Key implications found in White Paper

On 27 October 2016, the International Maritime Organization (IMO) announced that beginning on 1 January 2020, the maximum sulfur content allowed in marine bunker fuel will be reduced from 3.50% by mass (m/m) to 0.50% m/m. The IMO fuel sulfur content regulation will have a significant global impact on both the refining and the shipping industries. Owing to uncertainty around the implementation date and the ultimate level of compliance, both industries have not yet made the necessary investments to fully comply with the IMO rules. This will lead to a "scramble" around the 2020 implementation date.

  • The impact on the refining industry will depend on the actions that ships take to comply with the regulation.
  • The largest unknown is future compliance with the new regulation.
  • The refining industry will have to alter its current product slate, increasing supply of low-sulfur fuels while managing excess supply of high-sulfur fuels.
  • In the years around implementation (2020-21), the light-heavy price spread will spike and refining margins will be higher, particularly for complex refineries.

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