January 2022

Special Focus: Sustainability

IMO 2020 impact assessment study on KIPIC Al Zour Refinery future operations

What is IMO 2020?

Bin Naser, A., Shameeha, F., Kuwait Integrated Petroleum Industries Co. (KIPIC)

What is IMO 2020?

As of January 2020, the International Maritime Organization (IMO) has mandated that sulfur shipping emissions must be reduced: the regulation states that sulfur specifications for fuel oil (bunker) have been reduced from 3.5% (35,000 ppm) to 0.5% (5,000 ppm). The main purpose of the regulation is to prevent acid rain and lower the environmental effects.f

Shipowners must switch fuel from high-sulfur fuel oil (HSFO), which has a sulfur content of 3.5%, to very low-sulfur fuel oil (VLSFO), which has a sulfur content of 0.5%, marine gasoil (MGO), install scrubbers, or convert to liquefied natural gas (LNG)-powered systems (FIG. 1).1 While scrubbers can burn HSFO and extract the sulfur from it, ordering and installing scrubbers in ships can take as long as 8 mos–13 mos. The last option for ships is to convert to LNG, which is costly and presents uncertainties in future supply and demand.2 One thing is certain: the increased demand for fuels with lower sulfur content is affecting and changing the global market.

FIG. 1. Types of fuel that can be used as bunker.

IMO 2020 impact on refineries

The IMO 2020 will have a major effect on refineries of all configurations. Topping refineries, which use fuel as their main product, are considered the least complex configuration for refineries. Producing high quantities of HSFO when processing high-sulfur crudes means that they must switch to lower sulfur crudes (e.g., light sweet crudes) to meet specifications and produce VLSFO. If the refinery is unable to meet these specifications, it will have to sell the HSFO and accept the lower product demand and prices.3

Cracking refineries are medium-complex refineries that contain such units as catalytic crackers and hydrocrackers. They also produce fuel oil but have more options to produce lighter products to be utilized in other processes. Full-conversion refineries are considered the most complex and have more options than topping and cracking refineries. They produce a small quantity of fuel oil, and can switch between crudes and produce higher quantities of lighter products based on demand.4

For these refineries, options exist to meet IMO 2020 regulations, including:

  • Changing the crude slate to sweet crudes
  • Adding secondary processing units, which can take years to build
  • Revamping units to produce lighter products with low-sulfur content
  • Producing MGO as the main supplier for fuel for ships
  • Blending lighter products with fuel oil to meet the fuel specifications.

Predicted prices before 2020

Many refiners began switching to produce VLSFO and MGO prior to the implementation of IMO 2020. Prices for sweet crudes with low-sulfur content were predicted to rise due to anticipated high demand to meet the specification, while prices for sour crudes with high-sulfur content were predicted to fall.4 Prices for VLSFO and MGO were also forecast to rise, with MGO prices increasing more than VLSFO in conjunction with higher diesel demand.

VLSFO pricing was anticipated to increase by 11%–23%, while one report predicted that the price increase could be as high as 50%.1 HSFO, which comprises 70%–80% of the price of crude oil, was predicted to decline at the beginning of 2020.5 It was predicted that refineries that produce high quantities of diesel and low-sulfur fuel oil would gain significant margin growth for those products, as they were producing a blend of gasoil and fuel oil to meet the 0.5% sulfur requirement.

Actual prices in 2020

The year 2020 began strong, as researchers predicted, with VLSFO and MGO reaching their peak prices. By January 8, VLSFO had reached $686.50/metric t (tonnes), MGO reached $732/metric t, and HSFO prices remained stable at $407.50/metric t, based on the global average bunker pricing.6

However, by February 2020, the prices for these products fell—MGO prices fell almost 9% and VLSFO prices fell approximately 12%. This is attributed to the significant quantities of LSFO (i.e., VLSFO or a mixture of diesel and fuel oil) in the market at that time.7 Of course, it is impossible to deny the effects on global markets caused by the COVID-19 pandemic and the World Health Organization (WHO) declaration of a global health emergency. The havoc and tragedy caused by COVID-19 spread rapidly throughout the world—travel was limited globally and many consumers were required to stay home, so prices and demand for crude oil and other products began to sharply decline.8

To exacerbate the problem, a crude oil price war began between the Organization of the Petroleum Exporting Countries (OPEC) and Russia over oil production cuts, leading to breaks within the OPEC+ alliance.8 These factors led to a sharp decline in the prices of crude oil, VLSFO, MGO and HSFO (shown in FIGS. 2 and 3). On April 20, the WTI crude price dropped below $0/bbl due to limited storage capacities and low liquidity;9 by the end of the month, the crude prices of Brent, Kuwait Export Crude (KEC) and WTI fell to an average of $18/bbl,10 the lowest in years (FIG. 2).

FIG. 2. Crude oil prices.10
FIG. 3. MGO and VLSFO prices.

VLSFO and MGO pricing fell to $272/metric t and $400/metric t, respectively, (FIG. 3) which is a loss of approximately 60% for VLSFO and 53% for MGO from the first week of 2020.6 By May 1, the crude oil price war ended and prices began showing an upward curve, reaching $72.99/bbl for Brent, $72.61/bbl for KEC and $68.50/bbl for WTI by the end of August, an increase of approximately 300% for Brent and KEC and 280% for WTI since their April 2020 prices. VLSFO and MGO prices reached $567.5/metric t and $663/metric t, respectively—still a drop from the beginning of 2020, but a gain of 108% and 66%, respectively, from their low numbers in April 2020. FIGS. 2 and 3 highlight the fluctuating trends of crude oil, VLSFO and MGO prices since the beginning of 2020.11,12

Note: The OPEC+ countries have agreed to increase their production by 400,000 bpd beginning in May 2022, which will create a huge effect on the oil and gas markets, from crude oil to its petroleum products.


Kuwait Integrated Petroleum Industries Co. (KIPIC) is a subsidiary of Kuwait Petroleum Corp. (KPC) set up by the State of Kuwait to manage refining, petrochemicals, integrated refining and petrochemicals operations, and LNG supply that maximizes shareholder value and achieves LNG import operations in the Al-Zour complex.

Al Zour Refinery

Al Zour Refinery is designed to process 615,000 bpd of crude oil. The facility comprises three topping refineries of equal capacities and three atmospheric desulfurization units (ARDSs) for processing atmospheric residue.

The key objectives of the refinery are to satisfy future Kuwait Ministry of Electricity and Water (MEW) LSFO demand, with the remaining quantity to be used for export and internal consumption; satisfy the fuel oil requirements for use within the new refinery; and produce light products meeting long-term specifications. The combined total fuel oil production, including an estimated internal fuel oil consumption of 9,300 bpd, is 234,000 bpd.

Al Zour Refinery is designed to produce 1 wt%-sulfur LSFO for the MEW while producing 0.5 wt%-sulfur VLSFO for internal fuel and export.

Fuel oil production and facilities

Al Zour Refinery is a topping refinery with fuel oil production coming from the ARDS, crude distillation column bottom and property corrections using distillate yields, as required. The fuel oil production is illustrated in FIG. 4.

FIG. 4. VLSFO production at Al Zour Refinery.

The refinery has three 205,000-bpd crude distillation units (CDUs) and three identical 110,000-bpd ARDSs. Each ARDS train has two identical 55,000-bpd reaction trains. The refinery is designed to process 100% of the atmospheric residue. TABLE 1 shows the properties of fuel oil produced from the ARDSs, confirming that Al Zour Refinery can produce the VLSFO from each ARDS.


Various factors affecting refinery operations, profitability and optimization upon implementation of IMO 2020 have been studied. The different scenarios for each factor are detailed here.

Types of crude

Al Zour Refinery is designed to process four distinct types of crudes: KEC, Kuwait Heavy Crude (KHC), Lower Fars and Eocene. Scenarios with different crude mixes, as well and their impact on refinery throughput and fuel oil production, were studied. The ARDS is designed to process two types of feed: light crude and mixed crude.

  • Light crude refers to the residue coming from the CDU operating with 100% KEC.
  • Mixed crude refers to the residue coming from the CDU, resulting in a mixture of 25.5 wt% Eocene, 38.2 wt% KHC and 36.3 wt% KEC (TABLE 2).

Therefore, TABLE 3 shows that Al Zour Refinery is equipped to manage both crude mixes and does not need a crude reduction due to the new VLSFO specification.

Economically, it should be noted that mixed crude processing will be a superior feed for the ARDSs.

Refinery units shutdown scenarios

The following scenarios are considered:

  1. Normal operation of the CDU and ARDS (no shutdown). A CDU turnaround is considered only once every 6 yr, as per design. An ARDS shutdown is considered every year for catalyst changeover. After the first year, one train will be under a service factor for catalyst changeover every 2 mos. Therefore, if no emergency shutdown occurs, there will be no shutdown during the first year of operation. In a mixed crude case, if all ARDS trains are available, the ATB processing capacity (55,000 bpd × 6 = 330,000 bpd) is higher than its production (305,400 bpd) from the crude columns. In this case, the entire ATB will be routed to ARDSs to produce 0.5% sulfur VLSFO without bypassing the ARDSs. The VLSFO production for MEW/export is expected to be 235,240 bpd after an internal consumption of 10,000 bpd.
  2. Normal operation of the CDU and ARDS shutdown for catalyst changeover. A one-train shutdown of an ARDS for a period of 25 d is considered, as per design. The ATB processing capacity at the ARDS (55,000 bpd × 5 = 275,000 bpd) is lower than its production (305,400 bpd) from the crude columns. No ATB bypass is required to meet 0.5% sulfur specifications: around (30,400 bpd × 25 d) 760,250 bpd of ATB will be required to be stored over this shutdown duration, which can be processed later when the unit is back in operation. Total VLSFO production for MEW/export is estimated to be 210,830 bpd during this period.
  3. Normal operation of the CDU and emergency shutdown of ARDS. The ARDS will be required to run continuously at maximum capacity since each ARDS train will be out for catalyst replacement each alternating month. Any unplanned upset affecting ARDS availability will require CDU throughput reduction.

The cases are evaluated considering mixed crude processing.

Upgradation/modifications required in the existing configuration

Considering these cases, it was concluded that no modifications to the existing process units facility are required to meet the new IMO specification. However, the operational flexibility of the refinery is highly compromised and the handling of dual qualities is extremely challenging. Hardware modifications in shipment lines/tankage are required to produce two grades of fuel oil.

It is planned to evaluate alternate catalyst for ARDSs, along with modifications in the refinery line-up for handling two grades of fuel oil specifications.

Additional chemicals required

No additional chemicals or additives are required to meet the new IMO specification. However, the use of a hydrogen sulfide (H2S) scavenger additive can be optimized or stopped in view of non-blending of high-H2S streams—such as CDU residue from high-sulfur crudes like KHC, Eocene or Lower Fars—to the new product.

Blending facilities

With the implementation of the new specification, bunker fuel oil will be become a straight-run product rather than a blended product. Note: the high-sulfur content of CDU residue makes it impossible for blending; so, with the current configuration, no additional blending facilities are required.


The IMO 2020 regulation has affected both shippers and refiners: shippers must upgrade their ships by installing scrubbers to process the HSFO or use VLSFO as their bunker; and refiners must adapt by installing new units, changing the crude slate or blending light products with fuel oil to meet the specification. The regulation is being met with high demands for VLSFO, which made its price rise by the beginning of the year 2020.

The regulation on reduced sulfer will be beneficial for KIPIC refinery margins. From the unit product specification and shutdown scenarios, it can be noted that no additional modifications are required for meeting the new specification. With the increased focus on operational availability and reliability of the ARDS, KIPIC capacity utilization is expected to be more than design and, therefore, reap the benefits of the new regulation.

Further modifications in the future for sulfur content in fuel oil will cause KIPIC to either revamp their ARDS or change the activity of the catalyst to meet the specification. Pricing for crude oil, VLSFO and other products will continue to rebound. Future studies can examine the market after the crises are over and if new IMO regulations are applied. HP


  1. Odey, F. and M. Lacey, “IMO 2020—Short-term implications for the oil market,” Schroders, August 2018.
  2. Billing, E., T. Fitzgibbon and A. Shankar, “IMO 2020 and the outlook for marine fuels,” McKinsey & Company, September 2018.
  3.  Grimmer, R., J. Ahrens and L. Noda, “IMO 2020 rule: Refiner’s perspective,” 2018, online:  www.shipandbunker.com/news/features/industry-insight/547131-imo-2020-rule-refiners-prespective.
  4. Fuels Institute, “Literature review summary: IMO 2020,” April 2019.
  5.  Billing, E. and T. Fitzgibbon, “What shipowners, refiners and traders should know about IMO 2020,” McKinsey & Company, November 2019.
  6. Ship & Bunker, “Global average bunker price,” online: www.shipandbunker.com/prices/av/global/av-glb-global-average-bunker-price.
  7. Saville, K., “Low-sulfur fuel prices plummet as IMO 2020 transition fades,” The Journal of Commerce online, 2020, online:  www.joc.com/maritime-news/low-sulfur-prices-plummet-imo-2020-transition-fades_20200131.html.
  8. Breakthrough, “How COVID-19 eliminated IMO 2020’s impact on over-the-road diesel prices,” 2020, online: www.breakthroughfuel.com/blog/sulfur-2020-diesel-prices/.
  9. U.S Energy Information Administration (EIA), “WTI crude oil futures prices fell below zero because of low liquidity and limited available storage,” 2020, online: https://www.eia.gov/petroleum/weekly/archive/2020/200422/includes/analysis_print.php
  10. OilPrice.com, “Oil price charts,” online: https://oilprice.com/oil-price-charts
  11.  International Maritime Organization (IMO), “Sulfur 2020—Cutting sulfur oxide emissions,” 2020, online: www.imo.org/en/MediaCentre/HotTopics/Pages/Sulfur-2020.aspx.
  12. U.S. Energy Information Administration (EIA), “The effects of changes to marine fuel sulfur limits in 2020 on energy markets,” March 2019.

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