Its aim is to curb emissions from large vessels using some current distillate and residual diesel fuels, which essentially use the same crude cuts as distillate and residual base oils. However, they should not be confused with middle distillates like automotive diesels.

The new regulation will allow vessels to continue using fuel with up to 3.5 percent sulfur if they are equipped with a scrubber that removes sulfur from the exhaust. The uptake for scrubbers has been low due to high retro-fit costs, especially in light of pressure on freight rates in recent years. Use of liquefied natural gas and methanol – which are other alternatives – has also been mooted. Both require specific new types of diesel engine or significant modifications to existing ones. Methanol is also quite toxic to handle.

Crude-derived distillate and residual fuels, even in a low-sulfur form, have lower auto-ignition temperatures than even regular diesel fuel and so can be substituted directly for their high-sulfur analogues. For the current fuel oils used in the biggest ships with slow-speed, two-stroke diesel engines, the options are number 3 and 4 distillates or number 5 and 6 residual fuels, all of which contain increasing amounts of carbon numbers in the base oil range.

Hydro-desulfurization of most cuts is a relatively routine, though costly, refinery procedure. This is already used in preparing middle distillates such as kerosene and automotive diesel and for naphthas used in gasoline production. But the technology is also available for the much heavier fractions. Hydro-desulfurization needs to be distinguished from hydrocracking, which also tends to remove sulfur but is not necessarily required to upgrade marine bunker fuels. Such low-sulfur bunker fuels will have added value as marine fuel blend components to upgrade noncompliant high-sulfur marine fuels.

So, what has IMO 2020 got to do with base oils? In producing such heavy hydro-desulfurized streams, a lot of the heavy lifting for the initial desulfurization to base oil feedstocks will have been done. This is an additional potentially high-value outlet when using high viscosity index crudes, like many Middle East and some North Sea crudes.

Depending on what is intended for such low-sulfur base oil feedstocks, there is potential to use them, for example, as API Group I feeds. This is not as crazy as it might seem. Low-sulfur Group I oils have been made by hydrocracking in the past using sulfur-tolerant catalysts and can be made efficiently with an all-catalytic line up. Such hydrocracking has even been used for low-sulfur Group I bright stocks, which can have sulfur levels well below 300 parts per million, hence being Group I on aromatics alone.

If low-sulfur Group I was made with such desulfurized feeds, there is potential to provide base oils that are better suited to marine cylinder lubricants at the same time. For example, Group II is known to have issues with asphaltenes handling from current residual marine fuels, due mainly to the lack of aromatics in Group II, whereas current Group I base stocks handle them well. The solvency of Group I oils, which owes to the presence of aromatic molecules, is key here, and the aromatics would still be there in low-sulfur Group I by definition. Low-sulfur marine fuels will still have asphaltenes, although possibly at slightly lower levels.

While low-sulfur Group I oils are not ideal for some lubricants, they would be fine for such single-pass, slow-speed two-stroke marine cylinder oils, where they are burnt as soon as they have done their job.

Furthermore, these low-sulfur heavy cuts can provide good feedstock for Group II and maybe Group III production, either as distillates or residuals after de-asphalting. This current market is largely the preserve of hydrocracker bottoms from automotive diesel production.

SAE 50 cylinder oils, still preferred for slow-speed marine diesel engines, have a base oil viscosity of up to 18 centistokes, the additive package making up the viscosity balance. That means the base oil component of the lubricant currently requires something heavier than a distillate base oil (normally about 12 cSt maximum), which is usually Group I bright stock.

If additive packages become thinner with less over-based detergent post-2020, which is entirely possible as the fuel sulfur combustion products will require less neutralization, then the base oil’s viscosity could need to increase. This could require even more Group I bright stock unless there is a simultaneous reduction in preferred viscosity grades to, say, SAE 40.

Some commentators suggest large two-stroke diesel ships might even vie for global supplies of low-sulfur automotive diesel. But this is unlikely, since such engines perform currently on uncracked bunker fuels and can do so in future in a low-sulfur format.

It will require additional refinery investment to convert existing high-sulfur distillates and residues into the required low-sulfur marine fuel oils and low-sulfur base oil feedstock form, but so too did the mandated automotive and transport fuels in the recent past.

It is decision time for refiners. If they want to be in the marine fuels business after 2020, they have to at least run the business case for upgrades to produce the required low-sulfur distillate and residual fuels, as well as look to whether they can create added value and mitigate capital costs.

Pretty much all the alternatives – LNG, methanol, retro-fit scrubbers – will be down the list as solutions, based on the size of todays global fleet, which needs low-sulfur fuel for slow-speed two-stroke engines.

Whatever the eventual outcomes, it is an interesting time for suppliers of marine fuels and lubricants, again showing legislation can be a driver for innovation. In fact, at the time of writing, there is news that a moth-balled refinery in Germany may produce low-sulfur heavy fuel oils again.