Refiners raise clean shipping fuel as per IMO regulations - GulfToday

Refiners raise clean shipping fuel as per IMO regulations


Vessels pass an oil refinery in the waters off the southern coast of Singapore. Reuters/ File Photo

Global oil refiners have upgraded processing units and adjusted operations to raise output of low-sulphur residual fuels and marine gasoil (MGO) to prepare for stricter shipping fuel standards that kick in on Jan.1.

The new International Maritime Organisation (IMO) rules prohibit ships from using fuels containing more than 0.5% sulphur, compared with 3.5% through the end of December, unless they are equipped with exhaust-cleaning “scrubbers”.

The shipping industry consumes about 4 million barrels per day (bpd) of marine bunker fuels, and the rule changes will impact more than 50,000 merchant ships globally, opening a significant new market for fuel producers.

Below is a summary of how top refiners have prepared.

Chinese marine fuel suppliers have signed up short-term deals to buy very low-sulphur fuel oil (VLSFO) from companies like oil major Shell, Germany’s Uniper and US commodities trader Freepoint.

While China’s state refiners have pledged to produce a combined 14 million tonnes of the fuel for 2020 that complies with the tighter rules set by the International Maritime Organisation (IMO), Beijing has not yet rolled out much-anticipated tax breaks that will encourage refiners such as Sinopec and PetroChina to ramp up domestic output of VLSFO.

SK Chemicals has started tests on blending its biodiesel with petroleum-based fuels to create low-sulphur marine oil.

At SK Energy’s largest refinery in South Korea, engineers are rushing to complete a new processing unit ahead of schedule.

The unit of SK Innovation started supplying MGO from October and is building a vacuum residue desulphurisation (VRDS) unit that can produce 40,000 bpd of LSFO due online in March or April.

Japan’s Idemitsu Kosan Co is increasing production of LSFO and is also blending to produce IMO2020 compliant bunker fuel.

Hyundai Oilbank has said it will sell VLSFO from November.

Sales of low-sulphur marine fuel in the Singapore bunkering hub soared to an all-time high of 2.076 million tonnes in November, more than double the previous record, government data showed. Shell loaded its first LSFO cargo from its Pulau Bukom refinery in September, and Singapore Refining Company (SRC) supplied its first VLSFO cargo in October.

Chevron, which partly owns SRC, said its VLSFO and MGO supply capacity in Asia could double in the next one to two years.

Indonesia’s Pertamina said in December it would soon send its first marine fuel shipment from its Plaju refinery to its Balikpapan supply point.

Vitol is building a 30,000 bpd crude distillation unit (CDU) in Malaysia to supply LSFO starting in May 2020, and IRPC Pcl said it will produce 52,000 tonnes of VLSFO in November.

Indian Oil Corporation Ltd has started supplying IMO-compliant fuel in India.

Uniper Energy DMCC operates two CDUs in Fujairah, the UAE, that annually produce 3.6 million tonnes of VLSFO, including 0.1% sulphur fuel used in regional Emission Control Areas.

Brooge Petroleum and Gas Investment Co said it plans a 250,000-bpd refinery in Fujairah to produce low-sulphur fuel.

Marine fuel supplier Peninsula Petroleum plans to double VLSFO deliveries to 600,000 tonnes by year-end in Europe and the Americas.

Gunvor Group will overhaul its refinery in Rotterdam in March to produce LSFO.

Most US Gulf Coast refiners are able to process heavy crudes used to make IMO-compliant marine fuels, and have spent heavily this year refurbishing distillation units and cokers to process cheaper, heavy grades.

For example, Motiva Enterprises overhauled its Port Arthur, Texas, refinery, the nation’s largest, this year.

*LSFO stands for fuel oil with sulphur content of between 0.5% and 1.0%; VLSFO for fuel oil with a sulphur content of less than or equal to 0.5%; and ultra low-sulphur fuel oil (ULSFO) for fuel oil with sulphur content of less than or equal to 0.1%. Refineries that lack the technology to product VLSFO outright, may produce LSFO and blend it down to IMO-compliant levels. See the table at for more information.

One tonne of fuel oil is about 6.31-6.9 barrels, depending on the fuel’s relative density.

Meanwhile, China has raised the volumes of its first batch of 2020 fuel export quotas by 53% from a year earlier to 27.99 million tonnes, according to a document from the Ministry of Commerce that was reviewed by Reuters on Tuesday.


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