Bunker Fuel Market: Overview
- Currently, fuel oil is widely used as bunker fuel. However, other middle distillate fuels are also utilized as bunker fuels.
- Fuel oil employed as bunker fuel can be categorized into intermediate fuel oil (IFO), marine gas oil (MGO), marine diesel oil (MDO), high sulfur fuel oil (HSFO), and very low sulfur fuel oil (VLSFO)
- Increase in globalization and urbanization has boosted the demand for various commodities across the globe. Seaborne trade is economical; hence, it is widely practiced globally. Different types of ships such as tanker fleets, container fleets, and bulk & general cargo fleets are used for shipping purposes. Thus, rise in shipping activities across the globe is anticipated to fuel the bunker fuel market.
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Increase in Offshore Exploration & Production Activities to Drive Bunker Fuel Market
- Providing bunker fuel and associated services to the oil & gas industry is a major business activity of companies engaged in bunker fuel trading. The offshore fleet primarily comprises exploration vessels, platform supply vessels, anchor handlers, cable layers, and stand-by vessels.
- Rapid expansion in the exploration sector and increase in demand for new hydrocarbon reserves have led to a gradual shift from onshore to offshore reserves. This is boosting the global bunker fuel market.
- The offshore oil & gas sector has been expanding significantly. Currently, a significant portion of production of hydrocarbons is obtained from offshore locations. Rapid technological development has resulted in an increase in oil & gas exploration activities at deep offshore locations and other marginal oil and gas fields. This is augmenting the global demand for bunker fuel.
- Bunker supplying companies have strategically opened bunkering divisions in ports that are close to major offshore hydrocarbon basins, as bunkering requirements are significantly high for some offshore support vessels. Thus, increase in offshore exploration and production activities is likely to drive the global bunker fuel market.
LNG/LPG as Alternative Fuel Likely to Hamper Bunker Fuel Market
- LNG fueling is a mature technology that may be utilized to comply with the upcoming MARPOL regulations, which impose restrictions on sulfur emissions from marine vessels
- LNG bunkering is the only feasible option that enables compliance with the NOx Emission Control Area (NECA) and Sulfur Emission Control Area (SECA) requirements without the usage of the expensive marine gas oil
- LNG Fuelled Vessels Working Group is a special group specifically established to encourage the use of LNG as marine fuel. Development of LNG bunkering infrastructure and the enactment of emission control areas (ECAs) and other sulfur norms in each areas mentioned exhibit a high level of correlation.
- Currently, LNG bunkering in the U.S. takes place in Jacksonville, Florida, and Port Fourchon, Louisiana. A third facility is under development in Tacoma, Washington. Bunkering of LNG-fueled cruise ships using barges is also planned for Port Canaveral, Florida.
- Thus, availability of LNG/LPG as alternative fuel is anticipated to adversely affect the global bunker fuel market.
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Rise in Demand for Alternate or Low Sulfur Fuel
- Widely used bunker fuel for ships is heavy fuel oil, which is economical and easy available. It is obtained from crude oil distillation.
- Crude oil contains sulfur, which ends up in ship emissions on combustion. Sulfur dioxide is harmful to human health. It can cause respiratory issues and lung diseases. It may also lead to acid rain and acidification of oceans.
- Alternate fuel or low sulfur fuel oil needs to be used extensively to overcome the sulfur dioxide emission from ships. The International Maritime Organization, under the annex VI of the International Convention for the Prevention of Pollution from Ships (known as the MARPOL Convention), has implemented regulation on sulfur emission from ships.
- Sulfur emission from ships has been limited to 0.50% from January 01, 2020. This is estimated to significantly reduce the quantity of sulfur dioxide emission from ships.
- Thus, ships need to use fuel oil with inherently low sulfur content in order to comply with the IMO MARPOL regulation. Refineries can add additives and blend the fuel oil to lower the sulfur content. Additives are also projected to enhance other properties such as lubricity.
- Demand for liquefied petroleum gas (LPG) and liquefied natural gas (LNG) as alternate fuels is also increasing. LPG combustion results in lower CO2 emissions vis-à-vis oil-based fuels, due to its lower carbon-to-hydrogen ratio. LPG virtually eliminates sulfur emissions and can comply with low sulfur regulation.
- Consequently, demand for low sulfur fuel oil and alternate fuel is likely to increase in the near future in order to comply with the emission norms.
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