* IMO 2020 fuel rules aim to reduce pollution, improve
health
* West Africa provides three-quarters of heavy sweet oil
exports
* Prices for crude from Chad, Cameroon and Angola soar
By Noah Browning
LONDON, Aug 22 (Reuters) - African states like Chad and
Cameroon are shaping up to be big winners from new rules to cut
sulphur emissions from ships, providing just the right type of
oil to produce cleaner fuels.
Only around 1% of the world's crude oil exports are heavy
and sweet varieties, ideal for refining into fuel with a maximum
0.5% sulphur content mandated by International Maritime
Organization (IMO) rules coming into force worldwide on Jan. 1.
The regulations will tighten limits from the 3.5% sulphur
levels allowed now, aiming to improve human health by reducing
air pollution.
West African oil, mostly outside the continent's top
exporter Nigeria, is set to provide the "Holy Grail" for these
IMO 2020 fuels, according to market research firm ClipperData.
Nearly three-quarters of the world's exports of heavy sweet
crude - defined as oil with less than 0.5% sulphur content -
come from the region, with Angolan Dalia, Chadian Doba Blend and
Cameroonian Lokele alone making up most of that portion.
"The new environmental regulation starts in January, but
preparation has already begun. Refiners need to ready their
supply streams and learn how to best prepare for a low sulphur
future," said Josh Lowell, senior energy analyst at
ClipperData.
"Even though trading houses and refiners are keeping their
strategy and timing close to their chest, it's clear certain
West African grades really stand to benefit."
Prices for the coveted oil are already soaring.
According to price reporting agency Argus, Doba has vaulted
to 75 cents above dated Brent this month from 60 cents below at
the beginning of 2018, while Dalia went from a 60 cent discount
to a $2.50 premium over the same period.
By Wednesday, traders said Angolan state oil company
Sonangol was offering Dalia at $3.00 above dated Brent and
similar grade Girassol at $3.20.
"Outages from Iran and Venezuela after U.S. sanctions,
ramped up Chinese demand and the IMO rules around the corner -
all these factors have been quite supportive for medium to heavy
sweet grades," one seller of Angolan crude told Reuters.
Because much of Angola's oil is bound to flow to China per
term agreements, interest has mounted in grades trading more
freely on the market.
Oil from landlocked Chad, piped southwestward and exported
by sea via Cameroon, has increased in volume since new fields
came online this year and is being increasingly snapped up in
the world's key refining hubs.
"Recent flows of Doba have seen it head to suppliers already
providing very low-sulphur fuel oil (VLSFO) to the market,"
analytics firm Vortexa said.
"Going forward, we expect continued demand from the Fujairah
and Rotterdam bunkering and blending hubs, as well as from the
U.S. Atlantic coast."
Industry sources say trading giant Vitol bagged all three
cargoes of Doba scheduled for export in August, with at least
one bound for Fujairah in the United Arab Emirates, where
refinery re-tooling is underway ahead of the rules, also known
as IMO 2020.
The rule changes are requiring massive investment as
refiners cut sulphur content in their output. ExxonMobil (NYSE:XOM) XOM.N
completed a $1 billion unit at its Antwerp refinery last year to
upgrade high-sulphur fuel into various types of diesel,
including the variant mandated by the IMO 2020 rules.
Germany's Uniper UN01.DE upgraded its plant in Fujairah
earlier this year to produce fuel oil with a content of 0.1% to
0.5% sulphur, while Vitol's VITOLV.UL Fujairah refinery is
already producing compliant fuels.
In a sign that the quest is afoot for comparable grades
further afield, cargoes of Argentinian Escalante and Brazilian
Ostra grades were also bound for Fujairah this month for the
first time ever, according to Refinitiv Eikon data.
Likewise, the bunkering hub at Singapore took on more
cargoes of heavy sweet Australian crude at record prices since
March than in all previous years combined.
West African heavy sweet oil on the up https://tmsnrt.rs/2Nnysoy
Doba exports by destination https://tmsnrt.rs/2Z3sJvc
Heavy sweet crude exports https://tmsnrt.rs/2Nnopjq
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