Cem Saral – Group CEO

2020 sulphur cap to boost bunkering hubs: Cockett CEO

Large ports such as Singapore and Rotterdam will be winners in the supply of marine fuels when restrictions on the sulphur content of bunker supplies are implemented in 2020.

This is the view of Cem Saral, chief executive of Cockett Marine fuels. He says a lack of low-sulphur bunker fuel will push vessels to use other compliant products, such as Marine Gas Oil (MGO). While a pool of compliant products is likely to be stocked at larger hub ports such as Rotterdam and Singapore, it will not be economical to transport them to smaller ports that may only be able to supply one fuel type. And small ports lack the logistical and storage capacities to handle a larger variety of products, which will limit their capacity for further growth.

Legislation approved by the International Maritime Organisation (IMO) last year will ban vessels from burning fuel oil with a sulphur content above 0.5pc from 2020, unless they have abatement technology on board.

MGO typically contains 0.1pc sulphur, while existing heavy fuel oil (HFO) has a maximum sulphur content of 3.5pc.

Hub ports could face an initial threat to their business models because of the potential for non-compliance, Saral told Argus. This could see some vessels reroute their business through ports that have not ratified the IMO's legislation, enabling them to use non-compliant fuel. The use of flags of convenience could also enable vessels to non-comply outside of territorial waters.

Estimates of the price differential between compliant fuel and non-compliant heavy fuel oil (HFO) by 2020 are as high as $450/t, giving vessel owners a significant incentive to use HFO.

But this issue is not likely to be significant over the long-term because of pressure from the industry on regulators to ensure a level commercial playing field.

"In the early stage there is likely to be some non-compliance" Saral told Argus."But, as new frameworks and technology are deployed, it will not last very long", he added.

Intense competition between vessel owners means that ports offering non-compliant fuel would quickly be identified, he said, and the pressure to take action against them would be intense.

The majority of vessels currently call at ports that are expected to be fully compliant, he added.
Bunker meters at Turkish facilities to improve accuracy

Mass flow meters (MFM) will be mandatory at refineries and terminals delivering bunker fuel from tomorrow, in a move to increase accuracy and transparency.

A major bunker supplier based in Istanbul said the new regulation will have a positive effect on the Turkish market by showing buyers Turkish ports are reliable. The new system is already in place at Tupras 227,000 b/d Izmit refinery, which supplies Istanbul, the main Turkish marine fuels market. MFMs have also been installed at the Istanbul terminals.

Refineries are required to use a MFM when delivering product and terminals have to receive and deliver product using the meters. Delivery barges at the terminals are to be loaded with product under the control of a customs official who uses an electronic recording system and a MFM.

The final stage of the delivery from the barge to the buyer does not require a meter, but still involves a customs official to ensure the correct quantity of marine fuels has gone from the supplier to the customer.

The conventional method for measuring the transfer of liquids is through volume, which is open to variations in pressure, density and temperature. An MFM measures mass flow, volume flow and density, which allows greater accuracy for measuring volumes. It helps to ensure marine fuel buyers are receiving the amount they have paid for.

The change of regulation is unlikely to have an effect on the bunker market in Turkey as the rule was announced three years ago, allowing refineries and terminals to have MFMs in place well in advance.

In Istanbul, only one supplier out of five uses an MFM technology in the final stage of the delivery, as they are not compulsory. It is unlikely the use of MFMs in the final stage of delivery will become mandatory in the near future, as market participants are satisfied with current processes.

Recycled bunker fuel firm Ecoslops' output up

French micro-refining firm Ecoslops ramped up production of bunker fuel and light bitumen made from maritime transport residues from shipping in 2016.

The firm's industrial unit in Sines, Portugal, which started mid-2015, has processed more than 17,000 tonnes of slops over the course of 2016, including 6,000 t in the first half of the year and 11,000 t in the second half. Around 98pc of the waste products were turned into refined products, the firm said. The company's technology upgrades slops and sludge into fuels such as marine diesel oil (MDO), Intermediate Fuel Oil (IFO 380) and light bitumen.

The company aims to treat 25,000t at its Sines facility by 2017.

Ecoslops unaudited results show consolidated revenues of €4.3mn ($4.5mn) in 2016, up from €2.3 million in 2015.

A major part of Ecoslops increased revenue came from micro-refining and refined products. Revenue from these parts of the business rose from €300,000 in 2015 to €2.2mn in 2016.

Ecoslops signed an agreement with Total on 21 September 2016, in a partnership to process maritime waste at La Mede, near Marseille. Ecoslops and Total will assess the viability of the project and make a final investment decision this year.

France hiked diesel output, built stocks in 2016

French refiners helped build domestic 10ppm diesel stocks to a five-year high at the end of 2016, as they boosted output to compensate for falling imports.

French stocks of 10ppm diesel grew to 56.6mn bl at the end of 2016, said the country's petroleum committee CPDP, up by 6.3pc from the end of 2015. The stock build is in line with statements made by French transport minister Alain Vidalies during port, fuel depot and refinery strikes in May and June, that France would take extra measures to avoid a repeat of widespread shortages. The increase in stocks gives France forward cover of around two and a half months.

French diesel stocks built despite a reduction in imports to 350,000 b/d, a fall of 6pc on the year, according to the French customs bureau. Imports were 395,000 b/d in December, down by 9pc compared with December 2015.

Russia remained the largest supplier to France shipping 90,000 b/d, (see chart) but this was down from 96,000 b/d in 2015. The US also posted lower market share sending 74,000 b/d, down from 83,000 b/d on the year. Saudi Arabia managed to increase diesel shipments to France by 9pc on year ro 46,000 b/d. Saudi Arabia has benefited from expanding its refining capacity in the last three years, including the 400,000 b/d Satorp unit at Jubail, a joint venture between state-owned Saudi Aramco and Total.

Smaller diesel suppliers — including short-haul exporters the Netherlands, Belgium, Spain, Finland and Lithuania — increased shipments to France. They edged out competitors including the UAE and the UK, but especially Italy and India. Italian refiners sent 24,000 b/d in 2015 but under 10,000 b/d in 2016, a result of a fierce competition and a string of maintenance and unplanned downtime at its refineries. Indian diesel cargoes to France dried up, falling to below 4,000 b/d last year from 15,000 b/d a year earlier.

French 10ppm diesel demand stayed flat on the year at slightly under 710,000 b/d, said the CPDP, despite some economic growth. There has been a shift away from diesel vehicles by French consumers, who are wary of increasing government action over pollution concerns. French car manufacturers association the CCFA said diesel cars and light vans took a 52pc slice of domestic sales, down from 57pc in 2015 and as high as 73pc in 2012.

Taking the import, export, demand and stock data gives an estimated level of French 10ppm diesel production of slightly over 375,000 b/d in 2016, up by 5.7pc on the year, incentivised in part by positive margins for diesel production in much of 2016. Estimated French output in December was slightly under 405,000 b/d, close to the maximum at which the the French refinery complex seems to be able to operate over an extended period. Had the summer strikes not reduced output then production over the course of 2016 could have edged higher still.