Market Overview

Oil Major BP Announces New Low-Sulfur Fuel

Oil Major BP Announces New Low-Sulfur Fuel


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International oil major BP has announced that it will retail a new very low sulfur fuel oil following successful sea trials, however, it has not released a date when sales will begin. The fuel will have a maximum sulfur content of 0.5 percent and will be sold by BP around the world. BP is one of several refiners, such as Shell and Sinopec, that are offering or are researching low-sulfur fuel.

Locations where the fuel will be sold are New Zealand (three sites); Brisbane, Australia; Fremantle, Australia; Gladstone, Australia; Singapore; China and Hong Kong; Salalah, Oman; Amsterdam and Rotterdam, Netherlands; Antwerp (Belgium); Balboa and Cristobal, both in Panama; and Seattle, North America.

"BP supports the ambitions of MARPOL to reduce air pollution from ships and we have been actively working with partners to prepare for its introduction. We have undertaken a comprehensive test campaign, conducting ship-board trials of our new very low sulphur fuel. Following the success of these sea trials, and working closely with our customers, we believe we now have a robust commercial offer that will support customers in complying with MARPOL," said Eddie Gauci, Global Head, BP Marine.

BP is not alone in offering low-sulfur fuel oil. International oil major Shell announced in October last year that it will be retailing ultra low-sulfur fuel oil, with a sulfur content of less than 0.1 percent, at various locations around the world.

Meanwhile, Chinese oil company Sinopec is also reportedly researching the production of low sulfur fuel and, in early March this year, has produced several trial batches, according to reports from Xinhua, the Chinese state-owned news service. Sinopec has reportedly produced two separate batches of low-sulfur fuel and is currently having them trialled at Shanghai Maritime University. According to Xinhua, the company is planning to produce low-sulfur fuels at many of its refineries although the 2019 calendar year will be a year of "preparation" ready for 2020.

Representatives of countries to shipping's global legislative body, the International Maritime Organization (a specialist agency of the United Nations), sought to control ship-source pollution back in the 1960s with the passage of the International Convention for the Prevention of Pollution from Ships (Marpol). Since then, the scope of the Marpol treaty has been significantly increased. Annex VI entered into force in May 2005 to control air pollution from ships. In 2016, Marpol Annex VI was amended so that, in 2020, ship's fuel would be subject to a sulfur content limit of 0.5 percent mass-by-mass. IMO states that, in 2017, the yearly average sulfur content of residual fuel oils was 2.54 percent.

Sulfur oxide pollution has been targeted because exposure can harm the human respiratory system. Children, the elderly and those with chronic respiratory conditions are particularly vulnerable, according to the U.S. Environmental Protection Agency. Sulfur oxides can also damage plant health and contribute to acid rain, which is a threat to forests and agriculture.

As of January 1, 2020, ships will have to use low-sulfur fuel. Compliance can be met either through installing scrubbers that remove emissions before release into the atmosphere, using a low-sulfur fuel (distillate fuels had an average world sulfur content in 2017 of 0.08 percent) or by using a completely different fuel such as liquefied natural gas.

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From a U.S. trucking industry perspective, the concern – or even fear – is that the world shipping industry will buy up large volumes of marine diesel which could cause an increase in price for truck fleet operators and other diesel users.

This may be well-grounded fear. According to a September 2018 report by international business consultants, McKinsey, demand for high-sulfur oil was 3.5 million barrels in 2018. And, the consultants added, "the global refining system is not yet equipped to make this volume of residual fuel oil at 0.5 percent sulfur once the regulation goes into effect." McKinsey forecasts that the market will initially shift to marine gasoil (a distillate-only fuel) as the lowest-cost and easiest way to meet IMO requirements.


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