Tight distillates could buoy ARA biodiesel demand

Tight distillate supplies could buoy interest in B100 biodiesel for bunkering in Amsterdam-Rotterdam-Antwerp (ARA) early next year.

EU sanctions will ban all imports of Russian diesel from February next year, requiring Europe to replace 750,000 b/d of supply, or roughly a tenth of consumption. Buyers will have little bargaining power as their options will be heavily restricted and stocks are very low. In August, middle distillate inventories, predominantly diesel, fell to the lowest in 14 years in the EU 15 and Norway, Euroilstock data show. The ban could prop up distillate prices, including marine gasoil (MGO), a type of distillate fuel.

Advanced fatty acid methyl esters (Fame), also referred to as B100, is made from advanced feedstocks as outlined in annex 9A of the EU Renewable Energy Directive (RED III). Most advanced Fame currently produced and traded in ARA for road use is derived from either palm oil mill effluent (Pome) or brown grease, a by-product of used cooking oil (UCO) collection. It typically has a cold filter plugging point (cfpp) above 0°C, meaning that demand from road fuel blenders is usually stronger in the warmer months. As a result, and given that Pome feedstock availability is generally good, stocks available to the marine sector should be ample in the first quarter of 2023, a producer told Argus.

B100 is a viable bunkering option in Rotterdam and Amsterdam because the Netherlands' government subsidizes the fuel with renewable fuel credits that shave off 40-66pc of its outright price. Biodiesel is a plug-and-play fuel that does not require vessel engine retrofitting. ARA is also located in the northern European emissions control area (ECA), where vessels are required to burn marine fuels with 0.1pc sulphur maximum content. To comply with the ECA regulation, ship owners typically burn 0.1pc sulphur maximum MGO, instead of residual fuel oil. B100 has a maximum sulphur content of 10ppm (0.001pc).

B100 with applied Netherlands' renewable credits was selling at a discount to MGO in February and March this year, Argus data showed (see chart). Suppliers of biofuels for bunkering in ARA include BP, Bunker One, Delta Energy, ExxonMobil, GoodFuels, TFG Marine, Shell and VARO. Rotterdam port authority reported that sales of biofuel blended bunkers in the first half of the year rose to 329,392t, up by 168pc from the same period last year.

While marine fuel sales and consumption are not subject to greenhouse gas restrictions, fees or taxes, the EU has two proposals in the works that would change that. One proposal would add 100pc of marine emissions to the European emissions trading system (ETS) starting in 2024. An earlier proposal called for adding 20pc of emissions to the ETS from 2023, gradually increasing to 100pc from 2026. The proposals apply to emissions generated from burning the fuel.

By Stefka Wechsler

ARA B100 less MGO, $/t MGOe $/t