Viewpoint: E15 changes may lift midcon CBOB prices

Spanish Market: Oil products
26/12/23

US midcontinent gasoline prices may tick higher than normal next summer as eight midcontinent states seek to retain year-round sales of 15pc ethanol gasoline (E15) in a proposed reformulation that could pinch regional supplies and constrain pipeline movements.

The potential shift to year-round E15 could lead to portions of the midcontinent adopting a boutique grade of gasoline particular to the region that would be used for blending to produce the E15. The boutique grade would be 7.8 Reid Vapor Pressure (RVP), a more expensive specification, as opposed to the 9.0 RVP gasoline that is typically used during the summer months.

This lack of uniformity in gasoline specifications may cause logistical problems, with pipelines unable to make the necessary changes to accommodate two separate RVPs of CBOB before the 2024 summer. The change may also result in an inability to draw product from other regions, leading to higher prices.

Gasoline prices at the pump could potentially increase by between 8¢-12¢/USG if the proposed rule were to go through, said US refiner HF Sinclair in its 15 November petition to the US Environmental Protection agency opposing the move, citing a study conducted by energy consultant Baker and O'Brien earlier this year.

Southern US midcontinent suboctane gasoline prices averaged $2.62/USG from April through December this year, while Chicago's Buckeye Complex CBOB averaged $2.49/USG in the same timeframe.

Ethanol industry groups released a study conducted by energy consultant MathPro in December 2021 that estimated the cost of a nationwide shift to E15 gasoline at approximately 2¢/USG. Petroleum industry organizations say the MathPro study is flawed.

The change to E15 may benefit the environment as well with the Renewable Fuels Association claiming that E15 gasoline produces 40-50pc less greenhouse emissions than crude-based gasoline. The association also argues that the use of more US-made ethanol can increase energy independence and reduce the effects of market shocks.

E15 has been available for sale across the US since 2019, but a federal court in 2021 found that the Clean Air Act exclusively offers a fuel volatility waiver to refiners to produce 10pc ethanol gasoline. The EPA has worked around this ruling for the last two summers by issuing temporary emergency orders allowing the sale of E15 because of the Ukraine conflict's squeeze on fuel supply. The EPA currently intends to issue a final ruling by late March next year.

The change could also result in additional costs and losses in production for refiners. Segregating 7.8 RVP gasoline from 9.0 RVP gasoline could result in a 12pc decrease in production, HF Sinclair said in its petition to delay the change, citing a 2005 report from the US Government Accountability Office. The US midcontinent produced an average of 2.53mn b/d of finished gasoline between April and September this year, according to data from the US Energy Information Administration (EIA). Ethanol blending in the midcontinent averaged 248,000 b/d during that period.

Other US and Canadian refiners also filed petitions urging the EPA to delay the change beyond summer 2024. US refiners Phillips 66 and Country Mark and Canadian refiner Cenovus each filed petitions in October of this year. Country Mark, which operates a 30,000 b/d refinery in Indiana, said it planned to supply Illinois if the proposed change were implemented but would most likely be unable to continue to supply Ohio. Cenovus said that the change would require significant capital investment and would potentially not be done in time for the 2024 driving season.

Pipeline problems

Because any change in RVP specifications would not be uniform across the midcontinent, pipelines would face logistical issues over how to deliver different specifications of gasoline to different destinations.

Magellan, operator of a major fuel distribution system in the southern midcontinent, said in its 18 August petition to the EPA that it currently did not have the resources to "bifurcate" or divide shipments between multiple RVPs. The bifurcation of two different grades of gasoline may also lead to less efficient shipping along the pipeline and may have splash-over effects on diesel transportation due to a drop in available CBOB inventories, according to Magellan.

The US midcontinent receives a significant volume of CBOB from the US Gulf coast during the summer, averaging 2.19mn bl/month from April to September this year, according to data from the EIA.

The midcontinent would become more reliant on shipments from the US Gulf coast to meet demand due to the production pinches caused by the 7.8 RVP specification, according to the Baker and O'Brien study. US midcontinent refineries were running at an average of 91pc utilization from April to September of this year, according to EIA data. High utilization levels leave little room for increases in efficiency to compensate for the loss of production that would be caused by the transition to E15.

Still, the US Gulf coast would be the only region able to meet the new demand because its refiners already operate at high run rates.

By Zach Appel

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11/11/24

Lower Mississippi draft restrictions lifted

Houston, 11 November (Argus) — The US Coast Guard (USGC) removed draught restrictions from the lower Mississippi River on 8 November, after several rain washed across much of the Midwestern US. Draft restrictions were completely lifted for north and southbound barges on the lower Mississippi River between Tiptonville, Tennessee, to Tunica, Louisiana. Approximately 2-8 inches of rain were reported in Illinois and Missouri in the last seven days, adding around 14 inches to the lower Mississippi River, according to the National Weather Service (NWS). St Louis, Missiouri was at a high of 11.5 inches above baseline on 11 November, up from a low of -1.5ft on 1 November. The USGC has had draft restrictions in place since August, with the river system receiving a short reprieve in early October after rain from Hurricane Helene poured into the US river system. But low water levels and restrictions returned about two weeks later. Prior to recent precipitation, drafts were restricted to 10-10.5ft for southbound barges and tows could not not be greater than 6-7 barges wide. Northbound barges could not draft greater than 9.5ft, tows could not be more than six barges wide, and only four barges could be loaded. High water levels are expected to remain through November, according to NWS but barge carriers have said that water levels will slip quickly if no additional rain falls along the upper Mississippi River. By Meghan Yoyotte Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Peru bets on trade ties with Asia as Apec starts

11/11/24

Peru bets on trade ties with Asia as Apec starts

Lima, 11 November (Argus) — Heads of 16 countries are in Peru this week to kick off the Asia-Pacific Economic Cooperation's (Apec) annual Leaders Week, as government officials in Lima look to grow their partnerships with Asia while staving off potentially disruptive strikes. The summit comes at a fragile time for Peru, where President Dina Boluarte has a historically low presidential approval rate of 4pc and bus drivers and small business owners are demanding protections from a wave of extortion. The event begins today with meetings among senior officials of the 21 member countries and closes on 16 November with the leaders' meetings, the pinnacle Apec event. With the confirmed arrival of Chinese president Xi Jinping later this week, the summit is likely to strengthen ties between Peru and Asia, amid US concerns of China's growing influence in Latin America. US president Joe Biden is also expected to travel to Lima from 14-16 November, according to the White House. He is then slated to go to Manaus and Rio de Janeiro to meet with Brazilian president Luiz Inacio Lula Da Silva. This week is also the scheduled ribbon-cutting of the Chancay megaport, a $1.3bn commercial hub north of Lima that will cut the transport time between Latin America and Asia from 35 days to 25 days. Cosco Shipping, the Chinese state-owned port operating company, owns 60pc of the project and the rest is owned by Peru mining company Volcan. It aims to become the main commercial port in the Pacific for neighboring Brazil and has a 17.8-meter depth, the greatest in Latin America. While the port will be inaugurated on 14 November, Cosco Shipping has said operations are expected to begin in early 2025. Peru's priorities for Apec include trade investments and the energy transition, with a focus on its critical mining sector — and workers' transition to the formal economy in Peru, where the informality rate is about 73pc. These goals extend to the CEO Summit, which is running simultaneously and will host hundreds of business leaders from Asia looking to invest in Peru's energy and mining sectors. Angel Manero, Peru's agriculture minister, said last week the government expects to approve sanitary protocols with China to export nuts, with the potential of expanding to meat imports, according to the official gazette. He added there are talks with China about attracting investments through the creation of Special Economic Zones. Peru last hosted the Apec in 2016. This time, workers in Lima — led by bus drivers' unions — have vowed a three-day strike during Apec to call attention to a string of killings they say are linked to resistance to extortion. Among their main asks is repealing a recent law approved by congress that they say weakens prosecution of organized crime by, among other things, changing its definition to exclude crimes of extortion. Prime Minister Gustavo Adrianzén has repeatedly asked workers not to strike to avoid "a bad show" during the high-level meetings. By Bianca Padró Ocasio Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

German oil supply holds as refinery work continues

11/11/24

German oil supply holds as refinery work continues

Hamburg, 11 November (Argus) — Oil product supply in Germany remains high even though a delayed end to the autumn refinery maintenance season has cut regional production. Germany's refining sector had seemed poised to finish its maintenance season at the end of October as scheduled, but the Miro and Bayernoil consortiums took catalytic hydro-desulphurisation units offline at their respective 310,000 b/d Karlsruhe refinery and the Neustadt site of the 215,000 b/d Vohburg-Neustadt refinery, both in southern Germany, at the start of November for unplanned maintenance works. Production of distillates is restricted at both refineries, leading to a drop in local supply. It is unknown when supply in Karlsruhe will return to normal levels. Local traders said supply at Neustadt will be restricted until 19 November. TotalEnergies' 240,000 b/d Leuna refinery in southeastern Germany faced some technical difficulties after maintenance works at the end of October. This delayed a return to normal production levels, and suppliers restricted sales of heating oil and road fuels in the past week as inventories were running low. The restrictions were lifted on 8 November. The rest of Germany's 11 refineries are producing normally, and diesel imports into northern ports remain high. Demand for heating oil and diesel is relatively low. Traded diesel volumes reported to Argus were almost half in the week to 7 November compared with the last week of October, and heating oil volumes fell by about 50pc at the same time. Supply remains high enough to meet demand despite the locally reduced production. By Natalie Müller Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Q&A: Low-carbon marine options to grow: Baseblue

11/11/24

Q&A: Low-carbon marine options to grow: Baseblue

New York, 11 November (Argus) — With marine fuel greenhouse gas emissions regulations tightening, ship owners are looking for financially feasible low-carbon fuels to add to their marine fuel repertoire. Argus spoke with Dionysis Diamantopoulos , head of alternative fuels at bunker supplier and trading firm Baseblue, about ship owners' options. Edited highlights follow. Do you expect onboard CO 2 capture and storage technology to become more important in the next five years? The big question for carbon capture technology is the storage capacity for the seized CO2. For example, if an available technology only allows 200t of CO2 to be captured on a voyage for the full capacity of CO2 tanks, then if we take into account that 1t of fuel produces on a tank-to-wake assessment context 3.2t of CO2, this means that after burning 62.5t of fuel oil/gasoil on the vessel that would fill the entirety of the storage capacity of the carbon capture equipment. Considering that this consumption could be a 2-3 day sail for some vessels running on 30-plus day voyages, the proportion of time "online" and "offline" of this technology would be inefficient. In addition, questions over the development of carbon capture technology is dependent on the availability of infrastructure worldwide to collect the captured CO2. If a vessel calls at, say, Brazil and then west Africa, and has a full carbon capture tank from the second day of the voyage and cannot discharge the captured CO2 at a west African port, we have further "offline" time of the capture technology. Other questions could include the space on deck/holds and further design considerations for the carbon capture technology. In 2030 what do you expect the global marine fuel mix to look like? In the immediate future, conventional fuel will remain the front runner, followed by biofuels due to the ability of existing fleets/engines to burn them. LNG usage could also increase if orders/deliveries of new building dual-fueled vessels increase. The IEA's director, Mr Birol, said recently that he expects LNG prices to drop due to the inflow of cargoes of LNG from the US and Qatar in the upcoming year. In the years to come, we will also see more methanol dual-fueled vessels on the water, and different areas worldwide will surely develop to supply these vessels with sustainable methanol types. Ammonia will eventually join the mix after infrastructure developments and protocols have been set for the safety of bunkering procedures. Do you think that next year's FuelEU regulation will be sufficient to encourage the move to sustainable marine fuels? The reality is that we must start somewhere, and FuelEU is a solid driving factor in pushing our industry to begin incorporating alternative fuels in the energy mix. It is vital that FuelEU and EU ETS is incorporated gradually into shipping. A charge to completely eradicate emissions within the next year or so would not be reasonable, viable or achievable. This phase-in period also assists in avoiding stranded assets and global trade disruptions. To comply with FuelEU, shipowners must know each alternative marine fuel's well-to-wake (full lifecycle) greenhouse gas emissions scores, but there is a lot of confusion around these. What well-to-wake emissions would you say each fuel has? It is not a question of my own or others opinion; it is rather what can be proven with the relevant documentation, for example, from the proof of sustainability documentation that ISCC-certified suppliers can publish. This also showcases why having a proper paper trail and documentation that officially accompanies the supplies is important. If we are talking about the default values, they would be: B100 16.37 gCO2eq/MJ; B30 MGO 70.18 gCO2eq/MJ; B30 VLSFO 71.73 gCO2eq/MJ. Fossil LNG are default values based on the type of engine. For LNG Diesel DF, it is 76.13 gCO2eq/MJ. We have not yet delivered bio-LNG or bio-methanol, so we are unsure of the GHG savings. China is lagging behind Singapore in terms of biodiesel bunker (B24) sales. Do you expect Chinese biodiesel bunker demand to pick up next year? Singapore is the king of bunkering in the region and ranks as one of the largest global bunkering hubs/ports. But Hong Kong's biofuel supplies, namely B24 VLSFO, have started and have picked up. Specifically, we at Baseblue already have recurring customers who lift biofuel blends in Hong Kong. Is conventional bunker trading this year more or less competitive than last year? Conventional bunker trading this year is more competitive compared to previous years. In my opinion, this has to do with various factors. First, crude oil prices have been under pressure. Whenever prices are under pressure, smaller trading houses try to take advantage of the fewer financing needs and appear more competitive. Next, bunker trading companies have sprouted exponentially over the last few years, which is enough to increase competition. By Stefka Wechsler Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Cop: Finance deal remains on the cards, despite Trump

11/11/24

Cop: Finance deal remains on the cards, despite Trump

Edinburgh, 11 November (Argus) — Donald Trump's victory in the US election could influence the tone of discussions at the UN Cop 29 climate talks that get under way in Baku, Azerbaijan, today. But world leaders can still agree on a new finance goal for developing countries that has the potential to shape the energy transition for years to come. Parties to the Paris deal this year need to decide on a new finance goal for developing nations — funded by developed nations — 15 years after the current $100bn/yr target was agreed. But negotiations could be "severely undermined" by Trump's victory, according to non-profit IISD's policy adviser, Natalie Jones. Trump pulled the US out of the Paris accords during his previous term in office and has said he will do so again. His election is "a blow in the fight against the climate crisis", admits France's former climate change envoy, Laurence Tubiana, although he insists that "a positive outcome is possible". Unlike in 2016, at Cop 22 in Marrakesh, Morocco, when the election of Trump came as a shock, parties have had time to plan, many observers noted. And the US could still play a role, while other countries take the lead. Developed and developing nations have grasped the urgency of agreeing on a new goal, observers say. "All parties have an interest in reaching an outcome," non-profit World Resources Institute director of international climate action David Waskow says. Technical talks earlier this year failed to progress on key issues, including the amount of finance to be provided and who will contribute. Developing countries called for a floor of at least $1 trillion/yr, but developed countries have yet to put a number forward. The idea of a layered goal with a public finance core gathered support at ministerial meetings last month. China, in June, refused to be drawn into discussions to broaden the contributor base. In October, it reiterated that the goal is an obligation for developed countries, but said other countries can provide support voluntarily, as stipulated in the Paris agreement. Baku is a pivotal summit since new finance will help support more ambitious climate plans in developing countries, which are to be submitted by 2025. And Cop 30 host Brazil could emerge as a broker to pave the way for a successful gathering next year. Brazil is also heading the G20 this year, with finance for developing nations and the reform of multilateral development banks a priority. All about the money In 2021, the IEA projected that emerging and developing economies' emissions would grow by 5 gigatonnes over the next two decades under current policies. "The NCQG [new collective quantified goal] will be a key enabler of the energy transition," civil society organisation Oil Change International's global policy lead, Romain Ioualalen, says, adding that commitments in Dubai last year — including transitioning away from fossil fuels — will not materialise without a finance deal. Also key for Cop 29 will be whether parties can agree rules to unlock carbon markets under article 6 of the Paris accord. There has been progress this year — including the article 6.4 supervisory body adopting standards on methodologies and greenhouse gas removal — even though discussions are moving too slowly. In Baku, the focus will largely remain on environmental integrity, double counting and the role of registries, with US and EU views differing here. And for article 6 talks, too, there is a risk that Trump's victory could slow the pace of progress, although International Emissions Trading Association president Dirk Forrister says he hopes that the Biden administration's negotiators will use what is left of their time "wisely" to advance work on carbon markets. "Progress this year on article 6 can help unleash more private investment to help countries strive for stronger NDCs," he said. By Caroline Varin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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