New sulphur limit for marine fuels prompts an investment race between the shipping and refining industries to remain profitable

Regulations were adopted yesterday requiring all marine fuel used outside Emission Control Areas to contain less than 0.5% sulphur from the start of 2020. Full enforcement of the new fuel sulphur limit in 2020 will cause disruption to refiners and shippers and has implications for energy markets and trade. Alternative compliance options such as installing scrubbers on vessels or switching to LNG are expected to have limited impact by 2020. So in the short term the main compliance option will be switching to low sulphur distillate fuels. This will lead to a major price spike for distillate fuels and increased shipping costs.. An implementation road map should be forthcoming at the next IMO meeting in May 2017 and there appears to be recognition that a period of transition will be required with the possibility of derogations for vessels unable to source low sulphur fuel. Meanwhile the shipping and refining industries face a race to invest in the right equipment to remain profitable.