- INTERVIEW: VLSFO's shorter shelf life causing storage concerns: Veritas Petroleum
Singapore's fuel oil imports from the Middle East unlikely to rise in May on high freight rates, inventoriesMay 4
The shelf life of very low sulfur fuel is shorter than that of its dirtier predecessor high sulfur fuel oil, causing storage concerns for the fuel on ships, Steve Bee, Group Commercial & New Business Development Director at bunker testing company Veritas Petroleum Services, told S&P Global Platts.
"On average, the shelf life is around three months for 0.5%S very low sulfur fuel oils," Bee said. "We’ve had cases where we have seen destabilization of VLSFO within a couple of weeks. However, this is not a common occurrence."
In comparison, the shelf life for high sulfur fuel oil is approximately six months and six-to-twelve months for marine gasoil, he said.
VLSFOs tend to be a blend between residual and distillate products, and need more consideration on how they are stored, transferred and handled, he explained.
"If the fuels are not stored correctly and above the wax appearance temperature, the [paraffinic] wax [from the distillate component] will start to precipitate out of the fuel."
In extreme conditions, waxy deposits can block filters causing fuel starvation and possibly engine shutdowns.
"There is also the potential impact of upsetting the chemistry of the residual component, causing asphaltenic sludge formation ... So in essence you’re getting a double whammy of wax precipitation and asphaltenic sludge precipitation.”
As a result, “the fuel management criteria is probably more relevant to VLSFOs than any other bunker fuels we’ve seen to-date."
Talks on bunker fuel quality have resurfaced after persistent weakness in prices and tepid demand due to the coronavirus pandemic sparked storage interest across the globe.
This came only months into one of shipping's largest regulatory changes to-date -- dropping the sulfur cap on marine fuels from 3.5% to 0.5%.
In the week beginning Aug. 10, there were 100,000 mt of VLSFO product in the Mediterranean that has been in floating storage for 30 days or more, data from Kpler shows.
Meanwhile, in-land combined fuel oil stocks in the Northwest European Amsterdam-Rotterdam-Antwerp hub remain ample, at 1.36 million mt in the week to Aug. 6, according to data from Insights Global.
At the same time, bunker fuel prices remain under pressure on the back of subdued demand. Rotterdam-delivered Marine Fuel 0.5%S has averaged 41% lower than January at $313/mt in August so far, S&P Global Platts data shows.
Coronavirus has dented oil demand on a global stage this year. However, travel restrictions during the height of the pandemic saw demand for road and aviation fuels being hit harder than shipping fuels as freight operations remained ongoing.
"The lower levels of road and aerospace travels since March because of COVID-19 has meant there is more of the lighter products available and this is a good indication that they may have been used as blend components within VLSFOs," Bee said.
"We saw the overall densities and viscosities becoming lower in VLSFOs from March through to June, which indicates they have been blended with lighter materials."
Road and aviation fuels typically use more refined oil products than shipping fuels.
"Additionally, the cat fine levels in the VLSFOs have reduced significantly, which would suggest there is more refined, whiter products going into the blends."
In terms of pricing, the narrowing of the crack between VLSFO and distillates increases incentives for distillate blending in VLSFOs, sources previously said.
In March, during the peak of the pandemic, the spread between 0.1%S gasoil FOB ARA barge cracks and 0.5%S Marine Fuel FOB Rotterdam barge cracks averaged $3.13/b. This compares with 34 cents/b for the average in August so far.
It is no secret that the coronavirus pandemic has stolen the spotlight from IMO 2020 and its pricing impact on marine fuels.
But even less anticipated was the increased variety of blend components that could be used to make VLSFOs, as blenders shifted to make economics work.
"I think IMO 2020 was still the key driver for specification parameters of VLSFO, but the impact of COVID-19 has allowed more choice for blenders to be more cost-effective," Bee said.
Looking further ahead, "it’ll be interesting to see in the next six months whether or not the composition of VLSFOs will change as demand for road and air travel comes back online. Potentially we would see the VLSFOs become heavier fuels compared to what they have been in the first six months of 2020."
"There is a lot of variation in VLSFO compared to more historically popular fuels," Bee said. "Making sure shipowners are more aware and more informed about the quality of the fuel they are receiving is definitely a safeguard on damage-prevention for the ships tanks, filters, purifiers and engine."