Producing low sulphur marine fuels in Europe – 2020-2025 vision

20 Oct 2020

The global Sulphur cap entered into force from the 1st of January 2020, and it is seen by the refinery sector as an unprecedented step evolution for a key specification of one of their products. The sulphur going down from 3.50% max to 0.50wt%S is not just operating the refinery in a different way to remove the Sulphur from the current High Sulphur Bunker fuel. For the vast majority of refineries, it means producing the bunker using different internal streams, with new blending recipes, new constraints and resulting in a new optimum operation, which is affecting the refinery sector.
Being ready for the transition is a top priority for the refiners. They have done many simulations and lab testing to ensure their product will meet the required quality, and especially the stability1. Internal procedure and blending rules will make sure that incompatibility of internal streams will be avoided.
This Concawe Supply study (Linear Programming modelling) is highlighting several constraints and potential difficulties. It appears feasible to supply the demand of Marine Fuel (MF) 0.50%S, but with a significant market incentive and debottlenecking when required for the Sulphur Recovery (SRU) and Hydrogen Production (HMU). The crude slate is not expected to evolve in a significant way, even though marginal, the current evolution (lower density, lower S content) goes in the right direction to ease the production of MF 0.50%S.
A key uncertainty remains on the export of High Sulphur (HS) fuel oil. Historically, European refiners have exported to Asia, with the current volume being around 10Mt per year. However demand for HS fuel oil in Asia is also declining, according to public sources, creating potential supply issue. The degree of installation of on-board installed scrubbers may also impact the situation.
For middle distillate, the issue is the opposite with a strong need for import in Europe (more than 30 Mt/year). With an expected evolution towards middle distillate for the marine fuels, the global demand will increase, creating tension in regions already seeing a deficit of middle distillate.
The typical current heavy fuel oil quality is widely available over the globe (high sulphur, high density, and high viscosity) and evolves towards a multiple range of different qualities just like hybrid fuels. The trend being a clear evolution towards middle distillate type of fuel (low density, low viscosity) for more than 50% of the market demand. Every new fuel will raise the concern of stability and compatibility2; every stakeholder will have to consider it as a top priority and develop its own learning curve accordingly.

The data and vision have been updated in 2019. Therefore, the economic and Trade crisis, linked to the Covid-19 pandemic, have not been taken into account in this study. The impact on our sector being an unexpected and dramatic decrease in fuels Demand, the year “2020” is only relevant as representative of a year where the Demand goes back to 2019 level. The year “2025” as referred in this study remains, so far, fully relevant.
The data used in this study are historic and/or based on publicly available reports from independent consultancies. This study does not rely on data from Concawe members.