Dutch Energy and Environmental Policy - Air Quality

Bunker Fuels

Quick Scan of the Economic Consequences of Prohibiting Residual Fuels in Shipping

The Netherlands Ministry of Transport, Public Works and Water Management has requested to conduct a ‘Quick Scan’ on the economical impact of a potential prohibition of residual fuels in international shipping. The potential prohibition of residual fuels in international shipping was proposed by the International Association of Independent Tanker Owners (Intertanko) to the International Maritime Organisation (IMO). The proposal involves a switch by 2012 from the presently used residual fuel to distillate fuel with a sulphur content of 1%, to be lowered to 0.5% by 2015. Worldwide, an annual residual fuel  consumption of approximately 200 million tons is to be replaced by low-sulphur distillates. The present quick scan provides a view/estimate of the eco-nomic impact on Dutch petroleum companies, the bunker market for ocean-going vessels in Rotterdam and possible effects on other stakeholders in the Netherlands. The quick scan is intended as independent support for the Dutch viewpoint in the IMO discussions.

The Dutch refinery industry annually produces about 8 million tons of refinery residues, the main component of the presently used shipping fuel. It is technically possible to convert all resi-dues into lighter products, although this process will cause an additional energy use of about one million tons of crude oil and a related CO2 emission of about 3.5 million tons. A fast introduc-tion would lead to market disruptions and peak prices. These effects could be limited by a grad-ual introduction over about six years, preceded by a preparation phase for the refineries of ap-proximately six years. The investment costs for the Netherlands are estimated at about € 1.5 tot 2 billion.

The Rotterdam bunker market processes both domestic and imported refinery residues. The residues are used to blend shipping bunker fuels, which are both sold to ships and exported to other harbours. Rotterdam will not necessarily be able to develop a similar position in import, export and bunkering of distilled shipping fuels. On balance, there is a reasonable chance that the bunker sector, where about 1500 people are employed, would decrease.

The report can be downloaded at ECN.

For more information please contact Hein de Wilde