Russia mulls 2020 SOx delay

A report by Bloomberg suggests that Russia may delay local adoption of the IMOs 2020 SOx cap.

According to the report Russia’s energy and transportation ministries are looking to postpone the stricter standards for vessels operating within the country and four other former Soviet republics until 2024, Energy Minister Alexander Novak said in response to questions sent by Bloomberg.

The new rules “will lead to a sharp hike in the price of fuel for the river fleet and river-sea vessels, which operate mainly in Russia’s territorial waters,” Novak said. The energy and transportation ministries are seeking “to prevent a higher financial pressure on the nation’s shipowners,” he said. However, Novak added taht Russia will comply with IMO 2020 standards in international waters.

The potential delay would affect the five-member Eurasian Economic Union, which also includes Kazakhstan, Kyrgyzstan, Belarus and Armenia. Of the five countries, only Russia and Kazakhstan are coastal states.

Russia’s delayed adoption of IMO 2020 rules would support the domestic price and demand for high-sulphur fuel oil, giving a financial boost to the nation’s refiners. Russia’s refiners produce about 16 tonnes of fuel oil for every 100 tonnes of crude they process, in spite of steps they’ve take to upgrade their plants. The delay under consideration would also free up low-sulphur fuel oil for export, possibly putting downward pressure on international prices for IMO-compliant fuel.

Bloomberg said a spokeswoman for the IMO said she was not aware of the organisation receiving any communication on Russia potentially delaying adoption of the sulphur cap locally. The regulation’s enforcement is down to signatory countries — of which Russia is one — rather than the IMO itself, the spokeswoman said. There is an audit mechanism whereby a non-complying country can be issued with a “corrective action plan,” but punitive measures are not included.

As well as being an oil-producing giant, Russia is also a big refiner of crude. Yet, its plants are not fully ready for the new regulations, and some will be selling non-compliant fuel next year. A delay would help those companies. The nation’s refinery industry “currently does not have the technical expertise and capacities to produce the necessary volumes of low-sulphur fuel oil,” the Russian Association of Marine and River Bunker Suppliers said in an October letter to the Energy Ministry. “As of now, the oil companies practically do not produce low-sulphur shipping fuel fully-compliant with the new regulations, especially when it comes to viscosity,” it said.

Russia is not the only country to have considered shunning the IMO’s requirements for cleaner fuel. In July, Indonesia said it would not enforce the new rules, arguing that compliance would be too expensive. The Asian country later changed its plans and pledged its commitment to the IMO 2020 standards.

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