Analysis: Refiners threaten anti-pollution efforts in shipping - Reuters

Posted - January 17, 2010 - Reuters.com (US)By Francis Kan and Randy Fabi

Global efforts to drastically reduce toxic sulfur emissions in the shipping industry will likely be delayed for years due to the reluctance of refiners to invest billions of dollars to produce cleaner burning fuel.
The U.N. shipping agency, International Maritime Organization (IMO), has set a 2020 deadline for the maritime community to slash the amount of sulfur burned by the global fleet, blamed for thousands of deaths every year.
The IMO estimates the industry needs to invest nearly $150 billion in secondary refining capacity to ensure enough supplies are available.
IMO's cap can only be realistically met through the use of cleaner burning fuels, known as middle distillates, already in short supply due to high demand from automobiles, airplanes and power stations. As a result of the changes, demand for such fuels could rise by up to 50 percent, or an additional 600 million tones, from current levels by 2030, according to estimates by oil major ExxonMobil.
"This represents a major increase in distillate demand, a product that has experienced high growth even without the marine fuel growth," said Vincent Chong, global head of ExxonMobil's marine fuel division.
Gas oil, a key middle distillate product, accounted for 42 per cent of global oil products growth in the third quarter of 2010, expanding twice as quickly as the same period in 2009, according to the International Energy Agency's December oil market report.
Cheaper high-sulfur residual fuel oil (HSFO) -- the sludgy, bottom of the barrel residue left behind from refining more profitable fuels -- is most commonly used by ships now.
If the cap is imposed, refiners will have to scramble for waytonessing up millions of tones of the fuel. Global residual fuel production in 2010 is estimated at around 570 million tones with residual bunker consumption at around 190-200 million tones, according to a study by energy consultants Poten & Partners.
The shipping industry, which transports about 90 percent of the world's traded goods by volume, does not believe enough low sulfur marine fuel will be produced in time for its more than 50,000 merchant vessels.
"We will monitor the 2020 deadline very carefully because we believe the bunker fuel supplies to meet the limits may not be available," said Torben Skaanild, chief executive of BIMCO, the world's largest ship owners' association.

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