SK Trading International (SKTI) has inked six-month contracts with shippers for the supply of very low sulphur fuel oil (VLSFO), beginning from the fourth quarter, according to a company official.
With demand for stable compliant sulphur marine fuels increasing ahead of the IMO 2020 sulphur cap, shippers must comply with the new regulations by switching to lower sulphur fuels, or by installing exhaust gas cleaning systems.
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For this reason, a SKTI official told Reuters that the company has signed VLSFO term contracts with some shippers. The contracts will start from the fourth quarter to the first quarter of 2020, when the fuel switch would start applying.
However, the official did not reveal any more information regarding the contracts, such as how much the volume or price will be, due to confidentiality.
As only 3.5 months are remaining until the 2020 sulphur cap applies, VLSFO is considered as an economically attractive option for the shipping industry, in spite of expectations of higher demand for marine gasoil.
Namely, according to the official, operators are choosing VLSFO and not MGO, due to its physical properties and operational convenience.
What is more, two years ago, in 2017, SK Innovation informed that it would construct a vacuum residue desulphurisation (VRDS) unit until 2020, in order to prepare for the switch to cleaner marine fuels. The VRDS unit is expected to start operations in April 2020, and it will be able to produce 40,000 barrels per day (bpd) of LSFO.
Finally, SKTI targets to grow marine fuel blending capacity in Singapore to 90,000 bpd of LSFO next year, increasing it from about 23,000 bpd that it is today.
