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Beyond IMO 2020: Impacts on the Residual Fuel Oil Market, and the Outlook for Bunkering

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FGE’s latest annual study takes an in-depth look at the future of bunkering, exploring both the aftermath of the IMO 2020 bunker specification changes as well as longer-term issues arising from the IMO’s CO2 targets, including the prospects for fuel substitution and the adoption of new propulsion technologies.

At the start of 2020, the IMO (International Maritime Organization) implemented a cap on the amount of sulphur in fuel oil used on board ships (without exhaust gas cleaning systems—or scrubbers). This bunker specification change was the biggest upheaval the refining and shipping industries had ever faced. 

However, both industries have coped remarkably well. The shipping sector has either adopted scrubber technology in order to continue burning high sulphur fuel oil (HSFO) or has switched to very low sulphur fuels (VLSFO). The refining industry has largely responded to the jump in VLSFO demand by adjusting its existing refinery and blending operations.

HSFO and VLSFO use in the bunker sector will continue to be driven by the differential in price between the two fuels which will impact scrubber adoption. However, the bunker sector now needs to look beyond the subject of sulphur emissions and consider the potential impact on the industry of tighter CO2 emission targets that will encourage the adoption of low-carbon fuels. 

Grappling with shifting regulations, changing fuels, and new technologies, it is imperative that ship-owners, refiners, and other key stakeholders along the marine fuel supply chain stay at the forefront of market analysis and understanding. The capital budgeting decisions made today need to be seen in the context of adapting not only to short-term issues relating to the aftermath of IMO 2020 but also new legislative and economic pressures that will emerge over next 15-20 years. 

In a world where there is no “one-size-fits-all” solution, our analytical approach looks to move the debate forward to examine future risks and opportunities arising from fuel choices and technologies that will need to be adopted to meet stricter environmental standards and economic realities. In this study, market-leading oil market expertise and an understanding of the refining sector and fuel specifications are married to an in-depth analysis of the implications for the shipping industry. 

Key Features of This Report:

  • Review of IMO 2020 transition and remaining challenges.
  • Short-term bunker demand by marine fuel type and region.
  • Short-term supply/demand fundamentals for VLSFO and HSFO by region.
  • Stricter sulphur emissions regulations post-2020 and potential solutions.
  • Long-term global bunker fundamentals by marine fuel type to 2040.
  • Alternative bunker fuels for the long term, including Ammonia, Methanol, Hydrogen, and Biofuels.
  • A strategic outlook for scrubber adoption and economics.
  • Refinery economics related to the production of VLSFO.
  • Changes in VLSFO and HSFO trade flows.
  • IMO 2030 and 2050 targets–the transition away from fuel sulphur limits towards CO2 emissions.
  • LPG and LNG bunkering.
  • Detailed long-term price forecasts for crude, HSFO, VLSFO and LNG.

Scope of Coverage

  • Data
    • Bunker Demand for MGO, HSFO, VLSFO, LNG & LPG
    • Scrubber Adoption
    • Refining Capacity Changes
    • Refining and Blending Strategies
    • Refinery Margins
    • Product Prices
    • Product Differentials
  • Products
    • MGO
    • LNG
    • LPG
    • HSFO
    • VLSFO
  • Deliverables
    • PDF copy of the report (in PowerPoint format)
    • FGE consultants will be available to discuss the findings of the report either by telephone/WebEx or similar facilities.
    • Extensive supplementary excel data sets (see website for full list of available data sets).

This Service Will Add Value To

  • Ship-owners making capital budgeting decisions on their existing fleet in response to sulphur limits as well as investments in new technologies and propulsion systems.
  • Refiners assessing the impact of changing demand for marine bunker fuels in light of sulphur-related legislation and longer-term CHG-emission legislation.
  • Bunker Fuel Suppliers/Traders investigating the pricing of fuels post-IMO 2020 to understand blending economics and implications for storage facilities.
  • Storage/Terminal Operators assessing terminal operations as well as seeking an understanding of the competitor landscape for bunkering operations.
  • Charterers examining fuel procurement strategies and seeking to manage fuel price/quality risk.
  • Crude Oil Producers looking at sweet/sour and light/heavy differentials and the longer-term impact on oil demand of bunker fuel substitution from oil to non-oil-based fuels.
  • Crude Oil Traders reviewing opportunities/risk management strategies across the barrel, as well as shifting trade patterns.
  • Financiers considering investment opportunities and returns on investment around scrubber economics in the short-term and longer-term impact of GHG-emission legislation.
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