BP Ready for 2020 0.5% Global Sulfur Cap, but No-One Knows What 100+ of the World's Others Refiners Will Do

Rudy Kassinger says what the world's 100+ refiners are planning to do in future years is an unanswerable question.

Next week at the 70th Session of IMO's Marine Environment Protection Committee (MEPC 70), a decision is expected on whether a 0.50 percent global sulfur cap for marine fuel will come into force in 2020, or delayed until 2025.

Energy major BP says it is ready for 2020, but what over 100 of the world's other refiners will do is completely unknown despite the completion of two fuel availability studies, industry expert Rudy Kassinger has warned.

"BP has long been saying we're ready for 2020," Andy Milnes, CEO, Integrated Supply & Trading - Eastern Hemisphere told delegates gathered for SIBCON earlier this month.

"We would like clarity; we want certainty. If there is certainty coming out of the upcoming [MEPC 70] meeting then if it is 2020 we can get on working towards what those solutions are; solutions for the refiners, solutions for the suppliers, and solutions for the ship owners.

"I think the industry is ready for 2020, or the industry can be ready for 2020, if we have that certainty."

Flawed Fuel Availability Studies?

Key to the IMO's decision-making process is its official fuel availability study that was led by CE Delft, and this study concluded there were no major barriers to producing enough compliant bunkers to meet a 0.50 percent global sulfur cap in 2020.

A second independent study, conducted by EnSys Energy & Systems Inc. (EnSys), found that if the 2020 date is chosen then refiners could have "extreme difficulty" in meeting demand for low sulfur fuels.

Some observers have noted that it is hard to assess exactly how the two reports came to such different conclusions; the EnSys study, for example, did not undergo the same level of official review as the IMO study, nor was it subject to the same requirement for transparency as the CE Delft-led consortium was for its study.

Kassinger, a 50 year veteran of the oil and bunker industries, meanwhile, says both studies are no more than "a best effort to take on an unanswerable question."

"The two studies are what I label as an 'exchange of ignorance' as neither one has any idea what the world's 100+ refiners are planning to do in future years," he told Ship & Bunker.

"As you know there is not a single spokesperson for world refining - competition rules prevent this - but this is actually an unanswerable question as in fact I doubt the individual refiners know what they are going to do. I think their most reasonable response is to sit and wait till the dust settles."

Time & Money

One issue, highlighted by Kassinger numerous times in the past, is that the difference between a 2020 or 2025 timeframe is meaningless compared to the time it would take for refining to repurpose all the residual product currently used by marine.

"Waiting until 2025 won't do it, 2075 is more realistic," he says.

Another factor is that the industry has many competing claims as to where it should make its investments.

"An argument that hasn't been raised is that the petroleum industry has lots of pressing needs for its dollars and billion dollar resid destruction projects are only one of the many demands for capital," he told Ship & Bunker.

"There are also relatively few construction companies that can take on such a project, and they are roughly five-plus year efforts from planning to operation."

Indeed, this is an issue that was also highlighted by BP's Milnes.

"Refinery projects take a long time. They take a long time to plan, they take a long time to invest, and they take quite a long time to establish themselves," he said.

"So I don't think the industry will be any better ready in 2025 than is it today for 2020 ... we stand ready to invest; we're just waiting to get these pricing signals to tell us what to do."