IEA: MGO Demand to Grow 50% in Europe, Dominate in OECD Americas

Using MGO is one way ships can meet new ECA rules

The International Energy Agency (IEA) Friday predicted in its monthly report for November that European demand for Marine Gasoil (MGO) will grow by 50 percent from January 1, while the fuel will become the dominant choice among OECD Americas nations, Platts reports.

"European bunker fuel demand, at an estimated 790,000 b/d in 2014, approximately comprised 80% heavier sulfur fuel oil and 20% marine gasoil," said IEA.

"The relative ratio changes to 70:30 in 2015, as tightening sulfur regulations take effect."

For OECD Americas nations, MGO is expected to become the dominant marine fuel in use, seeing its market share move from 50:50 relative to HFO, to 65:35.

Demand for MGO is expected to increase as shippers operating within Emissions Control Areas (ECAs) seek to comply with new, stricter sulfur emissions rules from January 1, 2015.

MGO meets the new allowable sulfur limit of 0.10 percent by weight, but other methods of compliance are available such as using scrubbing technology or switching to Liquefied Natural Gas (LNG) bunkers.

Some shippers are expected to flout the new rules, IEA said, meaning MGO's market share may not grow in line with their prediction immediately.

"Potential compliance issues could, of course, slow the potential adjustment with European waters a particular concern as seas south of the Baltic are exempt, and without sufficient enforcement reduced compliance could ensue," said IEA.

IEA said OECD bunker demand was, overall, forecast to contract month-on-month by 165,000 barrels per day (bpd) in January against a seven year average of an 85,000 bpd increase for the same period.

OECD MGO deliveries are, however, expected to fall by less than usual, contracting by 195,000 bpd month-on-month as opposed to a 2008-14 average of 420,000 bpd.

IEA said last week that Asian governments must reform if they are to grow LNG supply in line with demand.