Supply and blending implication of LSFO...

Torbjorn Lie29 October 2009

0910

2901

Supply and blending implication of LSFO

Bunker Asia 2009

© Det Norske Veritas AS. All rights reserved.

Supply and blending implication of LSFO demand

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Agenda

� Supply and blending implication of LSFO

� Potential quality developments in Asia

� Potential price developments in Asia



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History

� Basic quality of residual fuels used by ships has been remarkable steady for the past 50 years

� Residual fuels with Sulphur content up to 4.5% has been widely used for propulsion since 1950s

� Residual fuels have provided shipping with a low-cost fuel, and refiners with a market for a byproduct of crude oil processing

� Refiners objective has always been to cut residual fuel production to a minimum, but also maximize the use of residues

� Controlling parameters for refiners or blenders has been Viscosity and Density

� Generally residual fuels have been produced with very similar quality and handling characteristics, regardless of bunkering location



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Refinery processes� Atmospheric Residue

- Cut point approximately 350 °C- Many atmospheric residues meet all

specifications of ISO 8217 (incl. Viscosity and Density

- Normally referred to as “straight run”- Feed stock for secondary refining- Availability diminishing due to higher value

� Vacuum Residue- Cut point approximately 550 °C- Most refiners have been making vacuum

residue for years- Meet most specifications in ISO 8217 with

exception of Density and/or Viscosity- … before cutter stock is added



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Fuel oil quality varies…

24-212-310Pour Point °C

881.61 200Vanadium PPM

3.59.82.53.719 000Viscosity cSt @ 40°C

0.111.650.090.265.5Sulphur %

.841.870.820.834.999Density@ 15°C

36.531413810API

ArdjunaIran HeavyBrass RiverBrentBoscanCrude Oil

IndonesiaIranNigeriaUKVenezuela

Residual fuel oil quality varies depending on the crude used and refinery configuration. It will determine, among other things, the Sulphur content…



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“At 4.5%, Sulphur is not a critical spec, but at 1.5% it is”

Sulphur variations

� Sulphur in crude gets concentrated in refinery residues

� Atmospheric Residue has about 85% of the crude’s Sulphur, Vacuum Residue even higher

� Vacuum Residue gives a product that is too high in Density and Viscosity, this is normally addressed by blending

� Meeting a Sulphur limit of 4.5% within these blends are normally not a problem

� Blending residual fuels to meet lower Sulphur targets will cause all other fuel properties to change, especially Density and Viscosity

Dr. Rudy Kassinger, DNVPS



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Sulphur development



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Fuel trendsSulphur trend (port average)

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

Am s terdam Antwerp Gibraltar Hong Kong Los Angeles Miam i New York Port Klang Rotterdam Singapore

2005 2006 2007 2008 2009



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Sulphur distribution following SECA 2

Industry advice regarding availability is that worldwide there is sufficient quantity of low sulphur fuel for the anticipated demand in existing ECAs

� The problem seems to be whether the supplies are distributed where they are needed

� Main bunkering ports such as Singapore and Rotterdam are said to have LSFO available; Baltic ports are also reported to have the fuel widely available

� Problem for shipowners is that the SECAs will have to be transited to reach those supplies2.642.64

2.212.21

3.103.10

3.003.00

1.331.33

1.581.58

1.251.25

2.552.55

2.732.73

1.811.81

2.422.42

1.931.93

3.483.48

2.522.52

3.193.19

1.671.67

3.133.13

2.762.76

2.492.49

2.442.44

2.142.14

2.342.34

2.142.14

1.531.53

Aug 11 th – Aug 10th

2.712.71

2.272.27

3.163.16

3.063.06

1.121.12

1.581.58

1.391.39

2.862.86

2.752.75

2.022.02

2.512.51

2.142.14

3.443.44

2.602.60

3.043.04

1.781.78

3.143.14

2.852.85

2.632.63

2.452.45

2.212.21

2.502.50

2.322.32

1.671.67

Aug 11 th – Aug 10 th

Average Sulphur Content [%]

--2.62.6World

--3.03.0West Africa

--2.12.1US Gulf Coast

--2.12.1South Asia

18.218.2South America - West

0.20.2South America - North

--10.210.2South America - East

--10.810.8South Africa

--0.60.6Oceania

--10.510.5North Sea SECA ex. ARA

--3.73.7North Sea SECA ARA

--9.89.8North Atlantic ex. Biscay

1.01.0Middle East

--3.43.4Mediterranean & Black Sea

5.05.0Indian Sub-Continent

--6.46.4Great Lakes

--0.20.2East Asia

--3.23.2East Afrika

--5.55.5Central America

--0.60.6Caribbean

--3.23.2Canada & US West Coast

--6.56.5Canada & US East Coast

--8.08.0Biscay

--8.78.7Baltic SECA

% ChangeRegion



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Abras ives trend (port average)

0

5

10

15

20

25

30

35

40

45

A msterdam A ntw erp Gibraltar Hong Kong LosA ngeles

Miami New Y ork Port Klang Rotterdam Singapore

2005 2006 2007 2008 2009

Fuel trends



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Bunker Alerts 2007 - 2008Issued Subject Location07-Aug-07 High Abrasives Fujairah, UAE

24-Aug-07 Chemical waste Gulf Of Guinea

28-Aug-07 High Density Valparaiso, Chile

31-Aug-07 High Sediment Kalilimenes, Greece

19-Sep-07 High Abrasives Rotterdam & Antwerp

10-Oct-07 High Sediments ST.Pettersburg, Russia

19-Oct-07 High Density Jacksonville

24-Oct-07 Low Sulphur Ventspils, Latvia

07-Nov-07 High Abrasives Naples, Italy

09-Nov-07 High Sulphur Leghorn, Italy

09-Nov-07 High Sediments Singapore

12-Nov-07 High Sediments Port Klang, Malaysia

13-Nov-07 High Abrasives Singapore

15-Nov-07 Chemical waste Balboa, Panama Canal Zone

21-Nov-07 High Sodium Suez, Egypt

21-Nov-07 High Sodium Honolulu, USA

27-Nov-07 Low Flash Point Fuels Singapore

28-Nov-07 Low Flash Point Fuels Tanjung Pelepas

28-Nov-07 High Abrasives Rotterdam, The Netherlands

19-Dec-07 HIGH CCAI FUELS GDANSK, POLAND

24-Dec-07 Used Lubricating Oil Greater ARA Region

28-Dec-07 High Sediment Fuels Antwerp and Ghent, Belgium

29-Jan-08 Chemical waste Marine Diesel Oil ST.Petersburg, Russia

05-Feb-08 High Density Fuels Kaohsiung, Taiwan

06-Feb-08 High Sediment Fuels Port of Callao, Peru

15-Feb-08 High abrasives Miami, USA

18-Feb-08 Low Flash Point Fuels Sydney, Australia

27-Feb-08 High Sediment Fuels Kaohsiung, Taiwan

27-Feb-08 High Water Content in Fuels Vladivostok, Russia

29-Feb-08 Fuels with Elevated Levels of Calcium, Phosphorus and Zinc Kingston, Jamaica



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Regulation and legislation (fuel)

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2025

Aug 11th

SECA 1, directiveinto force1.5% S

Aug 11th

SECA 2, directiveinto force1.5% S

MarpolAnnex VI ratified

May 19th

MarpolAnnex VI global S limit 4.5%

May 19th

Marpol Annex VI SECA1, S limit 1.5%

Nov 11th

Marpol Annex VI SECA2, S limit 1.5%

Annex VI enteredinto force for theU.S. on January 8, 2009

ECA limit down to 1.00% S

Global S limit down to 3.50% from 4.50%

ECA limit down to 0.10% S

Global S limit down to 0.50% (subject to review)*

Marine gas oil (DMA) at or below 1.5% sulfur; or Marine

diesel oil (DMB) at or below 0.5% sulfur,

July 1, 2009 (CARB)

Marine gas oil (DMA) or marine diesel oil (DMB) at or below 0.1% sulfur, January 1, 2012 (CARB)

ECA along the coast ofUSA and Canada? August, 2012?

* In line with the UK's proposal, the working group also suggested that there should be a review in 2018 to assess fuel availability.

Depending on the outcome of the review, the 0.50% sulphur global standard may be delayed to 2025 instead of 2020.



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2012 new reality…



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Supplies by port

% of DNVPS world total tested samples per port

12.1

7.7

4.5

3.2

2.5

2.4

2.3

2.1

2.0

1.9

1.5

1.4

1.4

1.4

1.3

1.2

1.2

1.2

1.2

1.1

0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0

Sing apo re

Ro t t erd am

A nt werp

Fujairah

B usan

Hong Kong

Gib raltar

St . Pet e

Panama Canal

Houst on

A mst erd am

New Y o rk

Hamburg

Piraeus

Los A ng eles

Sant os

M iami

A lg eciras

Durban

Port Klang



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Heavy Fuel Oil Development

More blending of different oil components to optimise sulphur content causes side effects:

� Increased average Density

� Increased average abrasive levels (Al+Si)

� Increase in unstable fuels

� Reduced ignition and combustion quality

� Increased problems with chemical waste

� Increased cases of low flash point



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Fuel oil pricing

HFO 380 cSt

USD 0

USD 100

USD 200

USD 300

USD 400

USD 500

USD 600

USD 700

USD 800

Jan-

02Apr

-02

Jul-0

2O

ct-02

Jan-

03Apr

-03

Jul-0

3O

ct-03

Jan-

04Apr

-04

Jul-0

4O

ct-04

Jan-

05Apr

-05

Jul-0

5O

ct-05

Jan-

06Apr

-06

Jul-0

6O

ct-06

Jan-

07Apr

-07

Jul-0

7O

ct-07

Jan-

08Apr

-08

Jul-0

8O

ct-08

Jan-

09Apr

-09

Jul-0

9O

ct-09

Singapore

Rotterdam

Houston

Source: Bunkerworld



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