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Bunker Fuel 2020: Beginning of a New Era for Marine Fuels

November 20, 2019 | Energy & Power

Bunker fuel (or Marine fuel) is the major stakeholder in the operational cost of the ships. Bunker fuel is commonly referred as the fuel used in the ship bunkers to power the engines of the ship. The kerosene, light diesel, and heavy diesel fractions from the refinery are used for the production of the bunker fuel. The bunker fuel is produced in the form of grades which include Bunker A, Bunker B, and Bunker C.

The Bunker C is the most commonly used type of the fuel which is comprised of vacuum residue range of the material and is available in different viscosity ranges such as of which 380 centistokes (CST) is most widely in demand. Whereas Bunker A & B grade fuels generally have low viscosity and density making them suitable for small & mid-sized industrial boilers and mid-sized ships.

In addition to the high sulphur content in bunker fuel, the shipping industry is a major contributor to the greenhouse gas emissions accounting for around 8% of the global sulphur gas emissions and more than 10% of NOx emissions. In order to reduce the sulphur emissions, the International Maritime Organization (IMO) has put the restrictions on the sulphur content present in the bunker fuel to be not more than 0.5% by January 2020 under the Annexure VI of MARPOL convention.

Additionally, in January 2015, the bunker fuel used in the Sulphur Emissions Control (SEC) Areas was restricted to comprise sulphur content of 0.1%, which is common in the Bunker A (or ultra-low sulphur) grade fuel oil. The Sulphur Emission Control Areas are the English Channel, the North Sea, Baltic Sea, and 200 nautical miles off from coastline of North America in addition to a zone in the Caribbean.

Demand Scenario for Bunker Fuel in the Recent Past

As per the reports of the United Nations Conference on Trade and Development, the dry bulk carrier fleet and other vessels have increased significantly in the recent years. Owing to this, the demand for bunker fuel has increased considerably by 45.6% from 2000 to 2016 as per a report of the International Energy Agency (IEA). It is estimated that around 50% of the total fleet of the marine vessels use heavy fuel oil bunkers, accounting for the lion's share across the globe.

In order to comply with the new specifications of the bunker fuel, various industry participants are now focusing on shifting their product mix by expanding the supply of low sulphur alternatives. Key market players, including Shell, ExxonMobil, LUKOIL, BP, GAC Group, Indian Oil Corp Limited, CEPSA, and Chevron, among others are working towards providing cost-competitive refined products for various sectors in the chemical industry.

Bunker Fuel

Impact and Assessment of IMO Regulations

The regulations imposed by the International Maritime Organization leave the suppliers and consumers with three choices which include reduction of the sulphur content in bunker fuel from the suppliers to meet the required standards, use of the scrubbers by buyers in order to reduce the sulphur and NOx emission, and use of alternative fuels such as Liquefied Natural Gas and hydrogen as primary fuel. In addition to this, if ships traveling to the SEC Area do not find compliant bunker fuel meeting the standards, they can file a report with the Environmental Protection Agency (EPA) and other authorities of the destination port using Fuel-Oil Non-Availability Report of Environmental Protection Agency.

As a result of the imposed regulations, the International Energy Agency has estimated that by 2020 4000 ships will be fitted with scrubbers by 2020, which is expected to consume double the bunker fuel oil consumed in 2019. Furthermore, the sour-crude refineries will face a significant slowdown in the revenues whereas the sweet-crude refineries are anticipated to have higher margins, and the prices of sweet crude will have a high impact on the low sulphur residue value. The sales of scrubber systems used in the reduction of the SOx are expected to increase at significant rates in the coming years and are anticipated to generate high sales revenues for key market players such as Wärtsilä, Mitsubishi Heavy Industries, Gard AS, Fuji Electric Co., Ltd, Alfa Laval, Panasia Co., Ltd, Andritz, LiqTech International, Goltens Worldwide Management Corporation, Mitsui O.S.K, and Kamelia Cleantech among others.

Lucrative Opportunity for Alternative Fuel Players to Step In

The regulations imposed by the IMO regarding sulphur content and emissions in the shipping vessels are impelling the shipping industry to adopt alternative and efficient fuel sources to replace the demand for high sulphur bunker fuel. For instance, in March 2019, British Petroleum announced the launch of a new very-low sulphur fuel oil, which is estimated to contain 0.5% sulphur content in Amsterdam/Rotterdam/Antwerp and Singapore. Liquefied Natural Gas, hydrogen, and battery-powered hybrid vessels are the optimized possible alternatives for bunker fuels with high sulphur content.

However, the counterparts of the bunker fuel are relatively non-economic and have low penetration in the market. This would likely have a profound impact on the future demand scenario of LNG and hydrogen as a marine fuel in the shipping industry. The players involved in the counterparts of the bunker fuel are Shell, BP, Chevron, Air Liquide, SHV Energy, Petronet LNG Limited, Cheniere Energy, Inc., Santos Ltd, and Hunt Oil Company among others. Some other players such as e5 Labs Inc., Rolls-Royce holdings Plc, DNV GL, and Oshima Ship Building have developed battery-operated hybrid ships in order to establish environment-friendly fuel source for ships.

Comparison of Bunker Fuels with Other Counterparts:


Bunker Fuel



Fully Electric

Sulphur Emissions






US$ 300-700 /mt

US$ 2.2-4.5/MMBtu

US$ 4-14/Kg

US$ 140-1,000 /kWh


Crude Oil

Natural Gas


Lead, Nickel, Cadmium, Lithium and other metal alloys







Annexure VI of MARPOL Convention




Bunker Fuel Switch and Growth of Counterparts

In the forthcoming years, the OECD and non-OECD countries plan to reduce the consumption of bunker fuel by a substantial rate. The demand for bunker fuel is forecast to decrease owing to the slowdown of economies following a massive hit by Brexit’s uncertainty. In addition to this, alienation towards high sulphur bunker fuel spreading across Europe and trade tensions and ongoing trade war between China and the U.S. are other factors responsible for lesser demand. The International Energy Agency has reported that the demand for high sulphur bunker fuel will slip to 1.4 million bpd from 3.5 million bpd by 2020, whereas, the demand for marine gasoil will significantly increase from 0.9 bpd to 2 million bpd in 2020. In order to maintain the usage of the high sulphur bunker fuel, consumers will have to install scrubber systems in the vessels to filter the gas emissions with an aim to meet environmental standards. 

Bunker Fuel

Additionally, alternative fuel sources such as LNG, batteries, and hydrogen will gain traction and show marginal growth in the next five years. These alternative fuel sources are expected to remain in demand for domestic applications, which include ferries, cargo ships, and privately owned boats and freight transport vessels among others.

About the Author

Name: Divyendu Sharma

Divyendu is a member of the energy & power team in Fortune Business Insights, one of the most promising market research firms in the industry. He is a petroleum engineer and has an experience of nearly two years in market research & consulting field. Divyendu has assisted multiple clients in the energy & power industry with customized analysis of various fields, to deliver recommendations & strategies in relation to new product introductions, geographical expansion, and market entry.

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