Shipping Industry To Use Cleaner Fuels By 2020

Recently, a confirmed proposal has come into circulation that the shipping industry will begin using cleaner fuels and nothing else by 2020. Although it is great news for environment conservationists, the switch can put a lot at stake for old oil refineries and literally wipe out the businesses of those who supply wrong crude. However, advanced refineries with state-of-the-art equipment can expect their profits to double up.

During the next 4 years, ships all over the world must cut down on their sulphur emissions from the current 3.5% to 0.5%. The on-target deadline has caused quite a pandemonium among some refiners and ship owners. This is because right now, nearly 3 million barrels of sulphur laden oil are used every day for powering tens of thousands of ships. And countries like Iraq, Brazil, Saudi Arabia, Mexico and Venezuela, which produce ship fuel with high concentration of sulphur, are feeling threatened.

The advanced refineries are, of course, considering this a windfall, since they are producing more and more fuel with very low sulphur for an increasing number of ships. But for ship owners who still utilise sulphur-laden fuel for their vessels, there are several avenues open in order to follow the new standards. The easiest solution is burning middle distillates, which, although expensive, are low in sulphur. According to expert estimates, the new rules can shift around 700,000 barrels every day of demand to distillates from fuel oil by 2020.

As per the calculations of international shipping agents, the fuel oil utilised by today’s marine sector accounts for 4% of refined product demand of the world. At less complicated and older units in Asia, Mediterranean and developing nations, fuel oil containing sulphur accounts for almost 40% of the total output.

Some professionals are suggesting investing in various upgrades, but it may not be as simple as it seems. Using a residual hydrocracker that removes sulphur from fuel costs about $1 billion. Besides that, the overall procedure can take a long period of time, perhaps even a decade.

However, as oil markets begin preparing for the brand new rules, the shipping sector can crush their well laid plans. For instance, scrubbers costing around $3 to $10 million are quickly becoming standard on the newer ships. This can cause the expected rapid decline in fuel prices to make that investment worthwhile. But if the marine sector is quick in investing, it can bring back the demand for oil.