New rules to reduce sulfur emissions from ships could lead to millions more in revenue for oil-producing African states like Chad and Cameroon.
Currently, only around 1% of the world’s crude oil exports are of the heavy and sweet varieties which are ideal for refining into fuel with a maximum 0.5% sulfur content. That’s the new mandate set 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.
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.
“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,” said ClipperData Senior Energy Analyst, Josh Lowell.
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.
By Wednesday, traders said Angolan state oil company Sonangol was offering Dalia at $3.00 above dated Brent and similar grade Girassol at $3.20.
Oil from landlocked Chad, piped southwestward and exported by sea via Cameroon, has increased in volume since new fields came online this year and is being increasingly snapped up in the world’s key refining hubs.
The rule changes require massive investment as refiners cut sulfur content in their output. ExxonMobil completed a $1 billion unit at its Antwerp refinery last year to upgrade high-sulfur fuel into various types of diesel, including the variant mandated by the IMO 2020 rules.
