New Regulations Regarding Sulfur Cap: Countries To Launch New Bunker Fuel

The recent surge in offshore oil & gas exploration activities and IMO’s regulations of the sulfur cap for marine fuels led to immense growth of the bunker fuel industry. Bunker fuel is the generic term offered to any fuel that has been used to power a ship’s engine. Bunker fuel is graded into A, B, and C according to its thickness and viscosity, with C being the most vicious. If bunker fuel is mixed with even 10% of a lighter fuel of the likes of diesel, it becomes a cheap fuel for international shipping, which boosted its popularity.

The fluid is considered highly toxic and hazardous to marine life and can cause long-lasting effects. Moreover, it contributes to increasing air pollution. Thus, the regulations regarding sulfur content were limited by the International Maritime Organization (IMO), reducing the maximum amount of sulfur content from 3.5% to 0.5% by 2020. In addition, various countries had to redetermine a way to use bunker fuel and countries such as China are set to launch low-sulfur fuel oil to comply with changed regulations.

According to recent news, China aims to unveil a bonded low-sulfur bunker fuel oil contract to enable foreign investors participate in trading by 2019 and the 0.5% sulfur content rule in the shipping fuel was the main motive. The new contract is expected to expand the country’s pricing influence in the bunker fuel market, which is expected to $273.05 billion with 9.4% CAGR by 2025, according to Allied Market Research. Moreover, it would help China to enhance its maritime transportation capacity.

Apart from China, oil price reporting agency Argus had also declared to introduce Singapore bunker fuel derivative contract on Chicago Mercantile Exchange (CME). According to Alan Bannister, the Asia head of business development at Argus, the new contract is expected to make Singapore more prominent financial trading marine fuel hub. Moreover, it would enable fuel suppliers and ship owners to hedge risks effectively. In fact, the contract would be the world’s first listed delivered bunker fuel derivative contract. It is 100 tonnes in size and for 380-cst centistoke high-sulfur fuel oil (HSFO). The new derivative product could help manage the risk of disconnection between cargo and delivered bunker market. In another news, Finland’s refiner Neste announced to offer low-sulfur fuels at the end of 2019 to aid ships and cargos meet upcoming IMO regulations. Neste’s new bunker fuel is said to be easier for shipping companies as it is was created by leveraging on in-house R&D and production expertise. What’s more, with the launch of this product, the country is expected to expand consumer base outside Finland and Greate Stockholm area.

While the majority of countries are gearing up to comply with the new regulations regarding sulfur cap, however they are completely ready. On the other hand, with the new launch of contracts, there is a hope that most of the countries would comply with the regulations.

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