SUBSCRIBER NOTE: Platts opens consultation to reduce sulfur in Singapore Gasoil benchmark

Platts is opening a formal consultation regarding the possible lowering of the sulfur specification of its flagship FOB Singapore Gasoil and FOB Arab Gulf Gasoil assessments to 10 ppm from 500 ppm currently.

Platts has received regular, informal feedback around the sulfur levels reflected in the benchmark over an extended period, and industry support has increased for a possible move to a lower sulfur limit in the benchmark.

The potential shift to ultra-low sulfur gasoil for the benchmark reflects the change in demand and supply trend across the region in recent years.

Through this consultation, Platts seeks feedback on the timing of any potential change to the sulfur limit, as well as the process and roadmap for such a shift.

RATIONALE FOR POSSIBLE CHANGE: Changes in the waterborne trade since 2013, coupled with new goals set by countries to move to even lower-sulfur fuel, suggest that the time is ripe to begin discussing further potential changes in the benchmark.

Notably, key regional consumers including China and India, among others, have embarked on a phased process of moving to a 10 ppm sulfur limit on diesel fuel.

In recent years, the volume of 10 ppm gasoil trades reported through the Platts Market on Close assessment process has grown substantially.

On August 25, Platts published a white paper titled "Platts Asia Gasoil Benchmarks -- Next Stage of Evolution," which discussed in greater detail industry trends that may warrant a change in the gasoil sulfur specifications. The white paper can be found at http://www.platts.com/IM.Platts.Content/InsightAnalysis/IndustrySolutionPaper s/SR-asia-gasoil-benchmarks-evolution-082016.pdf

CURRENT ASSESSMENTS: As of August 2016, Platts publishes assessments for four grades of gasoil on an FOB Singapore basis: medium sulfur grade 0.25% (2,500 ppm); low sulfur gasoil 500 ppm and 50 ppm; and ultra-low sulfur diesel 10 ppm. In the Middle East, Platts publishes assessments for four grades of gasoil on an FOB Arab Gulf basis: 0.25% (2,500 ppm), 500 ppm, 50 ppm and 10 ppm.

Platts publishes assessments under the names "Gasoil" and "Gasoil 500 ppm" for the two locations that currently represent fuel with a maximum of 500 ppm sulfur. Platts is inviting feedback on changing the sulfur content of benchmark assessments named "Gasoil", while retaining those titled "Gasoil 500 ppm" intact.

NOMENCLATURE: Platts prepared the groundwork for the next stage of evolution to lower sulfur by renaming the benchmark to "Gasoil" from "Gasoil Reg 0.5% sulfur" during the last change in the benchmark's sulfur specifications. A potential shift to 10 ppm therefore would not require a change in the benchmark's name, only in the grade it represents.

TIMEFRAME: Platts benchmark assessments are widely used in physical and derivative contracts that involve a multiplicity of counterparties and government entities. Platts recognizes that any change in the benchmark would require considerable advance notice. Platts would give ample notice to all stakeholders of any forthcoming changes in the gasoil benchmark -- the 2013 amendment was first proposed in August 2011.

QUALITY DIFFERENTIAL: For the switch to 500 ppm gasoil in 2013, Platts recommended a differential to be used by counterparties to shift their 0.5% sulfur positions to 500 ppm sulfur. Platts recognizes a potential shift in the benchmark to 10 ppm may require a similar approach to help with the transition and invites feedback on the requirement for such a recommendation.

BACKGROUND: Reflecting Asia's transition towards cleaner fuels, Platts on January 2, 2013 lowered the sulfur specification of the benchmark FOB Singapore Gasoil and FOB Arab Gulf Gasoil assessments to 500 ppm from 0.5% (5,000 ppm). That change had initially been proposed in a subscriber note published in August 2011.

While announcing that change, Platts also said that it would continue to study the market and observe trade flows to ensure the benchmark continued to evolve as the broader industry moved towards even lower-sulfur diesel standards.

FEEDBACK: Platts invites comments, questions and other feedback on these proposals by November 1, 2016. Please send all comments, feedback and questions to asia_products@spglobal.com and pricegroup@spglobal.com.

For written comments, please provide a clear indication if comments are not intended for publication by Platts for public viewing.

Platts will consider all comments received and will make comments not marked as confidential available upon request.