The implementation of International Maritime Organisation (IMO)’s new rules on marine fuels from 2020 will drive a profound shift in Asia’s refning slates towards low-sulphur fuels. As of January 1 2020, sulphur content in marine fuels sold globally will be limited to 0.5% mass by mass from 3.5% currently. High-sulphur fuel oil (HSFO) use for shipping will be rendered gradually obsolete, replaced by lower-sulphur fuel oil (LSFO) and marine gasoil (MGO), with the latter more favoured among shippers, due to compatibility issues associated with blending or converting to LSFO. Some 2.4mn b/d of marine demand may shift away from heavy residuals towards MGO and LSFO, according to our previous research (see ‘IMO 2020: Impact On Oil & Shipping’, July 26 2018). Implications for crude demand and fuel prices are expected to be signifcant, particularly in the early stages, as supply takes time to adjust to demand. Given the sheer size of Asia’s fuel market and patchy history of complying with fuel regulations, ensuring compliance could prove challenging, and this may dilute the impact of IMO’s new rules. In January, the IMO announced that ship-owners in violation of its new rules ‘can’t simply pay the fne for non- adherence and continue using non-compliant HSFO’.
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