Kassinger: No Point in Waiting to Implement 0.5% Global Sulfur Cap, but if You Do, Wait Until 2075, not 2020 or 2025

Oil and bunker industry veteran Dr Rudy Kassinger says there is little point in delaying the implementation of a 0.50 percent global sulfur cap for marine fuels until 2020, or even 2025.

The global cap on the sulfur content of marine fuel is currently set to be reduced in 2020 from 3.5 percent to 0.50 percent by weight, although an International Maritime Organisation (IMO) review, currently scheduled for 2018 to assess whether enough compliant product will be available in 2020, could see that date delayed until 2025.

Speaking at the recent Connecticut Maritime Association (CMA) Shipping 2015 event, Kassinger explained that the refining industry will have to invest at least $100 billion to convert all the residual fuel no longer being used by the marine industry into clean products.

"I think it's a waste of time to dilly-dally and go with the 0.5 percent spec at 2020. There's no point in waiting," he said.

"2025 doesn't make a lot of sense to me because if you really want to wait until the day there is no longer any high sulfur fuel, I would say change that from 2025 to 2075. Maybe you have a shot."

Kassinger explained the reason why there was no sense in waiting was that given the amount of time and investment it would take for the oil industry to alter its current practices, there will be little change to the refining picture over the next decade.

At the same time, he noted that there are a number of options available today for shipowners to comply with a 0.50 percent global sulfur cap.

"There's [Liquified Natural Gas] LNG, there's distillate fuels, there are hybrid fuel, and there's black oil and scrubbing," Kassinger said.

The Cost of Reduced Sulfur Levels

Residual fuel is not a refined product, but a byproduct of the refining process and its chemistry is not changed by the refiner.

As the target sulfur level for the fuel oil is reduced, the pool of available crudes that can be used gets smaller.

"Once [the target sulfur level] hits about 1.5 percent, even residues from low sulfur crudes need to be reduced in sulfur content, and refiners would then probably desulfurise gas oil and blend to the 0.50 percent spec," said Kassinger.

"Once it gets below 0.5 percent the game's up because the best option then is residue conversion."

At this point refiners are left with two choices to work with the residue: carbon rejection, known as coking where the coke is removed from the oil; or hydrogen addition, a process known as hydro-cracking.

Kassinger noted that in an earlier CMA presentation, a Shell representative said that in order to dispose of the residue that is currently being used as marine fuel it would take an investment of $100 billion.

"I thought that was in fact a lowball estimate," said Kassinger.

"But it's a number that you can rationalise because ExxonMobil just published their information about the Antwerp 50,000 barrel per a day coker at a cost of $1 billion. You'll only need about 100 of those to get rid of the residue currently used as marine fuel. That's $100 billion."

The other issue, he explained, was that even if the funds for such an undertaking were easily available, building such a large number of units would take considerable time.

"You have to remember if you need 100 cokers they don't come out over night. You don't call up your local purveyor and say, put a coker in. Figure five or more years to get it in," he said.

"So even my 2075 number I think is wishful thinking but at least it gives them a little bit of a reasonable target."

Speaking at the same event, Kassinger also questioned the practicality of the 2018 review.