Sulfur Restrictions Could Add More Than A Trillion Dollars To Fuel Costs

- Sep 14, 2019-

S&p global platts recently released an analysis report, saying that the implementation of the "2020 sulfur restriction order" issued by the international maritime organization (IMO) is imminent. It is estimated that many industries, including energy and shipping, will face severe financial challenges in the next five years, and the total investment may exceed $1 trillion.


According to IMO regulations, starting from January 1, 2020, ships around the world need to use bunker fuel with no more than 0.5% sulfur content.

With less than four months to go, the majority of the world's ships will switch from high-sulfur to IMO fuel, meaning about 3 million barrels of high-sulfur fuel a day will have to be replaced, according to s&p global.


Still, the industry isn't sure what kind of Marine oils will go mainstream.

Many industry insiders believe that ultra-low sulfur fuel or become the mainstream choice of shipowners.


On the price side, s&p global predicts that low-sulfur fuels will cost an average of $240 a ton more than high-sulfur fuels by 2020.

By 2023, the price difference between the two fuels has gradually fallen to $80 a tonne.


Major oil companies including exxonmobil, bp, sinopec and total have said they will produce fuels that meet the 2020 sulfur limit and meet market demand.


S&p also said owners need to clean fuel tanks before switching fuel, or the fuel could still contain excessive levels of sulphur even if the fuel is replaced.

Shipping companies, including Thailand's Precious Shipping and Norway's Hoegh Autoliner, have announced that the cleaning of ships' fuel tanks is under way.

S&p global platts cited a shipowner as saying November 30 this year could be the best time to switch to compliant fuel.


In addition to fuel conversion, the installation of desulfurization tower is also one of the important solutions to ensure fuel compliance for ships.

The exhaust gas purification systems association (EGCSA) estimates that by January 1, 2020, about 4,000 ships worldwide will be equipped with desulfurization towers.

IMO estimates that about 3,000 ships around the world will install desulfurization towers by then.

S&p global estimates about 2,200.


Although different agencies have different forecasts for the number of ships installed with desulfurization tower facilities, they all agree that this will bring huge financial pressure to the shipping industry.

According to some statistics, the cost of installing desulfurization towers per ship may be between $2 million and $10 million.

In a report, moody's investors service cited maersk shipping as an example. It calculated that installing desulfurization towers on 300 ships would cost an average of $5 million per ship, or about $1.5 billion.