GHG pricing mechanism to be finalised this week: IMO

Market: Biofuels, Oil products
07/04/25

The structure of the International Maritime Organisation's (IMO) economic pricing mechanism — aiming to reduce the cost gap between conventional marine fuels and zero/near-zero emission alternatives — will be agreed on by the end of the week, including details on the cost of carbon emissions and whether remedial units will be included, IMO secretary general Arsenio Dominguez said today.

Dominguez said the focus of the economic pricing mechanism is not just to raise revenue, but also to support fuel transition. By the end of this week, Dominguez said he is confident that we will see the architecture of what the proposal looks like, including if a remedial unit will be included in the pricing mechanism and what the numbers will look like. Dominguez also said that non-compliant penalties, once agreed on as part of the proposal, will be implemented via a guideline which will be developed after this week. This will be in place by the "entry into force" in 2027, and will cover vessels above 5,000 gross tonnage (GT).

Dominguez confirmed that the latest discussions between member states have favoured a "crediting" system for alternative marine fuels as opposed to a "flat carbon levy", although these details are set to be finalised by 11 April. He highlighted three main points being discussed — the definition of "znz" (zero and near-zero emission fuels and technologies), the pricing mechanism itself, and the approach of governance when it comes to implementing the mid-term measures.

One of the main concerns raised by market participants on IMO's efforts has been potential regulatory conflicts, such as in the EU where the emissions trading system (ETS) was extended into maritime in 2024 and FuelEU Maritime came into effect in 2025. The concern could be that clashes between IMO global regulations and EU regulations could lead to uncertainty and confusion in the market, potentially weighing on fundamentals for alternative marine fuels. Dominguez said this topic has not yet been explored, but he expects EU member states to look into the respective legal clauses and there could be potential for a unified regulatory approach in line with the global regulation.

IMO had also been looking at raising the limit on biofuel content onboard a Type I barge to 30pc from the current limit of 25pc. The proposal for this was submitted to MEPC 83, with a view to approval. "The guidance allows conventional bunker ships certified for carriage of oil fuels under Marpol Annex I to transport blends of not more than 30pc by volume of biofuel, as long as all residues or tank washings are discharged ashore, unless the oil discharge monitoring equipment is approved for the biofuel blend(s) being shipped.", IMO said. The MEPC circular on interim guidance on the carriage of blends of biofuels and Marpol Annex I cargoes by conventional ships was approved today, subject to final editorial review and then to be released as a circular.

Dominguez addressed questions regarding the IMO carbon intensity indicator (CII) system, for which a review is expected. IMO's CII regulation, which came into force in January 2023, requires vessels over 5,000GT to report their carbon intensity, which is then scored from A to E. A and B vessel scores are regarded as superior energy efficiency, while C, D and E are considered moderate to inferior scores. Dominguez said the review is likely to take place in 2027, in which IMO will assess the positive aspects of CII so far and identify any further improvements needed.

By Hussein Al-Khalisy

Related news posts

Argus illuminates the markets by putting a lens on the areas that matter most to you. The market news and commentary we publish reveals vital insights that enable you to make stronger, well-informed decisions. Explore a selection of news stories related to this one.

News

17/04/25

IMF anticipates lower growth from US tariffs

Washington, 17 April (Argus) — Economic growth projections set for release next week will include "notable markdowns" caused by higher US tariffs that have been disrupting trade and stressing financial markets, IMF managing director Kristalina Georgieva said today. The IMF earlier this month warned that the tariffs that President Donald Trump was placing on trading partners could pose a "significant risk" to the global economy. Those higher trade barriers are on track to reduce growth, raise prices for consumers and create incremental costs related to uncertainty, the IMF plans to say in its World Economic Outlook on 22 April. "Our new growth projections will include notable markdowns, but not recession," Georgieva said Thursday in a speech previewing the outlook. "We will also see markups to the inflation forecasts for some countries." Trump has already placed an across-the-board 10pc tariff on most trading partners, with higher tariffs on some goods from Canada and Mexico, a 145pc tariff on China, and an exception for most energy imports. Those tariffs — combined with Trump's on-again, off-again threats to impose far higher tariffs — have been fueling uncertainty for businesses and trading partners. The recent tariff "increases, pauses, escalations and exemption" will likely have significant consequences for the global economy, Georgieva said, resulting in a postponement of investment decisions, ships at sea not knowing where to sail, precautionary savings and more volatile financial markets. Higher tariffs will cause an upfront hit to economic growth, she said, and could cause a shift in trade under which some sectors could be "flooded by cheap imports" while other sectors face shortages. The IMF has yet to release its latest growth projections. But in January, IMF expected global growth would hold steady at 3.3pc this year with lower inflation. The IMF at the time had forecast the US economy would grow by 2.7pc, with 1pc growth in Europe and 4.5pc growth in China. The upcoming markdown in growth projections from the IMF aligns with analyses from many banks and economists. US Federal Reserve chair Jerome Powell on 16 April said the recent increase in tariffs were likely to contribute to "higher inflation and slower growth". Those comments appear to have infuriated Trump, who has wanted Powell to cut interest rates in hopes of stimulating growth in the US. "Powell's termination cannot come fast enough!" Trump wrote today on social media. Powell's term as chair does not end until May 2026. Under a longstanding US Supreme Court case called Humphrey's Executor , Trump does not have the authority to unilaterally fire commissioners at independent agencies such as the Federal Reserve. Trump has already done so at other agencies such as the US Federal Trade Commission, creating a potential avenue to overturn the decision. By Chris Knight Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Find out more

News

Risks rising for possible recession in Mexico: Analysts

17/04/25

News

17/04/25

Risks rising for possible recession in Mexico: Analysts

Mexico City, 17 April (Argus) — The Mexican finance executive association (IMEF) lowered its 2025 GDP growth forecast for a second consecutive month in its April survey, citing a rising risk of recession on US-Mexico trade tensions. In its April survey, growth expectations for 2025 fell to 0.2pc, down from 0.6pc in March and 1pc in February. Nine of the 43 respondents projected negative growth — up from four in March, citing rising exposure to US tariffs that now affect "roughly half" of Mexico's exports. The group warned that the risk of recession will continue to rise until tariff negotiations are resolved, with the possibility of a US recession compounding the problem. As such, IMEF expects a contraction in the first quarter with high odds of continued negative growth in the second quarter — meeting one common definition of recession as two straight quarters of contraction. Mexico's economy decelerated in the fourth quarter of 2024 to an annualized rate of 0.5pc from 1.7pc the previous quarter, the slowest expansion since the first quarter of 2021, according to statistics agency data. Mexico's statistics agency Inegi will release its first estimate for first quarter GDP growth on April 30. "A recession is now very likely," said IMEF's director of economic studies Victor Herrera. "Some sectors, like construction, are already struggling — and it's just a matter of time before it spreads." The severity of the downturn will depend on how quickly trade tensions ease and whether the US-Mexico-Canada (USMCA) free trade agreement is successfully revised, Herrera added. But the outlook remains uncertain, with mixed signals this week — including a possible pause on auto tariffs and fresh warnings of new tariffs on key food exports like tomatoes. IMEF also trimmed its 2026 GDP forecast to 1.5pc from 1.6pc, citing persistent tariff uncertainty. Its 2025 formal job creation estimate dropped to 220,000 from 280,000 in March. The group slightly lowered its 2025 inflation forecast to 3.8pc from 3.9pc, noting current consumer price index should allow the central bank to continue the current rate cut cycle to lower its target interest rate to 8pc by year-end from 9pc. IMEF expects the peso to end the year at Ps20.90/$1, slightly stronger than the Ps21/$1 forecast in March. By James Young Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

News

Saudi petchem expansion plans to cap naphtha exports

17/04/25

News

17/04/25

Saudi petchem expansion plans to cap naphtha exports

Dubai, 17 April (Argus) — Saudi Arabia's plans to integrate downstream petrochemical units with its oil refineries could weigh on naphtha exports and gasoline blending. State-controlled Aramco recently signed a deal with Chinese state-controlled Sinopec to build and integrate a 1.8mn t/yr mix-feed ethylene steam cracker and a 1.5mn t/yr aromatics complex into the 400,000 b/d Yasref refinery. This sort of integration would typically redirect naphtha to the petrochemical units and away from the gasoline blending pool, traders said. Market participants point to a likely fall in overall Saudi naphtha exports, as has been the case since the integration of petrochemical operations at the 400,000 b/d Jizan and PetroRabigh refineries in 2021 and 2008, respectively. Joint Organisations Data Initiative (Jodi) data show Saudi naphtha exports in steady decline to 93,000 b/d in 2024, 108,700 b/d in 2023, 144,800 b/d in 2022 and 169,200 b/d in 2021. Data from Kpler show naphtha exports from the Yasref refinery at 22,000 b/d in 2024, down from 25,000 b/d a year earlier but higher than 19,000 b/d in 2022. The majority of these exports went to Indonesia, Malaysia and South Korea. Yasref has the capacity to produce 112,000 b/d gasoline but it exported only 17,000 b/d in 2024 and 26,000 b/d in 2023. Market participants said the integration may not have any immediate significant effect on gasoline output but the addition of the aromatic complex, in theory, could need pull in more heavy full-range naphtha that is otherwise used as a blendstock for gasoline production. It remains to be seen if the new mixed feed cracker would favour naphtha or LPG as a feedstock. Ethane accounts for the majority of feedstock for Saudi crackers. The shift of focus from producing transportation fuels to petrochemicals comes as Saudi gasoline demand continues to lag pre-pandemic levels and faces pressure from growing uptake of electric vehicles. Saudi gasoline demand averaged 514,000 b/d in 2024, well below the 550,000 b/d in pre-pandemic 2019, mainly because of higher retail prices . Aramco has a target to process up to 4mn b/d of crude into petrochemicals by 2030, from 1mn b/d currently. It is developing an $11bn petrochemical expansion project at the 460,000 b/d Satorp refinery joint venture with TotalEnergies. By Rithika Krishna Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

News

Japan’s Mitsui invests in US e-fuel producer

17/04/25

News

17/04/25

Japan’s Mitsui invests in US e-fuel producer

Tokyo, 17 April (Argus) — Japanese trading company Mitsui has invested in California-based synthetic fuel (e-fuel) producer Infinium, aiming to acquire knowledge on technology and commercialisation in the emerging sector. The investment in Infinium was conducted in March, Mitsui told Argus on 16 April, declining to disclose the specific amount. This marks Mitsui's second investment in e-fuel producers. The firm invested in California-based synthetic sustainable aviation fuel (e-SAF) producer Twelve Benefit . Infinium produces green hydrogen from water by electrolysis, and converts the hydrogen and CO2 into e-fuels by using renewable energy. The firm is planning to launch its second plant, which will specialise in e-SAF production. International Airlines Group (IAG) and American Airlines have agreed to receive the e-SAF that will be produced at the plant. E-fuels can help reduce over 90pc of greenhouse gas (GHG) emissions compared with conventional fossil fuels, and are notable as "drop-in" substitutes for conventional fuels, applicable to existing engines and infrastructures, Mitsui said. Mitsui is observing the e-SAF market. SAF is a relatively promising prospect in the renewable energy sector, on the back of the target by the UN's International Civil Aviation Organisation (ICAO) to achieve net-zero emissions in international aviation by 2050, as well as governmental policies bolstering the deployment of SAF, a representative of the firm told Argus . Japan plans to replace 10pc of the jet fuel consumed by domestic airlines with SAF in 2030. By Kohei Yamamoto Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

News

Valero Benicia refinery closure latest Calif challenge

16/04/25

News

16/04/25

Valero Benicia refinery closure latest Calif challenge

Adds details on refinery operations, California regulations. Houston, 16 April (Argus) — US refiner Valero is planning to shut or re-purpose its 145,000 b/d refinery in Benicia, California, compounding the state's fuel market challenges. The company submitted a notice to the California Energy Commission (CEC) today of its intent "to idle, restructure, or cease refining operations" at the refinery by the end of April 2026. Valero also said it continues to evaluate strategic alternatives for its remaining operations in the state, namely its 85,000 b/d Wilmington refinery. Valero said previously west coast refinery closures were likely , citing the high cost of doing business in the state given its environmental and financial regulations. California refiners in recent years have faced what the industry views as a restrictive environment for processing crude. Phillips 66 last year said it would shut its 139,000 b/d Los Angeles refinery, saying that the long-term sustainability of the refinery was uncertain and affected by market dynamics. The Phillips 66 refinery will be shut by October. Growing legislative barriers California governor Gavin Newsom last year signed two laws, SB X1-2 and AB X2-1, which added regulations in an effort to reduce retail gasoline price volatility. The measures authorized the CEC to develop and impose requirements for in-state refiners to maintain minimum stocks of gasoline and gasoline blending components. They also authorized the CEC to determine an acceptable refining margin in the state and penalize companies that exceed it. The agency is currently in the rulemaking process on some of the measures including a requirement for refiners to submit "resupply plans" 120 days before planned maintenance that must be approved by the state. Non-compliance could carry a civil penalty of $100,000-$1mn per day. Separately, the city of Benicia recently approved a safety ordinance that applies to industrial facilities that handle hazardous materials including the Valero refinery. The ordinance included new air quality monitoring programs. California air regulators in October 2024 levied an $82mn fine against Valero for emissions violations at the Benicia refinery. The Bay Area Air Quality Management District and California Air Resources Board announced the penalty for "egregious emissions violations" stemming from a 2019 inspection that discovered unreported emissions coming from the refinery's hydrogen system. Since the 1980s, 29 refineries in California have been shut or integrated with other refineries that eventually closed or converted to renewable fuels production, according to CEC data. About half of the shut refineries were smaller operations, producing less than 20,000 b/d. Chevron, the US oil major that has long complained about a hostile regulatory environment in its home state of California, is relocating its headquarters to Houston. Valero said this week it recorded a pre-tax impairment charge of $1.1bn for the Benicia and Wilmington refineries in the first quarter as it evaluates strategic alternatives. The impairment will be treated as a special item and excluded from first quarter earnings, Valero said. The Benicia refinery produces jet fuel, gasoline, diesel, and asphalt and has more than 400 employees. By Eunice Bridges Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Business intelligence reports

Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.

Learn more