Repsol focuses on MGO production ahead of IMO

Spain's integrated Repsol is focusing on increasing its production of marine gasoil (MGO) ahead of the implementation of the International Maritime Organisation's (IMO) 0.5pc sulphur cap on shipping emissions in 2020.

Shipowners can comply with the upcoming IMO regulation by either buying compliant fuels — such as MGO or new 0.5pc marine fuels — or by using scrubbers to continue burning high-sulphur fuel oil.

The high conversion factor at Repsol's 895,000 b/d of Spanish refining system will allows the company to ramp up middle distillate production to comply with the IMO cap, chief executive Josu Jon Imaz said.

Repsol's four delayed coking units (DCUs) in Spain can produce 7.5mn t/yr of petroleum coke and account for over 20pc of European coking capacity.

This makes it more profitable for the firm to use bottom-of-the-barrel products to maximise middle distillates output such as MGO, than to produce new 0.5pc sulphur marine fuels by blending residual fuel oil from sweet crudes with gasoil from other streams, according to Repsol.

Repsol is fully prepared to produce 0.5pc fuel oil when the market demands, but the most economical choice for many shipping companies would be to switch from high-sulphur fuel oil to MGO rather than ultra-low sulphur fuel oil, Imaz said.

Repsol estimates that higher demand for middle distillates from the IMO limit could add an extra $1.5/bl to the company's refining margin after 2020. The firm plans to scrap sales of high sulphur fuel oil by the end of this year and use the product to feed its cokers.