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by Matt Muenster
Matt Muenster

2 min read

Adapting The Energy Supply Chain For IMO 2020

October 8, 2019

Matt Muenster
by Matt Muenster


Changes to refinery configurations are of key importance as IMO 2020 mandates come to fruition. The added complexities created from shifting product demand force refiners to adjust their business operations, both from an economic and a supply-demand perspective.

The comprehensive side effects associated with the IMO 2020 sulfur mandates will impact all aspects of the oil and refined product industry. Regions with low refinery complexity that heavily produce residual fuels will need to create a plan of action to stay competitive in a low-sulfur dependent future. Similarly, geographies capable of producing vast quantities of low-sulfur fuels will be called upon to create bunker fuels that stay compliant with the IMO regulations per the chart below.

Adapting The Energy Supply Chain For IMO 2020

Demand will shift, and the ensuing prices connected to these fuels will ultimately feel the brunt of the changes. The IMO 2020 regulations will transform the oil and refined product industry, creating an interesting dynamic for transportation supply chains.

Refineries have several options to react to shifting demand, including:

  1. Change their mix of crude oil inputs that later influence the type of refined product outputs
  2. Change the configuration of the refining processes to enable the increased production of low-sulfur products.
  3. Combine the above two options.
  4. Make no changes and simply ramp-up production of existing products to maximize profitability and limit the extensive capital expenditure associated with changing the overarching refining operations.

Though IMO 2020 is currently center stage, shippers should know that post-implementation the shift to move freight with lower emissions intensity will not be over. Looking to future strategies that remain ahead of the regulatory landscape and manage fuel accurately and transparently will be of greatest benefit to supply chain participants.

Read how refined product inventories have already begun to shift moving into Q4 here

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