A Platts report by Su Ling Teo says that the Chinese oil giant Sinopec is currently in talks with end-users to supply low sulfur bunker fuel compliant with IMO 2020 standards at domestic ports.
How will it be done?
The first commercial supply is expected to start from its coastal refineries from August 2019, a source familiar with the matter said on Monday.
Pricing details are expected to be finalized in August next year, the source said, adding that specifications of the low sulfur fuel oil have not been finalized as well.
Trials & Feedbacks lined Up
Currently, residue desulfurization units are in place at some of Sinopec’s coastal refineries, and the LSFO produced is sent to laboratories for testing, with the tests expected to run till February next year, the source said.
This will be followed by trials on different engine-manufactured vessels to ensure fuel compatibility. The trials are expected to take another two to three months.
And after gathering feedback from the various vessels, a internal report is estimated to be ready before June 2019 and commencement of LSFO supply should begin in August 2019, the source said.
Role of Sinopec
This will be Sinopec’s first foray into the supply of LSFO for the bunker fuel sector. Sinopec aims to start supply to all ports along China’s coastal region from late 2019, gradually expanding supply of the marine fuel to global markets, Sinopec’s general manager Liu Zurong had said earlier this month at an oil conference in eastern China’s Zhoushan.
How will it help China’s fuel demand?
The low sulfur marine fuel will also meet China’s gradual tightening of the sulfur limit in marine fuels to 0.5% in its domestic Emission Control Areas.
China has already implemented the sulfur limit in its Yangtze Delta ECA since October 1, and will extended the limit to the Pearl River Delta and Bohai Rim waters ECAs from January 1, 2019.
In compliance with the ECA regulation, ships running domestic routes mainly use low sulfur marine gasoil that is produced domestically through blending. Ships running international routes normally use LSMGO when they enter the ECAs, sources with shipping company Cosco said.
The Economic Prospect
Refinery sources said it is not realistic to produce low sulfur bunker fuel on a commercial basis now because the process will significantly reduce production of higher value lighter oil products.
The International Maritime Organization’s global sulfur cap of 0.5% in bunker fuels, down from the current limit of 3.5%, will come into effect on January 1, 2020.
Did you subscribe for our daily newsletter?
It’s Free! Click here to Subscribe!