India's IOC inches closer to start producing IMO-compliant fuel oil

State-owned Indian Oil Corp will start producing 0.5% sulfur compliant fuel oil in September 2019, months ahead of the International Maritime Organization's global sulfur limit rule for marine fuels, but will keep its options open to produce marine gasoil, IOC company officials said late Friday.

"We are looking at low-sulfur bunker fuel oil. We feel that's where the premium would be and that's what will be good for many vessel owners," a senior IOC official said."Demand as we see, is for RMG 380. We will be in a position to offer RMG 380 but 180 can also be given. We will see how the market goes ... We will be capable of supplying both," the official added.

The bunker fuel specification details from IOC senior officials come a few weeks after IOC Chairman Sanjiv Singh told S&P Global Platts in an exclusive interview that it was gearing up to start producing fuels to meet IMO 2020 specifications.IOC aimed to supply more than 1 million mt/year of the cleaner fuel from its Haldia refinery on the eastern coast and the Gujarat refinery on the western coast, Singh said earlier this month.

This is significant because shipowners and operators are mulling different options to comply with the rule and are looking for more clarity regarding the availability of different fuels worldwide from 2020.Saying that demand was expecte to be about 1 million mt initially, he said: "We should be able to meet that demand. The idea is to cater to both domestic and overseas ships across India's coastline."

POSITIVE RESULTS

IOC had already carried out detailed tests to advance the production of bunker fuels compliant with IMO's 2020 rule, he said."We first did tests at the laboratory stage. It was fine. Then we have done tests at the R&D pilot stage -- it is giving the right results," he said, adding that that the catalytic fine content of the compliant fuels will meet the level set out in ISO 8217:2017.

"We will be able to start supplying commercially after September 2019. The flushing of the system takes time. Some of the existing tanks will be utilized," he said.However, IOC had not started locking in any commercial contracts, he added.In the long run, IOC did not rule out supplying MGO."It's definitely a long-term opportunity and we are getting ready for that. But for now, the focus product is IMO-compliant fuel oil," the IOC official said, adding that MGO's attractiveness as a bunker fuel option for shipowners was somewhat tempered by its high cost.