Difficult transition ahead for the global refining industry – Neste

LONDON (ICIS)–The global refining industry will undergo a difficult transition period through to 2020 because of heavy investments required to produce new marine fuel grades, the head of Marine Fuels and Services at Finland’s sole oil refiner Neste said on Thursday.

“It is very difficult. It demands a lot of investment that we are putting in place right now,” Jacob Granqvist told ICIS.

The International Maritime Organisation (IMO) has set 1 January 2020 for the implementation of a 0.5% cap on sulphur content in marine fuels.

Currently, the global standard for marine fuel oil outside of emission control areas (ECA) is 3.5%.

In the ECA, which includes the Baltic Sea, North Sea and the English Channel, sulphur use was capped at 0.1% from 1 January 2015.

These changes have brought on much confusion and uncertainty among refiners who might need to upgrade units to meet the requirements.

“We have developed a low-sulphur marine fuel and have gained the Baltic region’s significant shipping companies as our customers,” Neste said in its annual report released on Wednesday 8 March.

Neste recently expanded distribution of this newly-minted 0.1% distillate-quality low-sulphur marine fuel from Finland to Sweden. The grades sell under the names Neste MDO DMB and Neste RMB.

The transition to this distillate-quality low-sulphur marine fuels has been easy because no significant investments have been required, the company said.

Distillates-quality marine fuel is different from the cheaper fuel-oil-quality marine fuel which has a higher viscosity. Both grades are popularly known as bunker fuel.

“If you look at the low-sulphur fuel oil available in the market, it is not fuel oil, it is distillates. Neste RMB low-sulphur fuel oil is distillates, just a little bit dirtier that’s all,” Granqvist said.

A plunge in crude oil prices in 2014 has helped the market absorb the shock of shifting from fuel-oil quality marine fuel to the more expensive distillate-quality spec.

However, Neste – which is the world’s largest producer of renewable diesel – is investing in producing the cheaper fuel-oil quality marine fuel by the end of the year which would help its shipping customers cut cost.

The company would achieve their aim with the help of a new solvent deasphalting (SDA) unit commissioned at their Porvoo refinery.

“In the future we will launch real fuel-oil-quality marine fuel with a viscosity of around 300. It could be as soon as later this year, potentially by the last quarter,” Granqvist said.

Any vessel that was previously configured to run on fuel oil would be able to use the new grade, Granqvist said.

Ultimately, Neste is looking into producing a 0.5% ultra-low-sulphur marine fuel to meet spec changes effective from 2020.

“There is no market for that grade right now. When we have a demand for it Neste will have a solution ready for the market. There will surely be a demand for it as the 0.5% global sulphur cap will be mandatory,” Granqvist said.

Neste’s consolidated statement of income for full year 2016 reveal an increase of 9% year on year in net profit.

Its return on average capital employed, after tax (ROACE) has increased by 4% over the same period.

Interview article by Cuckoo James

Pictured above: The Neste Oil Refinery in Porvoo, Finland. Source: Matti Bjorkman/REX/Shutterstock