<article><p class="lead">The IEA expects 60pc of bunker demand to move from high-sulphur fuel oil (HSFO) to 0.5pc blends and marine gasoil (MGO) in 2020.</p><p>The International Maritime Organisation's (IMO) 0.5pc cap on bunker fuel sulphur emissions content from 2020 means around 200mn t/yr (3.1mn b/d) of HSFO bunker fuel consumption will need to move to low-sulphur alternatives, the IEA said in its <i>Oil 2018</i> report — its outlook to 2023.</p><p>The alternative is for ship operators to use abatement measures, known as scrubbers, to reduce sulphur.</p><p>The IEA said 30pc of HSFO demand will switch to new 0.5pc blends, likely to be created from existing low-sulphur fuels and gasoil. A market of around 1mn b/d will be created, the IEA said, but will likely be limited to this level because of refining capabilities.</p><p>A further 30pc of the current HSFO market is predicted to move to MGO. This represents a jump in demand for MGO of about 970,000 b/d, to 1.75mn b/d. MGO demand is then subsequently expected to rapidly decline as companies switch to 0.5pc fuels. The initial uptake is expected to be driven by reluctance from ship operators to use new blends straight away, because of compatibility concerns.</p><p>The remaining 40pc of the fuel oil market is expected to be retained by HSFO in 2020, the IEA said. The market will be formed by ships with scrubbers and by non-compliant ships. The number of ships fitted with a scrubber is likely to be affected by shipyard availability towards the end of 2019, when more ships will look to have the technology fitted.</p><p>The change in bunker fuel demand may lead to small ports no longer supplying HSFO and opting for MGO and 0.5pc only.</p><p>The IEA said excess HSFO will be eliminated by refinery de-bottlenecking, new projects and better use of secondary units. Simple refineries may be forced to close or upgrade. </p><p>Other parts of the surplus could be consumed by urban heating and power sectors in Russia and the Middle East. Data from the Arab Union of Electricity shows the potential for a number of countries in the Mideast Gulf to consume an additional 460,000 b/d of HSFO in power plants from 2020, the IEA said.</p></article>
