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Lanka IOC gears up to grow business; meets upcoming IMO rule

Sri Lankan bunker supplier Lanka IOC is poised to serve the needs of the domestic bunker market as the International Maritime Organization’s global sulfur limit rule for marine fuels approaches, Shyam Bohra, Lanka IOC MD, told S&P Global Platts in an interview.

Lanka IOC, a subsidiary of India’s state-owned refiner Indian Oil Corp. Ltd., has a 35%-40% market share in Sri Lanka’s bunkering industry.
The IMO will cap sulfur in marine fuels at 0.5% worldwide from January 1, 2020, from 3.5% currently. This applies outside designated emission control areas where the limit is already 0.1%.

The upcoming environmental regulations in shipping make it imperative for suppliers to adapt to changing market demand and requirements, Bohra said.

“We are the only player in Sri Lanka right now offering low sulfur marine gasoil,” Bohra said.

Although LSMGO currently forms a very small proportion of the company’s total bunker sales volumes, estimated to be slightly over 310,000 mt for the fiscal year ended March 31, its share is set to increase significantly, Bohra said.

“That is our niche and gives us the capability to help customers to switch to cleaner fuels almost immediately,” he said.

Lanka IOC could also start offering 180 CST bunker fuel, if required, Bohra said.

“We are also ready with tankages to store cleaner fuel to meet requirements and if needed, we will develop additional ones,” he said, adding that “as of now, we have 33,000 mt of storage capacity out there.”

Lanka IOC typically imports fuel oil through tenders and it may come from Singapore, Fujairah or India. In India, it buys from its parent company IOC’s refineries.

India will likely supply more distillates and become a more important bunker supplier as regional trade flows alter due to the IMO 2020 rule, Bohra said. OTHER GROWTH PROSPECTS

Meanwhile, Lanka IOC expects its bunker sales volumes in 2018 to be steady to a tad higher compared with 2017, Bohra said.

The company saw a jump in its business in 2017, thanks to India’s new goods and services tax regime.

India’s new GST regime came into force on July 1. Under the old value-added tax regime, bunker sales to foreign-going vessels in India were treated as a deemed export. Even if some states taxed bunker sales to the vessels, the amount was negligible, in the range of 0%-5%.

“India’s GST had impacted our business in a big way [last year],” Bohra said.

However, the condition has stabilized somewhat after the 18% GST on bunker fuel was reduced to 5% in October, Bohra said.

Lanka IOC is seeing continued positive growth at the Trincomalee port and has strengthened infrastructure there to provide better services to its customers, Bohra said.

The company commenced barge loading from its Trincomalee terminal effective June 2, 2016. Last year, it also received an approval for a bonded storage for its facilities at the port.

With more than 50 meters draft available at anchorage, Trincomalee provides natural shelter, making this port a better place for bunkering even during adverse weather.

The company, with bunkering activities at other ports, including Colombo, is also closely monitoring developments at Hambantota.

The Port of Hambantota is located on the southern coast of Sri Lanka, occupying a prime location within 10 nautical miles to the main shipping route from Asia to Europe and also holding a strategic position along the ‘Silk Road Economic Belt and the 21st Century Maritime Silk Road’.

In July 2017, CM Port said in a statement that it had agreed on the terms of a concession agreement with the Sri Lanka Ports Authority, the Government of the Democratic Socialist Republic of Sri Lanka, Hambantota International Port Group (Pvt.) Ltd., and Hambantota International Port Services Company (Pvt.) Ltd., or HIPS, for the development, management and operation of the Hambantota Port.

Last month, Sri Lanka received a payment of about $584 million — the last tranche of the debt-equity deal — from China Merchant Port Holdings Ltd, local media reported.

“We don’t know what their plans are out there but Lanka IOC will be interested in bunkering there,” Bohra said.

Meanwhile, Lanka IOC’s lubricants business is also doing very well, Bohra said.

“That vertical is helping us and we are expanding our presence there too,” he said.
Source: Platts

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