Lloyds List: Shell prepares for impact of green fuel regulations: “'The significance of this legislation and the impact on availability should not be underestimated,' said Trine Wulff-Nilsen of Shell Marine Products.” (ShellNews.net) 11 Feb 05

Feb 11, 2005

SHELL Marine Products is looking into how much demand there will be for low sulphur fuel oil once the full force of the environmental regulations is being felt in northern Europe.

The division of Europe's second largest oil group Royal Dutch/Shell, is examining how demand for low sulphur marine fuels will be met through its existing refining base.

The introduction of Marpol Annex VI in May this year is unlikely to be a hurdle for Shell Marine Products.

Many industry analysts think the sector in general produces sufficient volumes of fuel oil with sulphur levels below 4.5% to cover existing demand. These same industry watchers feel the real test will come with the introduction of sulphur emission control zones (Secas), where sulphur levels in fuel will need to be below 1.5%.

The first of these will come into force in the Baltic Sea in May but a 12-month grace period will mean it will not become effective until 2006. The North Sea is expected to follow the year after, most likely by November, said Shell Marine Products.

'The significance of this legislation and the impact on availability should not be underestimated,' said Trine Wulff-Nilsen of Shell Marine Products.

'However, with Shell producing low sulphur fuel oil from a number of refineries in northern Europe, Shell Marine Products has a strong position on which to build.'

The Anglo-Dutch group can already supply low sulphur marine fuels to shipowners in ports around the Baltic and Norwegian coasts and Germany. These include the ports of Gothenburg, Malmo, Stockholm, Helsinki, Bergen and Oslo, as well as Hamburg and Bremerhaven.

Shell Marine Products also expects to have low sulphur fuels available in the second Seca zone once it comes into effect.

'We are currently examining how this strong supply position can best benefit the existing customers and others requiring low sulphur fuel oil,' added Ms Wulff-Nilsen.

'We are working with operators now to understand future demand and this will help us manage supply.

'We are committed to working with customers and other industry players to find the most efficient way to reducing shipping emissions.'

There are serious questions being asked about the supply of low sulphur marine fuels.

Shell Marine Products and industry analysts believe that future requirements will significantly exceed the current demand of 1-2m tonnes.

Shell estimates that more than 10m tonnes of low sulphur fuel oil are already produced in northern Europe and this is mostly destined for use in inland markets.

Market forces will surely come into play once the legislation is laid down and premium prices will lead some refiners to making investments in their facilities. 'With an increase in future demand for low sulphur fuel oils, the price premium over high sulphur fuel oils is expected to increase,' added Ms Wulff-Nilsen.

The drive to reduce emissions from shipping, particularly in northern Europe, will come at a financial cost, but the challenge can be faced if the shipping industry works with suppliers to understand demand and keep costs to manageable levels.