In this list

Refiners need to be incentivized more to meet VLSFO demand for IMO 2020: FGE

Commodities | Energy | Oil | Crude Oil | Refined Products | Fuel Oil | Gasoline | Shipping | Tankers

Dark ship-to-ship transfers keep Russian oil flowing despite sanctions

Energy | Oil

Platts Market Data – Oil

Energy | Oil | Energy Transition

APPEC 2023

Energy | Oil | Crude Oil

OPEC+ output cut talks begin, with eyes on heavyweights Saudi Arabia, UAE

Energy | Energy Transition | Petrochemicals | Oil | Coal | Natural Gas | Agriculture | Electric Power | Hydrogen | Emissions | Carbon | Polymers | LPG | Refined Products | Aromatics | Fuel Oil | Jet Fuel | Gasoline | Crude Oil | Biofuels | Renewables | Electricity

Insight Conversation: Saif Humaid al Falasi, ENOC Group

For full access to real-time updates, breaking news, analysis, pricing and data visualization subscribe today.

Subscribe Now

Refiners need to be incentivized more to meet VLSFO demand for IMO 2020: FGE

  • Author
  • Surabhi Sahu
  • Editor
  • Aastha Agnihotri
  • Commodity
  • Oil

Refiners worldwide need to be incentivized further to produce enough very low sulfur fuel oils (VLSFO) to meet the entire HSFO demand set to be displaced by the International Maritime Organization's global sulfur mandate for marine fuels, said Sri Paravaikkarasu, director for Asia oil at Facts Global Energy.

Not registered?

Receive daily email alerts, subscriber notes & personalize your experience.

Register Now

"Some refiners have already started producing 0.5% sulfur fuels from early this year but most of them producing this have managed to do so without making a lot of changes in the way they operate," Paravaikkarasu said at the Inaugural Bunker Fuel & Ballast Water Compliance Conference 2019, organized by Conference Connection on November 13 and 14 in Singapore.

Countries like Indonesia, Malaysia and even Thailand process a lot of low sulfur crude, said Paravaikkarasu, who also heads the East of Suez oil service at FGE.

So, it is relatively easy for these refiners to segregate the residual streams because the VLSFO premiums are very attractive currently, close to $200/mt, over HSFO, she said.

Still, "the market has tended to over read VLSFO production."

Not many refiners have invested in residual desulfurization capacity in this region as well as overseas, she said.

There have mostly been some small debottlenecking exercises but no massive investments so far, she added.

"So, at current price levels, refiners will be able to produce 1-1.2 million b/d of VLSFO globally," Paravaikkarasu said, adding that this translated to roughly only about 20% of the total bunker fuel consumption in 2020.

"If VLSFO premiums [over HSFO] increase by another 100/ton, we can see another 300,000-400,000 b/d of VLSO," she estimated.

"Globally, about 2.5 million b/d of HSFO is still (4Q 2019) being used in the bunker sector," Paravaikkarasu said.

"We still think a little less than 1 million b/d of HSFO will still be used in the bunker pool [post 2020] in two forms: scrubbed fuel oil and the rest will come from non-compliance," she said, adding that the remainder will have to be replaced by 0.5% low sulfur fuel oils and marine gasoil.

Close to 800,000 b/d of additional MGO demand will sprout up in the first few quarters of 2020 to meet displaced HSFO demand as well as the lack of adequate VLSFO, she said.

However, scrubbers uptake will accelerate post 2020 displacing the most expensive MGO in the beginning and some VLSFO in the subsequent quarters, she said.

"In early 2020, the MGO and HSFO differential will likely be somewhere $350-$400/mt but that will eventually narrow to around $300/mt by the end of 2020," Paravaikkarasu added.

-- Surabhi Sahu,

-- Edited by Aastha Agnihotri,