The decision by the International Maritime Organization (IMO) to cap the limit of sulphur content in marine fuel from the current 3.5% to 0.5% from 2020 came too late for the refining sector to react, says the Managing Director of Rosneft Deutschland, the German downstream unit of Russia's state-controlled Rosneft.
First announced by the IMO in 2008, the IMO confirmed in 2016 that global refiners and shippers would have to comply with these new environmental regulations by 2020.
“The announcement of the change came in late 2016,” Brian Chesterman told global energy and commodity price reporting agency Argus Media in an interview.
“Any significant investments in refining for reducing fuel oil production or reducing the sulphur in residue typically take four or five years to implement. So it was not possible for refiners to make significant investments in order to be ready for January 2020.
“Each refinery will have its own mechanisms of balancing internally which streams it can put where. Longer-term we are always reviewing our investment options, and planning our investments according with long-term prognosis.”
Chesterman, meanwhile, notes the Wilhelmshaven refinery having plans to start production of 0.5% sulphur marine fuel but believes there is still a market for high sulphur fuel oil (HSFO) as fuel for vessels moving forward.
“What has changed in the last year is the balance of demand. People were very pessimistic a year ago about the demand for HSFO. But the amount of scrubbers that have been built is shifting that balance. We can see this in the forward curves for HSFO versus gasoil. There will be demand for low sulphur fuel oil (LSFO), that is for sure. From PCK we predominantly supply HSFO, we will be aiming to sell that into the demand that will continue to exist,” he said.
“Up to 20% of ships are installing scrubbers, so there will be demand for HSFO. And there is an existing fleet that can take HSFO that had scrubbers already, for example the ferry business. The industry will balance one way or another around this.”
Rosneft Deutschland in January 2019 started direct marketing operations of gasoline, diesel, heating oil, jet fuel, LPG, bitumen, fuel oil and petrochemical products from its three refineries and other lifting locations in Germany.
The full Argus Media interview with Brian Chesterman on Rosneft Deutschland’s views on refining, IMO 2020 and climate mandates can be found here.
Photo credit: Rosneft Deutschland
Published: 13 February, 2019
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