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Transcript of Sulphur
IMO Sulfur Regulations Impact on the Bunker Fuel Supply
October 25-27, 2009
2009 Energy Buyers ConferenceMiami Beach, Florida
© Poten & Partners 2009
© POTEN & PARTNERS 2009
Page 2 Global & Regional Marine Fuel Regulations
2005, May 19 IMO Global cap – 4.5%S
2006, May 19 IMO Baltic Sea ECA – 1.5%S2006, Aug 11 EU EU passenger ships 1.5%S2006, Aug 11 EU EU ports - 1.5%S MDO & 0.2%S MGO2007, Jan 1 CARB California, auxiliary engines - 1.5%S MGO & 0.5%s MDO2007, Nov 22 IMO North Sea/English Channel ECA - 1.5%S2009, Jul 1 CARB California, 24 nm off coast - 1.5%S MGO & 0.5%S MDO
2010, Jan 1 EU EU waterways & 2 hrs+ ships at berth – 0.1%S2010, Jan 1 CARB California, auxiliary engines – 0.1%S MGO2010, Jul 1 IMO Existing ECAs – 1.0%S2012, Jan 1 IMO Global cap – 3.5%S2012, Jan 1 CARB California, 24 nm off coast - 0.1%S MGO2012, Aug 1 IMO U.S. & Canada ECA – 1.0%S (200 nm off coast)2015, Jan 1 IMO Existing ECAs – 0.1%S2020/25, Jan 1 IMO Global cap – 0.5%S (subj. to 2018 feasibility study)
HISTORICAL
FUTURE
© POTEN & PARTNERS 2009
Page 3 California Marine Fuel Stance
• July 2009, California banned residual bunker fuel burn 24 nm off its coast and imposed 1.5%S MGO & 0.5%S MDO fuel limits
• Market response: Los Angeles MDO/MGO price firmed compared to other major bunkering ports
• Possibility of oil spill from a ship whose propulsion fails while switching fuel
Major Bunkering Ports, MDO/MGO Cost
350
400
450
500
550
600
650
700
750
800
Dec-08
J an-09Feb-09M
ar-09Apr-09
May-09
J un-09J ul-09Aug-09
Sep-09O
ct-09
$/m
t
LOS ANGELESFUJ AIRAHNEW YORKSINGAPOREHOUSTONROTTERDAM
© POTEN & PARTNERS 2009
Page 4 International Bunker Fuel Sales Overview
*Europe excludes all the Former Soviet Union republics (which includes Lithuania, Latvia and Estonia)
75
18
51
12
23
1218
0.3
13
37
1 42
0
10
20
30
40
50
60
70
80
Mill
ion
Met
ric T
ons
Asia-Pacific Europe * NorthAmerica
Middle East S.America &Caribbean
FormerSoviet Union
Africa
Marine Bunkers Sales by Global Region, 2008
Residual Bunker Fuel
Marine Gasoil/Diesel
Global Bunker Fuel Sales, 2008Marine Gasoil/Diesel 20%
Residual Bunker Fuel80%
192.1 million mt
47.9 million mt
© POTEN & PARTNERS 2009
Page 5 July 2010 ECA 1.0%S Marine Fuel Switch:
• The Baltic Sea/North Sea ECA is satisfactory managing the current 1.5%S bunker demand
• The switch to 1.0% would not present too much of a supply challenge, however at what cost, remains to be seen
2010 North Europe ECA - Estimated Demand for 1.0%S Heavy Bunkers
0
5
10
15
20
25
30
35
40
2010
mill
ion
mt
1%S HFO Bunker Shift
Remaining HFO Bunker Demand
36.4
21%
79%
© POTEN & PARTNERS 2009
Page 6 Aug 2012 North America 1.0%S Marine Fuel Switch:
• Canada & US East Coasts can meet the 1.0%S demand
• North America West Coast would require LSFO imports
• Gulf Coast could require some level of imports
• The Great Lakes could meet the demand with Canadian LSFO production
2012 North America ECA - Estimated Demand for 1.0%S Heavy Bunkers
0
2
4
6
8
10
East Coast West Coast Gulf Coast Great Lakes
mill
ion
mt
1%S HFO Bunker Shift
Remaining HFO Bunker Demand8.3
23%
7.9 20% 6.4
22%
0.3 100%
© POTEN & PARTNERS 2009
Page 7January 2015 - ECA 0.1%S Marine Fuel Switch
• 0.1%S bunker fuel cannot be achieved by desulfurizing residual fuel oil; switching to marine gasoil required
• NW Europe diesel/gasoil short net position would create an issue for the 0.1%S changeover. Russian gasoil/diesel supplies would meet some of the demand.
• Generally refiners look to invest in resid destruction capacity to produce high value transportation fuels
• Depending on MDO/MGO cost, vessel exhaust scrubbing technology could be an option for shipowners if commercially viable
ECAs MDO/MGO 2015 Projected Availability
14
-17
68
-20
-15
-10
-5
0
5
10
15
20
North America ECA NW Europe ECA *
million m
t
Gasoil/Diesel Net Position
Demand for 0.1%S Bunker Fuel
* NW Europe gasoil/diesel net position given, does not include Russia's net position
© POTEN & PARTNERS 2009
Page 8 Global Marine Fuel Cap – 3.5%S
In January 2012, global marine fuel sulfur content is to be capped at 3.5%S. Since average global sulfur content is 2.7% according to IMO methods, this sulfur limit drop is generally symbolic
Major Ports Average Heavy Bunker Fuel Sulfur Content
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
ROTTERD
AM
NEW
YORK
LOS A
NG
ELES
HO
USTO
N
SING
APORE
FUJ A
IRAH
% S
ulfu
rJ an 2012 Global 3.5%S Cap
© POTEN & PARTNERS 2009
Page 9 Global Marine Fuel Cap – 0.5%S
• Global marine HFO, which in 2008 accounted for about 192 million mt, could increase by 10-15% by time frame of 2020/2025
• Global production of gasoil/diesel would not be sufficient to meet the surge in world 0.5%S MDO/MGO demand
• To speculate – unless scrubbers become accepted as commercially viable, refiners will need price incentives to desulfurize HFO. A combination of both will probably occur
MARPOL Annex VI Marine Fuel Sulfur Limits
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
2000 2005 2010 2015 2020 2025
Sulfur
, %
Global
SOx ECA
© POTEN & PARTNERS 2009
Page 10Considered Future ECAs
• In 2008, Mediterranean sea countries’ marine HFO sales for domestic burn were about 1 million mt and projected to grow through 2015
• Mediterranean countries are net short diesel/gasoil
• Gasoil/diesel supply from the Black Sea region would alleviate this short position
• Mexico is considering joining the U.S. and Canada North America ECA initiative
• In 2008, Mexico’s marine HFO sales for domestic burn were about 800 thousand mt and projected to grow through 2015
• Mexico is net short diesel/gasoil, so as a prospective ECA member it would need MDO/MGO imports to meet demand in 2015
Mexico, Diesel/Gasoil Net Position
-4.5
-6.0-7-6-5-4-3-2-101
2008 Projected 2015
mill
ion m
t
Mediterranean, Diesel/Gasoil Net Position
-13.2
8.4
13.6
-10.0-16-12-8-4048
1216
2008 Projected 2015
mill
ion
mt
Countries Surrounding the MedMed & Black Sea Countries
© POTEN & PARTNERS 2009
Page 11 Near-Term Tanker Shipping Expectations
• Still bullish on China and India• Lower than ‘expected’ GDP growth assessments do not necessarily denote low
growth
• Cash injections by certain governments will help support shipping industry in certain markets, particularly in the East
• Demand in OECD markets expected to recover slowly through the remainder of 2009 bolstering tanker demand
• Economic recovery will be largely dictated by policy• Banking sector regulation
• Stimulus and deficit
• Taxes
• Likelihood of the ‘double-dip’ recession
Marine Fuel Regulations 2010-2025What the Future Holds for the International Shipping Industry
A Focused Analysis and Outlook on the Marine Fuels Market
- Overview of Marine Fuel Historical and Future Regulations
- Residual Bunker Fuel and Marine Gasoil/Diesel (2007-2008)
Demand by Region
- ECA 1.0%S Marine Fuel Limit (July 2010)
- Impact of Future North America ECA (2012)
- ECA 0.1%S Marine Fuel Limit (January 2015)
- Global 0.5%S Bunker Limit (2020/2025)
- Future Marine Fuel Pricing Implications
to be published December 2009
© POTEN & PARTNERS 2009
Page 12
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