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Japan’s Cosmo to expand coker, slash HSFO output as IMO low-sulfur deadline nears

Cosmo Energy Holdings plans to significantly slash output of high sulfur fuel oil by expanding its coker capacity as the Japanese company prepares to meet the 2020 low-sulfur mandate deadline set by the International Maritime Organization.

In a new business plan released Tuesday, Cosmo said that meeting the IMO deadline would be one of its top priorities. As a result, the company plans to raise capacity of the coker unit at its 100,000 b/d Sakai refinery to 31,000 b/d from 29,000 b/d during a major scheduled maintenance in 2019.

“By investing in our coker at the Sakai refinery, our company intends to supply oil products that meet the IMO regulations at an early date in order to increase earning power in the petroleum business,” Hiroshi Kiriyama, Cosmo Energy Holdings president and CEO told a press conference in Tokyo.

The IMO decided in October 2016 to cut global sulfur emission limits for marine fuels from 3.5% to 0.5% by 2020. Ship operators will have to either switch to cleaner, more expensive fuels or invest in emissions cleaning systems to comply with the new limits.

The business plan highlighted that Cosmo would be investing about Yen 11 billion (about $103 million) in coker expansion as part of a “strategic investment.” The strategic investment would account for roughly 40% of the total investment for enhancing competitiveness and growth during a five-year period starting fiscal 2018-19 (April-March).

Providing details about other strategic investments, Kiriyama said Yen 145 billion would be earmarked for the refining and oil product sales segment. That includes Yen 4 billion expenditure for increasing low sulfur bunker fuel production, he said.

Cosmo Energy Holdings group includes the refining arm Cosmo Oil, marketing arm Cosmo Oil Marketing and upstream arm Cosmo Energy Exploration & Production.

MINIMIZING HSFO OUTPUT

After its Sakai coker capacity receives a boost, Cosmo’s HSFO production volumes are expected to be minimal as it expects to process residue from its 86,000 b/d Yokkaichi refinery in central Japan at the Sakai refinery, Koji Moriyama, Cosmo Energy Holdings director and senior executive officer, told S&P Global Platts after the press conference.

“Residue at Sakai is already minimal but we get HSFO at Yokkaichi,” Moriyama said. “Once we process that [HSFO] at Sakai, we should not have any HSFO in our group overall.

In fiscal 2016-17, Cosmo produced a total of 1.50 million kl (9.43 million barrels) of fuel oil, out of which low sulfur fuel oil accounted for 500,000 kl, with the balance shared by HSFO output, a Cosmo Energy Holdings official said.

Out of the 1 million kl HSFO produced in the fiscal year ending March 2017, roughly 70% of the total output was for bunkering, while the balance was for industrial and power plants, the official said.

Once the capacity of its Sakai coker capacity increases, Cosmo expects roughly half of the HSFO output of around 700,000 kl — produced in fiscal 2016-17 — to be replaced by marine gasoil or gasoil for automobiles. The balance would be replaced by LSFO, as well as some gasoline and naphtha, the official said.

DROPS PLAN TO SCRAP ONE CDU

Cosmo Energy Holdings also said Tuesday that it had scrapped its plan to decommission one of the two crude distillation units at its 177,000 b/d Chiba refinery in Tokyo Bay.

Under a deal made in December 2014 with then TonenGeneral, Cosmo Oil, which is the refining arm of Cosmo Energy Holdings today, had said it would decommission No. 1 CDU in Chiba when its pipeline connecting to the Japanese refiner’s Chiba refinery starts up.

Cosmo had also said scrapping one of the two Chiba CDUs would also be part of its response to the Ministry of Economy, Trade and Industry’s first round of refining regulations that took effect at the end of March 2014.

But the scrapping of the CDU had been delayed pending completion of the inter-refinery pipeline in Chiba.

However, Cosmo added that its scrapping of the No. 5 63,000 b/d CDU, which had already been mothballed in October 2016, has now been officially approved as its response for the first round of METI regulations.

Cosmo Energy Holdings also reiterated that its pipeline transporting finished and unfinished refined products between its Chiba refinery and the now JXTG Nippon Oil & Energy’s 129,000 b/d Chiba refinery would start up around mid-2018.

Cosmo Oil — which currently has the 75,000 b/d No. 1 CDU and the 102,000 b/d No. 2 CDU at its Chiba refinery — has a combined refining capacity of 363,000 b/d over three refineries in Japan.
Source: Platts

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