BP positive on 2020 product availability and compliance, expects role for scrubbing
Oil major BP thinks the rate of compliance with the 0.50% sulphur limit in 2020 will be high and that the global refining system has capacity to supply the required fuels, according to a presentation given at a joint forum organised by IBIA and the UK Chamber of Shipping in London last month.
Justin Longhurst, Marine Fuels Supply & Trading Manager, BP, said compliance is likely to be high because the majority of global bunker fuel consumption is consumed by a few large, publicly listed companies that will comply. A big share of that consumption is by very large vessels, with an estimated 6% of ships accounting for 30% of global demand, Longhurst said. Overall, 33% of ships account for 70% of global bunker demand and most of these volumes are picked up in a few large ports, he added.
BP’s forecast for the global fuel use picture in 2020 to 2025 assumes maybe 5% high sulphur fuel oil (HSFO) will be used non-compliantly in first year, then shrink year-on-year to less than 2% by 2025.
As for the volume of HSFO being used compliantly by vessels with scrubber installations, BP shows two different scenarios for 2020 with one assuming just 500 scrubbers in operation and another assuming 4,000 by 2020, resulting in either less than 5% or approximately 15% of global marine fuel demand being met by HSFO and scrubbers. By 2025, BP’s model suggested 35- 40% of global bunker demand would be met by HSFO as scrubber installations accelerate in response to economic signals.
Longhurst said the economics for scrubbers appears to be very good for large ships and that BP has had positive initial experience with the technology, despite a technically challenging installation. The company has had open/closed loop hybrid scrubbers fitted on two 40,000 dwt new-build product carriers, delivered in December 2016 and January 2017. The systems were designed for use in Northern Europe and Baltic emission control areas, and have successfully passed sea trials with emissions below the ECA equivalent requirement of 0.10% sulphur fuel. Longhurst added that trials have indicated that the systems could meet a 0.50% sulphur equivalent without adding caustic soda, and BP is currently evaluating retrofit options on other vessels in its fleet.
BP expectations are very much in line with the low sulphur fuel availability study done for the International Maritime Organization in 2016 by CE Delft, suggesting that scrubbers will play a role in meeting the MARPOL Annex VI sulphur limits in 2020 but that the biggest volume will be fuels that meet 0.50% sulphur. In line with the CE Delft study, BP’s forecast indicates that while some of the demand will be met by marine gas oil (MGO), most will be met other products. BP sees only a small share of demand, less than 1%, being met by LNG in 2020 and growing slowly to 2025.
Longhurst outlined ways refiners can shift production to gear it toward meeting demand for low sulphur marine fuels in 2020. For example, he said products with low sulphur that are currently used as feedstock for secondary refining units will instead go into the marine fuel supply pool, along with a range of other low and medium sulphur components that are currently blended into high sulphur fuel oil (HSFO). Components with sulphur well below 0.50% can be blended with components just above 0.50% to make compliant blends.
Refiners can also adjust their output by tweaks to their crude slates, using more low sulphur crude oils. There is also the option switch away from gasoline production in favour of making more distillates, which is possible if refiners think the price of distillate versus gasoline makes this an attractive option. There will also likely be more use of secondary refinery units to process high sulphur residues into middle distillates.
In summary, Longhurst said the global refining system has capacity to supply the products required, with distillate being “the marginal source of compliant fuel”. He said BP expects to be ready to meet demand for low sulphur marine fuels, as well as ongoing needs for HSFO for ships fitted with scrubbers.
Report by Unni Einemo