Global refinery activity to rebound sharply in 2020

Global refinery activity to rebound sharply in 2020

BAKU, Azerbaijan, Nov.15

By Leman Zeynalova – Trend:

Global refinery activity is expected to rebound sharply in 2020, after a pause in growth this year, Trend reports citing the International Energy Agency (IEA).

“While our oil demand growth estimate for 2019 is essentially unchanged at 1 mb/d, the volume of crude oil used by refiners and for direct burn in power generation declined by 300 kb/d through 3Q19. Even after a seasonal surge in refinery runs in 4Q19, crude oil demand for 2019 as a whole is still expected to decline by 90 kb/d, the first drop since 2009. This reflects the cyclical nature of refining that overproduces in some years and then slows down to clear product stock overhang,” reads the November Oil Market Report released by IEA.

A ramp up in refining activity in 2020 sets the stage for a hopefully smooth implementation in January of the International Maritime Organisation’s new bunker fuel regulations, according to IEA.

“Ports, ship owners and refiners have stepped up their preparations. Major bunker hubs such as Fujairah, Rotterdam and Singapore are reported to have large volumes of compliant fuel available. In the case of Singapore, one of the world’s two Ultra Large Crude Carriers is being used to store low sulphur fuel oil (LSFO) and marine gasoil offshore,” the report says.

Meanwhile, the price of high sulphur fuel oil (HSFO) is nose-diving with cracks in Rotterdam falling under -$30/bbl, the lowest in over 10 years, according to IEA.

“The LSFO-HSFO spread in North West Europe blew out to almost $30/bbl in late October from just under $3/bbl last year. Nevertheless, compliant supplies may not be available in sufficient quantities in smaller ports and for smaller ships, perhaps creating some dislocations.”

From 1 January 2020, the limit for sulphur in fuel oil used on board ships operating outside designated emission control areas will be reduced to 0.50% m/m (mass by mass). This will significantly reduce the amount of sulphur oxides emanating from ships and should have major health and environmental benefits for the world, particularly for populations living close to ports and coasts.

IMO regulations to reduce sulphur oxides (SOx) emissions from ships first came into force in 2005, under Annex VI of the International Convention for the Prevention of Pollution from Ships (known as the MARPOL Convention). Since then, the limits on sulphur oxides have been progressively tightened.

The main type of “bunker” oil for ships is heavy fuel oil, derived as a residue from crude oil distillation. Crude oil contains sulphur which, following combustion in the engine, ends up in ship emissions. Sulphur oxides (SOx) are known to be harmful to human health, causing respiratory symptoms and lung disease. In the atmosphere, SOx can lead to acid rain, which can harm crops, forests and aquatic species, and contributes to the acidification of the oceans.

Limiting SOx emissions from ships will improve air quality and protects the environment.

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Follow the author on Twitter: @Lyaman_Zeyn

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