The Organization of the Petroleum Exporting Countries (OPEC) has said that it expects as much as a 30% level of non-compliance with the 2020 sulphur cap when it is first introduced. In its recently released Reference Case OPEC assumed that about 70% of shipowners would comply with the new rules, either via scrubbers or by buying fuel that complies with the new 0.5% cap.
OPEC expected that there would be up to 30% of noncompliance because of a relatively low level of scrubber penetration, plus a potential lack of compliant fuel.
UK-based energy and ship brokerage Poten and Partners said in a weekly market report that OPEC overall was optimistic about scrubbers, whose penetration they expected to accelerate after a slow start.
At the beginning of this year fewer than 500 vessels had installed or ordered scrubbers. By 2020 OPEC expects this number to reach 2,000 vessels, growing to 4,500 – 5,000 vessels in the medium term, Poten said, adding that “this scenario implies that, while the use of Low Sulphur Fuel Oil (LSFO) and gasoil will initially jump in 2020, the increased penetration of onboard scrubbers will support continued use of High Sulphur Fuel Oil (HSFO) over time.”
OPEC feared that, because of various uncertainties, the global refining industry would be reluctant to make significant investments to make more compliant fuel available.
“Prices of medium and heavy sour crudes will come under pressure, while light sweet crudes will attract premiums,” Poten said.
According to OPEC this could lead to more imports of medium and heavy sour crudes from Latin America and the Middle East into North America. Simultaneously the light sweet crudes that are produced in the US would attract a premium in the export market.
That combination of more crude oil imports and exports involving North America would benefit the tanker market, said Poten
OPEC also expects a (temporary) boost in crude oil demand of 400,000 bpd in 2020 as a direct result of the IMO sulphur regulations. However, Poten warned that it was important to caution against too much optimism. “This 400,000 bpd increase is based on a lot of assumptions and, even if they all fall into place, it can be neutralized if owners order just 10 additional VLCCs”.