New marine fuel standards expected to hit prices for oilsands crude in 2020

CALGARY — Canada’s oilsands industry, hard hit by a price storm this year, could be sailing straight into a pricing typhoon stirred up by new fuel standards for the international shipping industry.

The tighter pollution rules by the International Maritime Organization, dubbed IMO 2020, are set to take effect Jan. 1, 2020, resulting in the sulphur content limit of “bunker” fuel on ships dropping from 3.5 per cent to just 0.5 per cent.

The switch is expected to wallop prices for heavy oil containing high levels of sulphur — exactly the kind of raw bitumen that makes up about half of Canada’s 4.4 million barrels per day of crude oil production.

“It’s bad news for any producers of heavy, sour crude oil,” said Martin Tallett, president of Massachusetts-based oil market research firm Ensys Energy.

“The shock is going to go through the system and affect all products, all regions.” Canada’s energy industry faced a widening spread between Canadian heavy crude prices compared with New York-traded West Texas Intermediate earlier this year that many observers blamed on a shortage of capacity on export pipelines out of Canada.

The coming marine shipping rules could double or even triple the discount on Canadian heavy, pushing it potentially much wider than the US$30 per barrel discount producers encountered earlier this year, Tallett said.