Singapore's bunker industry dilemma ahead of IMO 2020

THE move by the International Maritime Organization (IMO) to introduce a 0.5 per cent sulphur limit on fuel oil from January 2020 poses the largest and most disruptive change that the shipping and oil refining industries have had to face.

Trade participants are keeping an eye on how Singapore will gear up to meet its bunker demand. Singapore is the world's largest bunkering market and today imports around 1.4 million barrels per day of High Sulphur Fuel Oil (HSFO), compared with just a little over 100,000 b/d produced. In 2020, Singapore will still be a net importer of HSFO and the market will be amply supplied but most of its demand will switch to Low Sulphur fuel oil (LSFO) and Marine Gasoil (MGO), creating new challenges to its supply chains. Overall, the changes are likely to benefit refining in Asia which is long Gasoil and is developing supply options for LSFO fuel oil, especially among the major bunker suppliers and China.

In less than 10 months, we forecast an immediate drop of more than two million b/d of HSFO demand as shippers switch to low sulphur fuel oil or Marine Gasoil, increasing the demand for diesel/gasoil by over two million b/d. In the short term, we estimate the cost of compliance for shipping to be US$60 billion.