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IMO 2020 challenges global refinery industry’s capacity

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Hydrocarbon Engineering,


In 2016, International Maritime Organization (IMO) decided to strictly enforce use of bunker fuels with a sulfur content of 0.5% (mass by mass) from the existing 3.5% limit, from 2020. However, refineries do not have sufficient production capacity to meet bunker fuels demand with less than 0.5% m/m sulfur content, according to GlobalData.

Over the past few years, oil and gas majors such as Shell and BP, and independent organisations such as International Energy Agency (IEA) have projected varying daily bunker fuel demand for 2020. Shell, BP and IEA indicate that daily High Sulfur Fuel Oil (HSFO) demand could reduce from around 3.3 million bpd and fall within the range of 0.3 to 1 million bpd in 2020.

Arpan Roychowdhury, Oil and Gas Analyst at GlobalData, says: “The implementation of IMO 2020 could lead to a disappearing of substantial quantities of HSFO used by the shipping industry. The surge in ultra-low sulfur fuel oil (ULSFO) demand may put pressure on the refineries to increase capacity utilisation of coker, residue fluid catalytic cracker and hydrocracker units. On the other hand, reduction in demand of HSFO could affect their revenues.”

Simple refineries, having access to ultra-sweet crude from coasts of West Africa and US shales, can ramp-up their ULSFO production and reduce the supply-demand gap. Many complex refineries, in countries such as China and the US, are also changing their existing refinery configurations for increasing production of IMO 2020 compliant fuels. New refining capacities, which are expected to come online primarily in Asia and the Middle East, are well positioned to process high sulfur fuels in to IMO 2020 compliant fuels.

Roychowdhury concludes: “As the IMO 2020 regulation shifts demand towards low sulfur fuels, they might struggle to bridge the gap between demand and supply in near future.”

Read the article online at: https://www.hydrocarbonengineering.com/the-environment/17052019/imo-2020-challenges-global-refinery-industrys-capacity/

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