Report: Gulf States to get Refined Products Export Boost

IMO2020: Saudi Arabian advantage (file image/pixabay)

The International Maritime Organisation's 0.5% sulfur cap could stimulate demand for Saudi Arabia's refined product exports if shipowners, as expected, opt for low sulfur fuel oil (LSFO) or marine diesel as their main method of complying with the new rule.

According to a new report from Arab Petroleum Investments Corporation (Apicorp), the Gulf Cooperation Council (GCC) states are in pole position to benefirt for the shipping rule change. Their refining sectors are geared to produce more diesel wihile states such as Saudi Arabia and Kuwait can soak up excess high sulfur fuel oil (HSFO) from their respective power sectors.

However, other oil-producing states may not fair so well, the report points out.

Iraq has limited LFSO production capacity and few opportunities to use up any HSFO oversupply.

Falling oil demand in Iran could see the Middle Eastern oil producer facing a similar situation. In addition, the refining sectors on the two countries lack the complexity required to produce LFSO, the report said.

"The IMO regulations will create winners and losers across the industry," Mustafa Ansari, senior economist at Apicorp, told website Tradearabia. 

"Refineries that have the means to reduce fuel oil production, or that are geared to producing middle-distillates, such as those across the GCC, will benefit from the additional demand.

"By contrast, countries without this capability, and with fewer alternative sources of demand, such as Iran and Iraq, will not be able to absorb excess supplies of fuel oil," the economist said.