Data & analytics solutions

Insight 23 March 2017

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Report summary

This report analyses the impact of the IMO's decision to reduce the global limit on sulphur in marine fuels from 2020, which has the potential to be hugely disruptive to the shipping and oil product markets. The study analyses the different compliance options available for shippers. It provides Wood Mackenzie's forecast for the impact on oil product demand, crude and product pricing, and refining margins, with clear explanations of the assumptions made. The implications of an alternative full-compliance scenario are also described. The report provides a basis for refiners, shippers, crude producers, bunkering operators, investors and regulators to identify the implications of the legislation and the uncertainties it creates. The study is based on our detailed asset-level refinery modelling, economic forecasting and cross-fuel analysis. It draws upon the expertise of a global team of analysts who have conducted many conversations with market participants on this topic in recent years.

Current market for marine fuels
- Global marine fuel market by type
- Regional growth in marine fuels
Implementation of the IMO global sulphur cap
- Timeline for enforcement of MARPOL Annex VI SOx emission limits
- Role of MEPC 71 in the transition to the 0.5% global sulphur cap
Options for regulatory compliance
- Overview of fuel options including scrubbed HSFO, ULSFO, LNG and MGO
- Technological and regulatory uncertainties relating to scrubbers
- Future proofing scrubbers for new build vessels operating in ECAs
- Penetration of scrubbed HSFO in marine fuels market
- Global and regional availability of ULSFO
- Drivers and barriers to the expansion of the marine LNG market
- Size of LNG-fuelled vessel fleet and % share of international bunkers to 2025
- Forecast for marine fuel prices in regional bunker hubs to 2025
- Comparison of additional lifetime cost of fuel compliance options
- Comparison of IRR for scrubber and coker investments
Compliance in our base case outlook
- Assumed regulatory compliance by region in 2020
- Volume of unscrubbed fuel oil by regional market to 2025
- Volume of global marine bunkers by fuel type in 2019 and 2020
- Regional share of switch to compliant fuels in 2020
- Volume of marine bunkers by fuel type to 2025
Refinery response to phased implementation scenario
- Spare residue upgrading capacity and displaced fuel oil in 2020
- Product crack spread profile to 2025
- Crude differentials to Brent between 2015 and 2025
- Gross refinery margins by selected assets between 2015 and 2025
Implications from the full compliance scenario
- Volume of global marine bunkers by fuel type 2019 and 2020
- Spare residue upgrading capacity and displaced fuel oil in 2020
- Product crack spread profile to 2025
Summary