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Japan JXTG to halt 1% sulfur A-fuel oil supply in Oct as it starts IMO-compliant fuel supply

Japan’s largest refiner JXTG Nippon Oil & Energy will stop 1.0% sulfur A-fuel oil supply in the domestic rack and waterborne markets from October when it starts supplying bunker fuels that complies with the International Maritime Organization’s sulfur limit rule, a company source familiar with the matter told S&P Global Platts.

“The sulfur content in A-fuel oil will be reduced to 0.5% from 1.0% in October, then basically the supply of 1.0% sulfur A-fuel oil will end,” the source said.

JXTG has limited storage space at its terminals and there was “no advantage” in keeping separate tanks for the different grades of A-fuel oil with varying sulfur levels, the source said.

JXTG Nippon Oil & Energy, which has a 48% share of A-fuel oil supply in the domestic market, also told Platts in May it is considering suspending a part of its supply of A-fuel oil, when it starts supplying IMO-compliant bunker fuel.

According to market sources, JXTG had already informed some customers that it was halting its supply of A-fuel oil when it starts supplying IMO-compliant bunker fuels.

JXTG Energy, which accounts for 40%-50% of domestic bunker fuel supply, is ready to start supplying IMO-compliant bunker fuel by October, Tsutomu Sugimori, president of parent JXTG Holdings, said on May 13.

COSMO OIL TO SUSPEND 1% SULFUR A-FUEL OIL SUPPLY

Japan’s third largest refiner Cosmo Oil also said on May 23 it will halt the supply of 1.0% sulfur A-fuel oil in the domestic rack and waterborne markets from as early as September, when it starts to supply IMO-compliant bunker fuels.

Cosmo Oil holds about a 13% share of A-fuel oil supply in Japan.

Market participants said that Cosmo Oil’s move is related to difficulties in keeping separate tanks for a wide range of products, partly due to the company’s response to the IMO mandate.

The company is facing shortage of storage space to keep its supply of A-fuel oils with different sulfur content — 0.1%, 1.0% and 0.5%, according to market sources.

A-fuel oil — a blend of gasoil and fuel oil in a 90:10 ratio — is among the key products supplied by Japanese refiners, and is used by industrial and power plants, coastal ships, as well as construction and agricultural machinery.

The IMO will cap global sulfur content in marine fuels at 0.5% from January 1, 2020, down from 3.5% currently.

This applies outside the designated emission control areas where the limit is already 0.1%. Shipowners will have to either burn cleaner, more expensive fuels or install scrubber units for burning high sulfur fuel oil to comply with the rule.

Rack oil products are those that are transported by refiners and other independent suppliers over land by tank lorries — loaded from either refinery tanks or secondary tanks outside the refinery.
Source: Platts

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