LOW SULFUR FUEL IN 2020

Transcription

1 LOW SULFUR FUEL IN 2020 An overview of the projected maritime energy market Michael Ramsey Copyright March 2017

2 Low Sulfur Fuel in 2020 Executive Summary v The International Maritime Organization (IMO) is implementing environmental regulations on the shipping industry. Starting 2020, ships must reduce their sulfur emissions by 85%. Prior to deciding, the IMO considered two conflicting reports that projected the accessibility of low sulfur solutions for It is expected about 80% of the industry will require some form of low sulfur petroleum fuel (LSF), making its accessibility of highest concern. v Report Takeaway The reports agreed on nearly every projection except for one part of the refinery analysis. To produce sufficient LSF, refineries need to expand their capacities. A refinery unit of concern is the Hydrodesulfurization (HDS) unit, which removes sulfur. Expanding this unit is expensive and takes a few years. The reports disagree on if the capacity of this unit will be expanded by 2020: - The official report assumes refineries will automatically expand to meet the demand. - The supplementary report claims it is not that simple, and refineries will be reluctant to invest in expanding because of an unknown future market. The official report claims global compliance will be achieved through interregional trade, with costs around $616 for LSF (<0.1), $595 for LSF (<0.5), and $466 for HFO ($/ton). The supplementary report claims there will be a global shortage of LSF by 63 MTPA, and costs will be around $841 for LSF (<0.1), $725 for LSF (<0.5), and $396 for HFO ($/ton). The IMO only asked can the market adapt, but did not ask if it will, which is likely why it sided with the official report. v Implications Some of the refinery industry is taking a wait and see approach, some will meet the demand, and others will transition to other markets. Some ship owners currently using LSF have faced persistent challenges attempting to comply due to unreliable fuel supply and complications with engine compatibility. Compliance with LSF is not guaranteed. Enforcement is currently weak, but the development of a level playing field by 2020 is in progress. 2

3 Introduction This report provides an overview of the projected maritime low sulfur fuel market for 2020, with a concentration on petroleum fuels. Projections made by two research consultants are compared to shed light on the uncertain future of this market. A brief discussion is provided at the end to address concerns ship owners may have. IMO: 2020 Sulfur Cap The International Maritime Organization (IMO) announced that starting in 2020, ships must reduce sulfur emissions from 3.5% to 0.5%. This is a drastic 85% reduction. Other emissions (nitrogen and particulate matter) are included, but not of such high concern. Commercial ship owners around the world must change their fuel consumption practice by using low-sulfur petroleum fuel with a sulfur content <0.5% (LSF), Heavy Fuel Oil (HFO) with a scrubber, or Liquefied Natural Gas (LNG). Prior to setting this regulation, the IMO hired the consultant CE Delft (CE) to assess the availability of these low-sulfur solutions for The IMO wanted to know if 2020 is a feasible implementation date. The world s largest ship owner association BIMCo (and several other organizations) hired consultants EnSys and Navigant (EN) to provide a second opinion. All three solutions are addressed, but the focus of both reports is on LSF. CE claims LSF will be available in sufficient quantities, and EN claims it will not. This outcome reflects the complexity of this topic and difficulty in making an accurate projection. Despite contrasting conclusions, the IMO determined 2020 to be a feasible implementation date. Now, ship owners are uncertain how to proceed. There is concern that refineries may not be prepared to meet the demand in LSF, making prices extremely high for an unknown length of time (JOC). Ship owners are debating if they should brace themselves and see how the LSF market plays out, or rely on scrubbers or LNG, both of which require significant investments. Background of Projection Reports CE and EN are both credible consultants that have done research for the IMO before. CE is a consultant that specializes in practical solutions to promote environmental sustainability, and subcontracted several specialty consultants. EN is a collaboration between two consultants in the energy and maritime sectors, respectively. The reports involved dozens of experts in the shipping and energy industries, and each are about 200 pages of technical material. Both reports use very complex methods to project the availability of low sulfur solutions. The general method by both was to project supply and demand by region, and determine if global compliance can be achieved by balancing out regional surpluses and shortages. The consultants agreed to base demand projections off an IMO market assessment report from 2012, but supply projection base data and methods differed. To have confidence in their conclusions, both reports made conservative estimates and projected several potential market scenarios. Despite using similar methods and base data, each report addressed variables that the other did not, which resulted in contrasting market predictions. Projections were made to determine if low sulfur solutions can be available in a full-compliance market by Post-2020 market projections are not made. 3

4 Low Sulfur Fuel Background Low Sulfur Fuel (LSF) encompasses several types of fuels (Table 1). LSF is commonly referred to as Marine Gas Oil (MGO), as MGO is typically an essential component. It can be used as a marine fuel by itself, but it is usually blended with HFO. This is the current practice to produce LSF for ships in Emission Control Areas (ECAs), which require a sulfur content of <0.1% (TM4). For practical purposes, these fuels will fall under LSF in this report, as the several fuel types are considered by the consultants. Table 1. Common Low Sulfur Fuels Fuel Full Name Description MGO Marine Gas Oil Distillate gas that is condensed into liquid Marine Diesel Oil Mix of MGO and HFO IFO Intermediate Fuel Oil Mix of MGO and HFO, but with less MGO than MFO Medium Fuel Oil Mix of MGO and HFO, but with less MGO than IFO LS HFO Low Sulfur Heavy Fuel Oil Desulfurized residual fuel oil Source: viscopedia.com MGO is a distillate product like kerosene and diesel. Its availability for the maritime industry is of concern because of production limitations and competing distillate markets. The production of MGO involves a complex refining process, but an important part of the process involves a hydrodesulphurization (HDS) unit. HDS units use hydrogen gas to extract sulfur from the fuel, and a Sulfur Recovery Unit (SRU) (aka sulfur plant ) to capture it. Hydrogen gas is usually produced at the refinery with a hydrogen plant, as it is difficult and expensive to transport from off-site sources. A hydrogen plant can cost around $100 million, and a SRU can cost $20-50 million (Bunkerport). Installing these units by 2020 is considered possible, but very rushed (Platts). An emerging practice called Residue Desulfurization (RDS) removes sulfur directly from HFO. If distillates are in high demand and production is at capacity, this can be a valuable alternative to providing LSF (CLG), though this process is known to be more expensive and not widely practiced (Bunkerport). LSF Quantitative Projections Projecting Maritime Fuel Demand The demand of LSF was determined by projecting total marine fuel demand and the market penetration of scrubbers and LNG. As of 2012, 76% of the industry used HFO. These HFO users will need to find a low sulfur solution. There is no known incentive to implement low sulfur solutions prior to 2020, implying the change in demand will occur overnight. Because scrubber and LNG solutions take months to implement, both reports agree the rate of implementation will increase gradually as 2020 approaches, and the industries will reach installation/retrofitting capacity towards the end of Scrubbers and LNG will cushion the demand for low sulfur solutions, but Tables 2 and 3 show the demand will primarily fall on LSF. 4

5 Table 2. Projected Market Penetration of Low Sulfur Solutions for 2020 (MTPA) LSF (<0.1) LSF (<0.5) HFO (+Scrubber in 2020) LNG % 0% 76% 3% 2020 Projection CE EN CE EN CE EN CE EN 12% 8% 73% 73% 11% 13% 4% 6% See Appendix A for report data and calculations. Table 3. Projected Marine Fuel and LSF Demand for 2020 (MTPA) Marine Fuel Demand Demand of LSF (LSF + HFO + LNG) (<0.1 + <0.5) CE EN CE EN Projection See Appendix A for report data and calculations. Demand Summary The demand projections are reasonably close. The slight differences suggest the contrasting conclusions of the reports derive from differences in LSF supply projections. About 80% of the industry will require LSF starting in 2020, increasing the demand from 2012 levels by about 214 MTPA. Projecting LSF Supply To achieve global compliance, refineries are expected to meet the new demand of LSF. The overnight increase in production is about 4 years of normal growth for refineries (Bunkerspot). If refiners are to meet demand, they must work with what is currently available along with projects set to be complete by For example, coking units are considered very important to producing distillates, but they require several years and $1-2 billion to implement (Bunkerspot). Though they may alleviate the market post-2020, they are not seriously considered by the reports. The main question both studies address is if refineries can produce sufficient LSF for the maritime market, along with other distillate-consuming markets. Predicting LSF production is by far the most detailed analysis of both reports. The primary projection considered is the composition and capacity of refineries. Other important projections considered are the supply of appropriate crude oil, and the projected state of other markets that consume distillate products. Crude Processing Capacity Overall, Table 4 demonstrates the reports projected similar crude processing capacities. If the reports agree on general refinery capacity, there must be a conflict in the capacity of specific units which limit the output of LSF. 5

6 Table 4. Projected Crude Distillation Capacity for 2020 North Latin Middle Africa Asia Europe (MTPA) America America East Russia CE % 31% 15% 26% 8% 9% 8% EN % 33% 16% 21% 8% 10% 8% See Appendix B for report data. Refinery Unit Capacity Both reports generally agree with refinery unit capacities, including HDS units. However, there is a great divide when it comes to the projected capacities of HDS subunits: Hydrogen and Sulfur Plants. We have assumed that all units have sufficient sulphur plant capacity because this is generally the case. If this assumption is not accurate, refineries will need to expand the capacity of their sulphur plants capacity to fulfill 2020 demand (CEp59). CE has assumed sulfur plant capacity will be available and did not make their own projection. CE explains their reasoning in more detail in their Appendix B (p116). CE believes a general refinery practice is to have abundant sulfur plant capacity because if desulfurization were to increase, sulfur plants would be the limiting factor. CE assessed data provided by the Oil and Gas Journal and acknowledge that sulfur plant capacity will need to expand in some regions, but that it is not of serious concern, as refiners can expand within the timeframe. Insufficient hydrogen was also noted, but was dismissed as it can be transported to refineries if necessary. EN projected the capacity of sulfur and hydrogen plants and came up with similar projections to the Oil and Gas Journal. EN suggests the installation of sulfur plants during needs to increase by 60-75% and hydrogen plant projects need to increase by 30-50% (ENp8). The great divide between these reports is not if these units can be expanded by 2020, but if they will. CE has assumed they will, but EN has reasonable doubts. If it is even feasible to meet the timeframe, expansion projects would likely be delayed or aborted in the approval process because the post-2020 market is so uncertain (Bunkerport). There is a strong possibility the price of LSF will be so high that it will encourage the continued implementation of scrubbers and LNG, reducing the demand for LSF and leaving refinery investments abandoned within years. EN criticizes CE for assuming refineries will automatically meet the demand, but technically the IMO only asked can the market adapt by 2020, and did not ask will the market adapt. Supply Summary The most significant difference in the supply analysis is the opinion on sulfur and hydrogen plant capacity. Both agree it will need to expand, but disagree on if refineries will expand in time. This factor impacts their projection of LSF production, as demonstrated in Table 5. The total projected LSF supply difference is 19%. 6

7 Projected Accessibility and Market Impacts Table 5. Projected LSF Supply for 2020 (MTPA) CE EN LSF (<0.1) LSF (<0.5) LSF See Appendix C for report data and calculations. Table 6 summarizes the main findings of the reports. CE claims LSF demand will be met and EN claims there will be a global shortage of LSF by 63 MTPA. EN predicts that even if some refineries do manage to expand capacity, there would still be a deficit of 50 MTPA (EN Recap). Table 6. Summary of Projected Supply and Demand of LSF for 2020 Supply Demand CE EN CE EN LSF See Appendix D for report data and calculations. Regional Trade Flows The reports agree there will be regional shortages and surpluses of LSF, and changes in interregional trade of crudes and refined products will be necessary to achieve (or attempt) global compliance. Regional LSF supplies generally depend on access to appropriate crude oil, available refinery capacity, blending capabilities, and the demand for LSF in the local area. The reports projected the LSF accessibility for each region and determined probable interregional trade flows. Projections are presented in Appendix D. CE makes it clear the Middle East will have surpluses, and North America, Asia, and Africa will have shortages. EN does not discuss but provides a raw data table that suggests a different scenario, with North America, Latin America, and Russia having surpluses, and the Middle East and Asia as having shortages. Projected Costs Table 6. Projected costs of Marine Fuels for 2020 ($/ton). LSF (<0.1%) LSF (<0.5%) HFO CE EN CE EN CE EN See Appendix E for data and calculations. 7

8 Conclusion Summary of Reports CE claims there will be regional shortages of LSF, but is confident a global balance can be achieved assuming refineries expand hydrogen and sulfur plant capacity, and trade flows adjust. Also, the projected decrease in distillate demand from other markets will alleviate the strain on refineries. BIMCo has criticized CE for neglecting to address how refiners are expected to add capacity, if the available LSF will be compatible with ships, and how much a disruption an overnight change in demand would cause to the market (WMN). EN claims there will be a global LSF shortage because refineries have insufficient capacity, specifically because there is a lack of sulfur and hydrogen plants. Competing distillate markets will not help this issue. The shortage of LSF will make full compliance impossible, and even if there were sufficient capacity, an attempt to meet compliance would cause severe market strain and cause more environmental damage than if there were no sulfur cap at all. EN concluded there needs to be more time for the market to adjust, or to incentivize early adoption of low sulfur solutions. There were many important projections agreed upon, yet disagreements in the refinery desulfurization analysis are the main reason the reports contrasted in opinion. Both reports agree refineries need to be properly equipped with sulfur and hydrogen plants by Where they differ is if this will actually happen. CE assumes refineries will automatically expand, and EN argues expansion is not that simple and refineries will not see the long-term incentive to do so. BIMCo claims implementing the 2020 date is irresponsible because the accessibility of LSF is still uncertain and there needs to be a more in-depth analysis. The impacts of a shortage could be severe to the market, especially for developing nations (WMN). Ultimately, the IMO sided with CE and at the time of this report, there has been no official explanation for their reasoning. It can only be speculated that the IMO sided with CE because they only wanted to know if 2020 compliance was possible. An IMO transition team has been assigned to address challenges as 2020 approaches. Author s Note: On a subjective note, it makes sense why the IMO sided with CE. An unexpected challenge in the comparison of these reports was locating and understanding EN s projections. Relatively, the CE report presents its findings clearly and the EN report does so poorly. EnSys and Navigant are well-regarded consultants within the industry and they make valid points in their report, but their projections are poorly articulated (see Appendices). It seems possible the IMO couldn t fully understand EN s reasoning and didn t have confidence in their conclusion. Also, many believe IMO committed to 2020 because of political pressure (SB). The IMO is a sub-organization of the UN, which is committed to achieving Sustainable Development Goals (SDGs) by Achieving these goals requires significant action in the development of clean energy and the reduction of environmental damage. Also, a study has claimed extending the implementation date to 2025 would cause 200,000 premature deaths because of air pollution (SB). Extending the implementation date because of potential market strain while being aware of this information would severely damage the IMO s reputation. Michael Ramsey Energy & Environment Professional Norwalk, CT mcr513@gmail.com 8

9 Considerations & FAQ for Potential LSF Consumers: Do you have confidence in the IMO s decision? Both reports agree there will be market strain, but EN goes further to say it will be much more intense and will last longer. This report comparison indicates a potential assumption flaw in the CE analysis, and EN provides data and reason to back it up. Considering EN agreed on nearly every other significant projection, the claim by EN should not be taken lightly. If the market is capable of adapting, will it? The ability of refineries to produce LSF was analyzed, but the economic opportunities and challenges for them was not. Refinery configurations, inputs, and products are expected to change, causing a chain reaction with an unpredictable outcome (TM4). Some major suppliers (BP, Shell) have committed to meet this new demand, but others will transition into irrelevant markets (Platts). As mentioned, some refiners considering investing may never get past the approval process because the post-2020 market is so unclear. Fuel Specifications and Supply LSF encompasses various fuel blends that have different properties like viscosity, flash point, and density. Ship owners will need to determine which fuel blend their ship is compatible with, and if it will be available on their routes. If not, they must change refueling patterns. In ECAs, ship owners have reported issues finding the proper fuel because of unreliable supply and incompatibility issues. Ports will have different supplies of LSF blends, and they will all have their own engine compatibilities. Ship engines were designed to run on residual fuel, and the added complexity of varying levels of distillates are known to create issues (Platts). Compliance The IMO has decided to implement the sulfur cap regulations, but has left the enforcement aspect to individual ports and states. It is expected compliance will be ensured via documentation and fuel sampling. When a ship fuels, they will likely be given a bunker delivery note which states the sulfur content of fuel supplied, and the fuel may be sampled to verify (IMO). The challenge is to ensure compliance when at open sea. The industry has raised concerns about the level of enforcement to ensure an even playing field. In the 2015 ECA, only 30% of violations were sanctioned, and some fines were as low as $1,500 compared to savings of $100,000 per trip. Numerous shipping organizations have committed to compliance and support the development of robust and transparent enforcement (Platts). It seems methods to enforce compliance are currently weak, but in development. Further Reading: S&P Global: Platts The IMO s 202 Global Sulfur Cap. What a 2020 Sulfur-Constrained World Means for Shipping Lines, Refineries and Bunker Suppliers. Bunkerspot. Stress Test. 2020: Can Refiners Meet the Sulphur Deadline? 9

10 SOURCES Report Access and Summary: CE Delft (2015) Assessment of Fuel Oil Availability Netherlands Report Access and Summary: EnSys/Navigant (2015) Supplemental Marine Fuel Availability Study Massachusetts EN Recap: IMO Decides on Jan for Global 0.5% Sulphur Cap. EnSys. December Retrieved from Other: SB (Health Study): T&E and Seas at Risk: Delay of 0.5% Sulfur Cap from 2020 "Unacceptable and Unjustifiable" October, Ship and Bunker. Retrived from SB (Political Pressure): Postponing 0.50% Sulfur Cap to 2025 May be Considered Politically Unacceptable: ICS May, Ship and Bunker. Retrieved from postponing-050-sulfur-cap-to-2025-may-be-considered-politically-unacceptable-ics WMN (BIMCo criticism): BIMCO Calls IMO Study on Low Sulphur Fuel Availability in 2020 Flawed World Maritime News. October Retrieved from JOC: Low-sulfur fuel to come with high price for container carriers Aug JOC. Retrieved from TM1: Auers, John. He (It) Ain t Heavy, He s (It s) My Brother (Bunker) Turner, Mason & Company. February TM2: Auers, John. It Ain t Heavy, It s My Bunker Part 2: Winners and Losers Turner, Mason & Company. March TM3: Amand, David. It Ain t Heavy, It s My Bunker Part 3: The Decision Looms Turner, Mason & Company. September

11 TM4: Auers, John. It Ain t Heavy, It s My Bunker Part 4: What Do Impending New Bunker Specs Mean for Refiners Turner, Mason & Company. October Viscopedia (LSF Table Summary): Bunker Oil-Marine Fuel Oil. DN (Diesel Net): CLG. Arun Arora Refinery Configurations for maximizing middle distillates. Chevron Lummus Global Retrieved from 938d-6f69cc946fe8/Refinery-configurations-for-maximising.aspx Platt. The IMO s 202 Global Sulfur Cap. What a 2020 Sulfur-Constrained World Means for Shipping Lines, Refineries and Bunker Suppliers. S&P Global: Platts. October Retrieved from Bunkerpsot. Stress Test. 2020: Can Refiners Meet the Sulphur Deadline? Bunkerspot. January Retrieved from 11

12 APPENDIX A: Demand Data EN Overall Demand Data p51 Market Share Demand Data & Calculations p52 Summary of Marine Fuels Demand Cases Millions b/d 2020:no 2020:yes 2020:Effect of global rule Scenario Global 0.5% fuel no yes Effect of 0.5 NavLow HFO (3.26) NavLow NavLow ECA NavLow LNG NavLow fuel NavLow HFO NavLow Scrubber % of total fuel 13.3% n.b. Scrubber % of total fuel mmtpa 15% NavMod HFO (3.63) NavMod NavMod ECA NavMod LNG NavMod fuel NavMod HFO NavMod Scrubber % of total fuel mb/d 12.5% n.b. Scrubber % of total fuel mmtpa 14% NavHi HFO (4.01) NavHi NavHi ECA NavHi LNG NavHi fuel NavHi HFO NavHi Scrubber % of total fuel 11.8% n.b. Scrubber % of total fuel mmtpa 13% 2020 Base Case 2020 Global Fuel Cases EN Data and Calculations Average (Mod) Base With S Cap HFO (>0.5) % % Scrubber Pen % LSF (<0.5 & <0.1) % ECA (<.1) % LNG % HFO + LSF % Marine Fuel 6.82 Solution Penetration HFO + Scrubber 13% LSF <0.5 73% LSF <0.1 8% LNG 6% 100% Data to % Market Exhibit Marine Fuel Demand Cases 12

13 APPENDIX A Continued: CE Demand Data CE p38 Table 24 Global and regional marine fuel demand (2020) - base case Sulphur (% m/m) Petroleum-derived fuels LNG <0.10% % >0.50% In ECAs Outside ECAs Globally in combination with an EGCS Globally Million tonnes per year Africa Asia Europe North America Latin America Middle East Russia & CIS Global Source: This report. Table 8 Regional demand for maritime fuels and relative shares in 2012 (million tonnes per year) HFO MGO LNG HFO MGO LNG Million tonnes Regional share (%) Africa Asia Europe North America Latin America Middle East Russia & CIS TOTALS % 100% 100% Source: This report. Note: Because of rounding values may not add to totals. The approach used to derive disaggregated regional demands was as follows: disaggregate global fuel demand based on the IEA shares of regional fuel sales; verify regional fuel demand data against third-party data sources, adjusting as required; specifically for LNG a slightly different approach was adopted, using spatially explicit data from the bottom-up method of the Third GHG IMO Study and IEA statistics on natural gas. Further details can be found in Annex A, Section A Regional supply of maritime fuels in 2012 Asia is the world s largest petroleum product producer. In 2012, Asia s total refinery production reached 1,266 million tonnes per year, accounting for 32% of global total refinery production (Table 9). Asia s marine heavy fuel oil and 13

14 APPENDIX B: Regional Refinery Capacity Data CE p45 Table 30 Regional Refinery Capacity 30 June 2019 (change since 2012) - million tonnes per year Crude Distillation EN p125 Africa Asia Europe North 197 (+11%) Secondary Processing Units Region 1,630 (+9%) 723 (-9%) America 1,047 (+2%) Latin America 484 (+33%) Middle East 502 (+26%) Russia & CIS 437 (+23%) Refining Capacity - Capability to Contribute to Marine Fuels Production - Distillation Crude & Condensate Distillation Capacity - b/cd On Water Inland Not Inland Isolated Isolated Exhibit 5-19 Isolated Refining Capacity - Distillation Inland Isolated Captured in WORLD Inland Isolated Not Captured in WORLD Distillation Capacity On Water Inland Not Isolate d Global 5,020 (+8%) Capacity % Inland Isolated Inland Isolated not Captured in WORLD United States 10,501,971 5,043,340 2,654,151 1,914, ,391 18,199,462 58% 28% 15% 4% Canada 543, , , ,450 10,000 1,940,250 28% 40% 32% 1% South America 5,774,692 1,804, , ,700 7,967,326 72% 23% 5% 5% Europe 10,715,812 2,880,481 1,853,300-1,853,300 15,449,593 69% 19% 12% 12% FSU 1,317,113 4,607,533 2,100,941-2,100,941 8,025,587 16% 57% 26% 26% Middle East 7,007,933 2,019, , ,850 9,486,553 74% 21% 5% 5% Africa 3,530, , , ,600 4,101,186 86% 4% 10% 10% China 5,488,926 5,605,029 2,006,845-2,006,845 13,100,800 42% 43% 15% 15% Other Asia-Pacific 15,791,269 2,084, , ,853 18,848,762 84% 11% 5% 5% WORLD 60,671,822 24,976,007 11,471,690 2,524,210 8,947,480 97,119, % 25.7% 11.8% 9.2% Grand total global capacity differs slightly from base data used in WORLD as this analysis does not include a small number of corrections EnSys applied within the Model 14

15 APPENDIX C: Supply Data EN Data The supply of LSF and other marine fuels was projected by EN with their proprietary model (WORLD). The data presented in the EN report is found in section starting on p177. In the demand analysis performed by EN, the High and Low scenarios were averaged to calculate the Main projection. As both scenario supply projections are provided, this process was repeated for supply. This data was first divided into categories of %S (<0.1, <0.5, >0.5). High and Low scenarios were averaged and then converted from million barrels per day to million tons per year to properly compare to CE s projections. EN p178 million bpd Marine Fuel Pool Blends 2020 Mid Switch Volume Low Case HS IFO 0.5% IFO / Hybrid ECA Original Global 0.5% Marine Distillate Marine Fuel Change vs. Base Case (DMA) (DMA) (DMB) kerosenes (0.12) middle distillates cracked stocks VGO (non HDS) VGO HDS resid LS / HDS < 1% resid MS 1-2% resid HS > 2% (2.54) resid visbroken (0.10) distillates (incl cracked stocks) VGO resid (1.09) distillates (incl cracked stocks) 31% 3% 100% 60% 54% 70% 46% VGO 11% 5% 0% 40% 45% 30% 20% resid 59% 91% 0% 0% 0% 0% 34% 100% 100% 100% 100% 100% 100% 100% of which atmos resid HS > 3% (1.97) vacuum resid HS > 3% (0.57) visbroken resid HS > 3% (0.09) resid HS > 3% 0.49 (2.63) HS resid as % of total resid 97% 0% 0% 0% 0% 0% 23% 15

16 C. EN Supply Data Continued Note: This table is titled Mid Switch Low. It was assumed this is a typo, and is actually Mid Switch High. The last column on the right compares to Mid Switch Low, implying the table is not actually Mid Switch Low. EN p179 million bpd Marine Fuel Pool Blends 2020 Mid Switch Volume Low Case HS 0.5% IFO IFO / Hybrid ECA Original Global 0.5% Marine Distillate Marine Fuel Change vs. Base Case Change vs. Low Case (DMA) (DMA) (DMB) kerosenes middle distillates cracked stocks VGO (non HDS) VGO HDS resid LS / HDS < 1% (1.19) resid MS 1-2% (0.02) (0.13) resid HS > 2% (2.51) 0.02 resid visbroken (0.11) (0.00) distillates (incl cracked stocks) VGO resid (2.38) (1.30) distillates (incl cracked stocks) 26% 5% 100% 59% 53% 65% 56% VGO 12% 3% 0% 41% 47% 35% 31% resid 61% 92% 0% 0% 0% 0% 13% 100% 100% 100% 100% 100% 100% 100% of which atmos resid HS > 3% (1.91) 0.06 vacuum resid HS > 3% (0.61) (0.04) visbroken resid HS > 3% (0.10) (0.01) resid HS > 3% 0.50 (2.62) 0.01 HS resid as % of total resid 95% 0% 0% 0% 0% 0% 58%

17 C. EN Supply Data Continued Calculations to determine EN projected LSF supply: mb/d HS HFO 0.5% Blend Original ECA Global 0.5% (Conversion info provided on next page) Marine Distillate Fuel %S (>0.5) (<0.5) (>0.5) <0.1 < Mid Low Mid High Average Convert to MTPA Global Marine Fuel Production (MTPA) Mid High Mid Low Average LSF (<0.1) LSF (<0.5) HFO (>0.5) LS Fuel Marine Fuel Note: These supply calculations initially did not match up with the supply claims EN make. This was when Original was considered a LSF, as was assumed to be a low sulfur distillate product. When Original is considered a non-lsf (>0.5), the calculations match the supply claims of EN. This makes sense, as is a distillate fuel with traces of residual fuel, typically high in sulfur. The term Original is also considered to imply prior to sulfur cap, along with the fact that the quantity doesn t change from the base case (EN p177). 17

18 C. EN Supply Data Continued EN Conversion units for Supply Calculations (EN p180) WORLD Results - Global Weight Average Marine Fuel Densities & Conversion Factors Densities bbl / tonne s.g. API Gravity mmbpd mmtpa mmtpa mmbpd 2020 Base Case 3.5% IFO % IFO % ECA DMA %/0.5% DMA Mid Switch High Case mmbpd to mmtpa mmtpa to mmbpd 3.5% IFO % IFO % Global IFO % Global IFO/VGO % ECA DMA %/0.5% DMA % Global DMB

19 C Continued: CE Supply Data CE p47 Table 33 Global Refinery Production (2020 (2012)) - million tonnes per year Refinery Production (Base case (2012)) Production in 2020 (2012) (1, 2, 3) Demand in 2020 (2012) Gasoline 1,086 (963) 1,086 (963) Naphtha 305 (256) 305 (3) (256) Jet/Kero Fuel 331 (324) 331 (324) Middle Distillate 1,521 (1,316) 1,521 (1,316) of which MGO (S 0.10% m/m) (4) 39 (64) 39 (64) Marine Heavy Fuel Oil (HFO) 269 (228) 269 (228) Marine HFO (S 0.50% m/m) (5) 233 (0) 233 (0) Marine HFO (S > 0.50% m/m) 36 (228) 36 (228) Non-marine Heavy Fuel Oil (6) 194 (272) 194 (272) LPG 110 (113) 110 (3) (113) Other (7) 537 (784) 537 (784) (marine + non-marine, refinery only) 4,159 (3,984) 4,159 (3,984) (non-marine only from refinery) 3,852 (3,692) 3,852 (3,692) Source: Stratas Advisors; CE Delft. (1) Production numbers in brackets () are 2012 numbers from Table 4 and Table 5. 19

20 APPENDIX D: Regional Trade EN Projected Trade Flow of LSF Refined Products Movements MMBPD Distillate Bunkers All (MGO, ECA MGO, Gl.obal ) Exports Local + Exports Consuming Regions United Latin Middle Other Canada Africa Europe FSU PacInd China Producing Regions 1.19 States America East Asia/Pac United States Canada Latin America Africa Europe FSU Middle East PacInd China Other Asia/Pac Imports CE p51 Table 38 Trade flows of HFO <0.50 m/m S % for (2020), million tonnes per year From/to l (S<0.50%) Africa Asia Europe North America Latin America Middle East Russia & CIS Middle East Europe Latin America Source: Stratas Advisors Projection results: sensitivity analysis The supply model runs were organized around a base case scenario with sensitivities as shown in Table 39. The cases include the high and low case, as well tests of the maximum amount of compliant fuel (petroleum fuels with a sulphur content of 0.50% m/m or less) that can be produced and sensitivities with regards to the sulphur content of the crude oil slate. A further explanation of each model run is provided below the table. 20

21 APPENDIX E: Price Data CE p46 Table 32 Refinery Products and Crude Oil prices (USD/tonnes except for Brent) Product MGO 0.10% m/m SUL Fuel oil 0.50% m/m SUL Fuel oil 1% m/m SUL Fuel oil 3% m/m SUL Brent crude (USD/bbl) Source: Stratas Advisors; CE Delft, 21

22 D. EN Price Data and Calculations The EN LSF price projections needed to be calculated from data tables. On the following page is the data table provided by EN titled WORLD Global Premises & Results from page 118 (WORLD is their market model). Selected data were from the average of Mid Switch High and Mid Switch Low scenarios (like demand and supply). There were three regions addressed (US Gulf Coast, Northwest Europe, and Singapore). Each region s LSF prices were determined and averaged for a global representation. To determine the projected price: 1. Collected base scenario (2020: Base No 0.5% Fuel) cost for each fuel in $/ton. - Conversion factors are from table used in supply calculations (bbl/tonne*s.g.) - EN calls LSF <0.1 Diesel ULS. 2. The Price Change percentages (from base) were applied from the Mid High and Low scenarios. 3. Confirmed prices by comparing to info from $/tonne (using standard gravities) section. ULS Diesel (LSF <0.1) was not provided, which was why steps 1 & 2 were done to determine it. There are slight differences but they are reasonably close to have confidence these are the accurate EN projected prices. 1. BASE (2020 no cap) $/barrel ULS Diesel LSF (0.5) HFO US Gulf Coast Europe Singapore Average Convert to $/tons % increase of base (with cap) ULS Diesel LSF (0.5) HFO US Gulf Coast Europe Singapore Average 22% 23% -14% Projected Convert to $/ton MGO (1/0.5) HFO US Gulf Coast Europe Singapore Average

23 D. EN Price Data and Calculations Continued EN p118 Actual Prices, Projected Marginal Prices / Supply Costs & Differentials 2015: Base Case Calibration WORLD Global Premises & Results 2015: Base Case Adjusted 2020: Base No 0.5% Fuel 2020: Low Switch High 2020: Mid Switch High 2020: High Switch High 2020: Low Switch Low 2020: Mid Switch Low 2020: High Switch Low SAUDI LIGHT (input marker crude price) $49.50 $49.50 $76.03 $76.03 $76.03 $76.03 $76.03 $76.03 $76.03 WTI - Brent ($3.32) ($2.63) ($2.15) ($1.30) ($1.31) ($1.60) ($2.04) ($2.13) ($2.18) Brent - Dubai $3.44 $2.97 $3.16 $5.96 $6.15 $6.39 $5.32 $5.50 $5.70 Brent - Mayan $8.56 $7.04 $10.04 $20.66 $21.70 $22.58 $15.88 $16.27 $16.74 US Gulf Coast $/barrel Gasoline - CG Regular $67.28 $64.32 $ $ $ $ $ $ $ Diesel ULS $67.96 $65.67 $ $ $ $ $ $ $ MGO 1% / 0.5% $57.85 $56.53 $86.36 $95.25 $96.80 $99.80 $92.01 $93.15 $95.80 IFO380 HS $44.84 $45.76 $71.55 $57.05 $57.32 $58.47 $63.17 $63.94 $65.13 Gasoline - IFO380 HS $22.44 $18.56 $28.88 $58.32 $60.80 $62.78 $45.67 $46.56 $48.41 Diesel ULS - IFO380 HS $23.12 $19.91 $38.37 $75.61 $79.73 $83.66 $65.36 $68.51 $72.26 Marine Diesel - IFO380 HS $13.01 $10.78 $14.82 $38.20 $39.48 $41.33 $28.83 $29.22 $30.67 $/tonne (using standard gravities) MGO 1% / 0.5% $413 $404 $617 $681 $692 $713 $658 $666 $685 IFO380 HS $287 $292 $457 $365 $366 $374 $404 $409 $416 Marine Diesel - IFO380 HS $127 $112 $160 $316 $325 $340 $254 $257 $268 Price Changes ($/barrel basis) Gasoline vs 2020 Base Case 15% 18% 21% 8% 10% 13% ULS Diesel vs 2020 Base Case 21% 25% 29% 17% 20% 25% Marine Diesel vs 2020 Base Case 10% 12% 16% 7% 8% 11% IFO380 HS % vs 2020 Base Case -20% -20% -18% -12% -11% -9% Northwest Europe $/barrel Gasoline - EURO V 95 RON $64.54 $61.24 $95.70 $ $ $ $ $ $ Diesel ULSD $67.22 $64.95 $ $ $ $ $ $ $ MGO 1% / 0.5% $62.83 $61.31 $96.71 $ $ $ $ $ $ IFO380 HS $46.78 $47.26 $73.71 $62.07 $62.12 $62.97 $65.83 $66.70 $68.31 Gasoline - IFO380 HS $17.76 $13.98 $21.98 $47.79 $50.26 $52.60 $37.93 $38.59 $39.84 Diesel ULS - IFO380 HS $20.44 $17.69 $35.29 $68.77 $73.13 $77.36 $60.92 $63.89 $67.46 Marine Diesel - IFO380 HS $16.04 $14.05 $23.00 $46.56 $49.14 $51.24 $38.14 $39.11 $40.32 $/tonne (using standard gravities) MGO 1% / 0.5% $449 $438 $691 $776 $795 $816 $743 $756 $776 IFO380 HS $299 $302 $471 $397 $397 $402 $421 $426 $437 Marine Diesel - IFO380 HS $150 $136 $220 $380 $398 $414 $322 $330 $340 Price Changes ($/barrel basis) Gasoline vs 2020 Base Case 15% 17% 21% 8% 10% 13% ULS Diesel vs 2020 Base Case 20% 24% 29% 16% 20% 25% Marine Diesel vs 2020 Base Case 12% 15% 18% 7% 9% 12% IFO380 HS % vs 2020 Base Case -16% -16% -15% -11% -10% -7% Singapore $/barrel Gasoline ULS Regular $66.10 $63.34 $ $ $ $ $ $ $ Diesel LSD $68.04 $65.86 $ $ $ $ $ $ $ MGO 1% / 0.5% $59.22 $58.37 $91.66 $ $ $ $97.51 $99.38 $ IFO380 HS $45.30 $46.59 $73.25 $60.20 $59.86 $61.04 $64.86 $65.71 $68.23 Gasoline - IFO380 HS $20.80 $16.76 $27.96 $56.29 $59.46 $61.45 $45.08 $45.89 $46.42 Diesel - IFO380 HS $22.75 $19.27 $35.72 $71.39 $76.42 $80.28 $62.27 $65.08 $67.84 Marine Diesel - IFO380 HS $13.92 $11.79 $18.41 $41.62 $44.59 $47.02 $32.65 $33.66 $34.60 $/tonne (using standard gravities) MGO 1% / 0.5% $423 $417 $655 $728 $746 $772 $697 $710 $735 IFO380 HS $289 $298 $468 $385 $383 $390 $415 $420 $436 Marine Diesel - IFO380 HS $134 $119 $187 $343 $364 $382 $282 $290 $299 Price Changes ($/barrel basis) Gasoline vs 2020 Base Case 15% 18% 21% 9% 10% 13% ULS Diesel vs 2020 Base Case 21% 25% 30% 17% 20% 25% Marine Diesel vs 2020 Base Case 11% 14% 18% 6% 8% 12% IFO380 HS % vs 2020 Base Case -18% -18% -17% -11% -10% -7% 2015 Actual Prices from Bloomberg other than MGO $/tonne prices which are from Clarkson Research Services Shipping Intelligence Network (SIN) Exhibit 5-16 WORLD Premises & Results Crude & Product Prices 23