Price debate, tax change cloud Brazil gasoline outlook
Forecasting Brazilian gasoline demand in the second half of 2022 is proving to be complex for importers and distributors amid an unstable regulatory environment and fierce political tensions around the energy sector less than six months ahead of elections.
Producers and distributors are already prepping for potential regulation changes around essential issues, such as taxation, ahead of the October national elections. This includes closely monitoring a recent bill passed by the lower congressional house that caps the rate of the state-level, VAT-like tax ICMS on fuel and electricity at between 17pc and 18pc. If passed by the senate and sanctioned by the president, the measure could boost gasoline demand — which is the most heavily taxed fuel in most Brazilian states — by making it more competitive with hydrous ethanol. In Sao Paulo state, the ICMS levy on ethanol is 13.3pc compared with 25pc on gasoline.
The proposed legislation faces a difficult path in the senate, where President Jair Bolsonaro's coalition has less influence than the lower chamber. If approved, the constitutionality of the cap, which state governors say would decimate public coffers, would almost certainly be brought before the country's high court.
A recent decree establishing a national policy on climate change is also limiting visibility on motor fuels supply and demand. The project creates the basis for the country's low carbon market, covering all sectors of the economy and, in the view of some participants, setting up a potential collision with the country's existing domestic biofuels policy RenovaBio, which currently guides decision-making among ethanol producers and fuel distributors.
Pricing puzzle
Fuel supply planning is also being strained by a protracted leadership crisis at state-controlled Petrobras. Earlier this month, the country's mines and energy ministry announced it was nominating finance ministry veteran Caio Mario Paes de Andrade to replace Jose Mauro Ferreira Coelho, who took over as Petrobras' chief executive in mid-April.
The swap, the third inspired by Bolsonaro's anger over fuel prices, was accompanied by warnings that the country is facing a potential diesel shortage. The situation prompted the mines and energy ministry to recently declare that S10 diesel inventory levels must meet demand for up to 38 days, an increase from 30 days of supply first put in place when monitoring started in March of this year.
Gasoline supply has not been a major theme in the current debate, but ensuring that domestic demand is met during a period of intense market volatility remains a major issue for fuel distributors and importers who, starting in April, resumed negotiations for foreign cargoes.
On 30 May, Petrobras announced that the mines and energy ministry had recommended the company be included in a privatization portfolio managed by the finance ministry. Acceptance into the program, known locally at PPI, would allow for the start of studies on the actions necessary to limit the government's controlling stake in the company.
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HSFO demand supports Rotterdam 1Q bunker sales
HSFO demand supports Rotterdam 1Q bunker sales
London, 30 April (Argus) — Total sales of fossil bunker fuels and marine biodiesel blends at the port of Rotterdam were 2.45mn t in the first quarter this year, up by 13pc compared with the final three months of 2023 but 9pc lower year on year, according to official port data. Sales firmed across the board quarter on quarter, even though market participants had described spot bunker fuel demand in the region as "mostly limited" and shipping demand as lacklustre. High-sulphur fuel oil (HSFO) sales rose the most. Disruption in the Red Sea resulted in many vessels re-routing around the southern tip of Africa, increasing the incentive of bunkering with HSFO as opposed to very low-sulphur fuel oil (VLSFO) and marine gasoil (MGO), according to market participants. The longer journeys meant that vessels on the route increased their fuel consumption to reduce delivery delays, supporting conventional bunker fuel sales at Rotterdam. Higher prices for HSFO in Singapore also helped support HSFO demand in Rotterdam. Marine biodiesel sales at Rotterdam increased by 13pc on the quarter and by 76pc on the year in January-March, despite the Dutch government's decision to half the Dutch renewable tickets (HBE-G) multiplier for shipping at the turn of the year. The move has led to a substantial increase in prices for advanced fatty acid methyl ester (Fame) 0 blends in the Amsterdam-Rotterdam-Antwerp (ARA) hub. The inclusion of shipping in the EU's Emissions Trading System (ETS) from January may have lent support to demand for biofuel blends. Marine biodiesel made up 11pc of total bunker fuel sales at Rotterdam in the first quarter, the same share as the previous quarter, which was a record high. LNG bunker sales at Rotterdam in January-March soared by 45pc on the quarter and by 150pc on the year. By Hussein Al-Khalisy Rotterdam bunker sales t Fuel 1Q24 4Q23 1Q23 q-o-q% y-o-y% VLSFO & ULSFO 857,579 847,862 1,205,288 1 -29 HSFO 818,028 643,218 809,871 27 1 MGO/MDO 383,409 361,585 468,373 6 -18 Biofuel blends 262,634 233,108 149,206 13 76 Total 2,453,610 2,177,078 2,685,515 13 -9 LNG (m³) 131,960 91,305 52,777 45 150 Port of Rotterdam Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
G7 countries put timeframe on 'unabated' coal phase-out
G7 countries put timeframe on 'unabated' coal phase-out
London, 30 April (Argus) — G7 countries today committed to phasing out "unabated coal power generation" by 2035 — putting a timeframe on a coal phase-out for the first time. The communique, from a meeting of G7 climate, energy and environment ministers in Turin, northern Italy, represents "an historic agreement" on coal, Canadian environment minister Steven Guilbeault said. Although most G7 nations have set a deadline for phasing out coal-fired power, the agreement marks a step forward for Japan in particular, which had previously not made the commitment, and is a "milestone moment", senior policy advisor at think-tank E3G Katrine Petersen said. The G7 countries are Italy — this year's host — Canada, France, Germany, Japan, the UK and the US. The EU is a non-enumerated member. But the pledge contains a caveat in its reference to "unabated" coal-fired power — suggesting that abatement technologies such as carbon capture and storage could justify its use, while some of the wording around a deadline is less clear. The communique sets a timeframe of "the first half of [the] 2030s or in a timeline consistent with keeping a limit of 1.5°C temperature rise within reach, in line with countries' net-zero pathways". OECD countries should end coal use by 2030 and the rest of the world by 2040, in order to align with the global warming limit of 1.5°C above pre-industrial levels set out in the Paris Agreement, according to research institute Climate Analytics. The countries welcomed the outcomes of the UN Cop 28 climate summit , pledging to "accelerate the phase out of unabated fossil fuels so as to achieve net zero in energy systems by 2050". It backed the Cop 28 goal to triple renewable energy capacity by 2030 and added support for a global target for energy storage in the power sector of 1.5TW by 2030. The group committed to submit climate plans — known as nationally determined contributions (NDCs) — with "the highest possible ambition" from late this year or in early 2025. And it also called on the IEA to "provide recommendations" next year on how to implement a transition away from fossil fuels. The G7 also reiterated its commitment to a "fully or predominantly decarbonised power sector by 2035" — first made in May 2022 and highlighted roles for carbon management, carbon markets, hydrogen and biofuels. Simon Stiell, head of UN climate body the UNFCCC, urged the G7 and G20 countries to lead on climate action, in a recent speech . The group noted in today's outcome that "further actions from all countries, especially major economies, are required". The communique broadly reaffirmed existing positions on climate finance, although any concrete steps are not likely to be taken ahead of Cop 29 in November. The group underlined its pledge to end "inefficient fossil fuel subsidies" by 2025 or earlier, but added a new promise to "promote a common definition" of the term, which is likely to increase countries' accountability. The group will report on its progress towards ending those subsidies next year, it added. Fostering energy security The communique placed a strong focus on the need for "diverse, resilient, and responsible energy technology supply chains, including manufacturing and critical minerals". It noted the important of "guarding against possible weaponisation of economic dependencies on critical minerals and critical raw materials" — many of which are mined and processed outside the G7 group. Energy security held sway on the group's take on natural gas. It reiterated its stance that gas investments "can be appropriate… if implemented in a manner consistent with our climate objectives" and noted that increased LNG deliveries could play a key role. By Georgia Gratton Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Pemex fuel output surges, imports down in March
Pemex fuel output surges, imports down in March
Mexico City, 29 April (Argus) — Mexico's state-owned Pemex increased its gasoline and diesel output by 32pc in March from a year earlier, cutting its road fuels imports by 25pc year over year. Pemex's gasoline and diesel output at its six domestic refineries amounted to 562,300 b/d in March, up from 427,100 b/d in the same month of 2023, according to the company's monthly data published on 26 April. Gasoline production rose by 27pc to 350,400 b/d in March year over year. Gasoline output increased by 13pc from February. Pemex's gasoline imports fell by 16pc in March from a year prior, driven by increased domestic production. On a monthly basis, gasoline imports fell by 18pc from February. The company's diesel output surged by 40pc to 211,900 b/d in March year over year, driving imports down by 43pc to 112,500 b/d (see table) . Diesel production was 26pc higher in March compared with February. Road fuels output increased as Pemex's refining system processed 23pc more crude — 1.06mn b/d — in March from the prior year, as result of billion-dollar investments since 2019 to rehabilitate Pemex's refineries and a decline in crude exports . Pemex's regular 87-octane gasoline domestic sales remain almost steady at 527,400 b/d in March from a year earlier. In contrast, 92-octane premium gasoline sales rose by 11pc to 132,800 b/d year over year, as demand for premium gasoline in Mexico has increased this year. The company's diesel sales ticked up by 1pc in March from a year earlier and were 3pc above February sales. Pemex's domestic sales of refined products accounted for 75.6pc of the company's total revenue in the first quarter, Pemex said during its earnings call on 26 April. This compares to a 70.8pc share in full-year 2023, the company said. By Antonio Gozain Pemex fuel production, imports and sales '000 b/d Product Mar 24 Feb 24 Mar 23 YOY ±% Monthly ±% Production Gasoline 350 310 275.5 27.2 12.9 Diesel 212 168 152 39.8 26.0 LPG 110.0 104.0 100.3 9.7 5.8 Jet fuel 38 38 46 -17.1 1.6 Imports Gasoline 307 376 366.0 -16.1 -18.4 Diesel 112 119 196 -42.5 -5.1 LPG 69 100 101 -31.8 -31.1 Internal sales Regular gasoline 527 520 527 0.1 1.5 Premium gasoline 133 134 120 10.9 -0.7 Diesel 261.0 254.0 258 1.2 2.8 ULSD 30.0 28 32 -4.8 8.3 Jet fuel 95 97 94 1.0 -2.3 LPG 167 194 164 2.0 -13.8 Jet fuel and premium gasoline imports and ULSD imports and production are not broken out Pemex Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Norway's marine bio mandate ineffective: Marine market
Norway's marine bio mandate ineffective: Marine market
London, 29 April (Argus) — Norway's 6pc advanced biodiesel mandate for marine, which came into effect in October, has done little to incentivise the uptake of physical marine biodiesel blends at Norwegian ports, market participants told Argus . As of October 2023, bunker fuel suppliers in Norway must ensure that a minimum of 6pc, on a volume per volume basis, of the total amount of liquid fuels sold per year consists of advanced biofuel in the form of fatty acid methyl ester (Fame) or hydrotreated vegetable oil (HVO). The mandate is only applicable to bunker fuels sold in the domestic market, impacting vessels operating between Norwegian ports as well as local tugboats, offshore supply barges, and fishing vessels. Market participants confirmed that the mandate operates on a mass-balance system at the moment, such that the mandate could also be met by supplying the equivalent amount of biofuels into the inland road sector. Consequently, participants said that very few buyers end up purchasing the physical marine biofuel blends, and instead marine fuel suppliers have had to utilise the mass-balance system to meet their mandated targets. This has resulted in a premium added onto conventional bunker fuels in Norwegian ports of about $56-60/t on average. A market participant described the current system as "like a CO2 tax", with most marine fuel buyers paying the premium rather than purchasing a marine biodiesel blend directly. Participants told Argus that HVO is popular and frequently used in road transport because of its superior specifications compared with biodiesel and its generally low freezing point. Norway's HVO imports typically originate from the US — Kpler data shows that about 68.4pc of HVO flows into Norway have originated from there this year. This is mainly because Norway does not apply the same anti-dumping measures as EU nations, which typically put a substantial premium on US-origin biodiesel imports. Norwegian shipowners going internationally are exempt from being liable to the additional premium imposed by the mandate. But participants told Argus that they usually have to pay the premium and then claim it back from the Norwegian Environment Agency (NEA). The system may change very soon. Market participants told Argus that the NEA is considering some changes to the mandate requirement. A gradual move away from the mass balance system is being discussed, in favour of a physical product mandate that would require biofuel blends to be sold to bunker fuel buyers. Further, a switch from an annual reporting system to a monthly one could also be on the cards. NEA is also reportedly looking at mandating the availability of marine biodiesel at all Norwegian ports and biodiesel fuel reconciliation at the tank rather than terminal. By Hussein Al-Khalisy Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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