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Oil refiners unprepared to meet shipping demand for low sulphur bunker fuel oil

Jul 13, 2017

Only 15 per cent of oil refiners know how they are going to cope with the industry-changing rules about sulfur emissions that are due to come into force in 2020, a survey by KBC reveals. By 2020 the International Maritime Organization (IMO) has mandated that shipping lines either clean up emissions or use bunker fuel that has no more than 0.5 per cent m/m sulphur rather than the current permissible level of 3.5 per cent m/m.

KBC, the leading technology-based consulting company for the energy and chemical industry, surveyed refiners across the US, Europe, the Former Soviet Union and South Africa about their attitudes to the upcoming regulation.

With an estimated industry cost of $2 billion to meet this rule, the findings suggest that there is still uncertainty around how to respond. Stephen George, Chief Economist, from KBC explains, “While the shipping industry expects the refiners to meet their supply requirements, the refining industry is still waiting to know to what extent the shipping industry will install emission ‘scrubbers’ on board.

“This disconnect proves that now is the time for refiners to assess what choices are available and the decisions to be made for a strategic pathway forward,” George continues. “This is a wakeup call. Failure of refiners to study, agree and implement a robust strategy will leave many of the ‘less complex’ refineries severely economically disadvantaged.

“With refineries suffering in recent years from overcapacity and oversupply, the bunker fuel transition may prove a perfect time to implement new margin-boosting technology – although a one size fits all approach is not recommended. Implementing such technology for the reduction of other emissions and meeting other regulatory requirements at the same time may help to future-proof refineries while boosting margins and delivering the cleaner fuels that the shipping industry will continue to require. New refinery optimization strategies based on rigorous simulations, analytics and real-time data integration will assure continued compliance without sacrificing margin capture and subsequently protecting the price at the pump for consumers”, concludes George.

Read more about how to respond to IMO 2020.

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