quarters as energy supply shortages pinch industry and inflation rises.

Demand for MGO could rise comparative to other grades, after the International Maritime Organisation (IMO) announced on 15 December that it will adopt a 0.1pc sulphur Emissions Control Area (ECA) in the Mediterranean from 2024. Shipowners will look to scale up usage of the marine gasoil ahead of then, which in a short-supplied market could support prices for the grade.

By James Marriott and Jonah Sweeney

Photo credit and source: Argus Media
Published: 22 December, 2022

Business

Shell MGO bunker heist: Bunker clerk pleads guilty to helping Sentek acquire misappropriated fuel

Wong Wai Meng, who received more than USD 286,000 from Sentek Marine & Trading for his assistance, pleaded guilty to 12 counts of intentionally helping the firm acquire the misappropriated marine gas.

Published

10 hours ago

December 2, 2024

Admin

A bunker clerk, Wong Wai Meng, who received more than USD 286,000 (SGD 384,681) from Singapore-based Sentek Marine & Trading (Sentek) for his assistance, pleaded guilty to 12 counts of intentionally helping the company acquire misappropriated marine gas oil, The Straits Times reported on Friday (29 November).

The 58-year-old Singaporean was employed at the Sentek when he assisted in acquiring more than 28,000 metric tonnes (mt) of the misappropriated fuel worth USD 13.58 million (SGD 18.26 million).

Wong committed the offences over 46 occasions between August 2014 and December 2017.

Wong is among the three bunker clerks previously employed by Sentek, who were charged for offences under the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act (CDSA) and the Prevention of Corruption Act (PCA).

Another bunker clerk among the three charged, Wong Kuin Wah, 61, was sentenced to seven years and six months’ jail on 18 November for his role in misappropriating more than 27,000 tonnes of gas oil worth around USD 12.8 million (SGD 17.2 million).

The third individual who was charged, Boo Pu Wen, reportedly passed away in July 2023 and had his charges abated following his death, meaning Boo’s court proceedings over his 19 charges at the time came to an end.

Former Shell employees, who were key members of a group who dishonestly misappropriated fuel from Shell Pulau Bukom, were sentenced to jail in court earlier.

Earlier coverage of developments by Manifold Times regarding the Shell MGO bunker heist can be found below:

Photo credit: Katrin Bolovtsova
Published: 2 December, 2024

Biofuel

Singapore: GCMD introduces new technique for FAME bio bunker fuel fingerprinting

Fingerprinting identifies feedstock origins of FAME-based biofuels used in shipping industry; can be used as a potential tool to detect fraud in marine fuel supply chains and ensure biofuel authenticity.

Published

10 hours ago

December 2, 2024

Admin

Singapore: GCMD introduces new technique for FAME bio bunker fuel fingerprinting

The Global Centre for Maritime Decarbonisation (GCMD) on Monday (2 December) released its latest report, presenting a new technique that creates a fingerprint for Fatty Acid Methyl Esters(FAME) bio bunker fuels.

This fingerprint identifies the feedstock origins of the FAME-based biofuels used in the shipping industry.

GCMD said FAME fingerprinting is needed as the shipping sector is increasingly using biofuels, such as FAME, to reduce its GHG emissions. With that, concerns have arisen regarding the legitimacy of biofuels and whether they are truly sustainable.

Industry bodies are seeing a rising number of cases mislabelling biofuels purported to be made from recycled oils and fats, while suspicions persist that they might be produced from cheaper and less sustainable virgin oils.

“To address these concerns, FAME fingerprinting can be used as a potential tool to detect fraud in marine fuel supply chains and ensure biofuel authenticity. By providing a physical validation method that complements existing certification schemes, FAME fingerprinting can help justify the green premium with genuine environmental benefits and safeguard the integrity of marine fuels supply chain,” GCMD said.

FAME fingerprinting is based on the principle that the fatty acid profile of FAME is unique to its feedstock and can be preserved during feedstock transesterification to produce FAME. The "fingerprint" can then be compared against a database of known fatty acid profiles to identify the feedstock origin.

GCMD worked with VPS who modified existing fuel testing methods to carry out sample analyses using a gas chromatograph with flame-ionisation detection, an instrument commonly found in fuel test laboratories.

The analysis takes about an hour, comparable to the turnaround time for current marine fuel quality testing in the supply chain.

“We have tested this method on a variety of FAME samples from different suppliers, including virgin oils, used cooking oils, palm oil mill effluent, beef tallow and food waste and were able to identify the feedstock origins for each sample,” GCMD added.

Manifold Times previously reported Captain Rahul Choudhuri, President, Strategic Partnerships at marine fuels testing company VPS, forecasting the use of finger printing technology today will likely establish a blueprint of how future alternative bunker fuels’ feedstocks are authenticated.

Captain Choudhuri said this when he gave an update of VPS’ biofuels finger printing trials with GCMD.

Note: The full report, titled ‘Rapid forensic analysis of FAME-based biofuels: Potential use of its fingerprint as a fraud detection tool’, can be downloaded here.

Photo credit: Global Centre for Maritime Decarbonisation
Published: 2 December, 2024

Methanol

PLAGEN to produce and supply green methanol bunker fuel with Latvia plant

Korean firm’s MoU with AE Risinājumi will see construction of Latvia’s first commercial-scale green methanol production plant, which will supply green methanol to ships in EU’s maritime fleet.

Published

10 hours ago

December 2, 2024

Admin

PLAGEN to produce and supply green methanol bunker fuel with Latvia plant

South Korean clean energy firm PLAGEN on Friday (29 November) signed an MOU with Latvian company, AE Risinājumi, for the production of green methanol in Latvia at the “2024 Latvia-Korea Business Forum” hosted by the President of Latvia.

The agreement will result in the construction of Latvia's first commercial-scale green methanol production plant, which will supply green methanol to ships in the EU's maritime fleet, contributing to the reduction of greenhouse gas emissions from maritime transportation.

PLAGEN's MoU aims to produce 20,000 metric tonnes (mt) of green methanol per year and will begin feasibility studies in the first half of 2025, and full-scale production will begin in 2028.

With 53% of Latvia's land area covered by forests, timber production and wood processing make a significant contribution to Latvia’s economic production, which generates a large amount of forest residues and wood wastes. In addition, Latvia also has an abundance and low price of renewable electricity from wind power.

Latvia is one of the most competitive countries in the European Union, as it can produce clean methanol at a competitive price by using abundant wood waste as a raw material and renewable electricity from cheap wind power.

The use of abundant forest residues and wood wastes as a feedstock and cheap renewable electricity from wind power makes it possible to produce green methanol with a competitive price, making Latvia is one of the most competitive countries in the EU.

In the European Union, the European Emissions Trading Scheme (EU-ETS) will come into effect in 2025, requiring shipping companies to purchase carbon credits for their greenhouse gas emissions.

In addition, the EU is implementing FuelEU Maritime, which aims to reduce greenhouse gas emissions by 2% below the 2020 average by 2025 and 80% by 2050. This is expected to result in an energy transition to green methanol.

In July 2023, the International Maritime Organization (IMO) adopted a revised strategy that calls for reducing greenhouse gas (GHG) emissions from ships to net-zero by or around 2050, and plans to introduce full-scale regulations from 2027, and shipping companies have begun ordering methanol-powered ships fueled by green methanol, a carbon-neutral fuel.

“We expect to start producing green methanol in Latvia in 2028, which will reduce greenhouse gas emissions from EU maritime transport vessels and contribute significantly to the revitalization of the Latvian economy and national energy security,” said John Kyung, CEO of PLAGEN.

In November 2024, PLAGEN completed the purchase of an industrial complex and received a government permit for the construction of the country's first green methanol plant in Dongjeom Industrial Complex in Taebaek City, Gangwon-do.

The project, which will produce 10,000 mt per year, is scheduled to begin construction in the first half of 2025 and begin production in the second half of 2027.

Photo credit: PLAGEN
Published: 2 December, 2024