California will require commercial harbor craft vessels in the state to burn renewable diesel (R99) instead of ultra-low sulphur diesel (ULSD), increasing their marine fuel bills, starting in 2023.
At current price levels, burning R99 could increase harbor vessels' marine fuel bill by 10pc beginning 1 January next year, when the state's environmental agency California Air Resource Board (CARB)'s measure takes effect.
Los Angeles R99 was priced at $84/t (about $11.20/bl) premium to ULSD and at $107/t premium to marine gasoil on average on 1-22 February, Argus data showed.
Commercial harbor craft vessels include bunker barges, ferries, pilot boats, dredging vessels, articulated tug barges and commercial fishing vessels, among others.
CARB forecasts harbor craft vessels' demand for R99 in California at 3,562 b/d in 2023. Based on its discussions with renewable diesel producers, it expects that there will be enough fuel to meet the increase in demand.
California sold 7,210 b/d of distillate marine fuel in 2020, compared with 9,685 b/d in 2019, the latest US Energy Information Administration (EIA) data showed. Separately, California sold 30,507 b/d of residual fuel oil for bunkering in 2020, compared with 49,752 b/d in 2019, the last full year before the Covid-19 pandemic slashed fuel demand.
CARB will allow for R99 use exemptions for vessel operators that have existing fueling contracts as of 1 January 2023. The agency has determined that these contracts typically last 3-5 years. Thus, the exception for all vessel owners would end on 31 December 2025.
R99 is produced from renewable sources such as vegetable oils and animal fats. CARB says that R99 is chemically identical to petroleum diesel and the switch to R99 would not cause vessel engine problems, or require engine modifications. The agency expects the switch to R99 to reduce nitrogen oxide emissions by 30pc and particulate matter emissions by 10pc.
