Argentina and IMO 2020 – Reviving the Dead Cow

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The former chief of cabinet during the Kirchner era, Argentine President Alberto Fernandez, rose to power on a wave of public frustration over a chronically weak economy. Sworn in on Tuesday, the new president may be pegging his future to the performance of the nation’s energy sector. The introduction of stricter limits to sulfur in marine fuels could help him do just that.

Argentina’s heavy-sweet Escalante grade is demanding a large premium as new limits on the sulfur content of marine fuels go into effect. Heavy-sweet crudes like Escalante are ideal for the production of fuels necessary to comply with the International Maritime Organization’s sulfur cap. A steady flow of Escalante could be used by Fernandez to incentivize investments in the energy sector as demand for Argentina’s crude grows across international markets.

Total export loadings for Argentina for the first 11 months of the year averaged 67,000 barrels per day, some 5 percent more than over the same period in the year prior and the fastest pace on our records. Roughly 80 percent of those exports were Escalante.

With exports surging, Argentina’s heavy-sweet crude is finding its way to major bunkering hubs as the IMO spec change starts to influence global markets. The port of Fujairah in the United Arab Emirates has taken in around 2.8 million barrels of Escalante so far this year. The Dutch port of Rotterdam, one of the busiest bunkering hubs in the world, discharged just under a million barrels in recent days.

The International Monetary Fund said part of an economic turnaround for Argentina could rest in its energy sector. Apart from the export revenue from Escalante, Fernandez could look to incentivize developments in the Vaca Muerta shale reservoir as way to stimulate the economy even further.