French refiner Total will produce 0.5pc sulphur fuel oil to meet the 2020 marine fuel regulation, but it will not be compatible with fuel from other suppliers unless specially made to order.
Fuels that are compatible with product from other suppliers are more expensive and therefore less marketable. But the varying 0.5pc sulphur bunker specifications that will be offered in 2020 is raising compatibility concerns for shipowners.
Total will not make compatible fuel readily available at the locations where it sells its 0.5pc sulphur bunkers, Nicolas Rouquette, director of strategy for Total Marine Fuels Global Solutions, said at the company's Global Sulphur Cap Forum on Thursday in New York.
Total is not an exception. Other major suppliers such as Shell, BP and ExxonMobil have also said their fuels will not necessarily be compatible.
The density and viscosity of the new 0.5pc sulphur fuel oil will vary depending on the type of the blend, Rouquette said. The density of the 0.5pc sulphur will likely range from 900-950 kg/m3 at 15°C, or about 17.45-25.72° API gravity. But the density could also go up to 991 kg/m3, or 11.3° API. The 0.5pc fuel oil blends that Total has tested have viscosity of around 150 centistokes (cst) but could also range between 100-350cst.
Starting in October, the company will be marketing its 0.5pc sulphur bunkers in France, Germany, Amsterdam-Rotterdam-Antwerp, South Korea, China and Singapore. There will not be sufficient demand to justify producing 0.5pc sulphur fuel oil prior to October.
Total is well positioned for 2020, because it has access to sweet Kenyan crude to run through some of its refineries to produce low-sulphur resid, Rouquette said. Total will not be marketing 0.5pc fuel oil in the US. Its Port Arthur, Texas, refinery has a coker and does not produce residual fuel. But if demand for marine gasoil (MGO) picks up in the US Gulf, Total could consider chartering a bunker barge to supply MGO there, he said. Total will supply high-sulphur fuel oil to shipowners with scrubbers.
But Rouquette said that high-sulphur fuel oil suppliers might not have variety of viscosities to offer in 2020 because there will be limited tank storage capacity. Thus some ports might not have available both 500-700cst and 380cst high-sulphur fuel oil.
Total estimates 2018 global bunker demand at around 260mn t, of which around 180-190mn t was residual fuel oil, about 69mn t was MGO and the rest was LNG for bunkering. Total projects 0.5pc sulphur bunker fuel demand at around 150mn t in 2020. The company expects 1,700 vessels to be equipped with scrubbers at the start of 2020 and demand for high-sulphur residual fuel to be around 40mn t in 2020. Uptake of LNG for bunkering is expected to reach 10mn t in 2025.
The global marine fuel regulation will create a surplus of high-sulphur residual fuel. Total estimates that the high-sulphur resid will be priced at parity with LNG on a Btu basis in order to compete as a utility fuel in 2020. Rouquette does not think that high-sulphur resid will be priced at parity with coal on a Btu basis.
