China Preparing for IMO 2020

China Preparing for IMO 2020

The IMO will cap global sulfur content in marine fuels at 0.5% from January 1, 2020, from 3.5% currently. In order to ensure the effective implementation of the IMO’s new rule, the Maritime Safety Administration of China issued a draft of implementation scheme of the 2020 international sulfur cap on July 22.

Four big points should be noted in the implementation scheme.

● First, international ships shall use marine fuels with sulfur content no more than 0.5% m/m in waters controlled by China from January 1, 2020.

● Second, international ship shall use marine fuels with sulfur content no more than 0.1% m/m in China’s inland river emission control areas from January 1, 2020 and in the sea area of Hainan waters from January 1, 2022.

● Third, international ships shall not take any marine fuels with sulfur content over 0.5% m/m in all waters controlled by China from March 1, 2020.

● Fourth, international ships shall not discharge any wash water from open loop scrubbers in China’s emission control areas for atmospheric pollution from vessels from January 1, 2020.

China believes that the IMO 2020 0.5% sulfur cap on marine fuels is an opportunity for China, and China would like to seize the opportunity. At present, around 90% of China’s bonded bunker sales were imported from other countries, mainly from Singapore and Malaysia. And China’s refineries do not produce bunker for the bonded bunker market. But China is building Zhoushan Port into a bunkering hub in Northeast Asia, and Sinopec has promised that Sinopec will supply compliant low sulfur bunker at major coastal ports in China from 2020 and even supply low sulfur bunker in Singapore and some other ports along the Belt and Road Initiatives. At present, China’s refineries are active to study the production of compliant low sulfur bunker, especially the refineries under Sinopec and PetroChina.

● On January 18, Sinopec Shanghai Petrochemical started low sulfur heavy bunker, becoming China’s first refinery to produce low sulfur bunker.

● On February 22, Sinopec Hainan Refining and Chemical produced 2,200 tons low sulfur bunker for the study of Shanghai Maritime University.

● On February 27, Sinopec Jinling Company produced compliant low sulfur bunker.

● On April 9, PetroChina Liaohe Petrochemical produced 4,500 tons low sulfur bunker for the bonded bunker market.

● On June 11, PetroChina Dalian Petrochemical produced 3,500 tons low sulfur bunker.

On June 5, Sinopec issued the low sulfur bunker supply planning in Zhoushan. According to the planning, Sinopec’s low sulfur bunker supply will reach 10 million tons in 2020 and reach over 15 million tons in 2023. In addition, a total of 10 refineries under Sinopec will have stable supply of low sulfur bunker in 2020.

However, China’s refineries may suffer negative profits if they use crude oil to produce marine fuels instead of gasoline and diesel. Therefore, major refining groups and bunkering ports are applying for the tax rebate of LSFO exported under general trade. According to sources, the tax rebate application has been approved by many departments and is waiting for the final approval of the State Council. This will help China to build itself a bunkering hub in Northeast Asia.

State-owned groups are likely to get export quotas of LSFO at first just like to the quotas of gasoline, diesel and jet fuel, mainly including PetroChina, Sinopec, CNOOC, Sinochem. But there is a small possibility that independent refineries will also get the LSFO export quota. Even the mega independent refiners, such as Hengli Petrochemical and Zhejiang Petrochemical, are not expected to apply for the LSFO export quotas in the short term.

.......
More detailed information, please click "Read more".