Sri Lanka’s Bunker Industry...Regional Comparison of Bunker Storage Tariffs Source: Lanka Marine...
Transcript of Sri Lanka’s Bunker Industry...Regional Comparison of Bunker Storage Tariffs Source: Lanka Marine...
Sri Lanka’s Bunker Industry -
Opportunities and Challenges
Zafir Hashim Executive Vice President - JKH
Sector Head – Transportation Sector
World’s Main Bunkering Hubs
0.7
All In Mn MTs
Key Factors Affecting the Sri Lankan Bunker Industry
- Lack of infrastructure
- Unavailability of ex-refined products
- Zero facilities for blending
- High tariffs
Bunkering Infrastructure at Sri Lankan Ports
- 34,000 MTs land storage - Deliveries by barge and tank truck - 8 barges
- Deliveries by barge and tank truck
- 73,000 Mts land storage - Deliveries by barge, pipeline
and tank truck
- 27,000 MT land storage - Deliveries by barge and tank truck - 2 bunker barges
Land Storage Floating Storage Singapore Est: 14.5 Mn M3 14 VLCCs
Regional Comparison of Bunker Storage Tariffs
Source: Lanka Marine Services
US
D $
/P
MT
-
2
4
6
8
10
12
Singapore Fujairah India Colombo
2.05 2.25 1.64
3.10
0.59 0.65
0.47
1.29 2.36 2.60
1.89
6.61
Pumping Heating Other Charges
USD5.00
USD5.50
USD4.00
USD 11.00
Sri Lanka Bunker Sales
Source: Lanka Marine Services
-
100,000
200,000
300,000
400,000
500,000
600,000
700,000
2013 2014 2015 2016 2017 2018 2019 - July
298,908
389,179 421,585
484,692
687,061 702,650
349,759
MT
S HMB
TRINCO
Inside Port vs. OPL Volume (Colombo)
Source: Lanka Marine Services
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2014 2015 2016 2017 2018 2019 - June
40% 37% 36%
61% 58% 51%
60% 63% 64%
39% 42% 49%
IN OPL
Colombo - Singapore Price Differential - IFO
Source: Lanka Marine Services and PLATTS
0
100
200
300
400
500
600
US
$/M
T
Colombo Singapore
What is 2020 Global Sulphur Cap Regulation
IMO Sulphur Regulation 85% reduction in Sulphur emission worldwide
IMO CO2 Strategy (vs 2008) • 50% on total annual GHG emission • 70% on CO2 emission per transport
work
2018 2050 2020
Glo
bal
Re
qu
ire
me
nt
SE
CA
Current: <0.1% Low Sulphur Gas Oil & Ultra Low Sulphur Fuel
Oct 2018 & Jan 2019: New China/ Taiwan
Zones
Source: Sibcon 2018
Current: <3.5%
High Sulphur Fuel
Jan 2020: <0.5%
Estimated cost to the shipping
industry
$60B*
Low Sulphur Gas Oil & Ultra Low Sulphur Fuel
Options for Ship Owners
- Switch to
compliant
low-Sulphur
bunker fuel
(largest
pathway in
2020)
- Install exhaust gas
cleaning systems, aka
scrubbers (smaller
pathway in 2020 but
expected to grow rapidly
after)
- Non-compliance, sanctioned
or otherwise (not a true
pathway – but cause of great
uncertainty)
- Switch to
liquefied natural
gas (minor
impact in
transition)
Four
Pathways
Source: Sibcon 2018
Compliant Fuel – Key Benefits and Risks
Low Sulphur Fuel Exhaust Gas Cleaning System
(Scrubber) Conversation to LNG
0.5% Fuel, or Marine Gasoil
The principle of scrubbers involves passing the exhaust gas flow of an engine (main engine and/or auxiliary engines) through a sea water “shower”. The water droplets atomized in a cloud capture the Sulphur molecules and fine particles present in the exhaust gases
*Benefits of Liquefied Natural Gas • Up to 25% less CO2 • -99% Sulphur emission • -99% particulate matters • -85% nitrogen oxides emission
Key Benefits
Major Risks
Easy to implement No CAPEX
Proactive technology & innovation meets long term
sustainable vision
Availability and Compatibility Low OPEX
• High OPEX • Availability • Compatibility
• High CAPEX • Elevated risk of operation control • Waste disposal
• High CAPEX • Availability • Elevated risk of operation
control
Source: Sibcon 2018
LSFO and HSFO Price Differential
350
400
450
500
550
600
3.5% S Fuel Oil 0.5% S Fuel Oil
US
$/P
MT
USD 126.7
USD 93.6
USD 118.5
Source: PLATTS
Adoption Rate of Scrubbers
- Ships with scrubbers by 2020 – 2700est.
- July 18 – 490 Vessels with
Scrubbers and ¾ of these are on existing vessels
- As per Hyundai Heavy Industries 50% of their new built will be with scrubbers
- March 19, Maersk committed to USD 263 Mn in installing scrubbers
- MSC indicated USD 439 Mn for retrofits on 86 box ships
- CMA CGM orders 10 ships ; 5 powered by LNG and 5 with scrubbers installed
No
of ve
sse
ls
Source: PLATTS, Bunkerworld, Manifoldtimes
-
500
1,000
1,500
2,000
2,500
3,000
Installed On Order
≈ 54,000 Ships in the World
Opportunities and Challenges of IMO 2020 Sulphur Cap Regulation
Opportunities Challenges
- Uncertain demand projections
( LSFO/HSFO/MGO)
- Availability of LSFO
- Origin of cargo
- Compatibility
- Limited storage and common user facility
- Operational readiness (land side/barges)
- Limited technical knowledge
- Credit risk due to increase in fuel prices
- First mover advantage
- Presence of global players such as
IOC and Sinopec
- An interim increase in demand for
Marine Gas Oil (MGO)
- Ability to cater to a different
segment of vessels
Steps Taken to Mitigate Challenges Faced by New Regulations
- International Independent Technical team appointed to study and submit
report on the operational way forward for JCT
- JCT increase storage
- Request made to the Sri Lanka Customs to approve floating storage
- Enhance potential supplier base to cater to LSFO
- Train and upskill local staff to handle LSFO
“The industry must come together, meet the challenge head on, and rise to the
occasion”
Thank You