How Will New Fuel Standards Impact the Gulf?

23 October 2018

Lab Chat

As of 1st January 2020, the International Maritime Organisation (IMO) are implementing a 0.5% sulphur cap on bunker fuels. The IMO’s decision could cost the global economy $1 trillion over 5 years and increase crude prices by 10% in 2020 alone.

This could be bad news for the Gulf, which is home to the world’s second largest bunkering hub – the UAE’s Port of Fujairah. While the Gulf is developing low-sulphur fuel at an impressive rate, there’s no room for slow progress.

As it stands today, only 35% of the world’s refineries could supply 0.5% fuel by 2020. An oil expert at Kuwait Petroleum Corporation (KPC) told Petroleum Economist how ”we all need guidance” to ensure a sufficient supply of bunker fuels come 2020.

Looking to the skies

It’s not only the waters that the UAE needs to be aware of. The International Air Transport Association (IATA) is also making serious changes. The Carbon Offsetting Reduction Scheme for International Aviation (CORSIA) is being implemented from 2021, aiming to reduce annual increases in CO2 emissions.

The pilot phases from 2021 through to 2026 will apply to those regions that have volunteered to participate in the scheme. But, from 2027 onwards, all areas with an individual share of international aviation activities will have to take part.

CORSIA will include a rise in fuel and ticket taxation everywhere, including the Middle East, impacting travel and kerosene demand.

Time for change

As we gear up for the 115th Gulf Coast Conference in October, the world’s eyes will be on the environmental impact of the chemical and petrochemical industry. Understandably, the two most widely accepted accelerants of climate change – shipping and aviation – are under constant scrutiny.

The Gulf, home to the Port of Fujairah and one of the world’s fastest-growing aviation hubs, is looked to for guidance for big changes at this time. Will the region flop with a shortage of low sulphur fuels? Or will it leverage its flexible crude refining palette to boost its fuel and economy as 2020 rounds the corner? As it stands, the latter is looking more likely, with an increase in resources and funds being pumped into the development of alternatives.

As the world’s oil hub, the Gulf and Middle East are used to adapting and making transitions towards a new solution. There is little doubt that they will take this change in their stride, speeding up progress to ensure a better, more sustainable futur

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