Bunker Fuel Market to Garner $142,489 Million - Comprehensive and Competitive Analysis of Leading Market Players - Aegean Marine Petroleum Network Inc., Bomin Bunker Oil Corp., BP PLC, Bunker Holding A/S, Chemoil Energy Ltd., Exxon Mobil, Gazprom Neft PJS

Global Bunker Fuel Market was valued at $97,203 million in 2016, and is expected to reach $142,489 million by 2023, registering a CAGR of 9.6% from 2017 to 2023. Bunker fuel is the fuel oil/gas delivered to ships of all states that are engaged in international navigation. The international navigation may take place via sea, on inland lakes & waterways, and in coastal waters. The two major bunker fuel classifications in the marine industry are distillates and residual fuel oils. Marine distillates are divided into marine gas oil (MGO) and marine diesel oil (MDO). Marine gas oils are used in small, highly rated diesel engines, which are found in many types of ships. Residual fuel oil, also known as heavy fuel oil (HFO), is the highest viscosity oil fuel. The most commonly used heavy fuel oil at sea are the Intermediate Fuel Oils, IFO180, and IFO380.

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The International Maritime Organizations regulations of sulfur cap of 0.50% m/m (mass/mass) in 2020 for marine fuels, and increase in ocean-borne trade, especially in ton-km travelled, are the factors that drive the growth of the global bunker fuel market. However, obsolete vessels has been replaced by more competent boats, which in turn is expected to drive the market. These effective improvements are probably going to balance to some degree the increments in trade. Key market players have adopted merger as their key strategy to widen their brand portfolios and expand their market reach.

The global bunker fuel market is segmented based on type, commercial distributor, end user, and geography. The type segment is classified into residual fuel oil, MDO, and MGO. On the basis of commercial distributors, the market is divided into oil majors, large independent, and small independent. By end user, it is categorized into container, bulk carrier, oil tanker, general cargo, chemical tanker, fishing vessel, gas tanker, and others. Geographically, it is analyzed across North America, Europe, Asia-Pacific, and LAMEA.

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In 2016, the MGO segment, in revenue terms, accounted for around one-fourth of the global bunker fuel market share. In terms of volume, MGO held approximately 17% share in the overall market. MGO is the most lucrative segment for investment in the global bunker fuel industry, owing to IMOs decision of implementing a sulfur cap of 0.50% on international shipping, as MGO contains 0.1% sulfur. Thus, this segment is anticipated to show high growth rate along with significant return on investment for the stakeholders, owing to its notable revenue contribution.

Analyst Review:

The proposed amendments of achieving reduction in sulfur specification of 0.5% m/m (mass/mass) are achievable by 2020. However, refiners would incur additional investments to achieve the target specifications investing in desulfurization technologies. In addition, these can blend significant levels of distillate into the fuel oil pool to achieve similar results, but at a higher cost.

Vessel owners can decide between different strategies to meet the requirements, all have advantages and disadvantages.

• They can install scrubber systems
• They can buy more expensive low sulfur fuel oils such as MGO/MDO or new ECA fuels; for example, Exxon’s HDM50.
• They can refit the vessel to LNG

When the specification changes take place, they will have a number of impacts on refineries and on the fuel oil markets. One result of the changes in specification could be to see a move away from fuel oil to distillates, especially where ECA regulations are in force. The changes to the fuel oil pool would require significant investment by refiners to compete in the bunkers market. The price of bunkers is expected to be high, as the processes used are capital intensive and to achieve decent return on investment.

Switching from HFO to distillates comes with other disadvantages than just high pricing such as

• Lower acidity: Part of the sulfur is converted into sulfuric acid (H2SO4) during the combustion process. Using common cylinder oil with a high alkali base number will lead to wear, as the amount of sulfuric acid is now lower.
• The use of ultra-low sulfur fuels requires special consideration. Their properties vary depending on the supplier and there may be incompatibilities when mixed with HFO, MDO, or other ULSFs
• The much lower viscosity and reduced lubrication can cause abnormal wear.

North America is expected to have a significant market share in the global market by 2020, owing to the abundance of ultralow sulfur fuel oil (ULSFO) and gas oil. Increase in inclination towards distillates (MDO/MGO) could expand North America's market share, as such fuel are available at the least cost in the region.

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