Rewards ahead for GC refineries

The world’s most sophisticated refineries – especially those on the U.S. Gulf Coast, Europe and Asia - are about to become more lucrative thanks to a tweak in rules for the type of fuel ships consume. Beginning in 2020, ships have to start buying fuel with less sulfur, or refitted with equipment to curb pollutants. Only a small fraction of the fleet will have such gear when the rules go into effect. It’ll be a major boon for complex plants, including some of the biggest on the Gulf Coast. These refineries can already make marine gasoil - a distillate fuel the fleet will have to have without churning out leftover, non-compliant fuel oil, according to Alan Gelder, VP for refining, chemicals, and oil markets at Wood Mackenzie Ltd. in London. “They’ll print money,” he told Bloomberg. “If the shipping industry needs more clean fuels, then that’s good for refining.” The new sulfur standards, established by the International Maritime Organization in 2016, aim to cut the presence of a pollutant that has been blamed as a contributor to health conditions like asthma, and environmental damage. Some shippers claim that in an extreme scenario, the changes could upend world trade if the cost of compliance is too high. The existing global standard is generally 3.5 percent sulfur in fuel oil. The new IMO rules establish a 0.5 percent limit. Plants with more flexibility of the types of crude they process - many of the Gulf Coast will be among the top beneficiaries. More than 80 percent of Gulf Coast refineries have coking units that can create transport fuels from the residual fuel oil from heavy crude, according to research from Morningstar Inc. (Source: Bloomberg 03/21/18)