Biomethanol price not conducive to bunkering

Spanish Market: Biofuels, Emissions, Oil products, Petrochemicals
12/11/21

Shipowners switching to biomethanol as a marine fuel to curb CO2 emissions would face higher bunker bills at today's prices, even after accounting for the added cost of CO2 life cycle emissions from very low-sulphur fuel oil (VLSFO).

Marine fuels sale and consumption are not subject to greenhouse gas restrictions or fees, but the EU has two proposals in the works that would change that. One plan is to add maritime emissions to the EU emissions trading scheme (ETS), starting in 2023 with auctions for 20pc of CO2 emissions and gradually increasing to 100pc of CO2 emissions in 2026. This proposal applies to emissions generated during fuel combustion. The second proposal is for vessels to reduce their GHG intensities, starting in 2025 with a 2pc reduction and gradually increasing to a 75pc reduction by 2050, from a 2020 baseline. The proposal would apply to emissions generated during a fuel's life cycle.

During its life cycle, one metric tonne (t) of VLSFO emits about 3.734t of CO2, according to a study by the nonprofit International Council on Clean Transportation. CO2 traded through the EU's ETS averaged $70/t and Amsterdam-Rotterdam-Antwerp (ARA) VLSFO averaged at $573/t from 1-12 November, according to Argus data. Adding life cycle CO2 emissions cost to VLSFO would have increased its price to $833/t. By comparison, biomethanol, excluding CO2 life cycle emission cost, was pegged at $3,336/t in ARA average for the week ending 5 November, Argus data showed, four times higher than VLSFO with the added CO2 cost.

Biomethanol is produced from biomass and so creates fewer CO2 emissions than traditional methanol, which is produced from natural gas or coal.

Danish shipping company Maersk earlier this year said it is considering biomethanol as a way to reduce its CO2 emissions, in addition to considering lignin fuels, e-methanol, biodiesel and green ammonia. Fossil fuel-generated methanol in Rotterdam was assessed at $958/t average for the week ending on 5 November, Argus data showed, less than one-third of the price of biomethanol. Unless biomethanol prices drop sharply in the 13-plus months until January 2023 when the ETS scheme could be implemented, it is unlikely that most ship owners will embrace burning biomethanol. Paying for CO2 emissions through EU's ETS would be more cost effective than switching to biomethanol or fossil fuel-generated methanol at today's prices.

By Stefka Wechsler

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24/12/24

Viewpoint: California dairy fight spills into 2025

Houston, 24 December (Argus) — California must begin crafting dairy methane limits next year as pressure grows for regulators to change course. The California Air Resources Board (CARB) has committed to begin crafting regulations that could mandate the reduction of dairy methane as it locked in incentives for harvesting gas to fuel vehicles in the state. The combination has frustrated environmental groups and other opponents of a methane capture strategy they accuse of collateral damage. Now, tough new targets pitched to help balance the program's incentives could become the fall-out in a new lawsuit. State regulators have repeatedly said that the Low Carbon Fuel Standard (LCFS) is ill-suited to consider mostly off-road emissions from a sector that could pack up and move to another state to escape regulation. California's LCFS requires yearly reductions of transportation fuel carbon intensity. Higher-carbon fuels that exceed the annual limits incur deficits that suppliers must offset with credits generated from the distribution to the state of approved, lower-carbon alternatives. Regulators extended participation in the program to dairy methane in 2017. Dairies may register to use manure digesters to capture methane that suppliers may process into pipeline-quality natural gas. This gas may then be attributed to compressed natural gas vehicles in California, so long as participants can show a path for approved supplies between the dairy and the customer. California only issues credits for methane cuts beyond other existing requirements. Regulators began mandating methane reductions from landfills more than a decade ago and in 2016 set similar requirements for wastewater treatment plants. But while lawmakers set a goal for in-state dairies to reduce methane emissions by 40pc from 2030 levels, regulators could not even consider rulemakings mandating such reductions until 2024. CARB made no move to directly regulate those emissions at their first opportunity, as staff grappled with amendments to the agency's LCFS and cap-and-trade programs. That has meant that dairies continue to receive credit for all of the methane they capture, generating deep, carbon-reducing scores under the LCFS and outsized credit production relative to the fuel they replace. Dairy methane harvesting generated 16pc of all new credits generated in 2023, compared with biodiesel's 6pc. Dairy methane replaced just 38pc of the diesel equivalent gallons that biodiesel did over the same period. The incentive has exasperated environmental and community groups, who see LCFS credits as encouraging larger operations with more consequences for local air and water quality. Dairies warn that costly methane capture systems could not be affordable otherwise. Adding to the expense of operating in California would cause more operations to leave the state. California dairies make up about two thirds of suppliers registered under the program. Dairy supporters successfully delayed proposed legislative requirements in 2023. CARB staff in May 2024 declined a petition seeking a faster approach to dairy regulation . Staff committed to take up a rulemaking considering the best way to address dairy methane reduction in 2025. Before that, final revisions to the LCFS approved in November included guarantees for dairy methane crediting. Projects that break ground by the end of this decade would remain eligible for up to 30 years of LCFS credit generation, compared with just 10 years for projects after 2029. Limits on the scope of book-and-claim participation for out-of-state projects would wait until well into the next decade. Staff said it was necessary to ensure continued investment in methane reduction. The inclusion immediately frustrated critics of the renewable natural gas policy, including board member Diane Tarkvarian, who sought to have the changes struck and was one of two votes ultimately against the LCFS revisions. Environmental groups have now sued , invoking violations that effectively froze the LCFS for years of court review. Regulators and lawmakers working to transition the state to cleaner air and lower-emissions vehicles will have to tread carefully in 2025. By Elliott Blackburn Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: US BD demand awaits 1Q rebound as risks loom

24/12/24

Viewpoint: US BD demand awaits 1Q rebound as risks loom

Houston, 24 December (Argus) — US demand for butadiene (BD) is expected to increase in January, but buyer sentiment for the remainder of the first quarter remains uncertain. Inventory restocking in January is expected to draw down excess supply and provide near-term price support, according to market participants. Derivative manufacturers aim to rebuild inventories following earlier-than-normal destocking initiatives this year. Many buyers employ standard inventory control management strategies to avoid paying higher end-of-year inventory taxes, particularly in Texas. Others cut costs to improve year-end financial statements. Domestic demand in February and March is less clear, as market participants question whether the market will rebound from persistently low demand at the end of 2024. US BD prices on a contract basis fell by 12pc during the fourth quarter , owing to weak demand and oversupply. Demand was depressed by BD consumer turnarounds in October, seasonal slowdowns between November-December and trade pressures tied to derivative imports. US tire shipments this year are expected to rise by 2.1pc to 338.9mn units, surpassing the record set in 2021, according to the US Tire Manufacturers Association. However, market participants along with US trade data reference a jump in tire imports from Asia-Pacific. Both Bridgestone and Goodyear have said low-cost tire imports and structural changes in segment profitability across the Americas are eroding their market share, fueling capacity rationalization, asset sell-offs and plant closures in the region. Acrylonitrile butadiene styrene (ABS) is another segment at risk of stronger competition from low-cost, Asia-origin imports. Ineos Styrolution plans to permanently shut down its ABS plant in Addyston, Ohio, in 2025 because the facility cannot compete with imported material. "Over the past few years, we have seen the ABS market become increasingly competitive, particularly with growing competition from overseas imports," Ineos Styrolution chief executive Steve Harrington said in late October. Protectionist trade policies are likely to be a feature of president-elect Donald Trump's second administration, potentially altering business investment decisions and durable goods trade flows. Even if demand does not improve, planned maintenance in the first half of 2025 is expected to tighten BD supplies. A heavy turnaround cycle for steam crackers will concentrate in the first and second quarters, constraining availability of feedstock crude C4. One integrated US Gulf coast producer plans to enforce BD allocations while its assets are offline for planned maintenance. A separate, non-integrated producer has not announced BD sales controls, based on feedback from its customers. This same BD supplier was short on feedstock supplies for parts of this year, with the crude C4 merchant market illiquid in North America. A third producer has scheduled a cracker turnaround starting in January, but no indications emerged that would limit term volumes from its BD unit. Reduced BD supply during cracker maintenance is likely to pull volumes away from the export market until the second half of 2025. Export spot cargoes in the fourth quarter more than doubled from the third quarter, serving as a critical outlet to clear the domestic market of surplus BD supplies, even as lower export prices pressured US margins. By Joshua Himelfarb Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: US Gulf high-octane component prices to rise

24/12/24

Viewpoint: US Gulf high-octane component prices to rise

Houston, 24 December (Argus) — Cash prices of high-octane gasoline blending components in the US Gulf coast are likely to rise in 2025 after a year of declines as lower refining capacity starts to thin stocks. Alkylate and reformate cash prices and differentials have been lower over the course of 2024, in part from weaker refining margins. The lower margins are reflected in the region's crack spreads, which narrowed to $12.94/USG on 19 December from $18.67/USG a year earlier, as abundant supply in the region met weak demand . Inventories in the region have also been lower over the course of the year. Stocks in the region fell in November by 2pc from a year earlier to an average 29.75mn bl. US Gulf coast crack spreads have been declining steadily since 2022, according to the Energy Information Administration's (EIA) November Short-Term Energy Outlook, brought on by lower overall product demand, especially for gasolin e . But the EIA expects spreads to hold steady next year, even with a decrease in refining capacity, potentially supporting prices for high-octane components. The upcoming year will also bring a significant refinery closure to the region, which should reduce production and raise cash prices of components such as alkylate and reformate. LyondellBasell's closure of its 264,000 b/d Houston, Texas, refinery is scheduled to start in January. The refinery's fluid catalytic cracking unit (FCC), which converts vacuum gasoil primarily into gasoline blendstocks, is expected to be shut in February, followed by a complete end to crude refining by the end of the first quarter. US total refining capacity should fall to 17.9mn b/d by the end of 2025, according to the EIA, 400,000 b/d less than at the end of 2024, with the lower production leading to price increases. Although the LyondellBasell closing should eventually give crack spreads in the region a boost, some in the industry do not expect a return to pre-pandemic levels of refining margins in the immediate future. CVR Energy chief executive David Lamp said in November the company needed "to see additional refining capacity rationalization in both the US and globally" for crack spreads to gain ground. An increase in consumer demand for gasoline would also support a rise in cash prices and differentials for high-octane components. But the EIA in December forecast consumption nationwide would rise in 2025 by only 10,000 b/d, or 0.1pc, to 8.95mn b/d. By Jason Metko Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: Ethanol producers face higher costs in 2025

24/12/24

Viewpoint: Ethanol producers face higher costs in 2025

London, 24 December (Argus) — European ethanol producers may face rising output costs in 2025 as a poorer harvest season will push feedstock prices up, while other factors such as greenhouse gas (GHG) emission values could affect the price of finished products. Unfavourable weather conditions have led to a poor 2024-25 harvest, particularly for wheat. In Ukraine, Europe's largest wheat exporter excluding Russia, Argus forecasts wheat production will drop to 22.3mn t during 2024-25 , down from a five-year average of 24.7mn t. Corn supply from the country for 2024-25 is projected to fall to 22.9mn t, down from 31.5mn t in the previous season, according to Argus data. France — Europe's largest producer of ethanol — has cut its wheat production outlook for 2024-25 because of wet weather. And rainfall in other parts of Europe has affected corn toxin levels, potentially leading to poorer quality ethanol. This will likely weigh on ethanol output in 2025 as it will strain feedstock supplies, push production costs up and squeeze margins for producers. Nuts 2 It comes as markets are still waiting for an update on level 2 in the nomenclature of territorial units for statistics greenhouse gas (GHG) emission values — the so called Nuts 2 values. To determine the GHG emissions from growing crops in the EU, the bloc's Renewable Energy Directive (RED) allows the use of typical units that represent the average GHG value in a specific area. On the back of the implementation of the recast of RED (RED II), the European Commission requested an update of the Nuts 2 GHG values. Member states have to prepare new crop reports to be assessed by the commission. But reports have been slow to emerge, while those that have been submitted face a lengthy review. Producers rely on GHG values to calculate the GHG savings of end-products, but default RED values currently in place are significantly lower than the typical GHG values from Nuts 2. While this is unlikely to have long-term effects beyond 2025, in the current context finding values that meet market participants' criteria has been difficult for some, which may support prices. Rising demand Demand for waste-based and ethanol with higher GHG savings should increase in 2025 as a result of policy changes, after lower renewable fuel ticket prices in key European markets kept buying interest in check in 2024. Tickets are generated by companies supplying biofuels for transport. They are tradeable and can help obligated parties meet renewables mandates. The decline in prices for GHG tickets in Germany — the main demand centre for minimum 90pc GHG savings ethanol — weighed on ethanol consumption in 2024, squeezing the differential to product with lower GHG savings. The premium averaged around €17/m³ ($17.7/m³) from 1 January-1 December 2024, down from around €43/m³ during the same period in 2023. But an increase in Germany's GHG quota in 2025, coupled with Germany's decision to pause the use of GHG certificates carried forward from previous compliance years towards the 2025 and 2026 blending mandate, should increase physical blending and lift premiums for ethanol with high GHG savings, according to market participants. Meanwhile, the Netherlands' ministry of infrastructure and water management's plan to reduce the amount of Dutch tickets that obligated companies will be able to carry forward to 2025 to 10pc from 25pc may have little effect on Dutch double-counting ethanol premiums in 2025. Participants expect steady premiums, despite slightly higher overall blending targets. The Argus double-counting ethanol fob ARA premium to crop-based ethanol fob ARA averaged €193/m³ from 1 February-1 December 2024. Biomethanol slows Lower ticket prices in the UK have kept a lid on demand for alternative waste-based gasoline blendstock biomethanol. The Argus cif UK biomethanol price averaged $1,089/t from 1 Jauary-1 December, compared with $1,229/t during the same period of 2023. The European Commission's proposal to exclude automatic certification of biomethane and biomethane-based fuels, if relying on gas that has been transported through grids outside the EU, continues to slow negotiations for 2025 imports of biomethanol of US origin into the EU. But demand for biomethanol and e-methanol could be supported by growing interest from the maritime sector as shipowners seek to reduce emissions after the EU's FuelEU maritime regulation comes into effect. Shipping giant Maersk has signed several letters of intent for the procurement of biomethanol and e-methanol from producers such as Equinor , Proman and OCI Global . By Evelina Lungu Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: European HSFO supply to stay short

24/12/24

Viewpoint: European HSFO supply to stay short

London, 24 December (Argus) — A sustained reduction in global supply should keep European higher-sulphur fuel oil (HSFO) prices and margins elevated in 2025. European HSFO differentials against the front-month Ice Brent crude futures contract briefly moved to a premium in October 2024, when a fall in production coincided with strengthening demand for high-sulphur marine fuel. A fire at a crude distillation unit in September severely cut output at Motor Oil Hellas' 180,000 b/d Corinth refinery in Greece, a key HSFO bunker producer in the Mediterranean region. The possibility of sudden drops in output at refineries will underpin HSFO margins in 2025, assuming Europe maintains its ban on imports of Russian oil products. Europe imported sour fuel oil from a variety of other countries in 2024 — Iraq emerged as the largest single supplier of high-sulphur residual product, according to Kpler , accounting for about a third of the region's 5.7mn t of imports. Europe's HSFO stocks will come under indirect pressure next year from falling fuel oil output in Russia. Additional upgrading capacity at Russian refineries means output from the world's top fuel oil supplier has been dropping year-on-year. Vortexa data show nearly 37mn t of Russian fuel oil has arrived at non-Russian ports this year, 12pc lower than in 2023. Although Europe cannot take any of this, the fall means less to go around globally and this has a knock-on effect on European supply. If middle-distillate crack spreads stay relatively lacklustre in 2025, appetite for higher-sulphur straight run feedstocks will probably be subdued. This could allow for excess sour fuel oil to find its way into the marine fuels market, where demand for HSFO has been strong. Tankers opting to avoid the risk of being attacked by Yemen-based Houthi militants in the Red Sea are adding weeks to their journey times, and have been looking to HSFO rather than very-low sulphur fuel oil (VLSFO) to keep their bunker costs down. If longer shipping routes remain popular in 2025, demand for HSFO should stay strong. The Emissions Control Area (ECA) that will cover the Mediterranean Sea from 1 May 2025 could dampen buying interest for 3.5pc sulphur marine fuels. A sulphur scrubber can undergo more wear and tear if it is made to reduce a vessel's HSFO emission level to 0.1pc, in line with the ECA, rather than to the current limit of 0.5pc. This increases rates at which the scrubber needs to be replaced, making it uneconomical to install one. Mid-range sulphur fuel oils are now garnering interest from Mediterranean-based bunker buyers as a workaround. LSSR As the ECA comes into force, demand for the sweetest grades of low-sulphur straight-run (LSSR) fuel oil is likely to intensify from those who buy marine fuels for vessels not fitted with scrubbers. Demand for 0.1-0.2pc sulphur straight-run fuel oil has been high in 2024, reinforcing competition between blenders and refiners for Algerian LSSR. Exports of Algerian LSSR were 1.28mn t in the year to 20 December 2024, lower by 38pc from year-earlier levels and by 65pc from the same period in 2022, but global supply was somewhat balanced by output from Nigeria's new 650,000 b/d Dangote refinery. It exported 870,000t of LSSR in 2024, of a reportedly similar grade to the Algerian product according to data from Vortexa. Most Nigerian cargoes exported in 2024 were used for blending, according to information gathered by Argus . LSSR export availability from Dangote will depend on the refinery's ability to run feedstocks through residue fluid catalytic cracking units for gasoline production. Potentially adding to west African LSSR, at the start of December Nigeria's 210,000 b/d Port Harcourt refinery sold its first cargo since its long-awaited restart on 27 November. Port Harcourt's LSSR contains 0.26pc sulphur, according to Kpler. By Bob Wigin and Isabella Reimi Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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