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IEA sees 700,000 b/d of non-compliant bunker fuel demand in 2020

Some 700,000 b/d of fuel oil demand next year could be generated by ships illegally continuing to use the heavy product after global sulfur emission limits are cut, according to the International Energy Agency.

Fuel oil demand is expected to drop precipitously from the start of next year as the International Maritime Organization’s global marine fuels sulfur limit drops from 3.5% to 0.5%. Most of the shipping industry is expected to switch from burning fuel oil to cleaner, more expensive alternatives toward the end of this year, and any remaining fuel oil demand from shipping will come either from those fitting emissions-cleaning scrubber equipment to allow them to continue burning dirtier fuels, or those ignoring the new regulation altogether.

The IMO has no enforcement powers of its own to ensure compliance with the new sulfur limit, and will rely on port states and flag states where vessels are registered to check whether ships are following the rules.

Non-compliant fuel oil demand could be as high as 700,000 b/d in 2020 but fall to 300,000 b/d in 2021 and then drop to an average of 100,000 b/d in 2022-24, the IEA said in its Oil 2019 report Monday. The organization expects 700,000 b/d of fuel oil demand from vessels with scrubbers in 2020, rising to 900,000 b/d in 2021 and then to an average of 1 million b/d for 2022-24.

Total fuel oil demand from the bunker sector could fall to 1.4 million b/d in 2020 from 3.5 million b/d this year, the IEA said. The organization expects total bunker demand to grow by an average 1.8% per year in 2021-2024, down from 2.5% per year over the past decade.

But the organization said it does not see non-compliance as “a lasting phenomenon.”

“This is because the vast majority of commercial sea voyages typically occur between locations which are committed to enforce the IMO regulations, for example OECD countries, China, Chinese Taipei, Singapore and South Africa,” the IEA said. “In 2018, we estimate that 85% of oil flows, 93% of coal voyages and 94% of iron ore trips either originated or ended in these countries.”

“Moreover, fuel oil availability in smaller ports, which are most likely to see non-compliance in 2020, will likely decrease sharply after 2020,” the organization added.
Source: Platts

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