As a leading independent consulting company focused on the refining industry, over the past few years Euro Petroleum Consultants (EPC) has been paying close attention to strengthening the requirements of the International Maritime Organization (IMO) regarding permissible emissions from sea vessels. The discussion of these issues mainly took place during the Refining Technology Conferences and Bottom of the Barrel Technology Conferences organised by EPC and in January 2019 we held a special event in London focused exclusively on these new requirements that will come into force in January 2020.
The conference in London brought together representatives of the refining industry, suppliers of technologies, equipment and services, ship owners and representatives of regulatory bodies – Carnival Corporation, Cepsa, DFDS, Essar Oil UK, IBIA, INA-Industrija Nafte, Libya’s National Oil Corporation, Methanol Institute, Niels Bjorn Mortensen Consult, Petronas, PKN Orlen, Port of Rotterdam Authority, SASREF, SATORP, UK Chamber of Shipping, UKPIA, etc.
In addition to presentations, the format of the event included discussions with experts and live audience voting on the issues.
As with any other fundamental change in legislation, proper control should be ensured to comply with the new IMO requirements. Therefore, the first question to the audience was - Once IMO 2020 regulation comes into effect on 1st Jan 2020 – how confident are you that the monitoring and enforcement will be efficient and effective?
‘Lots of uncertainties remain and it’s difficult to tell’ was the most popular answer, with about 60% of the votes, and a third of the audience was non-confident. At the same time, a representative of IMO confirmed that in order to strengthen control over compliance with the new requirements, IMO adopted an amendment to MARPOL Annex VI to prohibit the carriage of non-compliant fuel oil for combustion purposes for propulsion or operation on board a ship. This amendment is expected to enter into force on March 1, 2020.
The next question was - With the compliance deadline less than a year away what do you think will be the most adopted solution by ship owners?
Most of the delegates (60%) believe that a solution would be to use low-sulfur bunker fuel and marine gas oil, while 27% of the audience voted for using scrubbers on ships. It is interesting that 10% consider non-compliance and use of high-sulfur fuel oil without flue gas treatment as possible.
Speaking about the use of scrubbers, according to the observation of Wood Mackenzie, there are now over 2,000 confirmed orders for scrubbers as the uptake starts to accelerate towards 2020. While open loop systems tend to dominate, orders for ‘hybrid ready’ systems are now more popular, which enables a closed loop system to be installed at a later date, dependent on future restrictions on scrubbers operating in open loop modes.
The issue of non-compliance with the new requirements is of paramount importance, and the next question was - What probability will non-compliance be considered a real option for ship owners?
More than half of the delegates believed that the probability is average - the majority sea fleet will comply with IMO 2020, but some companies in certain regions will continue to use high-sulfur bunker fuel without scrubbing capabilities. At the same time, a quarter of the audience estimated the probability as high - a high percentage of ship owners will non-comply with IMO 2020 requirements.
Pessimistic forecasts are supported by the fact that by 2020 not all refineries will have time to reduce or exclude the production of high-sulfur fuel oil. Thus, the results of research conducted by Concawe show that by 2020 on a whole European refining system full bunker fuel compliance is not straightforward.
Of course, a change in ship owners’ fuel strategy will lead to a change in transportation costs, and the next question was - How much impact will the IMO 2020 regulatory changes have on freight prices?
More than half of the delegates responded that they expect a significant increase in tariffs, namely, more than 20%. No one believes that freight prices will remain unchanged or decrease.
The technical part of the conference presented reports of leading technology suppliers. Axens presented examples of how the combination of their technologies — ebullated bed hydrocracking H-Oil & fixed bed hydrocracking HyK and residual catalytic hydrogenation Hyvahl & RFCC — make it possible not only to increase the processing depth at the refinery, but also to achieve the production of bunker fuel with sulfur content of 0.5%. To minimize the production of fuel oil, KBR demonstrated the advantages of using deasphalting technology ROSE, and Honeywell UOP - the use of slurry process Uniflex. Bechtel reviewed the feasibility of converting a visbreaking unit to a delayed coking unit, and Wood offered various options for developing a refinery depending on the time terms. Rigby Refining presented their own development – The Rigby Process – the use of which allows reducing the content of metals and sulfur in fuel oil without causing negative impact to the fuel oil properties.
Modcon Systems also presented their latest developments in equipment for in-line blending of bunker fuel and marine emissions monitoring systems and Innospec emphasised the importance of using dispersants to ensure fuel stability.
EPC will continue to monitor the situation around the implementation of IMO 2020 and the impact of these requirements on the refining industry. To find out more about modern refining technologies that help refiners to be ready, please don't miss out on attending EPC’s specialised events: ‘Development of Oil Refining & Petrochemical Industries of the Republic of Belarus’ including the 14th Russia & CIS Bottom of the Barrel Technology Conference & Exhibition and taking place on 23-25 April 2019 in Mozyr and the 19th edition of International Downstream Week taking place on 27-29 May 2019 in Sardinia.
Euro Petroleum Consultants is a technical oil and gas consultancy with offices in Dubai, London, Moscow, Sofia and Kuala Lumpur. Euro Petroleum Consultants also organises leading conferences and training courses worldwide. For further details please visit www.europetro.com.