EU lawmaker wants stricter shipping emissions measures

: Emissions, Natural gas, Oil products
21/09/01

The EU should quickly and comprehensively address a predicted increase in greenhouse gas (GHG) and sulphur dioxide (SO2) emissions to make maritime shipping more sustainable, German member of the European Parliament Jutta Paulus said today, following a new EU report on the sector's environmental record.

The European Environment Agency (EEA) and the European Maritime Safety Agency (EMSA) today published a 212-page report examining the EU maritime sector's impact on the environment. Shipping accounts for 13.5pc of EU transport emissions. SO2 emissions from ships calling at EU, Icelandic and Norwegian ports were 1.63mn t in 2019, some 16pc of global SO2 emissions from international shipping.

The report noted that even if CO2 emissions from international maritime transport in the EU decreased by 17pc in 2005-15, they are projected to go up by 18pc by 2030 from 2015 levels, and by 39pc by 2050. This is "not in line" with the EU's economy-wide, climate-neutral objectives.

Paulus said the report reveals the "full" scale of environmental and climate impacts from maritime transport. "We need to quickly and comprehensively address the predicted increase in GHG and SO2 emissions to make maritime shipping more sustainable," she said.

"To date, maritime shipping has not been subject to any binding emission reduction measures. It is incomprehensible why the European Commission is planning to involve maritime shipping only gradually in the reform of the EU emissions trading system [ETS]," Paulus said. "There must be an end date for open scrubbers for exhaust gas purification, whose wastewater is simply discharged into the sea," she added.

She further called for parliament to established an Ocean Fund, financed using proceeds from maritime shipping's inclusion in the EU ETS, when negotiating the revision of the ETS with EU member states.

In July, the commission presented a range of legal measures that propose phasing maritime transport emissions into the EU ETS in 2023-25 and mandate a reduction in the GHG intensity of marine fuels.

Paulus is negotiating on behalf of parliament with EU member states over the revision of the EU's regulation on monitoring, reporting and verification (MRV) of CO2 emissions from shipping.

Also commenting on the report, EU environment commissioner Virginijus Sinkevicius said the maritime sector will produce "more and more" GHG emissions, air pollutants and underwater noise. He called for a "smooth but rapid" transition towards carbon neutrality.

Using data sent under the EU's MRV regulation, the EEA/EMSA report notes that shipping emissions contributed to 13.5pc of total EU GHG emissions from transport in 2018. The report also records ships calling at EU, Iceland, Norway and Liechtenstein emitting some 140mn t of CO2 in 2018, with container ships accounting for 44.2mn t of CO2, followed by bulk carriers (17.9mn t), oil tankers (17.8mn t), ro-pax ships (13.9mn t) and chemical tankers (9.1mn t). LNG carriers accounted for 5.5mn t of CO2. The report further underlined the impact of cargo-carrying capacity on CO2 emissions and a ship's technical energy efficiency.

By Dafydd ab Iago

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24/12/24

Trump-Panama tiff highlights rising transit cost

New York, 23 December (Argus) — US president-elect Donald Trump's threat on Saturday to reclaim the Panama Canal for the US put a spotlight on rising costs this year and additional fees planned by the Panama Canal Authority (ACP) for 2025 in the ongoing fallout of a 2023 drought in Central America. Trump claimed that the US is the "number one user" of the Panama Canal, with "over 70pc of all transits heading to, or from, US ports" on 21 December. ACP data for ships destined for or departing from the US puts this percentage at 73pc in 2023 and 75.5pc in 2024 based on total tonnage of commodities moved through the canal. "This complete ‘rip-off' of our Country will immediately stop…" Trump said. The base transit tolls at the Panama Canal have been on the rise and are largely in line with those at the Suez Canal, but Panama Canal costs can be much higher for vessel operators that compete in auctions to enter the Central American passageway. The operator of a medium range (MR) tanker traveling laden through the Panama Canal would pay $279,564.87 in transit fees, while the operator of a laden very large gas carrier (VLGC) would pay $505,268.24 without accounting for reservation costs, ACP estimates. Suez Canal fees have also been on the rise , with MR tanker at $274,001 throughout 2024, while a VLGC operator would pay $487,562. But after last year's drought caused the ACP to temporarily limit transits, ACP required shippers to book transit reservations. Shippers unable to secure reservations via pre-booking often resort to the transit slot auction, where winning bids vary wildly. Pre-booked transit slots often quickly sell out to the containership and LPG vessel owners that dominate the top spots on the ACP's client list. Auction prices for the Neopanamax locks, which have a starting bid of $100,000 and handle large vessels like VLGCs, are at about $220,000, per Argus assessments. Auction prices for the Panamax locks, which have a starting bid of $55,000 and handle vessels like MR tankers, are around $75,000. The highest Neopanamax auction price was nearly $4mn, with the highest Panamax auction price at about half that level. In December 2023, 30pc of Panamax lock tanker transits were reserved via the auction system , according to ACP. The president-elect's criticism of the ACP's handling of Panama Canal fees comes as the administrators of the waterway bounce back from a severe drought throughout 2023. Freshwater levels in the manmade Gatun Lake that helps to feed the canal have recovered because of the return of the rainy season this year, but ACP has maintained its requirement that shippers wishing to transit have reserved transit slots. Prior to the drought, ACP maintained a first-come, first-serve basis for vessels without reservations. ACP ups reservation costs, adds fees for 2025 Starting in 2025, ACP is maintaining the auction system while also increasing pre-booking costs and adding other fees. ACP will raise transit reservation fees from $41,000 to $50,000 for Panamax lock transits for "Super" category vessels, including MR tankers. Neopanamax lock transit reservation fees will climb from $80,000 to $100,000 on 1 January. ACP announced a third transit option in late 2024 for vessel operators in the form of the "Last Minute Transit Reservation" (LMTR) fee to start 1 January 2025 alongside other new fees and higher existing reservation fees. ACP set the cost of the LMTR fee at about twice the starting bid of an auction , or $100,000 for Supers and $200,000 for Neopanamax, and will likely offer the LMTR fee to vessels that fail to secure a transit slot at auction. Furthermore, vessel operators that cancel within two days of their transit will be charged a fee at 2.5 times the transit reservation fee, described by the ACP as a surcharge to the existing cancellation fee, which ranges up to 100pc of the transit reservation fee depending on how close to the transit date that an operator cancels. This means that a Super vessel that cancels within two days of its transit date will receive the 2.5 times surcharge on top of the 100pc transit reservation cancellation fee and pay a total of $175,000. A Neopanamax vessel will pay a total of $350,000. "Vessels of war" should also vie for slots: ACP Trump also suggested that the ACP was charging the US Navy, alongside US corporations, "exorbitant prices and rates of passage" and that these fees were "unfair and injudicious". In March 2024, the ACP published an update on transit slot assignments for vessels of war, auxiliary vessels and other "government-owned" vessels encouraging their operators to participate in the transit system rather than waiting for the ACP to assign them a slot. "Vessels of war, auxiliary vessels, and other government-owned vessels are encouraged to obtain a booking slot through the available booking mechanisms in order to have their transit date guaranteed and minimize the possibility of delays," the ACP said. The ACP points out that these vessels of war are entitled to "expeditious transits" based on the Treaty Concerning Permanent Neutrality and Operation of the Canal and are technically not required to obtain a reservation to be considered for transit. Panama president Jose Raul Mulino on Sunday rejected Trump's threat to retake the canal , which has been under full control of the Central American country since 1999. The canal's rates are established in a public and transparent manner, taking into account market conditions, Mulino said. "Every square meter of the Panama Canal and its adjacent area is Panama's and will continue to be," Mulino said. "The sovereignty and independence of our country are non-negotiable." By Ross Griffith Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: US east coast diesel oversupply to linger

24/12/23

Viewpoint: US east coast diesel oversupply to linger

Houston, 23 December (Argus) — The US Atlantic coast distillate market grappled with higher inventories and flat demand throughout most of 2024, dynamics that are likely to continue in the coming year. In the US Gulf coast, the main supplier of distillates to the Atlantic coast, refinery production has outpaced US domestic distillate demand, saturating the region with product shipped via the Colonial and Plantation pipelines. The US Gulf coast supplies roughly 70pc of all diesel consumed in the US Atlantic coast, with the majority shipped via pipeline. The four-week average for production of ultra-low sulphur distillates — including diesel (ULSD) and heating oil (ULSH) — in the US Gulf coast for the week ended 13 December was 7pc higher than levels from a year earlier. But overall US diesel demand was down by 2.1pc year-over-year and down by 1.9pc on the US Atlantic coast. In addition to soft demand, ultra-low sulphur distillate stocks in PADD 1B — which includes New York, New Jersey, Pennsylvania, Maryland and Delaware — in the week ended 13 December were nearly 36pc above levels a year earlier and 33pc higher than average levels recorded since the beginning of the Russia-Ukraine war in February 2022. Even with demand flat and inventories oversupplied, US refineries have not cut production. Heightened export opportunities, primarily to Europe, have created active trade flows between US Gulf coast diesel refiners and overseas end-user markets. Total distillate exports loading from the US Gulf coast year-to-date 2024 are 10pc higher than in the same period in 2023, with a 1.12mn b/d export average in 2024, compared to 1.02mn b/d loading in 2023. But not all of the additional supply is making it out of the Gulf coast. A 4.9pc increase in production in the Gulf coast means an extra 130,000 b/d of supply, while an increase of 10pc in diesel exports means an extra 100,000 b/d in outflows. Fluctuations in vessel availability and refinery production often prevent all distillate output allocated for export from being shipped from the US Gulf coast. As a result, incremental overproduction of distillates is redirected to the US Atlantic coast, with one market participant describing the Colonial pipeline as a "dumping ground" for excess product. Although economic growth in Europe remains flat, changes in the global supply chain following Russia's invasion of Ukraine are expected to sustain arbitrage opportunities for US producers to ship diesel to Europe. Shipping EN-590 gasoil — the European diesel fuel standard with a 10 ppm sulphur limit rather than the 15 ppm ULSD equivalent used in North America — from the US Gulf coast to Europe is easier than from the US Atlantic coast because of the US Gulf coast's larger refining capacity and export infrastructure, despite the US Atlantic coast's closer proximity to Europe. Although EN-590 and ULSD have similar low-sulfur requirements, EN-590 requires specific blending to meet European standards, a process better supported by US Gulf coast refineries. It does not appear that significant relief is on the horizon in the form of increased domestic demand. Diesel demand traditionally closely traces gross domestic product (GDP). But that correlation has been decoupling in recent years as the US economy has increasingly relied on non-manufacturing services to provide economic growth. Year-over-year GDP in the US grew by 2.8pc at the end of the third quarter of 2024, while diesel demand fell by 2.1pc during the same period, according to US Bureau of Economic Analysis data. While some economists are projecting US GDP to grow around 2.5pc in 2025, this is unlikely to lead to a spike in diesel demand. Continued demographic shifts and population migrations away from the US Northeast to the Sun Belt states also do not support increased demand forecasts. With narrowing refining margins, dwindling demand and sustained higher production, market participants could expect to face challenging economic conditions in 2025. By Cooper Sukaly Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: US LPG cargo premiums poised to fall

24/12/23

Viewpoint: US LPG cargo premiums poised to fall

Houston, 23 December (Argus) — The booming US LPG export market has fueled record spot fees this year for terminal operators that send those cargoes abroad, but those fees are poised to fall next year as additional export capacity comes online. US propane exports surged over the past two years, hitting an all-time high of 1.85mn b/d in the first quarter of this year, according to data from the US Energy Information Administration (EIA). Terminal fees for spot propane cargoes out of the US Gulf coast hit an all-time high of Mont Belvieu +32.5¢/USG (+$169.325/t) in mid-September. US propane production is expected to grow by another 80,000 b/d in 2025 to 2.22mn b/d while the outlook for domestic consumption is fairly steady, at 820,000 b/d next year — meaning even more propane will be pushed into the waterborne market. But that is dependent on US infrastructure keeping up with the pace of production. US export terminals in Houston, Nederland and Freeport, Texas, have run at or above capacity for the last two years given the thirst for cheaper US feedstock, largely from propane dehydrogenation (PDH) plant operators in China. This demand has created bottlenecks at US docks, and midstream operators like Enterprise, Energy Transfer, and Targa have rushed to ramp up spending on both pipelines and additional refrigeration to stay ahead of the wave of additional production. US gas output spurs LPG exports As upstream producers have ramped up natural gas production ahead of new LNG projects, most producers are counting on LPG demand from international outlets in Asia to offload the ethane and propane the US cannot consume. For the past four years, Asian buyers have been more than happy to oblige. US propane exports to China rose from zero in 2019, when China imposed tariffs on US imports, to an average of 1.36mn metric tonnes (t) per month in January-November 2024, according to data from analytics firm Kpler, making China the largest offtaker of US shipments. US exports to Japan averaged 480,000t per month throughout most of 2024, and exports to Korea averaged 460,000t per month in the first 11 months of 2024. China, Korea, and Japan received 52pc of US propane exports in 2024, up from 49pc in 2020, according to data from Vortexa. Strong demand in Asia has kept delivered prices in Japan high enough to sustain an open arbitrage between the US and the Argus Far East Index (AFEI). Forward-month in-well propane prices at Mont Belvieu, Texas, have remained well below delivered propane on the AFEI. In 2020, Mont Belvieu Enterprise (EPC) propane averaged a $143/t discount to delivered AFEI — a spread that has only widened as additional PDH units in Asia have come online. During the first 11 months of 2024, the Mont Belvieu to AFEI spread averaged a hefty $219/t, leaving plenty of room for wider netbacks in the form of higher terminal fees for US sellers, especially as a wave of new VLGCs entering the global market has left shipowners with less leverage to take advantage of the wider arbitrage. The resulting wider arbitrage to Asia has kept US export terminals running full for the last two years. So when a series of weather-related events and maintenance in May-September limited the number of spot cargoes operators could sell and delayed scheduled shipments, term buyers willing to resell any of their loadings could effectively name their price. This spurred the record-high premiums for spot propane cargoes in September. New projects may narrow premium An increase in US midstream firm investments in additional dock capacity and added refrigeration in the years ahead could narrow those terminal fees, however. Announced projects from Enterprise and Energy Transfer, in particular, will add a combined 550,000 b/d of LPG export capacity out of Houston and Nederland, Texas by the end of 2026. Enterprise's new Neches River terminal project near Beaumont, Texas, will add another 360,000 b/d of either ethane or propane export capacity in the same timeframe. These additions are poised to limit premiums for spot cargoes by the end of 2025. Already, it appears the spike in spot cargo premiums to Mont Belvieu has abated for the rest of 2024. Spot terminal fees for propane sank to Mont Belvieu +14¢/USG by the end of November. The lower premiums come not only as terminals resume a more normal loading schedule, but at the same time a surplus of tons into Asia ahead of winter heating demand has narrowed the arbitrage. The spread between in-well EPC propane at Mont Belvieu fell from $214.66/t to $194.45/t during November. A backwardated market for AFEI paper into the second quarter of 2025 means US prices are poised to fall more in order to keep the spread from narrowing further. By Amy Strahan Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: Low-carbon fuel battles tumble into 2025

24/12/23

Viewpoint: Low-carbon fuel battles tumble into 2025

Houston, 23 December (Argus) — Fights over North America's largest low-carbon fuel mandates will tumble into 2025, long after a contentious year spent updating the program. California's minority Republican lawmakers have seized upon fears that new, tougher targets approved in November to the state's Low Carbon Fuel Standard (LCFS) could hike today's pump prices by 15pc. Environmental opponents have sued the California Air Resource's Board (CARB) alleging regulators ignored shortcomings to push through those amendments. And fuel suppliers, meanwhile, continue to grapple with new demands on feedstock selection, certification and other decisions that will begin to tighten by the end of this decade. LCFS programs require yearly reductions in transportation fuel carbon intensity. Higher-carbon fuels including petroleum diesel and gasoline incur deficits for exceeding annual targets. Suppliers must offset these deficits with credits generated from distributing approved, lower-carbon alternatives to the state. California operates the oldest and largest among five operating programs on the continent. The program helped drive a surge in US renewable diesel production capacity that earlier this year cut petroleum's share to less than a quarter of the liquid diesel used in the state. Credit trade representing each metric tonne (t) of carbon reduction drives the incentives for renewable diesel, captured dairy methane or electric vehicle charging capacity used in California transportation. Credits peaked at $219/t in February 2020, equivalent to roughly $267.10/t in today's dollars. But spot credits have languished below $100/t since late 2022. Prices buckled under the growing weight of more than 30mn t of extra credits available for future compliance — enough to satisfy all the deficits generated in 2023 a second time, with another 30pc leftover. CARB staff estimated that the targets board members approved in November would reduce that reserve by more than 8mn t, or less than a third. Fuel producers warned that carbon reduction could stagnate under the smothering imbalance of new credits. Staff dismissed outside estimates of 65¢/USG increases to gasoline prices attributed to the tough new program targets, but declined to offer a competing cost estimate. Spot credit prices would need to more than triple to $250/t next year to hit gasoline prices that hard at the pump, based on Argus analysis. Pump prices make good politics Governor Gavin Newsom (D) has for two years sought and received state tools to scrutinize oil company profits on California fuel sales. Now a California state senate Republican bill would repeal the new targets and other newly adopted changes intended to restore incentives under the program. A state assembly bill would require any CARB new rulemaking or standard to undergo a cost analysis by the state's Legislative Analyst Office, a nonpartisan office that performs such reviews of legislative proposals. These Republican measures face a likely impossible climb through Democratic supermajorities in both chambers. But lawmakers noted the potency of fuel price complaints. A legislative session — framed in defiance of a new federal administration hostile to their climate efforts — opened with leaders acknowledging the need to balance costs. "California has always led the way on climate change and we will continue to lead on climate," speaker Robert Rivas (D) said on 2 December. "But not on the backs of poor and working people. Not with taxes or fees for programs that don't work." Similar battles have already spilled out of the state. British Columbia voters in October narrowly denied conservatives a majority on a platform that included ending the province's aggressive LCFS. National conservatives targeted Canada's carbon taxes in a campaign against Premier Justin Trudeau's wobbling government ahead of elections next year. As regulators update programs to drive ambitious transportation changes, voters will become more aware of where the changes are heading. By Elliott Blackburn Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: US tax fight next year crucial for 45Z

24/12/23

Viewpoint: US tax fight next year crucial for 45Z

New York, 23 December (Argus) — A Republican-controlled Congress will decide the fate next year of a federal incentive for low-carbon fuels, setting the stage for a lobbying battle that could make or break existing investment plans. The 45Z tax credit, which offers greater subsidies to fuels that produce fewer emissions, is poised to kick off in January. Biofuel output has boomed during President Joe Biden's term, driven in large part by west coast refiners retrofitting facilities to process lower-carbon fats and oils into renewable diesel. The 45Z tax credit, created by the 2022 Inflation Reduction Act (IRA), was designed to extend that growth. But Republicans will soon control Washington. President-elect Donald Trump has dismissed the IRA as the "Green New Scam", and Republicans on Capitol Hill, who had no role in passing Biden's signature climate legislation, are keen to cut climate spending to offset the steep cost of extending tax cuts from Trump's first term. Biofuels support is a less likely target for repeal than other climate policies, energy lobbyists say. But Republicans have already requested input on 45Z, signaling openness to changes. Republicans plan to use the reconciliation process, which enables them to avoid a Democratic filibuster in the Senate, to extend tax breaks that are scheduled to expire in 2025. "I want to place our industry in a place to make sure that the biofuels tax credit is part of reconciliation," said Kailee Tkacz Buller, president of the National Oilseed Processors Association. But lawmakers "could punt the biofuels discussion if stakeholders aren't aligned." A decade ago, biofuel policy was a simple tug-of-war between the oil and agriculture industries. Now many refiners formerly critical of the Renewable Fuel Standard produce ethanol and advanced biofuels themselves. And the increasingly diverse biofuels industry could complicate efforts to present a united front to Congress. Farm groups worry about carbon intensity scoring hurting crop demand and have lobbied to curtail record-high feedstock imports, to the chagrin of some biorefineries. Those producers are no monolith either: Biodiesel plants often rely more on local vegetable oils, while ethanol producers insist on keeping incentives that do not discriminate by fuel type and some oil majors would back subsidizing fuels co-processed with petroleum. Add airlines into the picture, which want greater incentives for aviation fuels, and marketers frustrated by 45Z shifting subsidies away from blenders — and the threat of fractious negotiations next year becomes clear. There are options for potential compromise, according to an Argus analysis of comments submitted privately to Republicans in the House of Representatives, as well as interviews with energy lobbyists and tax experts. The industry, frustrated by the Biden administration's delays in clarifying 45Z's rules, might welcome legislative changes that limit regulatory discretion regardless of what agency guidance eventually says. And lobbyists have floated various ways to appease agriculture groups without kneecapping biorefineries reliant on imports, including adding domestic content bonuses, imposing stricter requirements for Chinese-origin used cooking oil, and giving preference to close trading partners. Granted, unanimity among lobbyists is hardly a priority for Republican tax-writers. Reaching any consensus in the restive caucus, with just a handful of votes to spare in the House, will be difficult enough. "These types of bills always come to down to what's the most you can do before you start losing enough votes to pass it," said Jeff Navin, cofounder of the clean energy advocacy firm Boundary Stone Partners and a former House and Senate staffer. "Because they can only lose a couple of votes, there's not much more beyond that." And the caucus's goal of cutting spending makes an industry-wide goal — extending the 45Z credit into the 2030s — even more challenging. "It is a hard sell to get the extension right away," said Paul Winters, director of public affairs at Clean Fuels Alliance America. Climate costs Cost concerns also make less likely a simple return to the long-running blenders credit, which offered $1/USG across the board to biomass-based diesel. The US Joint Committee on Taxation in 2022 scored the two-year blenders extension at $5.5bn, while pegging three years of 45Z at less than $3bn. An inconvenient reality for Republicans skeptical of climate change is that 45Z's throttling of subsidies based on carbon intensity makes it more budget-friendly. Lawmakers have other reasons to not ignore emissions. Policies elsewhere, including California's low-carbon fuel standard and Europe's alternative jet fuel mandates, increasingly prioritize sustainability. The US deviating from that focus federally could leave producers with contradictory incentives, making it harder to turn a profit. And companies that have already sunk funds into reducing emissions — such as ethanol producers with heavy investments in carbon capture — want their reward. Incentives with bipartisan buy-in are likely more durable over the long run too. Next time Democrats control Washington, liberals may be more willing to scrap a credit they see as padding the profits of agribusiness — but less so if they see it as helping the US decarbonize. By Cole Martin Tax credit changes 40A Blenders Tax Credit 45Z Producers Tax Credit $1/USG Up to $1/USG for road fuels and up to $1.75/USG for aviation fuels depending on carbon intensity For domestic fuel blenders For domestic fuel producers Imported fuel eligible Imported fuel not eligible Exclusively for biomass-based diesel Fuels that produce no more than 50kg CO2e/mmBTU are eligible Feedstock-agnostic Carbon intensity scoring incentivizes waste over crop feedstocks Co-processed fuels ineligible Co-processed fuels ineligible Administratively simple Requires federal guidance on how to calculate carbon intensities for different feedstocks and fuel pathways Expiring after 2024 Lasts from 2025 through 2027 Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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