IMO 2020: Will you sink or swim?



In just eight months, the International Marine Organisation (IMO) 2020 regulation will cut the maximum sulphur content in marine fuels worldwide, in an attempt to clean up the shipping industry. The new regulation will impact all levels of the market across the globe, from oil drilling operations in Nigeria to refineries in China.

The IMO has agreed to limit the sulphur content in all marine fuels to 0.5%, a decrease of 3.0% from the current level. This is a major issue for refiners, who historically have used the shipping industry as means of getting rid of high-sulphur material without the cost of further processing.

Some larger operations may have the capacity to remove this excess sulphur, whereas smaller scale refiners will be forced to use a lower-sulphur feedstock, which unfortunately is already being used for fuel in other sectors.

What options do shippers have for alternative fuels?

The need for lower-sulphur refinery input will filter into the oil market, increasing demand for sweeter crude oil grades containing less sulphur. This could prop up prices of benchmark grades such as Brent and WTI. Regions, such as the Americas, which produce sweeter crude are in a better position to produce low-sulphur fuels. This will push them into greater positions of strategic strength.

Another option for shippers is the use of gasoil as fuel. The conversion process is relatively cheap and doesn’t require a long period of time in the shipyard. Unfortunately, there is a catch: gasoil can be blended into diesel, making it a far more valuable product than alternative fuels. Despite this, ICIS sees this as being one of the most viable options for shippers, accounting for over half the bunker fuel mix in 2020.

Alternatively, at a high upfront cost shippers could install exhaust scrubbing facilities which remove sulphur from engine fumes, making vessels compliant with the new regulation. This will allow the continued use of cheap high-sulphur fuel oil (HSFO). Ship owners would lose time at dock, with Wartsila saying fitting would take 1-3 weeks. Some countries, as shown in the infographic, have already proposed restrictions to this technology as the treated wash water is then discharged back into the ocean.

The idea of using liquefied natural gas (LNG) is also gaining traction. However, similar to scrubber installation, shipowners will require a large amount of capital expenditure. This is why ICIS expects most shippers to transition to gasoil in the short term before seeking alternative technologies as the industry adapts to IMO 2020.

The regulation could also squeeze the oil products market. Changes in price for fuels or refinery output could have a knock-on effect on base oils prices, margins, and financial viability. In future, base oils could face more competition from low-sulphur fuels such as diesel for the use of vacuum gasoil (VGO) feedstock.

Our latest infographic highlights the main areas of the value chain affected by the IMO 2020 regulation. Download your free copy now.

Article by Richard Price


Spot LNG rebounds from $4/MMBtu lows


Global spot LNG prices fell to their lowest levels of the year in late-March and...

Learn more

Spot LNG prices steady at low levels


Global spot LNG prices held steady over the four weeks from mid-April to mid-May...

Learn more
More posts
US LNG projects advance as spot remains low

Global LNG prices remained soft in the four weeks to mid-January as US export projects continued to ...

Spot LNG prices for January slide as US plants begin

Spot LNG prices over the past four weeks for January 2020 cargoes to Asia averaged $5.515/MMBtu, fal...

Asian LNG softens on mild weather, strong supply

Spot LNG prices in east Asia softened over the past four weeks on indications of mild weather for th...

Spot bulls challenge LNG supply bears

Cuts to Dutch gas production, French nuclear troubles and a court case impacting Russian pipe flows ...

Freeport LNG set for first cargo, storage talk grows

The 5.0 million tonnes per annum (mtpa) US Freeport LNG train one was getting ready to load its firs...

LNG spreads tighten, Gulf braces for storm

Spot LNG prices held below $5.00/MMBtu in the four weeks from mid-June to mid-July on the back of co...

European energy prices looking weak heading into third quarter

This article was written by Harriet Roberts. It discusses the findings of the ICIS European Energy M...

Spot LNG falls, but tensions in Gulf

Spot LNG prices remained low around the world in mid-June, prompting continued speculation over whet...


Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more


Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more