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A.P. Moller – Maersk says it has secured a deal New Jersey-based PBF Logistics on the production and storage of .5% sulphur fuel that will amount to approximately 10% of the shipping giant’s annual fuel demand starting in 2020.
Under the agreement, Maersk will source and PBFX will process crude oil at CPI Operations LLC, a PBF Logistics LP terminal facility in New Jersey, United States.
The agreement enables Maersk Oil Trading to supply IMO 2020-compliant 0.5% marine fuel to ships on the U.S. East Coast. Maersk says annual production will be around 1.25 million metric tonnes, equivalent to about 10% of A.P. Moller – Maersk’s annual fuel demand.
The deal comes ahead of the International Maritime Organization’s global sulphur limit regulations which will enter into force January 1, 2020 and require ships around the world to use bunker fuel with a maximum sulphur content of .5%, significantly lower than the current global limit of 3.5%. Ships also have the option to use cheaper high sulphur fuel if they are equipped with Exhaust Gas Cleaning Systems, commonly referred to as scrubbers, or if they use an alternative fuel such as LNG.
Maersk, the world’s largest shipping line controlling about a fifth of the global container fleet, plans to use more expensive low-sulfur fuel when the new rules enter into force, opting to install scrubbers on only a limited number of vessels.
“This processing agreement forms a cornerstone in Maersk’s fuel sourcing strategy for the IMO 2020 sulphur cap,” says Niels Henrik Lindegaard, Head of Maersk Oil Trading. “The vast majority of our fleet will comply with the regulation through use of compliant low sulfur fuels. With the capability to produce and store compliant low sulfur fuel on the U.S. East Coast we take control of the fuel supply in a key maritime hub for us. We will continue our drive to ensure compliance in all geographies come 2020.
PBF Logistics acquired CPI Operations LLC from Crown Point International on October 1st, 2018. It assets include crude processing and storage located on the Delaware River south of Philadelphia, Pennsylvania.
”This processing agreement with Maersk delivers on our plans for the CPI acquisition to deliver accretive growth for the Partnership,” notes Matt Lucey, PBF Logistics Executive Vice President. ”We will repurpose a portion of the existing idled asphalt facility to process an average of approximately 25 thousand barrels per day of crude for Maersk as part of their overall IMO fuel sourcing strategy. This processing arrangement is a prime example of how we will maximize the potential of our assets through strategic commercial opportunities and valuable partnerships.”
In August 2018, Maersk announced a leasing agreement with Vopak in the Netherlands for the storage of 2.3 million mt 0.5% compliant fuel, equivalent of approximately 20% of Maersk’s annual fuel demand, at the Vopak Europoort Terminal in Rotterdam.
Maersk has estimated that the added cost of burning .5% low sulphur fuel will be in the range of $2 billion annually, which it intends to pass to customers in the form of a bunker surcharge.
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