Latin American refiners will have more difficulty adjusting to the pending sulphur content cap in residual fuel oil as they produce more high sulphur resid than their US Gulf coast counterparts, according to consultancy firm Turner Mason.
The average sulphur level in fuel oil produced by Latin American refineries is eight times higher than in US Gulf coast refineries, Turner Mason said. There is expected to be a surplus of 3.5pc high sulphur fuel oil (HSFO) as demand for 0.5pc sulphur fuel oil rises at the International Maritime Organization's (IMO) regulation takes effect 1 January decreasing marine fuel emissions levels from that of 3.5pc sulphur fuel to 0.5pc.
The refineries have multiple options to respond to the changing market conditions, including upgrading the HSFO into other products through a coker unit, selling it to refineries with excess upgrading capacity or boosting up on sweet crudes to blend into IMO-compliant fuel.
Brazil has the highest processing capacity able to use the excess HSFO, at 2.2 mn b/d, according to Turner Mason, followed by Mexico and Venezuela at 1.6 mn b/d and 1.3 mn b/d respectively. But most Latin American refineries lack coking capability due to outdated facilities.
Latin American refineries could sell surplus HSFO to Gulf Coast refineries that have excess capacity, the firm said, which may be of interest to US Gulf refineries with the price of HSFO expected to decline.
The facilities could purchase more sweet crude to blend the HSFO down to meet the future sulphur content standard, but that option could decrease shipments due to capacity limits and an inability to find enough sweet crude supply, the Turner Mason report said.
Most Latin American bunker ports have already begun selling 0.5pc sulphur resid, except for ports in Ecuador and Peru, which are still awaiting supply dates from refiners there. Brazil and Argentina are supplying 0.5pc sulphur resid exclusively but it is produced locally.
By Luis Gronda
