0.50% Global Sulfur Cap Could See Singapore, Other Major Bunker Ports Take an Even Bigger Share of the Global Bunker Market: Tolson

Tuesday July 19, 2016

The new 0.50 percent global sulfur cap should be particularly good news for Singapore, and could help to grow its bunker sales to take an even bigger share of the global market, Adrian Tolson, Senior Partner, 20|20 Marine Energy, has told Ship & Bunker.

Other major world bunker supply ports could also benefit when the new Global ECA limit comes into force, he added.

That is widely expected to happen from January 1, 2020, although a delay until 2025 is still possible, with the IMO set to make a decision on the matter at MEPC 70 this coming October.

So far, options for compliance with the new limit have centred around burning either low-sulfur distillates or otherwise non-complaint HFO in conjunction with a scrubber to achieve an equivalent level of emissions compliance.

A smaller number of players are also looking into using liquefied natural gas (LNG) and other non-oil-based bunkers for compliance.

So far, little attention seems to have been given to 0.50 percent maximum sulfur blends, but it is precisely these emerging products that Tolson says will give Singapore an edge, as well as being advantageous to others in the Straits of Malacca in general.

Blends and Blending Centres

"I think that most suppliers expect to be making a 0.50 percent maximum sulfur residual / gasoil blend. There are lots of options, and depending on the location they could include Vacuum Gas Oils (VGOs), or topped low sulfur crudes," said Tolson.

Canada-based Genoil Inc. (Genoil), who is aiming to produce 0.50 percent sulfur crude for the marine market, is also an option worth exploring, he added.

Any 0.50 percent blend would be expected to contain a significant proportion of distillate.

"The natural flow of distillates is from East to West, as opposed to fuel oil that tends to flow West to East, so it makes sense that some of that distillate will stay in Asia, in Singapore. I see the cargo traders and suppliers blending close to the limit as they do now, and this all creates an opportunity for a large supply base of compliant fuels that can feed the Singapore, Malaysian, and possibly Indonesian bunker market," said Tolson.

"In fact, the opportunity is there for all the big blending centres that are also big ports with regional supply options, so there is a similar potential for Fujairah, Rotterdam, and Houston also."

While volumes of compliant fuel will then build at those key supply points, smaller ports will not be in a position to optimise their blending to create the 0.50 percent products and will therefore possibly only be able to offer MGO for compliance, Tolson explained.

As Ship & Bunker analysis has previously indicated, in the future MGO is also expected to continue to get more expensive relative to crude, while HFO is expected to be cheaper.

That widening price gap between the two will act as a further incentive to buy and burn 0.50 percent sulfur bunkers.

"In my opinion, growth 2020 beyond will be product availability driven, and it all leads to the big ports, including Singapore, getting bigger," said Tolson.

Even without this boost, Singapore is already by far the world's biggest bunker supply port and growing.

As Ship & Bunker reported last week, H1 2016 bunker sales stood at 24,384,100 mt, the highest ever total for the first half of a year, and 13 percent higher than the six-month period in 2015 - a year that ended with its highest ever annual sales of 45.1 million mt.

Any suppliers looking to explore these issues in the context of their own business can reach Tolson as follows:

Adrian Tolson, Senior Partner, 20|20 Marine Energy

Tel  +1 203 594 7065
Mob  +1 415 420 0767
Email  adrian.tolson@2020marineenergy.com
Skype  adriant58
Yahoo  adrian_tolson