Currently, the higher sulfur levels found in heavy fuel oils help lubricate marine engines, so the prospect of lower sulfur content could positively impact lubricant consumption, according to Jack Jordan of S&P Global Platts Bunker News. If you are going to work with lower sulfur fuel, you will either need more of the same lube or a higher-quality product, Jordan said.

Jordan also said there will be a knock-on effect for base oils that will speed the adoption of higher grade base stocks. For base oil producers, it is going to increase total base oil demand and, in particular, accelerate the shift toward Group III+ base oils.

The transition to the 0.5 percent IMO cap, which it announced in October 2016, represents around 75 percent of global marine fuel demand, according to Shell. The impact on base oil and lubricants is noteworthy when global demand is static or by some measures declining.

Still, it is not all going to be smooth sailing. During the S&P Global Platts Dubai Oil Forum in September, an analysis of crude oil benchmarks indicated Middle East grades are often more sour and possess higher amounts of hydrogen sulfide, which must be removed before transportation and so increases refining costs. Sweeter crudes are likely to be favored when it comes to complying with the IMO directive. That could tilt the supply axis at a time when the Middle East has gained a reputation as a prominent base oil supply hub. Asian producers will see the most benefit from that shift toward Group III+, Jordan said.

With questions over compliance and the shipping industrys readiness to meet the 2020 ruling, it is crucial that lubricant blenders offer a solution for fleet owners. The result is that end-users will probably require a wider range of marine products. Some ships use several marine fuels in the course of a journey, and each fuel could potentially have a different lube requirement. Nevertheless, how ship owners will respond to the new regulation is adding to uncertainty.

Shell said that to minimize cost, some ship owners may fully embrace the 0.5 percent requirement and switch to compliant fuel oils while others may use marine gas oil. However, that is more expensive and presents its own lubricity issues. The industry is also debating whether fleet owners will build new ships or retrofit scrubbers to comply with the IMO regulation – a workaround that is cheaper and offers a quicker payback. Even so, the scale of the challenge and questions over how the new limit will be enforced continues to preoccupy stakeholders.

Indeed, a new report by IHS Markit says that shippers and refiners are vastly unprepared and that both sectors will experience significant disruption ahead of the deadline. The report also warns Middle Eastern refiners. Refiners of sour crude will be negatively impacted by the nearly valueless sour crude residue, while refiners of sweet crude conversion will experience moderately higher margins. But sweet crude prices will reflect the low-sulfur residue value, Kurt Barrow, vice president of downstream research at IHS Markit, said.