World Oil Outlook - Opec

Germany, provide tax incentives for 50 ppm heating oil to enable the use of cleaner
and more efficient fuel burners. Parts of North America plan to reduce sulphur levels
in heating oil to 15 ppm before 2020. Elsewhere, some progress is expected to be
made in reducing the levels of sulphur in heating oil, but not to very low levels, and
only after the transition in transportation fuels is completed.
In Europe, reductions in the sulphur content of jet fuel have been discussed
with initiatives aimed at global harmonization. However, no major progress has been
achieved until now and, as reported in last year’s WOO, current jet fuel specifications
still allow for sulphur content as high as 3,000 ppm, although market products run
well below this limit, at approximately 1,000 ppm. Longer term, it is expected that
jet fuel standards for sulphur content will be tightened to 350 ppm in industrialized
regions by 2020, followed by other regions in 2025. Industrialized regions are also assumed
to see a further reduction to 50 ppm by 2025.
Marine bunker fuels are also subject to regulation. In 2005, Annex VI of
MARPOL regulations for the IMO entered into force, which provides the initial control
strategy for marine emission control. The IMO approach also created grounds
for establishing ECAs for NOx, SOx and particulate matters. To date, there are three
ECAs in operation, two in Europe (the Baltic Sea ECA and the North Sea ECA) and
one including the North American coastline (East and West Coast). In April 2008, the
IMO’s Marine Environment Protection Committee (MEPC) moved to revise Annex
VI, establishing a much tighter global cap on bunker fuel sulphur, in particular. In
October 2008, the MEPC decided that as of July 2010, the sulphur level in marine
fuels used in ECAs should be reduced from 1.5 wt% to 1 wt% and, as of January
2015, the level will be further lowered to 0.1 wt% (1,000 ppm). The North American
1 wt% sulphur limit was enforced in August 2012.
Moreover, as of January 2012, the global sulphur cap was lowered from 4.5 wt%
to 3.5 wt%, and will be further lowered to 0.5 wt% (5,000 ppm) as of January 2020,
although it will be subject to a review that will be carried out in 2018 to establish
whether there is sufficient 0.5 wt% sulphur fuel oil available. If not, the further reduction
of sulphur content in marine fuels will be deferred until 2025. However, in September
2012, the European Parliament approved final legislation requiring all ships
in the EU waters to switch to 0.5 wt% sulphur fuel (or use corresponding technology
allowing ships to reach the required emissions reduction) in 2020, independently of
the IMO’s decision on global cap requirements.
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