Title: Eddy Van Bouwel
1MARPOL Annex VIRefinery Considerations and
StrategiesOutcomes from IPIECA workshops on
shipping emissions
- Eddy Van Bouwel
- ExxonMobil
- 27th International Bunker Conference
- Gothenburg April 27, 2006
2Who are we?
- International Petroleum Industry Environmental
Conservation Association - Founded 1974 - Global Membership national
multinational petroleum companies / associations - Interaction/cooperation with UN other
international organizations (Special Consultative
Status with UN) - Secretariat based in London
- Tackling global issues
- Global Climate Change
- Biodiversity
- Social Responsibility
- Oil Spill Preparedness Response
- Fuels and Transportation
- Health
3IPIECAs Aims
- To represent the views of our members, and enable
consultation with appropriate UN agencies and
others dealing with global issues - To promote realistic, science-based, economically
efficient solutions to global environmental and
social concerns - To develop international petroleum industry
consensus on key global issues, in close
cooperation with key stakeholders
4Company Members
5Association Members
6MARPOL Annex VIand the Refining Industry
MARPOL Annex VI
EU SLFD
The oil companies European association for
environment, health and safety in refining and
distribution
7Crude Composition / Demand
Crude Variability
LPG Mogas Kero/Jet Distillate HFO
Maya Arab Light Demand
- Product yields and qualities vary by crude
- Average world wide crude composition similar to
Arab Light - Product yield from crude heavier than demand
- Additional processing or conversion required to
convert Fuel Oil
8Refining Overview
LPG
TREAT-MENT UNIT
Gasoline
Crude Oil
Aviation Fuels
Diesel
Conversion to lighter products
D I S T I L L
V A C U U M
Fuel Oil
Bitumen
9Sulphur is Concentrated in the Bottom Products
300 ppm S
1600 ppm S
1.5 S
3.3 S
- Arab Light crude sulphur content 1.9
10Low Sulphur Fuel Demand
Note implementation of a North American SECA
could almost double global LSBF demand
2005
2007
2015
Source CONCAWE
11Meeting the EU LS BFO Demand
- Segregation of low sulphur blend streams
- Optimisation of crude diet
- Blending to specification
- Declining demand of (LS) HFO for inland use
- Demand for Baltic and North Sea SECAs and for
European ferries likely to be met based on
operational adjustments, with some refinery
investment - Response will be driven by market forces (premium
LSFO vs. HSFO)
12Long Term Choices Refiners are Facing
- Blending
- Change Crude feedstock
- Desulphurise Residual fuels
- Complete conversion to distillate fuels (eg
Gasoline and Diesel) - Exit the Bunker market find land based
customers (eg Power Stations) - In each case there are unknowns
- In some cases other stakeholders hold the answers
13Desulphurisation of HSFO
- Significant increase in refinery CO2 emissions
- Technological challenges
- Stability reserve decreases
- Potential problems with inter-fuel compatibility
- Significant premium required to make option
attractive versus conversion to distillate fuels
Results generated by EU Refining Model based on
38/bbl crude price scenario
Source CONCAWE
14Refinery Economics
- Behaviour based on what refiners believe the
market will do perhaps not what was envisaged
by regulators - For refiners willing to invest, conversion route
may be more attractive - Economics likely to be better
- Investment decisions can be based on known (or at
least assumed!) differentials - Regulatory endpoints are known and markets are
familiar
15Bunker Market Compared to Gasoline/Diesel Markets
- Historically, the oil industry has responded to
market demand by adapting to make the fuels that
are required - Bunkers are different!
- End of the line in the refinery
- Energy and capital intensive to desulphurise
- Desulphurisation changes the nature of the fuel
- CO2 lifecycle costs may be higher
- Investment costs US250M-500M/refinery
- Differentials and regulatory endpoint ?
- Exiting the market is a real option
16The Need for Evaluation
- Annex VI revision should aim to identify
cost-effective, appropriate and scientifically
valid measures addressing areas of concern, i.e.
actual improvement on land based receptors - Need to consider
- Actual environmental impact of emissions
- Fuel availability and impact on fuel quality
- Flexible approach mix of ship and fuel based
measures - Technical developments, e.g. on-board scrubbing
technology - Feasible time scale for compliance
- Enforceability
17Summary
- There are some knowns and many unknowns about
the future marine fuels market - Significant changes to the demand for low sulphur
marine fuels beyond currently agreed SECAs and EU
legislation will have significant impact on the
marine fuels market - Marginal economics cannot be applied
- Fuel quality considerations
- In an extreme scenario of ships switching to
gasoil, the EU middle distillate deficit would
increase by 50 Mt/a - Market forces will determine outcome
- We believe that the concepts of cost
effectiveness and environmental sustainability
need not be mutually exclusive - We believe a holistic solution will be more
environmentally sound - Continued stakeholder dialogue is key
18Back-up
19Bunker Fuels Market Mechanisms
- Regulatory Drivers
- Enacted legislation
- Fuel max 1.5 S Baltic Sea, North Sea and
Channel, ferries (2006/2007) - 0.1 S fuel inland waterways/at berth (2010)
- Possible future IMO or EU initiatives
20Bunker Fuels Market Mechanisms
- Regulatory Drivers
- Fuel max 1.5 S Baltic Sea, North Sea and
Channel, ferries - Possible future IMO or EU initiatives
- Shipowners Decisions
- Single or dual fuel operation
- BFO vs. distillate
- Onboard scrubbing
- New ship vs. retrofit
- Considerations
- switchover procedures and time required
- risk of engine stalls due to switchover errors
- lube oil system considerations
- scrubbing operability considerations
- fuel cost differentials
- compliance demonstration
21Bunker Fuels Market Mechanisms
- Regulatory Drivers
- Fuel max 1.5 S Baltic Sea, North Sea and
Channel, ferries - Possible future IMO or EU initiatives
- Refiners Decisions
- Short term
- Blending and storage facilities
- Crude adjustments
- Longer term (possible future IMO or EU
initiatives) - Make, convert or export
- Deep desulphurisation
- Deep conversion
- Exporting to other markets
- Shipowners Decisions
- Single or dual fuel operation
- BFO vs. distillate
- Onboard scrubbing
- New ship vs. retrofit
- Considerations
- low S HFO demand
- high S fuel outlets
- fuel price differentials
- CO2 emission allowances
- Considerations
- switchover procedures and time required
- risk of engine stalls due to switchover errors
- lube oil system considerations
- scrubbing operability considerations
- fuel cost differentials
- compliance demonstration
22Bunker Fuels Market Mechanisms
- Regulatory Drivers
- Fuel max 1.5 S Baltic Sea, North Sea and
Channel, ferries - Possible future IMO or EU initiatives
- Shipowners Decisions
- Single or dual fuel operation
- BFO vs. distillate
- Onboard scrubbing
- New ship vs. retrofit
- Other factors
- Economic growth
- Shipping volume growth
- Shipping demand elasticity
- Transport policy
- Considerations
- switchover procedures and time required
- risk of engine stalls due to switchover errors
- lube oil system considerations
- scrubbing operability considerations
- fuel cost differentials
- compliance demonstration
23Bunker Fuels Market Mechanisms
- Regulatory Drivers
- Fuel max 1.5 S Baltic Sea, North Sea and
Channel, ferries - Possible future IMO or EU initiatives
- Shipowners Decisions
- Single or dual fuel operation
- BFO vs. distillate
- Onboard scrubbing
- New ship vs. retrofit
- Considerations
- switchover procedures and time required
- risk of engine stalls due to switchover errors
- lube oil system considerations
- scrubbing operability considerations
- fuel cost differentials
- compliance demonstration
- Other factors
- Economic growth
- Shipping volume growth
- Shipping demand elasticity
- Transport policy