At the ERTC 2017 conference, KBC will present its outlook on the new IMO sulphur bunker fuel regulation. The 22nd ERTC will be taking place during 13-15 November 2017, in Athens, Greece.
During the conference, Joris Mertens, senior staff consultant, KBC, will discuss the global specification that requires oil businesses to reduce their sulphur fuel consumption by 0.5% and the impact this would have on the shipping and refining industries.
The news on the regulation caught everyone by surprise since industries are now expected to meet these demands by 2020 instead of 2025. Specifically, in October 2016, the International Maritime Organization (IMO) confirmed that ship owners and refiners needed to drastically reduce their sulphur fuel production from 3.5% to 0.5% by 2020, while earlier it was expected that the step-change reduction would only apply from 2025 onwards.
Mertens observes that a large number of businesses are not yet properly equipped for this transition and will need to revisit their business models. Therefore, the IMO’s decision puts pressure on these businesses to put an immediate plan of action in place in order to meet the necessary deadline. This will also affect them financially and businesses incapable to adjust may face the risk of closing down.
Addressing these issues at ERTC, Mertens will explain how the fuel market and bunker fuel market would look like in 2020 and how to approach this regulation. In addition, he will highlight the different factors that need to be taken into consideration before embracing this plan.
One key factor impacting this decision would be the location of the refinery as this would determine the future prices and availability of crude oil in the market. Another factor is the complexity of the refinery, and lastly the amount of investment that businesses can afford to make.
Mertens will also touch upon the impact on the value of intermediate refinery products and mention different investment strategies that refineries could apply to achieve the IMO 2020 goal.
Apart from the challenges, the IMO 2020 regulation would carry various opportunities for some refineries. For instance, businesses able to produce on-purpose motor fuels (components low in sulphur) would not have to worry about the price hike in the market due to high demand. Mertens will explore similar examples at the conference.
Mertens’ talk at ERTC is scheduled for 14 November 2017.