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Preparing for IMO 2020 Price Shocks: Strategic Implications for Refiners


 

FGE’s detailed assessment of the upcoming IMO bunker specification changes uses our proprietary bottom-up supply and demand models as a foundation for examining the options available to both shippers and refiners as well as the likely overall outcomes of these changes in unparalleled depth.

On January 1st 2020, the IMO (International Maritime Organization) will be implementing a cap on the amount of sulphur in fuel oil used on board ships. This upcoming bunker specification change will be the biggest upheaval the refining and shipping industries have ever faced.

MARPOL Annex VI, which came into force in May 2005, seeks to control levels of air pollution from ships, therefore promoting better health and environmental benefits, especially for those living near ports. In 2008, revisions were made to Annex VI to help strengthen the requirements of this legislation. In 2010 the newly updated Annex VI came into force, bringing with it a new way of reducing sulphur oxide emissions from ships.

Shippers have significant decisions to make, such as switching to alternative low-sulphur fuels or installing flue gas scrubbers to remove sulphur from ship exhaust emissions. These decisions will result in winners and losers across the shipping and refining industries.

Scope of Coverage

Implications for refiners
  • To what extent will the IMO specification changes impact the refining sector?
  • Impact of IMO on downstream oil product balances and corresponding shift in refinery yields required to balance the market.
  • HSFO disposal - Will there be a surplus of fuel oil? If so, where can it go?
  • Refinery investments and upgrading - Where are upgrading projects taking place?
  • Global oil demand by product/sector.
  • Global refining capacity changes (to 2025).
  • Long-term crude price outlook.
  • Long-term crude quality outlook.
  • Who are the winners and losers?
Implications for the Shipping Sector:
  • What is the proposed outcome? Will shipping companies opt for near-term quick solutions such as:
    • Use LSFO (low sulphur fuel oil) or marine gasoil (MGO),
    • Install exhaust gas cleaning systems (also known as scrubbers) and run HSFO (high sulphur fuel oil),
    • Run other fuels such as LPG and LNG.
  • LSFO supply, demand, and pricing outlook.
  • HSFO supply, demand, and pricing outlook.
  • Will new ships now come with scrubbers by default?
  • Scenarios around scrubber uptake vs. compliance.
  • Availability and price of alternative fuels (LNG and LPG).
Structure:
  • Part 1: Overview of IMO Ruling and Evaluation of Ship- Owner’s Options Post-2020
  • Part 2: Global Bunker Demand Outlook and Availability of Alternative Fuels
  • Part 3: Implications for Downstream Oil and Shifts in Long-Term Fuel Prices
  • Part 4: Strategic Implications for Refiners
  • Part 5: HSFO Disposal - Global Oil Use for Power Generation Sector

 

Interested in finding out more?

Further information on this study can be found by downloading our latest brochure.

 

Download Brochure

Deliverables

  • PDF copy of the report (in PowerPoint format).
  • Extensive supplementary excel data sets.
  • FGE consultants will be available to discuss the findings of the report either by telephone/WebEx or similar facilities

This Study will add value to

Refining Companies

  • Needing a perspective on how the legislation will impact demand on the refining system.

Ship Owners, Charterers, Operators, and Storage Owners

  • Seeking to review the economics of the various fuel and investment options.

Bunker Suppliers, Port Owners, and Operators

  • Looking for information on how bunker demand by type will develop over time.

Trading Community

  • Trying to identify how bunker demand by quality, and by region, will develop.

Environmental Policy Makers

  • Looking to understand how the shipping and refining community will need to invest in order to meet the changing product quality requirements.

Shipping Operators

  • Conducting analysis of potential tanker demand, also reviewing the overall implications of the new IMO bunker regulations.

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Further Information

If you require additional information on this or any FGE service, including requesting a trial, or you would like to discuss ways in which FGE can assist you further, please contact a member of our sales team:


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