Baku, Azerbaijan, May 7
By Leman Zeynalova – Trend:
The first impact of the new International Maritime Organisation’s (IMO) rules is on liquefied natural gas (LNG) bunkering, and the global LNG bunkering demand is expected to reach 9 mmtpa by 2025, Research director at Wood Mackenzie Nicholas Browne said, Trend reports.
It is also leading to more LNG fuelled ships being built, according to Browne.
The International Maritime Organisation’s (IMO) major change limiting the airborne sulphur dioxide emissions from international shipping is now less than a year away.
On 1 January 2020, the sulphur dioxide emission standard tightens to limit the emissions to burning the equivalent of fuel with a sulphur content less than 0.5 percent.
"The second impact is the value of LNG within contracts. The Japanese crude cocktail is used for around 40 percent of LNG contracts. Its value will fall relative to Brent. For North East Asian buyers this could mean a saving of approximately $2.5 billion in 2020 alone,” he added.
On upstream, research director Angus Rodger, noted that on the face of it the financial impact of IMO 2020 on big upstream producers of sour crudes - Saudi Arabia, Russia and Iraq - could be significant.
With heavier sour crudes expected to fall in value relative to lighter sweeter grades, revenues of the big national oil companies (NOCs) that operate in these countries should be directly hit, he added.
"However, it is not as simple as many of these NOCs can use their equity refinery capacity to mitigate the effects. These countries are also some of the lowest cost global producers, and so while there may be some revenue impact, it will not be enough to directly influence field breakevens or output.
"That said, the pain may be greater for another one of the top five global sour crude producers, Canada. Over half of the 3 million b/d of oil sands output is not upgraded and sold as diluent-blended heavy grades like Western Canada Select (WCS). For those companies that sell their crude direct onto the open market, the price impact will be significant and painful. This will be compounded by oil sands' high cost of production and transportation bottlenecks.
"And there will also be upside, particularly for countries such as Brazil and the US that produce large quantities of heavy-sweet and light-sweet crudes respectively. IMO 2020 should lead to price upside for these grades, will be in greater demand due to their lower sulphur content."
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