JULY 2018 - A recent regulation by the International Maritime Organization (IMO) sets a global limit for sulphur in fuel oil used to power ships at 0.5% (by mass) from the current 3.5% starting in January 2020. This more stringent regulation restrict

STUDY FINDINGS CERI used a refinery optimization model to determine the margin change CERI's model accounts for US refinery configurations and their operating costs, capital investments, crude oil blending, and the associated refinery acquisition costs of crude blends, product slates and their market values, thus requiring the development of revenue forecasts from the sales of refinery products. [...] Non-compliance scenarios effect the demand for heavy sour crude Non-compliance with the new regulation is a serious concern for the IMO and will effect the demand for heavy sour crude. [...] Although some PADDs will have low margin reductions and even an increase in margins for some by 2020, we expect the highest margin reduction refineries, in this case, the medium refineries in the US, to set the prices for heavy sour crudes and determine the light-heavy crude price differentials. [...] Based on our assessment of the price impacts and the options available, the following impacts are likely: ~60% of shipping industry fuel currently using high sulphur resid will need to switch to either marine gasoil or a blend of high sulphur and ultra-low sulphur middle distillate marine fuels Adoption of scrubbers is likely to increase moderately and peak by 2025 where ~5% of the resid bunker de. [...] The dotted lines represent the WCS pricing that is historically discounted at $13/bbl plus the discounts resulting from the IMO regulation for the three scenarios considering a medium refinery in the US.