AFPM '19: IMO 2020 and beyond
By VIC SCALCO, General Atomics
Refiners around the world have learned to adapt to ever-changing market demands—even the advantages of opportunistic crudes have come with their own set of challenges. To overcome the need for technical advancements in the refining industry, processing tight oils and heavier crudes has just been dealt another blow.
The hottest topic at oil and gas conferences is the International Maritime Organization Regulation 2020 (IMO 2020). The understanding of what the future holds is mixed, but what is known are the limits of today’s technical solutions to meet the IMO 2020 < 0.5% sulfur requirement. For smaller refineries, this may mean doing nothing and waiting for the shipping industry to react by installing more scrubbers (FIG. 1).
For mid-size refineries, investment may be considered for blending or desulfurization, but a longterm, higher capital expense may not be in the cards for them. Larger refineries, however, are already capable of producing low-sulfur fuel oil (LSFO), making them ready for IMO 2020 regulations with only minor investments.
IMO 2020 and the regulations of MARPOL Annex VI will shake up the bunker fuel market. The bottom of the barrel will still flow from refineries after the regulation requiring LSFO for maritime use is enforced beginning in 2020. Although the requirements have been in constant change, this new regulation represents the most dramatic change since 1996, when ISO 8217 MARPOL standards held a limit of 5% sulfur and a maximum of catalyst fines at 80 ppm. In 2012, MAPROL standards called for limits of 3.5% sulfur and maximum catalyst fines at 60 ppm. Today, the MARPOL standard requires < 0.5% at 50 ppm, creating an excess of high-sulfur fuel oil (HSFO) with catalyst fines.
Recent studies illustrate that 60% of refining capacity will remain HSFO, although supply will begin to become less severe. More than 70% of the industry will either make plans to reduce overall fuel oil supply due to IMO 2020 regulation tightening, or ultimately find other markets for HSFO. The global supply of HSFO is approximately 3.3 MMbpd, with a maximum 3.5% sulfur and less than 100 ppm catalyst fines. The new requirement for all ships to use marine fuel regulated under IMO 2020 will not only require LSFO with sulfur content under 0.5%, but Annex VI of the MARPOL requirements will also enforce reduction of the catalyst fines content known to cause engine wear and pollution.
Refiners will have little incentive to produce HSFO after the new regulations begin to be enforced. A small demand will remain from shipping companies installing scrubbers, but tight regulations on backwash scrubbers and even vessels containing HSFO can become a concern for shipping companies relying solely on exhaust scrubbers. The increase in scrubber-equipped ships and the increased demand for power generation will play a large role in balancing the call for HSFO in the market.
Facing the challenge
The fuel oil market or residue fuel is the bottom of the crude distillation unit (CDU). To extract more value from this stream, it can be processed using fluidized catalytic cracking (FCC), hydrocracking or cokers to produce products that are more valuable. This will come at a higher
Catalyst fines are very small particles < 25 micron from the catalytic cracking process. Removal of these particles is complicated and, in most cases, even using settling tanks does not allow the
To succeed in the dramatic switch to LSFO, refiners will want to cut their HSFO as much as possible to offset the anticipated drop in value. For refiners unable to upgrade in time to meet the expected demand, a shift in refinery low-sulfur crude processing will be the next step in meeting production without reducing CDU production.
This will alter refineries’ bottom lines by causing them to seriously consider the extra cost of upfront purchases of low-sulfur crude. For refineries bracing for the upcoming tide of HSFO, the only certainty is how each refinery will uniquely prepare to address IMO 2020. In this emerging market, one solution will not fit all.