Bunkers - pricing outlook

Transcription

1 Bunkers - pricing outlook Robin Meech Marine and Energy Consulting Limited London Rmeech@RobinMeech.com 1

2 Marine and Energy Consulting Limited (MECL) was established 12 years ago Consulting Services Ship Owners Fuel Strategies Scrubber Selection Compliance Options Technology investments Bunker Suppliers Supply Strategies Investment Evaluation Strategic Development Organisation Investors Vessels Terminals Bunker Suppliers Finance Bunker for Managers Blending Claims Abatement Technology and Finance Limited Leasing Scrubbers Hedging Sulphur Premium Publishing Outlook for Marine Bunkers and Fuel Oil to 235 Bunkers to Technical and Environmental Issues Rmeech@RobinMeech.com 2

3 Fast Growing Economies Non OPEC Price formation OPEC New Reserves Politics Production Costs Margin Strategic Importance Regional Differences Expansion / Closures Quality Markets continually try to balance after disruption - New regulation - Interruption of supply - Technologies Quantity Requested Spec Credit Service Rmeech@RobinMeech.com 3

4 Fundamentals 16 Brent, $/bbl Environmental Regulations Higher Prices Light/Heavy Switch Lower Sulphur Fuels BFO MGO Higher Bunker Prices - Suppressed demand - Alternative Fuels Cleaner environment Higher transport costs Ship owner investment Refinery investment Sustainable transportation Rmeech@RobinMeech.com 4

5 mmb/d Global Oil Demand Growth by Region Non-OECD Asia Latin America Middle East FSU Africa OECD Asia Europe North America 5

6 mmb/d mmb/d OPEC Production the impending squeeze on Saudi Arabia Other OPEC Iran Iraq Libya Saudi Arabia (RHS) Uncertainty on political outcome Rmeech@RobinMeech.com 6

7 mmb/d $/bbl Saudi Arabia s Role as the Swing Supplier Potentially, Saudi output heading under 8 mmb/d in 215; but not willing to take all the cut? Likely to be phase of weak price while OPEC sorts itself out; but deal to keep price at $85/bbl? Saudi Comfort Zone Call on Saudi - Base Case Forecast - LHA Call On Saudi - No Libya Return Dated Brent Nominal - RHA Dated Brent Nominal - No Libya Return Rmeech@RobinMeech.com 7

8 16 Brent Crude Oil - $/bbl Average price increase of 2.2% pa Prices of $11/bbl are currently unsustainable US tight oil will be supressed The timing of the dip is politically driven and hence uncertain Rmeech@RobinMeech.com 8

9 Five Key Oil Demand Growth Centers increasing regional differences (Year-on-year Oil Demand Growth, kb/d) China Latin America Africa Middle East Two sectors will drive future oil demand growth: transport and petrochemicals India Non-OECD oil consumption to increase by 1.4 mmb/d to 22 and by 6.7 mmb/d OECD oil consumption: -2.1 mmb/d through 22, followed by -4.2 mmb/d between Middle distillates account for more than 6.8 mmb/d growth over period Rmeech@RobinMeech.com 9

10 million b/d Global Refining Capacity Additions, Firm reductions and Assumed closures Assumed closures Firm reductions Firm additions Net forecast Net increase of 25 mmbpd capacity retaining a relatively tight balance Rmeech@RobinMeech.com 1

11 Implementation schedule now has three key steps All ECA.1% S Jan 1 Review of introduction of Global Cap Puerto Rica & USVI ECA EU regulations In line with Annex VI EEZ.5% cap in 22 Ferries.5% S in 22 Global Cap.5% S Jan 2 3 Possible delay Global Cap.5% S Jan Rmeech@RobinMeech.com 11

12 Future ECA Existing ECA Arctic Increasing controls China Considering greater emission controls Hong Kong.5%S along side This year. Possible extension to Pearl River Delta Japan Domestic waters only Possible introduction of.5%s Global Cap in 22 is reducing appetite for new ECA Including Mediterranean Sea Atlantic Malacca Straits Possible ECA Australia Mexico & Panama Turkey Considering implementing EU regulations 12

13 Implications of the new EU ruling are still to be established ECA EU EEZ 13

14 Regulatory unknowns The timetable for the development of future legislation SOx and NOx New ECA s Rate at which distillates will be made available In-port legislation particularly in the US Incentives to use cold ironing Scrubbing changing regulations Requirements for monitoring equipment GHG cap, schedule and method of control Regulations for use of LNG as bunkers Enforcement regimes and penalties Rmeech@RobinMeech.com 14

15 The impact of the Energy Efficiency Design Index is suppressing demand The EEDI has been ratified by most nations through Annex VI and ships can not be classed unless they meet the following levels of efficiency which increase over time As the fleet develops with new builds and mostly older vessels being scrapped the over all average efficiency of the whole global fleet increases Year of Increase in Energy Delivered Efficiency mandated % % % The average global fleet efficiency will have improved by 12% in % in 23 17% in Increase in Efficiency % This negates a bunker demand growth rate of over 5% pa Rmeech@RobinMeech.com 15

16 35 3 Global International Bunker Demand - million tons Increase in.5% in EU EEZ Increasing scrubbing of HSFO off set by increasing compliance Increasing technical efficiency and alternative fuels continue a slow decline in conventional bunker demand By million tons pa LNG as bunkers 2, LNG powered non LNGC s 1,5 scrubbers in operation $4 billion invested in scrubbers Residual demand will grow again and distillate decrease as scrubbing becomes the norm on most ships Demand growth returns Residual Max 1.5% Residual Max 1.% Residual Max 4.5% Residual Max 3.5% MDO Max.1% MDO Introduction.1% to.5% MDO Other Switch from 1.% to.1% distillate LNG Source: Outlook for Marine Bunkers and Fuel Oil to 235 of.5%s Global Cap Rmeech@RobinMeech.com 16

17 Avails summary Sufficient distillate avails to implement the ECA.1%S in 215 EU EEZ.5%S in 22 Low levels of enforcement and hence compliance will soften the impacts Probably only sufficient avails to implement.5%s global cap in 22 if Annex VI avails analysis started in 214 Immediate very fast uptake of retrofitted scrubbers Refiners commission sufficient hydro-treating and conversion capacity in short term running at high levels of utilisation Inland demand for distillates grows at reasonable levels Take up of LNG will not have a significant impact on the decision to implement the Global Cap in 22 Global Cap implementation definitely feasible in 225 Possible between 22 and 225 but requires amendment to Annex VI Rmeech@RobinMeech.com 17

18 1,4 1,2 1, From HSFO in 215 to.5%s Bunkers in 225 increases prices by $53/ton Average Global Prices $/ton Differential.1%S Gas Oil - HSFO $27/ton Differential.5%S Bunkers - HSFO $35/ton HSFO Gas Oil.1%S Bunkers.5%S Rmeech@RobinMeech.com 18

19 High Sulphur Bunker Prices $/mt Houston $/mt ARA $/mt Genoa $/mt Singapore Rmeech@RobinMeech.com 19

20 The final bunker price uncertainty Quality - What spec did you ask for - What spec did you get - What did you ask the testing company to test for $2/ton Credit - From COD to 6 days $35/ton Quantity - More smaller stems which cost more - Short delivery typically 1.5% $5/ton $12/ton These can generate 1% price variation Short term lack of avails can put 5% on the price Rmeech@RobinMeech.com 2

21 More bad than good news Prices to become more volatile Train buyers Regulatory uncertainty Changing regional differentials Caveat emptor "Let the buyer beware Wider range of possible specifications Credit is tightening Better measurement Lower residual prices but then resumption of continually higher prices 21

22 Outlook for Marine Bunkers and Fuel Oil to 235 FGE and Marine & Energy Consulting Ltd, are combining their respective expertise again to provide an up-to-date assessment of how the global bunker market is changing over the medium & long term. Key issues addressed in the study How are the shipping and bunker industries reacting to the inexorable move towards lower sulphur fuels in ECAs and Globally? Is the world ill-prepared for the 215 ECA switch? What is the likely resulting swing from fuels oil to distillates demand globally and what sort of market pressures are likely to emerge? With the proposed timetable for the Global cap introduction looking increasingly difficult, what are the potential scenarios for post 22? To what extent will abatement technology (on-board scrubbers) play in setting the legislation time frame? How rapidly will LNG and other alternative fuels penetrate the conventional bunker market? 22

23 Bunkers - pricing outlook Rmeech@RobinMeech.com Marine and Energy Consulting Limited London Rmeech@RobinMeech.com 23