Challenges and Prospects of International Marine Bunker Fuels Demand

1
Challenges and prospects of international

marine bunker fuels demand
opec_182
1..26
Mohammad Mazraati
Energy Models Analyst, Helferstorferstrasse 17, A-1010 Vienna, Austria. Email: mmazraati@opec.org
Abstract
The international marine bunker demand faces many challenges with regard to regulation on fuel
quality by the International Maritime Organization (IMO). This paper reviews the most recent challenges and evolutions related to fuel demand and development in international maritime transportation. By developing a simple recursive econometric model, the future demand is forecast under the
no-policy change scenario. In the alternative scenario, the impacts of Annex VI of IMOs marine
pollution convention on spread price between the high-sulphur and low-sulphur fuel oil are elaborated, and eventually, the impacts on future bunker demand are evaluated. The low price elasticity of
bunker demand confirms minimal impacts on demand albeit considerable impacts on running cost of
vessels. Bunker demand elasticity with regard to international maritime transportation is estimated
at 0.55, showing that inevitable international transportation requirement is the key driver for bunker
demand. Implementation of Annex VI would certainly change the mixture of bunker fuel, which
mainly depends on the penetration of SO2 scrubbers on-board of vessels and/or fuel switching.
However, due to discrepancy in the level of fuel consumption and uncertain mixture of bunker fuels
in the future, the refinery sector and the international maritime transportation sector would face huge
uncertainties.
1. Introduction
Transportation as one of the four cornerstones of globalisation, along with communications, international standardisation and trade liberalisation, is the major contributor to
incremental oil demand. In the literature, oil consumption in the transportation sector
includes road, aviation, rail and domestic navigation and pipelines but excludes the international marine bunkers (IMB) consumed in the international maritime transportation
(IMT). Bunker fuel is technically any type of fuel used by international seagoing ships and
acquired its name from the containers used to store fuel on-board or in ports. As shown
in the simplified energy balance in Fig. 1, marine bunkers should not be confused with
aviation bunkers, which is the fuel supplied to the aviation sector.
The IMT sector is responsible for the international transportation of cargos; therefore,
the fuel delivered to international vessels cannot merely be ascribed to the fuel suppliers
2011 The Author. OPEC Energy Review 2011 Organization of the Petroleum Exporting Countries. Published by
Blackwell Publishing Ltd, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA.
Mohammad Mazraati
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Description
Production
Import
Export
International Marine Bunkers
Stock Changes
Domestic supply
Transformation
Final energy Demand
Transportation (road, rail, aviation
domestic navigation, pipelines)
Industry
Residential
Other final sectors
Oil
Gas
Coal Other
Figure 1 A simplified energy balance. Source: IEA (2008).
country. Vessels are able to load fuels in many ports including the starting ports, at destinations and any ports in between. It is crucial how the delivered fuel is ascribed to a certain
country or a region of the world.
It is well known that fuel cost forms a big share of a vessels running costs. Even at the
higher level of fuel prices, it is the most cost-effective mode of international long-distance
transportation, which will be evolving in the future with regard to efficiency and technology improvement. This sector is expected to develop to retain its leading role in
international cargo transportation due to its inherent cost-effectiveness feature.
Although international maritime transport was not considered in the Kyoto Protocol, it
accounted for 2.7 per cent of the worlds total CO2 emissions in 2007 (TERI, 2008). It is
estimated to account for between 1.6 per cent and 4.1 per cent of world CO2 emissions
from fuel combustion in the same year, most of which comes from oil tankers and container vessels. The CO2 emissions of 870 million tons in 2007 are projected to increase by
a factor of 2.23.1 between 2007 and 2050 (UNCTAD, 2009). Environmentally speaking,
this sector is already under pressure to reduce emissions of sulphur oxide (SOx) during the
coming decade. Currently, the International Maritime Organization (IMO) is under pressure to consider CO2 emission reduction from the international maritime sector.
The IMB data have raised crucial debates in the literature. Many organisations and
research institutes have questioned the reliability of available data that are sale-based data.
The overestimation or underestimation of data is very challenging when the impact of new
policies and regulations is evaluated. The impacts of IMOs regulation on fuel quality
along with other challenges will be discussed in different sections.
Section 2 discusses the challenging issue of data discrepancy from different sources.
The IMO regulations laid out in the marine pollution (MARPOL) convention are presented in Section 3. The bunker price and its role in the running costs of vessels and the
possible increase of these costs due to fuel switching, the IMT growth, and fuel intensity
OPEC Energy Review March 2011
2011 The Author.

OPEC Energy Review 2011 Organization of the Petroleum Exporting Countries
Challenges and prospects of international marine bunker fuels demand
and bunker consumption trend are discussed in Section 4. A recursive econometric model
is developed in Section 5 to estimate future bunker fuel demand and to evaluate the
impacts of IMO regulations through spread price of high-sulphur fuel oil (HSFO) and
low-sulphur fuel oil (LSFO) on bunker demand. Section 6 evaluates impacts of scrubbers
penetration on mixture of fuel demand and possible uncertainties for refineries investment. The last section provides the concluding remarks.
2. Challenges of bunker fuel data
There are different types of fuel in IMB classification that can be found in different
sources. The IMT sector burns marine gas oil (MGO), marine diesel oil (MDO) and
residual fuel oil (RFO). The RFO is consumed by three main consumers, including marine
bunkers, stationary consumers such as power generation and industry, and, finally, as feedstock by refineries.1 The quality features of this fuel vary depending on which consuming
sector is considered. The RFO for bunkers is called Residual Marine (RM) followed by a
letter to show the grade of the fuel. The letter A would refer to lowest viscosity. One other
element of bunker fuel oil is the sulphur content of fuel. There are different ranges of
LSFO to HSFO that are consumed in vessels in different regions of the world.
Bunkering is conducted in hundreds of ports around the world, but in some ports, the
reporting is poor and there is no distinction between total fuel oil and the fraction delivered
to bunkers. Using the bottom-up methodology and combining the data on the number of
vessels, engine consumption, travelled distance, etc., one can estimate the amount of fuel
consumed by marine bunkers in a certain year. But, for time series purposes, this method
would not be the best choice since it requires vast amount of information, processing time
and costs.
The International Energy Agency (IEA) provides the time series data of marine bunker
fuel consumption by countries and regions of the world. The IEA (2009a) considers those
quantities delivered to ships of all flags that are involved in international navigation either
at sea, inland lakes and waterways and coastal waters as marine bunker fuel consumption.
The amount of fuel delivered to domestic ships is not included in this category. The
domestic/international split is determined on the basis of port of departure and port of
arrival and not by flag or nationality of the ship. A small survey in the IEA countries
(Reece, 2004) revealed that even among IEA countries, there is a huge discrepancy due to
different and inconsistent definition, among other factors.
The Ministry of Transport and Communication, Finland (2009), for example, has estimated the marine bunker fuel demand allocated to Finland in connection with Finnish
export and import to be in the range of 3250 kb/d in 2007. While the IEA data is 8 kb/d.
The Russian data comparison also shows that IEA data are underestimated. As another
example, marine bunker consumption in Iran from 2004 to 2008 was compared with IEA
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Mohammad Mazraati
Figure 2 Impact of input parameters on marine bunker estimates in 2004 by activity-based method.
Source: Corbet and Winerbrake (2008).
data. In all given years, the IEA data are higher than the data given by the National Iranian
Oil Refinery and Distribution Company (NIORDC, 2009).
In the literature, a great deal of interest is being shown in the alternative activity-based
estimation of bunker fuel demand. Research institutes use this technique to estimate
global and regional bunker fuel demand (EnSys, 2009; Purvin & Gertz, 2009). This
method requires a large database on ship fleets by categories and technical details on
engines along with travelled distance, carried cargos, waiting time, etc. Even this method
faces big challenges since it relies on many different assumptions. Figure 2 shows how
much the estimations might differ if the input factors change. For example, considering the
cumulative distribution of world fleet, the marine bunker consumption could be 4.7 mb/d
(248 Mtons) if fewer at-sea days and in-port days and more laid-up days are assumed;
otherwise, the consumption could be estimated at 5.7 mb/d (289 Mtons).
Figure 3 compares different point estimations for marine bunker fuel consumption by
different organisations and research companies for 2003/2004. As this figure shows, there
is a considerable gap of more than 3 mb/d between different estimations in the literature.
This gap could increase in the course of time, which, in turn, would lead to further
2011 The Author.

Figure 3 Wide range of marine bunker fuel consumption estimation. Source: EnSys (2009).
uncertainty especially with regard to evaluation of the impacts of policy on IMT sector, the
refining industry and the fuel market.
The data discrepancies might have a great implication on the impacts of international
environmental regulations on refinery industry when they come into force in the future,
since underestimation or overestimation of bunker fuel consumption data might mislead the
impacts of new regulations and policies on refinery requirements and bunker fuel market.
3. The IMO regulations on emissions

The regulations by the IMO, national or regional organisations on marine bunker fuels
could generate impacts on the petroleum product market in the medium-to-long term. The
impact could be on the level of consumption by unit of carried cargos (the energy or fuel
intensity) or the combination of different types of fuel. The objective of new regulations on
emissions is to mitigate the emissions, especially oxides of sulphur. Therefore, the impact
on petroleum markets could be different according to the methods used to reduce the emissions. It could be through cleaner fuel types or installing on-board scrubbers.
Regulations for securing improved standards for safety of life at sea and MARPOL are
mandated by two conventions: the Safety of Life at Sea and MARPOL. The MARPOL
2011 The Author.
Mohammad Mazraati
convention has been amended many times and, in the latest modification, included a sixth
annex concerning the pollution to air in 1997. Finally, in 2004, sufficient states2 expressed
consent and the annex entered into force 12 months later on 19 May 2005.
Based on Annex VI, the fuel sulphur content should not be higher than 4.5 per cent, and
bunkers have to provide a bunker delivery note with details of the sulphur content and
density of fuel delivered. After entry into force of Annex VI, the Baltic Sea became a
sulphur emission control area (SECA) where the sulphur content of fuel by marine
bunkers should not be higher than 1.5 per cent. The North Sea and English Channel also
became a SECA on 21 November 2006.
The amendments to MARPOL Annex VI regulations to reduce harmful emissions
from ships were considered and accepted in October 2008. The main changes to MARPOL
Annex VI will see a progressive reduction in SOx emissions from ships, with the global
sulphur cap reduced initially to 3.50 per cent (from the current 4.50 per cent), effective
from 1 January 2012, then, progressively, to 0.50 per cent, effective from 1 January 2020,
subject to a feasibility review to be completed no later than 2018. The limits applicable in
SECAs will be reduced to 1.00 per cent, beginning on 1 July 2010 (from the current 1.50
per cent), being further reduced to 0.10 per cent, effective from 1 January 2015. Figure 4
draws the possible caps for SOx emissions as adopted by the amended MARPOL Annex VI
Figure 4 Maximum sulphur content of marine bunker fuel based on Annex VI of marine pollution.
Note: SECA stands for sulphur emission control area. Source: IMO (2010).
2011 The Author.

(IMO, 2010). Progressive reductions in nitrogen oxide (NOx) emissions from marine
engines were also agreed, with the most stringent controls on so-called Tier III engines,
i.e. those installed on ships constructed on or after 1 January 2016, operating in emission
control areas (ECAs).
The revised Annex VI will allow for an ECA to be designated for SOx and particulate
matter (PM), or NOx, or all three types of emissions from ships, subject to a proposal from
a party or parties to the annex, which would be considered for adoption by the organisation, if supported by a demonstrated need to prevent, reduce and control one or all three of
those emissions from ships. With the inclusion of other emissions such as NOx and PMs,
the SECA is generally called the ECAs.
Alongside the MARPOL legislation, there are some other national or regional legislation to put caps on the sulphur content of marine fuels. For example, the European Union
(EU) has taken steps to limit sulphur in its member states. The European legislation
requires the use of 0.1 per cent sulphur fuels in ports and on inland waterways. After
January 2010, all ships berthed in EU ports for more than 2 hours are required to use fuel of
less than 0.1 per cent sulphur, and the sale of MGO with a sulphur content of more than 0.1
per cent is banned in EU member states (Platts, 2010).
4. Trends and evolutions
4.1. Fuel price and running costs
The MARPOL legislation could have implications on cleaner bunker fuel prices as
demand would rise on those fuels. Besides, switching to lighter and cleaner fuel will
increase the cost of bunker transportation, which, in turn, might have impacts on the speed
of seaborne transportation and other fuel-saving actions. The operating costs include fuel,
overheads, insurance, repairs and maintenance, crew and capital expenditures. The weight
of cost elements varies according to different types of vessels, their size and speed at sea. It
is believed that fuel cost represents as much as 5070 per cent of total ship operating costs,
depending on the type of ship and service (Platts, 2010). Of course, changes in fuel prices
for any reason would affect the operating cost and the fuel share. The current fuel price
rise, for example, has increased the day-to-day operating cost of vessels and has increased
the share of fuel cost. The share of fuel cost in total running costs by vessels are between 43
per cent and 67 per cent, and the highest and lowest shares belong to container vessels and
car and passenger vessels, respectively (Fig. 5).
Due to impacts of fuel prices and environmental policies on operating costs, the carriers have developed measures to save fuel through some operational adjustments including
1.
2.
3.
optimising the utilisation factor by redeployment of ships;

consolidating services through multicarrier alliance;
serving more locations with fewer ships through consolidation of routes;
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Mohammad Mazraati
Figure 5 Share of fuel cost in total operating costs by vessels (20062008). Source: Ministry of
Transportation and Communication, Finland (2009).
4.
5.
conserving fuel through speed adjustment where possible within the schedule;
reducing resistance through improved monitoring of hull and propeller conditions.
Adjustments to vessel speed, where applicable, could save a great deal of fuel consumption. In some cases, the slowdown of the transportation due to the value of commodities and timely arrival at the intended market prevents speed adjustments.
As an example, a ship with a speed of 18 knots would consume 33 mt/day of intermediate bunker fuel. If the ships speed slows down to 15 knots, it would consume 25 mt/
day, which is about 25 per cent less consumption. Thus, it would take 20 per cent longer
to get to the destination (Platts, 2010). There are cases that speed adjustment is
economically viable where the time-charter value of the ship per day is lower than the
value of fuel saving. The same impact can be seen when the industry has to move from
cheaper heavy and high sulphur to a lighter and cleaner fuel. The latter costs more and
increases the operation costs and share of fuel costs in total operating costs of vessels.
Switching to low-sulphur bunker fuel will increase the average fuel price for bunkers
where it finally affects the total operation cost and fuel cost. This would act as a main driver
for fuel saving actions. It is worth noting that the demand pressure on light fuel oil in 2015
and 2020, as seen in MARPOL regulations, would even put more price pressure on
2011 The Author.

Figure 6 Low- and high-sulphur prices of different bunker fuels (20002010). Source: Energy
prices and taxes (2009).
light-sulphur fuel oil and LSFO in the absence of sufficient refinery capacity for light
fuels. In the presence of idle refinery capacity, the big challenge would be potential change
in the light/heavy differentials, which requires deep conversion investments. Due to positive experience, deep conversion process are more favourable to refiners. Figure 6 compares the LSFO and HSFO prices in the Rotterdam market in recent decades. The price
differential has been fluctuating during the whole period but experiencing positive values,
meaning that vessels have to pay higher values for LSFO. The premium reached around
$77 per ton exceptionally in 2008 but averaged $22 per ton during the period 20002009.
4.2. Seaborne trades
It is generally accepted that on average, more than 90 per cent of world trade is carried by
sea (IMO, 2009). According to UNCTAD, about 80 per cent of total trade volume was
carried by sea in 2008, which translates to more than $380 billion in freight rates or 5 per
cent of world trade (UNCTAD, 2009). Different cargos are carried by sea transportation as
a cost-effective way of transportation including crude oil, petroleum products, coal, iron
ore, phosphate, bauxite aluminium, grain and other cargos such as finished products,
vehicles, etc. With an annual growth rate of 3.5 per cent in the period 19882008, the
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Mohammad Mazraati
Figure 7 World seaborne trade (19882010). Source: Fearnleys (2009).
carried cargos amounted to more than 8.1 billion tons (equivalent to about 33,000 billion
ton-miles) in 2008. Figure 7 demonstrates the trend of seaborne transportation of different cargos from 1988 to 2008. Energy cargos (oil, oil products and coal) formed about half
of the carried cargos in 2008. Crude oil, with a 28 per cent share in total carried cargos,
holds the biggest individual share among other cargos.
Considering crude oil, iron ore, grain and coal seaborne transportation, the Middle
East region accounted for more than 28 per cent of total world seaborne carried cargos in
2007, followed by South America and the Caribbean region with 20 per cent share in the
same year. The international seaborne trade is very much related to world gross domestic
product (GDP) growth and, consequently, to international trade. In tandem with the global
economic crash in 2008, seaborne trade expanded by only 3.6 per cent compared with 4.5
per cent in 2007 showing resilient behaviour.
4.3. Marine bunker fuel consumption
The transportation and international maritime sectors could be called world transportation activities (see Fig. 1) that consumed about 50 per cent of total oil demand in 2008. As
shown in Fig. 8, transportation activities consumed less than 25 mb/d out of 63.3 mb/d of
total world oil demand in 1980, accounting for only 37 per cent of total oil demand. Oil
demand in transportation activities is fast approaching the level of oil consumption by all
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Figure 8 Trend of oil consumption by transport activities and other sectors. Source: OPEC (2010).
other sectors in 2008 where the share of transport activities reached 49.5 per cent.
Although the share of the IMT sector (marine bunker) in total oil consumption is about 3.6
per cent, it is growing very fast.
Figure 9 compares oil consumption growth rates for the long and short intervals by
different economic sectors. Marine bunker fuel demand or the fuel demand in the IMT
sector has increased by 2.3 per cent per annum from 1980 to 2008, which is higher than the
transportation sector, total oil demand and oil demand in other economic sectors. In recent
years, the annual growth has experienced a higher rate of 3.3 per cent per annum. The IMT
sectors fuel consumption was only 1.6 mb/d in 1980 but, with continuous growth,
reached more than 3.6 mb/d in 2008.
The marine bunker consumption growth rate has increased to 3.7 per cent per annum
during recent years reflecting an ongoing increase in its share in the course of time. Fuel oil
holds the greatest share in the consumption basket. About 85 per cent of total marine
bunker fuel consumption was fuel oil in 2008. Except for South Asia, all other regions
share of fuel oil was more than 70 per cent in 2008.
Organization for Economic Coopration and Development (OECD) countries
accounted for more than 48 per cent of total marine bunker fuel consumption in the world
in 2008. Southeast Asia, Western Europe and North America accounted for 26.4 per cent,
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Mohammad Mazraati
Figure 9 Oil consumption growth by the economic sector. Source: OPEC (2010).
26 per cent and 17 per cent of total bunker fuel consumption, respectively, in 2008. These
three regions collectively consumed about 70 per cent of total bunker fuel demand in 2008.
China as a single country had 5 per cent share in the worlds marine bunker demand in the
same year.
4.4. Fuel intensity
Fuel efficiency in the IMT sector is affected by many technical and economical variables.
Environmental legislation and emission limits encourage the efforts from both the operational and the technological side for better efficiency. The operation is affected by the fuel
price, volume of trade and, in turn, the utilisation factor of vessels that eventually affects
the sailing speed of vessels. During the economic and trade downturn, or higher fuel
prices, the sailing speed of vessels is lowered to save fuel, although accordingly, it delays
the delivery of cargos. Technical improvements are related to the size of vessels (the size of
vessel could decrease the energy intensity up to 80 per cent (Bazari and Reynolds, 2005)
and the design of engines, among other factors. The current engines are more efficient than
those of old generations. Broadly speaking, the areas for efficiency improvement include
ship/hull design, coatings, ship operations, voyage operations, heat recovery, engine
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Figure 10 Average fuel intensity in the international maritime transportation (19882008). Source:
OPEC (2010) for bunker fuel data; Fearnleys (2009) for seaborne trade data.
design (with current 4550 per cent thermal efficiency), charter contractual changes,3 and
the new conceptual ideas of exploitation of upper-level wind and solar energies.
Notwithstanding a very strong correlation, about 0.99, existed between marine bunker
fuel consumption and carried cargos by the IMT sector during 19882008, the fuel consumption per carried cargo has been declining. Figure 10 shows the latest trend of fuel
intensity in the IMT sector. The average fuel intensity improvement with some fluctuations
was 0.69 per cent per annum during 19882008. The average fuel intensity was 46.6
barrels of oil equivalent (boe) per million ton-miles carried cargos in 1988, which peaked
at 50 boe per million ton-miles carried cargos in 1992 mainly due to low economic and
trade growth rates. However, the fuel intensity improved thereafter. It finally reached
40.6 boe per million ton-miles carried cargos in 2008, showing a 6 boe per million tonmiles improvement. It is worth noting that these achievements have been made considering the fact that maritime transportation has the lowest ever energy intensity among other
modes of transport. This sectors energy intensity (KJ/t-km) is only 3.3 per cent of air and
11 per cent of road energy intensity (Bazari and Reynolds, 2005).
The fuel intensities by vessel categories are different due to inherent economy of scale,
vessel size, and speed at sea, among other factors. Since oil tankers are large and carry
dense cargo, they are the most fuel-efficient vessels. As shown in Table 1, the container
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Mohammad Mazraati
Table 1 Fuel intensity by vessel category in 1995 and 2007
Type
Ton of fuel per

millions ton-mile
(1995)
Ton of fuel per

millions ton-mile
(2007)
Annual growth
rate %
(19952007)
Oil tankers
Bulk carriers
Container ships
3.04
5.00
11.87
3.03
4.78
11.55
-0.027
-0.371
-0.559
Source: Purvin & Gertz (2009).
ships have the highest average fuel intensity, which is 3.6 times more than that of oil
tankers. It was 11.55 tons (77.6 boe) of bunker fuel per 1 million tons of carried cargo in
2007. However, container ships witnessed the highest improvement in fuel intensity by
0.56 per cent growth rate per annum during 19952007. The fuel intensity improvement
by bulk carriers and oil tankers during the same period registered -0.37 per cent and
-0.027 per cent, respectively.
5. Modelling marine bunker fuel demand
Marine bunker fuel demand is considered in the IEAs World Energy Model (WEM)
model, the Energy Information Administration (EIA)s World Energy Protection System
(WEPS) plus model and the OPEC World Energy Model (OWEM) model at the aggregate
or regional levels. There are other modelling activities for special purposes in the
literature. This might include the bottom-up approaches that estimate marine bunker
fuel demand through vessels attributes, i.e. capacity, size, engine efficiency, speed and
travelled time, among other factors. This type of model requires a huge database. In some
cases, the bunker fuel demand is estimated at the aggregate level and then split into regions
of the world using trade data and seaborne transportation by each region (Purvin & Gertz,
2009). Figure 11 shows the general structure of a bottom-up model that applies the
highest level of granularity. As can be seen, the economic outlook is used to forecast the
global trade for four different categories of cargos. These forecasts are then used in the
ship fleet model where the bunker fuel demand is calculated based on different vessel
attributes such as vessel size, speed, engine efficiency, vessel type, and other related features. The model allows consideration of the gradual fuel efficiency improvement by
assuming entrance of larger and more fuel efficient vessels into the fleet in the future.
When global marine bunker fuel is forecast, it is disaggregated to a regional level by an
auxiliary econometric regional trade model and other supporting data such as the base year
regional bunker fuel sales. Therefore, the regional bunker fuel is a function of historical
bunkering sales, projected global bunker demand and regional trade.
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Regional bunker fuel demand

Historical bunker fuel
sale (base year)
Econometric regional
trade model
Tankers
Bulk
Containers/
General
Size
Speed
Engine
efficiency
Design
Size
Speed
Engine
efficiency
Design
Size
Speed
Engine
efficiency
Design
Trade data (cargo demand)
Ship fleet model
Vessels
category
Vessels
attribute
Bunker projection model
Global bunker fuel demand
GDP
Figure 11 The structure of bottom-up Bunker Projector Model. Source: Author on the basis of
Purvin & Gertz (2009), EnSys (2009), and Meech (2010). GDP, gross domestic product.
EnSys (2009) has applied a similar methodology to estimate global and regional marine
bunker demand and the models estimates have been used by the IMO for different purposes
including emission analysis. The model includes three segments: in the first segment, using
the average cargo carried, average theoretical daily fuel consumption and engine load
factors, the average daily fuel consumption is estimated in tons per day for main engines at
sea and auxiliary engines at ports by vessel category. In the second segment, total days at sea
and in ports are estimated by vessel category. Finally, in the third segment, the average daily
fuel consumption at sea and in ports is multiplied by number of days at sea and in ports,
respectively, to estimate total fuel demand by vessel category.The model has been calibrated
and validated by 2003 available data and finally used for long-term forecast.
The EIAs WEPS plus model classifies transportation fuel demand in freight and
passenger categories, where the freight includes all transportation modes as a function
of economic variables. The IEA model appears to be at aggregate level where total
global bunker fuel consumption is estimated as a function of economic variables. The
details of the IEA model are not available but the forecast of the model provided
suggests that it deals with global demand at a non-regional level. The OPEC mode
l considers the regional marine bunker demand as a function of regional real GDP and a
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Mohammad Mazraati
proxy variable for fuel price plus time trend variables to capture the structural and technology changes in the course of time.
Although the granular ship fleet model might be useful for point estimation and calibration, it requires huge efforts for historical estimation of bunker consumption. For the
purpose of the current paper, the historical bunker sales data are being used to develop and
econometric model.
5.1. Key variables in modelling demand
The intention of developing an econometric model is to forecast marine bunker fuels at the
aggregate level by fuel type and to evaluate the impact of IMO regulations on the price of
marine bunker fuel and eventually on fuel demand in the future.
The specification of the model should benefit from analysis of the key variables, which
affect marine bunker fuel consumption. These variables include seaborne transportation,
world trade (export or import), price of oil and marine bunker fuel prices, GDP at global
level or so-called world gross product (WGP). Table 2 summarises the correlation coefficient of the aforementioned variables.
Seaborne trade and export as a criterion of world trade are correlating strongly at 0.97.
In the same way, export and real world GDP holds strong positive correlation at 0.96. The
marine fuel oil demand and seaborne trade shows 99 per cent correlation, confirming that
during better economic conditions, the seaborne trade demand is increasing and that, in
turn, boosts the marine fuel consumption. This correlation for MDO holds at a lower rate
of 0.77, which is still considered as strong. This is due to the fact that, despite the growth in
Table 2 Correlation coefficients between variables of model (19802008*)
Variables
Export
RGDP
Seaborne
trade
Marine
fuel oil
MDO
Export
RGDP
Seaborne trade
Marine fuel oil
MDO
1.0
0.96
0.97
0.96
0.63
0.96
1.0
0.996
0.98
0.75
0.97
0.996
1.0
0.99
0.77
0.96
0.98
0.99
1.0
0.73
0.63
0.75
0.77
0.73
1.0
Variables
Low-sulphur
fuel oil price
Price of
MDO
Price of
bunker fuels
High-sulphur
fuel oil price
Oil price
0.991
0.998
0.998
0.995
* Except for seaborne trade (19882008).

The weighted average price of high-sulphur fuel oil and MDO.
MDO, marine diesel oil; RGDP, Real Gross Domestic Product.
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seaborne trade, the auxiliary engines of large vessels and high-speed small ships do not
change drastically in ports.
Turning to the price of fuels, it is obvious that all marine bunker fuels have a strong
relationship with the OPEC basket price of oil. Therefore, these prices can be easily
moulded as a function of the OPEC basket price. The unrestricted future price of these
products can be forecast in a scenario considering no drastic structural changes in the
market and no imposing of new international legislations.
5.2. Model specification, estimation and forecast
In order to explore the impact of fuel price on bunker demand due to clean fuel substitution, a recursive econometric model is developed as shown in Fig. 12. The model could be
developed only as a function of real GDP and real fuel price variables, but inclusion of
seaborne trade (in ton-miles) has the advantage of fuel intensity estimation and fuel efficiency evolution in the future.
All equations are being estimated by ordinary least square method using the time
series interval of 19802008 except the seaborne trade in ton-miles values, which covers
Marine bunker fuel demand

Marine
bunker fuel
oil
MDO
and
MGO
Fuel oil
price
Seaborne trade
(ton-mile)
MDO
price
Oil
Real world
trade value ($)
Oil
price
Real global
GDP (WGP)
price
OWEM reference case assumption
Figure 12 The recursive marine bunker fuel demand model. Source: Author. MDO, marine diesel
oil; MGO, marine gas oil; GDP, gross domestic product; WGP, world gross product; OWEM, OPEC
World Energy Model.
2011 The Author.
18
Mohammad Mazraati
the period 19882008. The letter L at the very beginning of all variables reflects the natural
logarithm, and all t-statistics are presented in the parenthesis below each estimated coefficient. Since all equations have log-linear functional form, the estimated coefficients are
interpreted as elasticities with regard to the dependent variables.
The marine bunker fuel oil consumption measured in 1000 boe per day (F) is a function of real price of HSFO in the Western European market measured in dollars per ton
(PF). The nominal fuel price was adjusted by the OECDs deflator of exports of goods and
services (2005 as the base year for the index). In addition, it is a function of global
seaborne trade measured in billion ton-miles carried cargo (ST) and a lagged dependent
variable to capture the long-term dynamics.
LFt = 0.59 0.01 LPFt + 0.55 LSTt + 0.36 LFt 1

( 1.6 )
( 3.2 )
(1.74 )
R 2 = 0.97.
This specification allows the exploration of the impact of fuel price elasticity on fuel
demand especially during the time of switching to cleaner and lighter fuels. The price elasticity was estimated separately and inserted exogenously in the current model. The endogenous fuel intensity evolution in the future can be traced using the current specification.
Although fuel cost is a major component of the running cost and any price increase
will considerably increase the vessel running costs, at the aggregate level, fuel demand is
not sensitive to price. That is due to the fact that sea transportation in any cases is relatively
the most cost-effective mode of transportation and cargo demand and, in turn, bunker
demand for this industry is inevitable. This has been reflected in the seaborne trade
elasticity of fuel demand. The elasticity is estimated at 0.55, meaning that a 10 per cent
increase in seaborne trade (demand for cargo transportation by sea) will increase marine
fuel oil demand by 5.5 per cent ceteris paribus. It is worth noting that elasticity less than
unity confirms the ongoing fuel intensity improvement.
The MDO/MGO fuel demand (M) is a function of the real price of MDO (PM) in the
West European market and seaborne trade (S) and a lag-dependent variable to include
long-term dynamics.
LM t = 0.14 0.08 LPM t + 0.33 LSt + 0.51 LM t 1

( 0.13) ( 1.2 )
(1.4 )
( 2.2 )
R 2 = 0.87.
It is obvious from the estimated equation that the price elasticity of MDO/MGO demand
is low, reflecting the fact that this type of fuel is inevitably consumed due to unavoidable
demand for sea transportation and the use of this fuel for auxiliary engines especially during
the stay in ports. In other words, the higher fuel price would have more impact on operation
costs and the cost of transportation than the demand for MDO/MGO fuel itself. The price
impact on demand will be limited. For example, a 10 per cent increase in real MDO price will
decrease demand by about 0.8 per cent ceteris paribus. Similar to the marine fuel oil
2011 The Author.

19
demand, the MDO is mainly affected by the seaborne trade level. The elasticity of 0.33 is
lower than unity and a little lower than that of marine fuel oil but still considerable.
Seaborne trade, which is measured in ton-miles, is a function of real global trade value
(X) in dollars. The total amount of nominal export (or import) is adjusted by the OECDs
deflator of exports of goods and services (2005 as the base year for the index). This equation also includes the trend value (T) that captures the natural increase in demand for
seaborne transportation.
LSt = 5.3 + 0.20 LX t + 0.02 T + 0.26 LSt 1

( 6.1) ( 7.7 )
( 5.2 )
( 2.4 )
R 2 = 0.99.
The following equation relates the world trade with real world GDP or so-called
WGP (G):
LX t = 2.9 + 0.44 LGt + 0.79 LX t 1

( 5.6 ) ( 4.5 )
(10.7 )
R 2 = 0.98.
The trade elasticity of global income is estimated at 0.44 showing a relatively strong
relation between the two variables.
The two last equations are auxiliary equations that relate the marine bunker fuel prices
to OPEC Reference Basket price for oil (POIL):
LPFt = 1.7 + 0.99 LPOILt

(10.2 )(19.1)
R 2 = 0.934.
LPM t = 1.8 + 0.87 LPOILt + 0.14 LPM t 1

(10.9 )( 20.4 )
( 2.73)
R 2 = 0.98.
As can be seen from the estimated coefficients, they are very closely correlated. The
elasticities are very close to unity, meaning that any changes in oil prices are traced by
them accordingly.
5.3. Forecast
To forecast the future demand of marine bunker fuel in the reference scenario, assumptions have been taken from the OWEM world oil outlook for real world GDP and oil prices
(OPEC, 2010). It is assumed that GDP would grow at about 3 per cent per annum, and the
nominal oil price, with an average growth rate of 1.9 per cent, would reach $106 per barrel
in 2030. The impact of IMOs regulations on clean fuel has not been considered in this
scenario in order to draw the future without those regulations. Figure 13 shows that, in
this case, the major part of demand would have been from fuel oil so that the share of
MDO/MGO holds steady around 15 per cent up to 2030. Oil demand in the marine bunker
sector was about 1.91 mb/d in 1980, consisting of 0.32 mb/d of MDO/MGO and
2011 The Author.
20
Mohammad Mazraati
Figure 13 Marine bunker fuel demand forecast in the reference case (20092030). Source:
Authors model. MDO, marine diesel oil; MGO, marine gas oil.
1.59 mb/d of bunker fuel oil. It grew by 2.3 per cent per annum during 19802008 and
reached 3.64 mb/d in 2008. It is expected that demand will grow by almost the same rate to
reach 6.2 mb/d in 2030.
Uncertainty in future bunker fuel demand can be seen while forecasts are compared
in the literature. Different methodologies, data sources and assumptions have led to huge
differences in future forecasts of marine bunker fuel demand. The highest amount of
consumption is based on the EnSys4 estimation at around 11 mboe/d in 2030. This is
more than two times the IEA forecast. The EnSys and Purvin & Gertz forecasts are
based on activity and navigistic methods, while the IEA is using econometric models
based on sales data (EnSys, 2009; IEA, 2009b-d; Purvin & Gertz, 2009; OPEC, 2010).
There is no doubt that the fuel combination will be changing in the course of time due
to the IMOs MARPOL regulations and other regional environmental limitations. The
IMOs regulations to reduce sulphur emissions would have a severe impact on the running
cost of marine vessels in the case of a tight market for cleaner fuel. Demand pressure on
low-sulphur bunker fuel oil might push up its market price especially during the year when
the IMO regulations come into force. The mark-up price increase and the running cost
pressure would certainly encourage some possible efforts for better fuel efficiency.
Although the premium over low-sulphur bunker fuel oil will be increasing, the pace at
2011 The Author.

21
Figure 14 Fuel price impact due to switching to clean fuel. Source: Authors model.
which low-sulphur bunker fuel oil price will distance from the high-sulphur bunker fuel oil
is uncertain. The trend of MDO price over high-sulphur bunker fuel oil price during 1980
2010 shows that this ratio could be as high as 1.4 to more than 2.2. One can assume the
average price of fuels for vessels could be any figure between 1 and 2 times the prices of
high-sulphur bunker fuel oil.
Having said that, in the alternative scenario, it is assumed that switching to maximum
sulphur content of 3.5 per cent instead of 4.5 per cent in 2012 would add a premium of about
10 per cent on the average price of different marine bunker fuel oil in the base case. This
would be 70 per cent in 2020 where the industry is switching to 0.5 per cent sulphur content
fuel instead of 3.5 per cent. Applying this price set to the model would generate marine fuel
demand affected by price increase due to demand pressure and/or switching the lower
sulphur marine bunker fuel oil. As shown in Fig. 14, although the price increase is quite
sharp, its impact on total demand is minimal. Most of the price impact will be transferred to
the transportation costs and will possibly partly narrow down the industry benefit margin.
6. Impact of MARPOL legislation on fuel combination
How the emission reduction is tackled, directly affects the possible combination of fuel
type in IMT. The possibilities to comply with the IMO regulations include switching
2011 The Author.
22
Mohammad Mazraati
to clean fuel (fuel compliance) or using scrubbers on-board (scrubber compliance).

The latter would lead to less fuel mixture change in this sector, conditional on a high
penetration of scrubbers on-board of vessels.
6.1. Fuel compliance
There is no doubt that the IMOs new legislation would bring a lot of changes in the marine
bunker fuel market. The global low-sulphur bunker fuel will increase the cost of fuel for the
bunker industry. The refining industry also has to be prepared to produce more quality fuel
for vessels. This needs time and capital costs. In the fuel compliance case, refineries around
the world should take new investments into consideration to be able to produce more quality
bunker fuels. Quality bunker fuel by different technologies would cost considerable
amounts. The production cost of LSFO is expected to be in the range of $145$254 per ton
above the HSFO in different markets by different technologies (Purvin & Gertz, 2009). The
estimated costs are the average of 5 years starting from 2020 and are based on inflation
adjusted Brent crude price of about $85/b and a Rotterdam HSFO price of $445 per ton.
On the other hand, it seems that the fuel compliance is practically more feasible than
that of the scrubbing option. Since it would be easier for the vessel owners to simply
replace the quality fuel even at higher prices. Changes of fuel might need technical revisions where some fuel mixture might create operational problems in the vessel (see for
example, Forget, 2005).
The fuel compliance scenario would have serious implications for the refining industry
and petroleum prices. Figure 15 shows the possible trends of different fuel types up to
2030. A significant shift in fuel quality is expected to create a sharp decrease in HSFO
when the use of LSFO, i.e. global 0.5 per cent sulphur content, is mandatory in 2020. It is
assumed that between 2010 and 2014 and 2014 and 2015 and thereafter, about 5 per cent
and 10 per cent of the high-sulphur bunker is replaced by the ECA bunker, respectively.
These percentages are based on the historical approximation of consumption in possible
ECAs. Most of the high-sulphur bunker (90 per cent) will be replaced by low-sulphur
bunker and the ECA bunker in 2020 and thereafter. This is the year vessels have to switch
to clean fuel globally.
In this scenario, the demand for HSFO declines by more than 3 mb/d in 2020 and
thereafter, and it is expected to be replaced by LSFO that meets the IMO legislation.
Shares of fuel type will change drastically after 2020 where the LSFO will have the highest
share among other fuels. The shares of LSFO, ECA, MDO/MGO and HSFO will be 60 per
cent, 17 per cent, 15 per cent and 8 per cent corresponding to 3.7 mboe/d, 1.05 mboe/d,
0.9 mboe/d and 0.5 mboe/d, respectively, in 2030, meaning that the refining sector has to
invest in hydrotreating units to be able to meet the balance. In this scenario, Europe will
lose its bunkering market share due to the relatively high local cost of distillate fuels. There
would be no demand for low-cost European and Russian high-sulphur residue supplies. It
2011 The Author.

23
Figure 15 Marine bunker fuel mix in fuel compliance scenario. Source: Author. HS, high sulfur;
LS, low sulfur; MDO, marine diesel oil; MGO, marine gas oil; ECA, emission control area.
is expected that, due to the lower cost of capital and accordingly production cost, the
Middle Eastern refineries will more readily expand conversion capacity and residue
hydrotreating to supply the new demand.
6.2. Scrubber compliance
The scrubber technology has already been used in power generators and in the industry
sector. A Krystallon scrubber installed on P&O Pride of Kent ship showed successful
results of recorded 560 ppm SO2 at inlet and 0 ppm at outlet (BP, 2007). It might be the
case that ships install the scrubbers on-board instead of switching to cleaner fuel,
although, even in this case, it is believed that in an aggressive scrubber adoption, the
refinery impact will not be completely eliminated.
Around 100,000 vessels in different sizes, classes and capacities are sailing the globe.
The fuel consumption of vessels depends on size, age and other technical factors. Most of
the RFO is burned by the main engines in large ships, while auxiliary engines consume
MDO and MGO. About 35 per cent of the fleet consumes 100 per cent of the residual fuel,
which is more than 80 per cent of total fuel consumed by maritime vessels. About 10 per
cent of vessels consume over 60 per cent of RFO. These vessels might have an incentive to
install scrubbers assuming the technology become widely available; it is economically
viable and environmentally acceptable.
2011 The Author.
24
Mohammad Mazraati
The economics of installing scrubbers is related to many variables and assumptions on

capital cost, operating costs, fuel spread price, size of engines and inclusion of auxiliary
engines, among other factors. Purvin & Gertz (2009) have assumed $300 per ton price
spread between the high-sulphur bunker fuel and the low-sulphur bunker fuel where about
25 per cent of ships, which consume more than 85 per cent of the bunker fuel oil, will have
a payback period of up to 5 years. Literature supports economic feasibility of scrubbers.
Scrubbers are economically viable at even lower spread prices but higher sailing hours
(Meech, 2010). For example, 300 days steaming in ECAs at $50 per ton spread prices lead
to 5-year payback return, while the same payback period is achieved with lower sailing
time in ECAs, i.e. 100 days at $150 spread prices (Meech, 2010). The payback period with
fuel oil consumption by vessels categories shows that the economies of scrubbing appear
quite strong for ships that account for a large portion of the global high-sulphur bunker
consumption. Although the inclusion of scrubbers during the ship design might even
results in better economic feasibility.
The scrubber compliance assumes that vessels adopt the scrubbing technology where
it reduces the demand for ECA bunker fuel and LSFO. Therefore, the HSFO remains the
primary fuel for this sector. Since not all vessels adopt the scrubbing technology (especially older vessels close to retirement, etc.) the quality transition in 2015 and 2020 results in
reductions in HSFO, but its increasing trend would remain. The realisation of the scrubber
scenario requires capital investment, time, acceptance from the vessels owner and international authorities and regional port organisations. There are some other technical issues
regarding the operation of scrubbers at sea, their scrubbing measurements, retaining,
maintenance issues and sewage disposal issues.
7. Conclusions
IMT as the most cost-effective method carries about 80 per cent of globally transported
international cargos and has a leading role in economic development and world trade.
Although its share in total oil consumption is not very high, it is growing very fast.
Data discrepancy has created a big challenge for the sector, albeit the difficulties have
been recognised by the experts in the industry, but not yet tackled. The activity-based
methods using the ship fleet models are estimating bunker fuel demand that is far above the
bunker sales numbers. Using unreliable and underestimated data provide huge uncertainty
on the level of bunker demand in the future. This is very vital when the impacts of international policies and regulations on fuel are analysed. Annex VI of MARPOL enforces
all vessels in ECAs sailing regions to consume very low-sulphur bunker fuel from
2015 and globally all international vessels after 2020. In an era of unreliable data, the
required investments and necessary capacity building in the refining sector to supply
enough cleaner bunker fuel will remain unidentified. Pressure on a tight market for cleaner
2011 The Author.

25
bunker fuel in the future will increase the low-sulphur bunker price and vessel running
costs and eventually the cost of transportation, albeit with minimal impact on total bunker
fuel demand due to low price elasticity.
The consequences of Annex VI of MARPOL on the mixture of bunker fuel demand is
uncertain. There are three options to comply with the SOx emission regulations, i.e. fuel
compliance, scrubbing compliance and a mixture of the two. Although the scrubbing
technology is available, its practicality is uncertain and it is impacted by many factors,
including the spread between the high- and low-bunker fuel oil prices. On the other hand,
the existence of current capital stocks on bunkering ports make the fuel compliance scenario much more practical and easier for vessel owners. It seems this option would have
more chance, although the existence of scrubbing is not completely ruled out.
Switching from bunker fuel oil 1.51 per cent sulphur content in ECAs in 2010
could bring new data and analysis that might be useful to redraw the future and revise
the fuel compliance and scrubbing scenarios. In addition, the IMO is under pressure to
reduce CO2 in international maritime transport. This might have vital implications for
the petroleum product market and the oil market as well. Therefore, further study is
needed to shed more light on the basis of geographical evolution to comply with the
IMOs regulations.
Notes
1. The RFO sold as marine bunker fuel is usually a blend refinery product. Such blends are rarely
used as feedstock for other refineries. However, some refineries are selling the RFO under this
category. Therefore, they are traded under the same category and have to be considered in
overall RFO supply demand balance.
2. Not less than 15 states representing not less than 50 per cent of the gross tonnage of the
worlds merchant fleet.
3. Since the fuel costs are paid by the charterer, vessel owners have no incentive to increase fuel
efficiency. Contractual change might provide incentives for the owner.
4. Note: The base year for EnSys is 2003 and the forecast to 2030 is based on their growth rate
between 2012 and 2020.
References
Bazari, Z. and Reynolds, G., 2005. Sustainable energy in marine transportation, IMarEST
Conference, Sustainable Shipping, London, 12 February 2005.
BP, 2007. bpmarine/kristallon a BP Group Company. Sea Water Scrubbing: Facts & Fantasy.
Clean Ships Conference, San Diego, CA, 9 February 2007.
Corbet, J.J. and Winerbrake, J., 2008. The Impacts of Globalization on International Maritime
Transport Activity. Global forum on Transport and environment in a globalizing world,
Guadalajara, Mexico, November 2008.
2011 The Author.
26
Mohammad Mazraati
Energy Prices and Taxes, 2009. IEA Statistics. Paris, France.

EnSys, 2009. Recent EnSys Studies & Their Implications, for OWEM/Downstream Analyses.
http://www.ensysenergy.com [accessed 27 January 2011] .
Fearnleys, 2009. Data Bank. URL http://www.fearnleys.com [accessed 29 March 2010].
Forget, K., 2005. The Changing Face of Marine Fuels and the Effects on Ship Operations. URL
http://www.ship-efficiency.org/onTEAM/pdf/FORGET.pdf [accessed 31 August 2010].
IEA, 2008. Energy Balances of OECD Countries. Statistical Databases: World Energy Statistics
and Balances IEA Database, Paris, France.
IEA, 2009a. World Energy Outlook. Statistical Databases: World Energy Statistics and Balances
IEA Database, Paris, France.
IEA, 2009b. Energy Prices and Taxes. Quarterly Statistics, Fourth Quarter. Statistical Databases:
World Energy Statistics and Balances IEA Database, Paris, France.
IEA, 2009c. Energy Statistics of Non-OECD Countries, OECD, and Energy Balances of OECD
Countries. Statistical Databases: World Energy Statistics and Balances IEA Database, Paris,
France.
IEA, 2009d. Non-OECD Energy Statistics. Statistical Databases: World Energy Statistics and
Balances IEA Database, Paris, France.
IMO, 2009. International Shipping and World Trade Facts and Figures. Maritime Knowledge
Center. URL http://www.imo.org [accessed 2 October 2009].
IMO, 2010. International Convention for the Prevention of Pollution from Ships, 1973, as modified
by the Protocol of 1978 relating thereto (MARPOL). URL http://www.imo.org/Conventions/
contents.asp?doc_id=678&topic_id=258 [accessed 23 March 2010].
Meech, R., 2010. Annex VI Compliance: How Will the Refiners and Ship Owners Invest? Platts
European Bunker Fuel Conference, Rotterdam, 14th April 2010.
Ministry of Transport and Communication, Finland, 2009. Sulphur Content in Ships Bunker Fuel
in 2015: A Study on the Impacts of the New IMO Regulations on Transportation Costs.
Ministry of Transport and Communications, Helsinki, Finland.
NIORDC, 2009. National Iranian Oil Refinery and Distribution Company, Statistical Bulletin.
[Persian], Chapter 7: Bunkering. URL
http://www.niordc.ir/index.aspx?siteid=78&pageid=1380 [accessed 5 February 2010].
OPEC, 2010. World Oil Outlook. Organization of the petroleum exporting company, Vienna, 2010.
URL http://www.opec.org [accessed 2 July 2010].
Platts, 2010. Cleaning Up Bunker Fuels; But At What Cost, Platts special report, January 2010.
Purvin & Gertz, 2009. Residual Fuel Market Outlook: Impact of Bunker Quality Changes on
Market Fuels and Refining. URL http://www.purvingertz.com [accessed 22 December 2009].
Reece, M., 2004. Reporting of International Aviation and Marine Bunkers in the Joint
IEA/UNCE/Eurostat Questionnaire. Workshop on emissions of greenhouse gases from
aviation and navigation, Copenhagen, 1718 May 2004.
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2011 The Author.

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1

Challenges and prospects of international

Figure 1 A simplified energy balance. Source: IEA (2008).

2011 The Author.

Challenges and prospects of international marine bunker fuels demand

OPEC Energy Review March 2011

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Challenges and prospects of international marine bunker fuels demand

3. The IMO regulations on emissions

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Challenges and prospects of international marine bunker fuels demand

optimising the utilisation factor by redeployment of ships;

2011 The Author.

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Challenges and prospects of international marine bunker fuels demand

OPEC Energy Review March 2011

Figure 7 World seaborne trade (19882010). Source: Fearnleys (2009).

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Challenges and prospects of international marine bunker fuels demand

OPEC Energy Review March 2011

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Challenges and prospects of international marine bunker fuels demand

OPEC Energy Review March 2011

Table 1 Fuel intensity by vessel category in 1995 and 2007

Ton of fuel per

Ton of fuel per

Source: Purvin & Gertz (2009).

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Challenges and prospects of international marine bunker fuels demand

Regional bunker fuel demand

Trade data (cargo demand)

Ship fleet model

Bunker projection model

Global bunker fuel demand

OPEC Energy Review March 2011

Table 2 Correlation coefficients between variables of model (19802008*)

* Except for seaborne trade (19882008).

2011 The Author.

Challenges and prospects of international marine bunker fuels demand

Marine bunker fuel demand

OWEM reference case assumption

OPEC Energy Review March 2011

LFt = 0.59 0.01 LPFt + 0.55 LSTt + 0.36 LFt 1

LM t = 0.14 0.08 LPM t + 0.33 LSt + 0.51 LM t 1

2011 The Author.

Challenges and prospects of international marine bunker fuels demand

LSt = 5.3 + 0.20 LX t + 0.02 T + 0.26 LSt 1

LX t = 2.9 + 0.44 LGt + 0.79 LX t 1

LPFt = 1.7 + 0.99 LPOILt

LPM t = 1.8 + 0.87 LPOILt + 0.14 LPM t 1

OPEC Energy Review March 2011

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Challenges and prospects of international marine bunker fuels demand

OPEC Energy Review March 2011

to clean fuel (fuel compliance) or using scrubbers on-board (scrubber compliance).

2011 The Author.

Challenges and prospects of international marine bunker fuels demand

OPEC Energy Review March 2011

The economics of installing scrubbers is related to many variables and assumptions on

2011 The Author.

Challenges and prospects of international marine bunker fuels demand

OPEC Energy Review March 2011