London - African states like Chad and Cameroon are shaping up to be big winners from new rules to cut sulfur 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% sulfur content mandated by International Maritime Organization (IMO) rules coming into force worldwide on Jan. 1.
The regulations will tighten limits from the 3.5% sulfur 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% sulfur 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 sulfur 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.