Bimco develops FuelEU clause for charter parties

Market: Biofuels, Oil products
26/11/24

Danish shipping association Bimco has developed a contractual clause to support time charter parties ahead of FuelEU Maritime regulations that come into force at the beginning of 2025.

The clause designates the shipowner to be the party responsible for FuelEU Maritime. Bimco said the clause is intended to be the standard applicable for most scenarios and commercial relationships.

Among the recommendations, the clause states it is mandatory for a shipowner to present the vessel's compliance balance for the previous two years and in the current year.

The FuelEU maritime regulation will start in 2025 and will require that ships traveling in, out of, and within EU territorial waters gradually reduce their greenhouse gas (GHG) intensity on a lifecycle basis. It will start with a 2pc reduction in 2025, 6pc in 2030, and will be 80pc by 2050, all compared with 2020 levels. The regulation applies to all commercial ships above 5,000 gross tonnes (GT) carrying passengers or cargo.

"The clause we have adopted today is the result of a collaborative process between owners, charterers, Protection and Indemnity (P&I), legal experts, and other stakeholders," said Bimco's documentary committee chairman Nicholas Fell.

Bimco has also already adopted a clause for emission trading allowances under the EU emissions trading system (ETS) for ship management agreements, voyage charter parties, and contracts of affreightment.

By Gabriel Tassi Lara and Natália Coelho

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27/12/24

Shell shuts oil unit at Singapore refinery

Singapore, 27 December (Argus) — Shell has shut an oil unit at the 237,000 b/d Pulau Bukom refinery in Singapore to investigate a "suspected leak", said the Maritime and Port Authority of Singapore (MPA) and National Environment Agency (NEA) today. Shell informed the government agencies that they will have to shut one of its "oil processing units" at Pulau Bukom to facilitate investigations into a suspected leak. The exact oil processing unit cannot be confirmed, but it is a unit "used to produce refined oil products such as diesel". This means it is likely a crude distillation unit or a hydrocracking unit. Shell's initial estimates show that a few tonnes of oil products were leaked, together with cooling water discharge. Sea water is typically drawn to aid in the cooling process, according to the media release. This came after the 20 October leak at a pipeline at Pulau Bukom, when 30-40t of "slop" — or a mixture of oil and water — leaked into the sea, according to Shell. The gasoline market has shown little reaction so far with spreads being "stagnant" and "range bound", said a Singapore-based gasoline broker. But this could be because of a lack of market activity, with many traders away for holidays at the end of the year. The gasoil January-February spread last traded at $0.58/bl in backwardation at around 6:30pm Singapore time on 27 December, according to a Singapore-based gasoil broker. This marks a slight increase from an assessment of $0.55/bl in backwardation on 26 December, according to Argus pricing data. By Aldric Chew Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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Viewpoint: SE Asian IMO2 MRs to rise on EU policy

27/12/24

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27/12/24

Viewpoint: SE Asian IMO2 MRs to rise on EU policy

London, 27 December (Argus) — Rates for specialised Medium Range (MR) tankers in southeast Asia will be driven up in 2025 by changes in EU policy on deforestation, higher biofuels blending mandates, and new mandates in the aviation sector, all of which will support exports of biodiesels, feedstocks and palm oil. Demand for specialised MRs in southeast Asia is ruled by exports of palm oil to Europe and the US Gulf coast. Palm oil does not usually need to travel on IMO2 ships and can be moved on IMO3 vessels. But it is often moved as a part-cargo of between 5,000-15,000t so is often picked up by IMO2 or IMO2/3 vessels, which are more suitable as they have a higher number of segregated tanks. Kpler data show around 6.3mn t of palm oil was exported from Indonesia and Malaysia to the US Gulf and Europe in the January-November 2024 period. Palm oil deliveries from southeast Asia have been trending lower since 2020 with the product becoming less popular in Europe because of deforestation issues. On 4 December, an agreement was reached between the European Council and the European Parliament to delay the application of the EU Deforestation Regulation (EUDR) by one year. This means larger companies will not be required to prove that their products, such as palm oil, did not contribute to deforestation until 30 December 2025. This has averted a potential rapid loss in palm oil exports to Europe in 2025 but there will probably be a substantial decline in exports later in the year as businesses prepare for the EUDR. In the short term, the decision to postpone the EUDR will probably boost cargo numbers heading to Europe as traders had been holding off for clear regulatory guidance. This will support freight rates for IMO2 MRs in the new year by pulling more IMO2/3s and IMO3s away from the market and by increasing the number of part cargoes available for IMO2s. Feedstock exports ramp up Indonesia and Malaysia also export many specialised products that require IMO2s, such as waste based feedstocks palm oil mill effluent (POME), palm fatty acid distillate (PFAD) and used cooking oil (UCO), as well as finished biodiesels like Ucome. Kpler puts exports of these products to Europe at around 2.8mn t in the first 11 months of 2024, with POME cargoes making up 42pc of all shipments or around 1.2mn t. POME was included in Annex IX Part A of the EU's renewable energy directive (RED), meaning member states can count it twice towards their renewable energy goals. Exports of feedstocks and biodiesels to Europe will probably rise in 2025 as blending mandates rise and because of a reduction in the carryover of emissions tickets in Germany and the Netherlands. Argus estimates European demand for biodiesel Pomeme to rise by around 36pc on the quarter in first three months of 2025 to around 3.5mn litres. Higher requirements for biofuels and feedstocks in Europe should push up demand for products like POME, PFAD, and UCO from Malaysia and Indonesia and support higher IMO2 demand in southeast Asia. But this could be tempered by an Indonesian ruling to include an export permit for POME and PFAD that requires participants to fulfil their cooking oil domestic market obligation. SAF mandates begin in Europe Exports of HVO and SAF from Singapore to Europe also make up part-cargo demand for IMO2 MRs. Argus forecasts European HVO demand will rise by 85pc on the quarter to 2,582mn l in the first three months of 2025. New 2pc SAF mandates in the EU and UK in 2025 will provide a sizable rise in SAF demand. This should spur a jump in cargoes loading from Singapore — driving up demand for part-cargo space on IMO2 MRs. By Leonard Fisher-Matthews Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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Viewpoint: Policy doubts hit Australia's biofuel sector

27/12/24

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27/12/24

Viewpoint: Policy doubts hit Australia's biofuel sector

Sydney, 27 December (Argus) — Australia's biofuels sector has garnered significant interest during the first 2½ years of the current federal Labor government, but uncertainty over key policy support measures has stymied investment and led developers to question whether 2025 will be a year of reform. Labor secured its first majority government since 2007 in the mid-2022 election and subsequently pledged to cut Australia's greenhouse gas emissions by 43pc on 2005 levels by 2030. But the country is not on track to meet this ambitious target because of slow progress decarbonising its electricity and transport sectors. Biofuels have become increasingly popular, given decarbonising hard-to-abate transport industries is seen as key to reaching the 2030 goal. Canberra has committed to a low carbon liquid fuels (LCLF) standard, which the industry views as crucial to enabling investment in processing, refineries and new feedstock crops. In its May 2024 budget, the federal government expressed a desire to develop sustainable aviation fuel (SAF) and renewable diesel (HVO) industries. The outcomes of consultations are expected to be released imminently. On the demand side, a regulatory impact analysis of the costs and benefits associated with mandates for LCLF has been promised, but no timeframe has been released. Domestic refiners Ampol and Viva, as well as BP at its former Kwinana refinery, have expressed interest in biofuel production but all require certainty on demand and supply-side support mechanisms. Australian bioenergy developer Jet Zero and a consortium including major airlines aim to build a 113mn litres/yr plant in the northern part of Queensland state, but initial engineering for the concept has not yet been completed. The consortium plans to convert bioethanol from domestic agricultural byproducts like sugarcane molasses into SAF and HVO through the alcohol-to-jet pathway, with production expected to start in 2027. Jet Zero is also planning to produce SAF through the Hydrotreated Esters and Fatty Acids (HEFA) production pathway in a 50:50 joint venture with Aperion Bioenergy. But the project, which is still in its feasibility stage, is facing hurdles in pricing the feedstock offtake agreements or term contracts. Complicating the picture, heavy transport is now showing greater signs of electrification, as demonstrated by iron ore producer Fortescue's major order for new electric haul trucks. Regardless, the introduction of new safeguard mechanism laws requiring large emitters to reduce pollution has led Australia's fuel companies to increase HVO sales, with 500,000l contracts now signed on a regular basis despite the higher costs. Australian coal mining firm Stanmore has tested a 20pc HVO blend at its Bowen basin Poitrel mine, demonstrating an increasing acceptance of biofuels by customers. Ampol and Viva both sell fatty acid methyl esters (Fame) based biofuel blends at 5pc, 10pc and 20pc. Ampol has two projects in the pipeline: a co-processing facility that would supply up to 60mn l/yr by 2026 and the Brisbane renewable fuels joint venture, which would be a larger project of 0.5bn-1bn l/yr and is due for a final investment decision by late 2025. Viva has been less forthcoming about its plans for biofuel production since it announced a new biofuel blending venture at its 120,000 b/d Geelong refinery in 2023. There will be a federal election no later than mid-May 2025 and both major parties are keen to enhance their green image while supporting regional communities and manufacturing jobs. New regulatory support is crucial if Australia is to transition from supplying significant quantities of feedstock for biofuels to other countries, particularly tallow and canola seed, to producing its own renewable fuels. Australia's increasing reliance on imported oil products and foreign crude, along with a worsening geopolitical backdrop, has started to raise concerns in Canberra. This could be the deciding factor in whether the government will create the required regulatory environment for a local biofuels industry to thrive. By Tom Major and Tom Woodlock Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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Viewpoint: US naphtha market poised for change

26/12/24

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26/12/24

Viewpoint: US naphtha market poised for change

Houston, 26 December (Argus) — US Gulf coast naphtha supplies accumulated in the last half of 2024 amid faltering demand, with gasoline blenders representing a higher profile buying sector, but a pending refinery closure is set to tighten the market. Demand for all naphtha grades was much weaker coming into December because of a bearish gasoline outlook and as elevated octane prices dampened naphtha demand. Poor refinery margins encouraged refiners to run minimally, cutting back on refiner demand as well. Gasoline blenders' demand for naphtha dominated in 2024, which highlighted stronger naphtha prices in visible trades. Prices for good quality, low sulphur N+A naphtha into the gasoline blend pool averaged about 10-15¢/USG above generic reformer feedstock naphtha. Naphtha sellers were also keen to export, which moved larger volumes without engaging in volatile domestic spot markets. US naphtha exports this year through mid-December were up by over 50pc to average 272,730 b/d from a year prior, according to Vortexa data. From November to mid-December, naphtha departures from the US were up on the year by 66pc to 312,800 b/d. Despite overall increased exports in 2024, weakened Asia Pacific and European naphtha markets in the latter half of December diminished arbitrage opportunities. Heavy virgin naphtha (HVN) differentials to Nymex RBOB hovered in the mid-to-stronger 30s¢/USG discounts in the first half of December, compared with upper Nymex RBOB -40s¢/USG observed in the same period last year. However, these higher differentials were attributed more to the lower Nymex RBOB pricing basis than market strength. Comparative cash prices hovered around 160¢/USG year on year, despite a 10¢/bl hike in differentials in 2024. Supply, demand changes in store A major supply change in the Gulf coast naphtha market should tighten the ample supply of naphtha by February. LyondellBasell is on schedule to begin a staggered shutdown of its 264,000 b/d refinery in Houston, Texas, in January. The last crude distillation unit (CDU) at the site is expected to shut by February. The refiner is a steady supplier of premium quality HVN with very low sulphur, which is typically sold into the gasoline blending market. Depending on production rates, LyondellBasell, also known as Houston Refining (HRC) in naphtha circles, can load 10-15 barges of the premium quality HVN a month. However, Gulf coast naphtha remains well-supplied. ExxonMobil's third CDU at its 609,000 b/d Beaumont, Texas, refinery started operations in 2023, adding more naphtha production to the region. Naphtha exports were also significant on the demand front in 2024, despite Gulf coast naphtha export opportunities to Venezuela being curbed again on 18 April. US sanctions on oil trades to Venezuela were eased in October 2023, but reimposed by April this year due to fresh political conflict. Naphtha exports to Venezuela are currently restricted to joint-venture partners such as Chevron and Reliance. Some participants hope the incoming administration of president-elect Donald Trump will re-address oil trading with Venezuela, keeping this an item to watch in 2025. US naphtha exports to Venezuela averaged 57,600 b/d in 2024, up from 11,100 b/d during 2023, according to Vortexa, on relaxation of Venezuela sanctions from October 2023 through May 2024. Meanwhile, naphtha exports out of the Gulf coast were still focused on shipments to South America, led by Brazil and Colombia. Exports to Brazil averaged 48,600 b/d in 2024, up by 68pc from 2023 while naphtha arrivals in Colombia averaged 36,600 b/d in 2024, up by 36pc from 2023. Colombia buys light naphtha from the US for use as diluent and sells full-range naphtha out of Mamonal port to the US. By Daphne Tan Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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Viewpoint: Tariffs may curb US bunker demand

26/12/24

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26/12/24

Viewpoint: Tariffs may curb US bunker demand

New York, 26 December (Argus) — US president-elect Donald Trump's plans to enact new tariffs, especially those targeting Mexico and Canada, may curb demand for US bunker fuel and ripple across international markets. The proposed 25pc tariffs on imports from Mexico and Canada could affect all products coming into the US from those countries, including the significant volumes of residual fuel oil from Mexico and Canada that US Gulf coast and east coast buyers import. This could lift prices of residual fuel oil sold for bunkering in US Gulf coast and east coast ports, prompting some ship owners calling there to instead fuel outside the US in more price-competitive ports. Depending on their routes, ship owners could shift some of their bunker demand to Singapore, Rotterdam, Fujairah and Panama. Mexico alone supplied 74pc of the residual fuel oil imported to the US Gulf coast and and 29pc to the east coast in the first nine months of the year, according to US Energy Information Administration (EIA) data ( see table ). Meanwhile, Canada supplied 7pc and 16pc of the fuel oil imported to the US Gulf and east coasts, respectively. The US east coast imported 46,730 b/d of residual fuel oil and produced 35,000 b/d in the first nine months of the year ( see chart ). By comparison, the US Gulf coast imported 48,909 b/d and produced 161,667 b/d. Prices of Canadian and Mexican residual fuel oil exports to the US are typically benchmarked against US Gulf and east coast residual fuel oil prices. Should Trump implement the 25pc tariffs, companies bringing Canadian and Mexican residual fuel oil to the US could bid lower to try to offset their tariff costs. Lower bids from US buyers could redirect some of the Mexican and Canadian residual fuel oil exports to buyers in northwest Europe, Panama and Singapore. Or if Canadian and Mexican producers are not able to find lucrative clients outside of North America, they may have to settle for lower profit margins for their residual fuel oil exports to the US. On the US west coast, Trump's campaign promise to impose tariffs of up to 60pc on imports from China has already prompted some shippers to front-load container cargoes. Potential additional tariffs could slow container ship traffic from China to the US' busiest container ship ports — Los Angeles and Long Beach in California. There is a lot of uncertainty around the extent of Trump's tariff plans, as some analysts view his threats as aimed at generating leverage for negotiations. But provided that they are put into place, the Mexico and Canada tariffs could push US east and Gulf coast importers to purchase more residual fuel oil from other countries like Algeria, Colombia, Iraq, Kuwait, Nigeria, Peru and Saudi Arabia. An increase in Chinese tariffs could prompt US west coast importers to shift their purchases to other southeast Asian countries such as Vietnam, Indonesia, Malaysia and Thailand. But once the dust settles from the geographical reshuffling, new trading networks may have been established, and the US bunker market could settle into a new normal. By Stefka Wechsler US Gulf and east coasts residual fuel oil imports, Jan-Sep 2024 '000 b/d East coast % of all countries Gulf coast % of all countries Mexico 13.6 29% 36.1 74% Canada 7.4 16% 3.3 7% All countries 46.7 100% 48.9 100% — EIA US Gulf and east coast FO imports, Jan-Sep ’000 b/d Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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