Pinning Hopes on Stricter SOx Emissions Regulation
Expectations are growing among South Korea’s oil refining, shipbuilding and steel companies as the “IMO 2020” rules will take effect on Jan. 1, 2020, requiring vessels of 400 gross tonnage and above to lower the upper limit of sulfur oxides (SOx) emissions from 3.5 percent to 0.5 percent.
The stricter SOx emissions regulation is expected to boost demand for low sulfur vessel fuel oil. Oil refiners’ advanced facilities turn heavy crude oil, including bunker-C oil, into high value-added products, such as gasoline, diesel and kerosene.
SK Energy Co. is building a vacuum residue desulfurization (VRDS) facility at the complex plant in Ulsan with an investment of 1 trillion won (US$885.74 million). When the VRDS facility starts operation next year, it is forecast to create 200 billion won (US$177.15 million) to 300 billion won (US$265.72 million) of profits every year.
S-Oil Corp. is producing low sulfur oil products at the RUC-ODC plant that converts high sulfur bunker-C oil into high-value products. Nearly 76,000 barrels of residue is turned into high value-added products, including propylene and gasoline, per day at the plant.
GS Caltex Corp. has advanced facilities that can covert 274,000 barrels of high sulfur heavy crude oil into light oil, such as gasoline and diesel, per day.
Hyundai Oilbank Co. completed a solvent de-asphalting (SDA) facility with a daily production capacity of 80,000 barrels last year. When de-asphalted oil produced at the SDA is injected into the advanced facilities, it is turned into high-value products, including gasoline, diesel and jet aircraft fuel.
As the IMO 2020 rules is to come into effect next year, the number of orders for LNG ships has jumped, providing a boost to the shipbuilding and steel industries. Recently, the number of new orders for LNG ships has increased dramatically. It is also expected to show a steady growth in the future. Shippers can use low sulfur fuel oil or install scrubbers in existing ships to meet the new IMO regulation, but those who need new vessels are highly likely to opt for LNG-powered vessels. South Korean shipbuilders clinched combined ship orders of 11 million compensated gross tonnage (CGT) as of January this year, accounting for about 80 percent of global orders of 14 million CGT.
In addition, the steel industry, which provides raw materials to the shipbuilding industry, is gearing up for the IMO 2020 rules. POSCO Group has recently developed the world’s first high manganese steel which is capable of carrying and storing LNG at extremely low temperatures. Hyundai Steel Co. developed steel bars for LNG tankers that can endure ultra-low temperatures and has been manufacturing them since 2017.
An official from a steel company said, “Korea’s price competitiveness in steel materials will help Korean shipbuilders gain an advantage over their rivals in Japan and China in competing for LNG-powered vessels. We expect that there will be a win-win for the shipbuilding industry and the steel industry.”