ILMA Compoundings - October 2018 - 34

sour crude, their costs should go down. Whether that gets
translated to the price of base oils is another issue."
Smith noted that freight costs will increase across the
board. "The shipping industry is being regulated to burn
lower sulfur bunkers, which will be significantly more
expensive," she explained.

"IMO 2020 is a very big deal to
the overall refining landscape.
The major refiners, like they
always do, will adapt to the
change in demand."
Lance Puckett, senior vice president of
global lubricant sales, Ergon
Preparing for Change
For refiners that are looking to produce low-sulfur marine
fuel oil or marine gas oil, it is too late to begin installing new
equipment, Ames said.
"It takes four to five years to put in the process units/
equipment that would convert the current high-sulfur
marine fuels into low-sulfur marine fuels," he explained,
adding that installing a "bottoms-upgrading" facility, such
as a delayed coking or residual cracking process, would cost
more than $1 billion. "For those low-complexity third- and
fourth-quartile refineries, that investment is more than the
refinery is worth. Why throw good money after bad?"
Group I plants without such bottoms-conversion facilities
could be vulnerable if they do not have access to light sweet
crude, Ames said. "There may be a case or two that the
mother ship can survive, but only if they shut down the base
oil plant," he said. "Unlike Europe, Russia, Asia and possibly
South Africa, however, I don't see it impacting any base oil
producer in the U.S."
Ames said that for greater than 90 percent of lubricant
applications, Group II base oils can do everything Group I
can do, often at an additive cost savings. But the opposite
does not apply. "They are one-way fungible," he said. "This
has been true for many years, and a lot of blenders have
gone to Group II for the bulk of their base oil needs."
Overall, the impact on ILMA should not be large, Ames
said. "Some of the prices of the base oils may change as the
market changes," he explained. "Some crudes will be higher
priced than others. If your supply of Group I comes from a
refinery running light sweet crude, their relative cost is going
to go up, whereas if your supplier of Group I runs heavy

OCTOBER 2018

| COMPOUNDINGS | ILMA.ORG

Changes to the Shipping Industry
The move to low-sulfur diesel in ships could lead to a
reformulation of certain marine lubricants used in the main
propulsion systems of ships, but not in the volume consumed, Ames said.
Sulfur is a lubricant in various points of a marine diesel
engine, and fuel pumps may have difficulties with marine
gas oil because of its low viscosity, which can lead to overheating, Murphy-Smith said. "Lubricity can be added, either
on-shore or through on-board dosing, to offset the viscosity
issue to ensure lubricity is covered before burning in the
main engine and generators," she explained.
Shipping companies that don't want to pay the higher
cost for low-sulfur marine fuels can install stack scrubbers,
which capture the sulfur in the exhaust gas produced from
high-sulfur fuels. However, only a small portion of companies will utilize scrubbers. "By the onset of IMO 2020,
less than 15 percent of ships will have the scrubbers. By
2030, it is estimated less than 25 percent will have installed
scrubbers," Ames said. "There will be a significant demand
for low-sulfur marine fuels, and most of that is forecast to be
marine gas oil, a distillate cousin of diesel."
However, as more and more shippers install scrubbers
on board vessels, the demand for high-sulfur fuel oil will
increase again, allowing the market to rebalance. "A key
metric is to watch the uptake, or lack thereof, of scrubbers
onboard the global fleet," Murphy-Smith said.
Jeff Leiter, ILMA's general counsel, said the marine industry
can also turn to liquefied natural gas. Murphy-Smith noted that
there currently is insufficient LNG bunkering infrastructure
for this to be a viable solution. What's more, switching to
LNG could mean reformulating the types of lubricants used
on ships. However, Ames said the lubricant manufacturers are
likely prepared for any necessary changes.
IMO 2020 could also affect the blending and burning
of recycled used oil in the ships. "Recycled fuel often has
metals or heavy wax paraffin that must be run through the
ships, purification system before being suitable to burn,"
Murphy-Smith said, noting that the spec on blending recycled fuel oil post-IMO 2020 has not been published.
Long is a freelance writer and journalist. She can be reached
at 925-750-7163 or mindy@mindylong.com.

http://www.ILMA.ORG

ILMA Compoundings - October 2018

Table of Contents for the Digital Edition of ILMA Compoundings - October 2018