Quadrise: Economics of MSAR Emulsion Bunkers Still "Remain Sound" Despite Low Oil Price

A ten year long run as executive director of Quadrise comes to an end for Ian Williams. 

Quadrise Fuels International plc [LON:QFI] (Quadrise) has reiterated that the economics of its MSAR emulsion bunker fuel proposition "remain sound" despite chronically low oil prices - echoing a similar sentiment made last year.

Commenting in the UK-based firm's latest interim results for the last six months of 2015, in which it reported an operating loss for the period of £2.37 million ($3.41 million), outgoing Chairman Ian Williams said the "Quadrise value-add" in fact stemmed from the price differential between Heavy Fuel Oil (HFO) and distillate fuels.

"By using only low value heavy residue from the crude oil refining process, and ultimately selling it as MSAR emulsion fuel, the refiner is able to substantially increase the yield of high value distillate (principally diesel) fuels from their oil refinery," explained Williams.

"This adds significant value to the refining process at very low capital cost allowing the MSAR fuel to be priced competitively and provides financial incentives to the user to switch from conventional HFO. Directionally, the progressive tightening of combustion emissions standards by regulatory bodies, at national and global levels, has positive implications for Quadrise MSAR fuels in our target markets."

Last month Ship & Bunker noted that since the 2014 oil price collapse, the MGO - HFO spread has widened considerably in percentage terms, but in dollar terms has narrowed from an MGO premium of around $375 per metric tonne (pmt) in 2012 to under $200 pmt in recent months.

Quadrise said this was nevertheless "still sufficient at present and projected levels to support conversion to MSAR production for suitably configured semi-complex refineries."

As Ship & Bunker previously reported, last year Quadrise signed a deal with Spain's Compañía Española de Petróleos, S.A.U. (CEPSA) to trial supply MSAR to Maersk Line, and in its most recent update, the firm says that commercial roll-out should take place through 2017.

Quadrise also dismissed any challenge to these plans from liquefied natural gas (LNG) bunkers, saying that while gas prices are likely to stay low in the medium term, it was "generally acknowledged" that LNG bunkers' market share is likely to be constrained in the medium term if gas prices remain depressed.

"The Company does not anticipate that the entry of LNG into the marine market will have any material impact on the post [CEPSA / Maersk Line] MSAR commercialisation and roll-out programme," Quadrise said.

"The marine fuels market is very large and there is more than enough room for a range of competing fuels."

The company also noted its cash reserves of £6.50 million ($9.4 million) as at December 31, 2015 was "sufficient to carry the group through to sustainable early revenues from its major projects."

Last month Ship & Bunker reported that Williams will be retiring effective March 2016, and will be succeeded by Mike Kirk.