Implications of IMO 2020 on the oil and gas sector

  • Implications of IMO 2020 on the oil and gas sectorImplications of IMO 2020 on the oil and gas sector
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June 2019

 

The International Maritime Organisation’s (IMO) sulphur reduction rule will kick in on 1 January 2020. We refer to this rule in short as IMO 2020. This is a global rule that will apply to the maritime industry. Being the largest bunkering hubs in Asia, Singapore and China will be affected. Therefore, stakeholders such as ports, shippers, bunker suppliers and refiners will need to adapt in order to comply with this rule. This report highlights the implications of the rule on each group of stakeholders.

Globally, marine vessels carry more than 80% of global trade by volume and more than 70% by value. Marine vessels consume about 3 million to 4 million barrels per day (M b/d) of high sulphur fuel oil, accounting for 3% to 4% of global oil consumption.

Shippers will incur higher costs either to install abatement technology such as scrubbers or to use compliant fuels such as marine gasoil or low sulphur fuel oil

Bunker suppliers will have to consider providing a wider slate of compliant fuel options to shippers.

Ports and bunkering hubs that aspire to stay competitive will have to make all bunkering options including liquefied natural gas (LNG) available to shippers.

Refiners may seek more capital for equipment upgrades and catalysts to produce low sulphur compliant fuels in anticipation of increased demand.

Finally, the IMO 2020 effect supports sweet crude prices such as the prices of Brent and West Texas Intermediate (WTI) as refiners prefer sweet crude for their low sulphur content.

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