An independent study carried out by
EnSys Energy & Systems Inc. and
Navigistics Consulting and submitted to the
International Maritime Organization (IMO) says oil refiners will have "extreme difficulty" in meeting demand for low-sulphur marine fuel if a global sulphur cap of 0.5 percent is imposed in 2020, IHS Fairplay reports.
The study's conclusions contrast sharply with those of a separate
CE Delft-led study commissioned by the IMO, which said that there could be sufficient refining capacity to meet demand for low-sulphur compliant bunkers by 2020.
Both studies have been submitted ahead of the 70th session of the IMO
Marine Environmental Protection Committee (MEPC 70), which is due to take place between 24th and 28th October in London to potentially decide whether to implement a global 0.5 percent limit in January 2020, or to delay until 2025.
The EnSys study was carried out despite the firm not winning the bid for the IMO study. Instead, the Massachusetts company conducted research as part of its regular consulting business and was supported by sponsors including oil and gas industry association
IPIECA, and shipowner association
BIMCO, who in turn submitted the report to IMO.
The new report's findings "point to extreme difficulty - and indeed potential infeasibility - for the refining sector to supply the needed fuel under the global sulphur cap and to simultaneously meet all other demand without surpluses or deficits".
The study adds: "Market impacts are projected as very substantial across all products and regions worldwide, not just marine fuels, and, consequently, to have potentially significant impacts across economies and sectors.
"The global refining industry is unlikely to be able to meet the needed extra sulphur removal demand because 2020 sulphur plant (and hydrogen plant) capacity will not be adequate based on current capacity plus projects."
In CE Delft's earlier IMO-commissioned study, it stated: "The refinery industry can produce sufficient amounts of marine fuels of the required quality in the base case, the high case, and the low case while at the same time supplying other sectors with the petroleum products they require."
In the report, CE Delft also assumes that refineries around the world will have enough capacity to supply compliant fuel.
"We have assumed that all units have sufficient sulphur plant capacity. If this assumption is not accurate, refineries will need to expand the capacity of their sulphur plants to fulfil 2020 demand," the study says.
Maritime consultancy
20|20 Marine Energy stated in May that fears of a distillate shortage 'could be misguided'. The company pointed out that diesel use within the automotive and land-based industries may be in decline, which would free up surplus product that could be directed to shipping; it added that refiners will look to create a market for HFO - a refinery by-product which can only realistically be used within shipping.
The
International Energy Agency (IEA) estimates that shipping will account for 9 percent of global distillate demand by 2020, up from 3 percent in 2015. It says a 2020 implementation date for the 0.5 percent sulphur cap would see 2 million barrels per day (b/d) of marine fuel demand switch from heavy fuel oil (HFO) to marine gas oil (MGO), leading to a 2 million-b/d jump in global distillate demand to 30 million b/d. By comparison, the change in the ECA sulphur cap from 1 percent to 0.1 percent in 2015 led to a 0.1 million b/d switch from HFO to MGO, the IEA says.
Meanwhile, the
International Petroleum Industry Environmental Conservation Association (IPIECA), using combined data from BP, Marine and Energy Consulting, IEA and OPEC, has said that a switch from HFO to distillates and/or desulphurised HFOs in 2020 would see demand for these products jump 3 million b/d or more, compared to a rise of 0.5 million b/d when the ECA regulations were implemented in 2015.
