Environmental Concerns Lead to Development of Efficient Low-sulfur Bunker Fuels

For several decades, the shipping industry was under significant pressure to curb harmful emissions and use marine or bunker fuels with low sulfur content. Recent developments in the bunker fuel market suggest that achieving greener marine ecosystem will be a reality soon. The pressure on the marine industry is largely driven by the growing need to curb air pollution and significant rise in the number of childhood asthma cases worldwide. Cargo, container, and tanker fleet play a major role in adding to the air pollution across the world. These major sources of air pollution, which run on bunker fuels laden with sulfur have also caused significant damage to communities that live close to shipping channels.

Despite efforts being made to use low-sulfur fuels, emissions from cargo ships continue to pose a major threat to the environment. In the wake of these growing concerns, stringent air quality regulations have been formulated, which are likely to set the pace for the growth of the bunker fuel market during the forecast period (2019-2027). While high sulfur fuel oils (HSFO) enter the last leg of their journey, demand for low sulfur fuel oils is set to witness a steady growth in the coming years.

bunker fuel market infographic

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International Marine Organization Regulations to Impact Growth of Bunker Fuel Market

With mounting pressure to clean their act, the marine industry is set to witness a major overhaul in the forthcoming years. Efforts to curb sulfur-emission have gained significant traction in the bunker fuel market in the past three to four years. Drastic changes in sulfur-emission policies are expected to influence the growth of the market for bunker fuels in the coming decade. In 2016, when the International Marine Organization agreed to restrict the sulfur content in bunker fuels to around 0.5% by 2020, the stage was set for a paradigm shift in the bunker fuel market toward the use of low-sulfur bunker fuels. While the demand for high sulfur fuel oils will witness a gradual decline, it will provide a boost to the demand for low-sulfur fuel oils and liquefied natural gas (LNG). The fluctuating prices of liquefied natural gas or alternative bunker fuels could pose a major hurdle for stakeholders involved in the bunker fuel market value chain. Several shippers are exploring the potential of alternative for high sulfur fuel oils by installing exhaust scrubbers or tilting toward liquefied natural gas.

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Although installing scrubbers could potentially result in high capital expenses, it will enable shipping companies to use high sulfur fuel oil. In addition, stakeholders in the bunker fuel market are also expected to negotiate their way through steep up-front costs and large-scale availability of liquefied natural– two factors that could deter the demand for liquefied natural gas during the coming period.

Demand for Marine Diesel Oil Likely to Rise

Barriers put forward by liquefied natural gas and environmental concerns over the deployment of high sulfur fuel oils have opened up the floodgates for marine diesel oil to penetrate the bunker fuel market. The new regulations laid down by the International Marine Organization offers significant promise for stakeholders eyeing investment opportunities and potential applications of marine diesel oils. The shift in the tide toward marine diesel oil is likely to result in higher crude runs. Furthermore, the blazing demand for marine diesel oils is expected to topple the prices of high sulfur fuel oils, which, in turn, will widen the spread between marine diesel oil and high sulfur resid bunker. At present, as marine diesel fuel are set to replace high sulfur fuel oils, producers of high sulfur fuel oils are expected to find other end uses, including power generation. The demand for low-sulfur fuel oils during the forecast period will hinge on a range of factors, of which the segregation of low-sulfur resid materials will play an important role. New commercial agreements and in logistics and tankage will shape the future for low-sulfur oils.

bunker fuel market segmentation

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Analysts’ Viewpoint

The bunker fuel market is expected to grow at a sluggish CAGR of ~2.5% during the forecast period. Some of the factors that are expected to fuel market growth include a significant rise in demand for marine diesel oil and steady adoption of low-sulfur fuel oils. Stakeholders in the current bunker fuel market should invest their resources in improving the availability of marine diesel bunker fuels and liquefied natural gas. The regulations laid down by the International Marine Organization will continue to fuel the growth of the bunker fuel market during the forecast period, as a shift from high sulfur fuel oils toward LNG and marine diesel oils can be observed.

Bunker Fuel Market: Overview 

  • Currently, fuel oil is widely used as bunker fuel. However, other middle distillate fuels are also utilized as bunker fuels.
  • Fuel oil employed as bunker fuel can be categorized into intermediate fuel oil (IFO), marine gas oil (MGO), marine diesel oil (MDO), high sulfur fuel oil (HSFO), and very low sulfur fuel oil (VLSFO)
  • Increase in globalization and urbanization has boosted the demand for various commodities across the globe. Seaborne trade is economical; hence, it is widely practiced globally. Different types of ships such as tanker fleets, container fleets, and bulk & general cargo fleets are used for shipping purposes. Thus, rise in shipping activities across the globe is anticipated to fuel the bunker fuel market. 

Increase in Offshore Exploration & Production Activities to Drive Bunker Fuel Market 

  • Providing bunker fuel and associated services to the oil & gas industry is a major business activity of companies engaged in bunker fuel trading. The offshore fleet primarily comprises exploration vessels, platform supply vessels, anchor handlers, cable layers, and stand-by vessels.
  • Rapid expansion in the exploration sector and increase in demand for new hydrocarbon reserves have led to a gradual shift from onshore to offshore reserves. This is boosting the global bunker fuel market.
  • The offshore oil & gas sector has been expanding significantly. Currently, a significant portion of production of hydrocarbons is obtained from offshore locations. Rapid technological development has resulted in an increase in oil & gas exploration activities at deep offshore locations and other marginal oil and gas fields. This is augmenting the global demand for bunker fuel.
  • Bunker supplying companies have strategically opened bunkering divisions in ports that are close to major offshore hydrocarbon basins, as bunkering requirements are significantly high for some offshore support vessels. Thus, increase in offshore exploration and production activities is likely to drive the global bunker fuel market. 

LNG/LPG as Alternative Fuel Likely to Hamper Bunker Fuel Market 

  • LNG fueling is a mature technology that may be utilized to comply with the upcoming MARPOL regulations, which impose restrictions on sulfur emissions from marine vessels
  • LNG bunkering is the only feasible option that enables compliance with the NOx Emission Control Area (NECA) and Sulfur Emission Control Area (SECA) requirements without the usage of the expensive marine gas oil
  • LNG Fuelled Vessels Working Group is a special group specifically established to encourage the use of LNG as marine fuel. Development of LNG bunkering infrastructure and the enactment of emission control areas (ECAs) and other sulfur norms in each areas mentioned exhibit a high level of correlation.
  • Currently, LNG bunkering in the U.S. takes place in Jacksonville, Florida, and Port Fourchon, Louisiana. A third facility is under development in Tacoma, Washington. Bunkering of LNG-fueled cruise ships using barges is also planned for Port Canaveral, Florida.
  • Thus, availability of LNG/LPG as alternative fuel is anticipated to adversely affect the global bunker fuel market. 

Rise in Demand for Alternate or Low Sulfur Fuel 

  • Widely used bunker fuel for ships is heavy fuel oil, which is economical and easy available. It is obtained from crude oil distillation.
  • Crude oil contains sulfur, which ends up in ship emissions on combustion. Sulfur dioxide is harmful to human health. It can cause respiratory issues and lung diseases. It may also lead to acid rain and acidification of oceans.
  • Alternate fuel or low sulfur fuel oil needs to be used extensively to overcome the sulfur dioxide emission from ships. The International Maritime Organization, under the annex VI of the International Convention for the Prevention of Pollution from Ships (known as the MARPOL Convention), has implemented regulation on sulfur emission from ships.
  • Sulfur emission from ships has been limited to 0.50% from January 01, 2020. This is estimated to significantly reduce the quantity of sulfur dioxide emission from ships.
  • Thus, ships need to use fuel oil with inherently low sulfur content in order to comply with the IMO MARPOL regulation. Refineries can add additives and blend the fuel oil to lower the sulfur content. Additives are also projected to enhance other properties such as lubricity.
  • Demand for liquefied petroleum gas (LPG) and liquefied natural gas (LNG) as alternate fuels is also increasing. LPG combustion results in lower CO2 emissions vis-à-vis oil-based fuels, due to its lower carbon-to-hydrogen ratio. LPG virtually eliminates sulfur emissions and can comply with low sulfur regulation.
  • Consequently, demand for low sulfur fuel oil and alternate fuel is likely to increase in the near future in order to comply with the emission norms 

Recent Developments, Expansions, Acquisitions, and New Contracts in Bunker Fuel Market 

  • In November 2019, Neste announced that the new IMO2020-compliant low-sulfur marine fuel is available in Germany. Neste and Germany-based BMT Bunker und Mineralöltransport GmbH have signed a partnership agreement regarding distribution and sales of Neste MarineTM 0.5. The new marine fuel, containing maximum 0.5% sulfur, has been available in Bremerhaven, Germany, since the beginning of November 2019. 

 Asia Pacific to be Highly Lucrative Market for Bunker Fuel 

  • Asia Pacific is anticipated to be a highly attractive region of the global bunker fuel market during the forecast period. The bunker fuel market in the region is estimated to expand at a significant pace during the forecast period. The economic development of Japan, Singapore, and South Korea has been significant. According to the United Nations Conference on Trade and Development, the global seaborne trade has reached approximately 10 billion tons in 2018, with about 60% passing through Asia. This is expected to propel the demand for bunker fuel market in Asia Pacific.
  • Europe accounted for a major share of the global bunker fuel market in 2018. Furthermore, the region is home to the world’s largest shipping fleet. Increase in seaborne trade with Asia Pacific is anticipated to propel the bunker fuel market in the region during the forecast period. 

Bunker Fuel Market is Highly Competitive

  • The global bunker fuel market is highly fragmented. Large-sized, multinational, and small-sized players dominate the global bunker fuel market.
  • Key players operating in the global bunker fuel market include
    • Total
    • Neste
    • Marathon Petroleum Corporation
    • Brightoil Petroleum (Holdings) Limited
    • BP
    • Saudi Arabian Oil Co.
    • Gazprom
    • LUKOIL
    • BP Sinopec Marine Fuels
    • Chevron U.S.A. Inc.
    • Exxon Mobil Corporation
    • Royal Dutch Shell plc
    • World Fuel Services Corporation.
    • GAC
    • BUNKER HOLDING

Bunker Fuel Market – Scope of Report

The latest study collated and published by Transparency Market Research (TMR) analyzes the historical and present-day scenario of the global bunker fuel market to accurately gauge its future development. The study presents detailed information about important growth factors, restraints, and key trends that are creating a landscape for the growth of the global bunker fuel market so as to identify opportunities for stakeholders. The report also provides insightful information about how the global bunker fuel market would expand during the forecast period of 2019 to 2027.

The report offers intricate dynamics about different aspects of the global bunker fuel market, which aids companies operating in the market in making strategic decisions. TMR’s study also elaborates on significant changes that are highly anticipated to configure growth of the global bunker fuel market during the forecast period. It also includes key indicator assessment to highlight growth prospects for the global bunker fuel market and estimate statistics related to the market growth in terms of volume (million barrels) and value (US$ Bn).

This study covers a detailed segmentation of the global bunker fuel market, along with key information and a competitive outlook. The report mentions company profiles of key players that are currently dominating the global bunker fuel market, wherein various developments, expansions, and winning strategies practiced and executed by leading players have been presented in detail.

Key Questions Answered in TMR’s Report on Bunker Fuel Market

The report provides detailed information about the global bunker fuel market on the basis of comprehensive research on various factors that are playing a key role in boosting the market. Information mentioned in the report answers path-breaking questions for companies that are currently operating in the market and are looking for innovative methods to create a unique benchmark in the global bunker fuel market so as to help them design business strategies and make target-driven decisions.

  • Which application segment would emerge as a major revenue generator for the global bunker fuel market during the forecast period?
  • How are the key market players successfully earning revenues in the competitive global bunker fuel market?
  • What would be the Y-o-Y growth rate of the global bunker fuel market between 2019 and 2027?
  • What are the winning imperatives of leading players operating in the global bunker fuel market?
  • Which fuel segment is expected to witness maximum growth potential during the forecast period?

Research Methodology – Bunker Fuel Market

The research methodology adopted by analysts for compiling the global bunker fuel market report is based on detailed primary as well as secondary research. With the help of in-depth insights of the market-related information obtained and legitimated by market-admissible resources, analysts have offered riveting observations and authentic forecasts of the global bunker fuel market.

During primary research, analysts have interviewed market stakeholders, investors, brand managers, vice presidents, and sales and marketing managers. Based on the data obtained through interviews with genuine resources, analysts have focused on the changing scenario of the global bunker fuel market.

For secondary research, analysts have scrutinized numerous annual report publications, white papers, industry association publications, and company websites to obtain the required understanding of the global bunker fuel market.

Bunker Fuel Market – Segmentation

TMR’s research study assesses the global bunker fuel market in terms of fuel, application, seller, and region. This report presents extensive market dynamics and progressive trends associated with different segments of the market and how they are influencing the growth prospects of the bunker fuel market.

Fuel

High Sulfur Fuel Oil (HSFO)

Very Low Sulfur Fuel Oil (VLSFO)

Marine Diesel Oil (MDO)

Liquefied Natural Gas (LNG)

Application

Tanker Fleet

Glass Container Fleet

Bulk & General Cargo Fleet

Others (including Passenger Ferries and Cruise Ships)

Seller

Major Oil Companies

Leading Independent Sellers

Small Independent Sellers

Region

North America

Europe

Asia Pacific

Middle East & Africa

Latin America

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