Summary

The bunker fuel market in the Middle-East and Africa is expected to grow at CAGR of more than 12% during the forecast period of 2020-2025. The increasing preference of LNG-based vessels and growing LNG trade is one of the significant factors driving the demand for bunker fuels in the Middle-East and Africa during the forecast period. The region is also a global leader in crude oil production. With the expected increase in production, the demand for bunker fuel is likely to increase. However, the recent outbreak of COVID-19 tremendously affected the consumption of bunker fuel. With the closure of international and domestic trade movements to curb the spread of the virus, the demand for bunker fuel is expected to decline during the pandemic.

Key Highlights
With the implementation of IMO regulations, the share of very low sulfur fuel oil (VLSFO) is expected to increase, replacing high sulfur fuel oil in the forecast period.
The Middle-East countries like the United Arab Emirates and Saudi Arabia are planning to increase crude oil production. With increased production, the shipping market is likely to witness significant opportunities in the forecast period.
The United Arab Emirates is one of the largest exporters of crude oil, which has a significant share in the container shipping sector. With the expected growth in trade, the nation is likely to continue its dominance during the forecast period.


Key Market Trends

VLSFO to Witness Significant Growth


Marine fuel containing less than 0.5% of sulfur is generally termed as very-low sulfur fuel oil. From January 1, 2020, HSFO can only be used in ships having scrubbers installed to reduce the emissions, which will drive the demand of VLSFO.
Most of the high-sulfur fuel oil (HSFO) bunker fuel market is expected to be shortly replaced by low-sulfur alternatives. Most of the VLSFO available in the market is blended from residual and distillate components, which are blended with various cutters of varying sulfur and viscosity to create an on-specification product.
The demand for VLSFO slightly declined in early 2020 due to global supply chain disruptions, a decrease in demand for general goods and products, lockdown implementation in most of the countries, and a global economic slowdown.
During 2018, with 8.67 million container throughput, Saudi Arabia witnessed a 7% increase as compared to 2017. The increase in the throughput was because of the development of the King Abdullah Port of the Red Sea.
The demand for VLSFO is likely to recover at a significant rate after mid-2021. Post-2020, the demand is expected to rise on account of the opening of all the trade routes and relative price rise.


The United Arab Emirates to Dominate the Market


The United Arab Emirates is one of the major oil producers and exporters in the region. In 2018, the state-owned oil company ADNOC announced that the country plans to increase its oil production capacity to 4 million barrels per day by the end of 2020 and 5 million bpd by 2030 after new oil and gas findings.
With the expected increase in oil and gas production, trading activities are expected to further increase between the United Arab Emirates and the rest of the world. Several other goods, such as food items, manufactured goods get traded in the country, for which seaports act as a gateway that enables trade across the region and beyond.
In 2018, the container throughput was around 19.05 million TEU, which decreased by 0.7 million compared to 2017. The decrease in shipping container volume was due to challenging macro-environment, loss of lower-margin cargo, and softer volumes in the UAE shipping market.
There are nearly 13 ports and terminals in the United Arab Emirates that have infrastructure and facilities to supply marine fuels to the vessels operating in the region. Jebel Ali port is the largest port in the United Arab Emirates and the Middle-East region with a container handling capacity of 19.3 million TEU.
Fujairah Port, the second-largest bunkering port globally, is the only multi-purpose port on the eastern seaboard of the United Arab Emirates. Apart from the conventional marine fuel supply facility, the port authority plans to introduce a ship-to-ship LNG transfer facility, which is expected to support IMO regulation towards low sulfur content fuels.
With the outbreak of COVID-19 in the first quarter of 2020, the trading business was significantly impacted. Thus, a decrease in trade is likely to impact vessel transportation, which is expected to have a negative impact on marine fuel consumption in the region.


Competitive Landscape

The Middle-East and Africa bunker fuel market is moderately fragmented. Some of the major companies include Gulf Agency Company Ltd, Abu Dhabi National Oil Company, Royal Dutch Shell PLC, Total SA, and Exxon Mobil Corporation.

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