EMEA News
Saudi Refinery Delay Bears Down on Fuel Fundamentals
Two Saudi Arabian energy projects could affect high sulfur fuel oil fundamentals in the run up to IMO2020 and beyond.
The two projects are a refinery and power plant at Jazan on the Saudi Red Sea coast. The 400,000 barrels a day (b/d) Jazan refinery which had originally been expected to start in 2018, is yet to start up.
Its feedstock -- some 90,000 b/d of high sulfur fuel oil -- has been earmarked for the nearby Jazan power plant.
But with no start up date, that demand is being met by fuel oil imports.
According to Rhidoy Rashid, an analyst with London-based firm Energy Aspects, the start up date could be put back to early 2020.
Meanwhile, the power plant will pull in fuel oil barrels and put pressure on global fuel oil balances. However, once the refinery starts up, those barrels will be backed out, Rashid said.
"With the start-up of the power plant, Saudi fuel oil imports will remain supported this year, which will further tighten an already tight fuel oil market.," Rashid said.
In addition, the Jazan refinery is expected to produce 250,000 b/d of distillate to meet the expected high demand for the product post-IMO2020.
One of the key uncertainties for shipowners in the run up to rule change on the sulfur content of fuel oil is around the future price of bunker fuel.
Price differentials between high and low sulfur fuel oil will inform shipowner choices on which bunker fuel solution to adopt.
