China's Thirst for Gasoline Sees Barges Clog Up Amsterdam's Portby
Dozens of barges wait to put gasoline onto ocean-going tankers
Eastern China provinces need more gasoline blending components
China’s switch to higher quality gasoline is being felt half a world away as barges bringing supplies for export clog up Amsterdam’s port, which ships more of the fuel than anywhere else.
The Asian country’s government ordered eleven eastern provinces and cities to switch to higher quality gasoline as well as diesel as of January. That’s boosted orders from Europe of an oil product that is used to upgrade gasoline because independent refineries don’t have the capacity to process enough fuel themselves, according to Energy Aspects Ltd.
More than 60 fuel barges, most holding gasoline or components to make it, are waiting as long as two weeks around Amsterdam’s port, according to Jelle Vreeman, a Rotterdam-based broker with Riverlake Barging, which arranges charters of the vessels. They would normally wait just a few days.
“A lot of product is coming out of places like Germany among others, especially gasoline components and naphtha, and discharging in Amsterdam,” Pieter Kulsen, founder of PJK International, a Dutch firm that monitors the region’s fuel flows, said by phone. “That seems to be creating a lot of congestion with long waiting times to discharge product. Cargo-wise there is a lot of demand out of north-west Europe into various directions worldwide, including China.”
Traders booked tankers to load 289,000 metric tons of reformate, a gasoline blending component, to sail to China in the four weeks to Feb. 14, the highest outflow since November 2013, lists of charters compiled by Bloomberg show. The voyage lasts about 40 days.
Modeled on Euro V standards, the new China V rule means gasoline must contain lower levels of manganese, an additive that helps improve octane levels but can cause adverse health effects, according to the U.S. Environmental Protection Agency. Reformate helps China’s refineries to comply. Previous efforts to improve emissions standards were hindered by shortages of sufficient quality fuel, Bloomberg Intelligence analyst Ji Shi said in a Feb. 24 note.
More cargoes of European gasoline components are going to China to help refiners upgrade their fuel to meet new standards, according to Steve Sawyer, a consultant at Facts Global Energy in London.
While state-owned refiners have upgraded their plants to make the higher quality gasoline, privately-owned refineries need to import components like reformate because they are not equipped to produce the fuels by themselves, according to Energy Aspects.
China’s appetite for reformate may only be set to further increase. The new fuel quality rules are to be imposed nationwide at the start of 2017.
“A lot of independent Chinese refiners don’t have the capacity in-house to meet the new specification standards so they are importing a lot of reformate from Europe,” said Michal Meidan, an Asian energy analyst at Energy Aspects. “As this is only the first upgrade in an ongoing process, we expect to see strong import demand for reformate and other octane-boosting components.”
The Dutch port is the world’s largest gasoline port and handled 39.4 million tons of oil product shipments last year, Port of Amsterdam spokeswoman Anja de Kiewit said by e-mail.
“The petrol market fluctuates so we see differences on a regular basis that are mostly trade related,” she said in response to questions about the barge congestion, adding the port was “busy but not extreme”.
Other signs of plentiful supply in the oil market are also in evidence at nearby Rotterdam, Europe’s biggest port and a fuel trading hub. There are as many as 50 oil tankers waiting outside the facility, double the normal number and the most since 2009, spokesman Tie Schellekens said by phone. They are waiting because of storage sites are full, he said.
In terms of gasoline, China’s demand is expected to continue rising in the coming years despite the slowdown in overall growth thanks to the country’s swelling vehicle fleet, according to the International Energy Agency.
Europe’s refineries are at the point where they must clear out inventories of winter-specification road fuel, according to Sawyer. European refiners and traders use Amsterdam as a location to transfer storage tank volumes and small barge shipments of the road fuel onto larger tankers that are designed to cross oceans. Less of the continent’s gasoline is likely to go to its biggest customer, the U.S., because of high stockpiles this year, meaning refiners will need to look further afield for buyers.
Inventories of gasoline in the PADD 1 area, which encompasses the East Coast, rose to 72.23 million barrels in the week to Feb. 19, according to data from the U.S. Energy Information Administration. That’s the highest for the time of year since at least 1988.