Chinese oil giant Sinopec announced on October 18 at a fuel conference in Zoushan, China that it would produce IMO 2020 compliant low sulfur bunker fuels (LSFO) by August 2019. During the conference, Liu Zurong, Sinopec’s General Manager, announced limited production to start next August.
Sinopec will initially focus production on its coastal refineries with the goal to supply all of China’s coastal ports with IMO 2020 compliant LSFO – and eventually the global market. Liu Zurong also confirmed that all of Sinopec’s LSFO production will meet the IMO 2020 LSFO standards by January 1, 2020.
Sinopec does not currently compete in the LSFO bunker market but has constructed desulfurization units at its coastal refineries and is currently producing LSFO for laboratory analysis. The process is expected to complete in February 2019, after which the LSFO will be supplied to vessels with different main engines for a period of two to three months to determine compatibility. Once the test period is complete, Sinopec will analyze vessel data and generate a report in June 2019 followed by actual production in August 2019. In addition, by August next year, LSFO prices and specifications will be finalized between Sinopec and vessel owners.
China has already begun reducing sulfur in marine fuels to 0.5% in its Emission Control Areas (ECA). On October 1, 2018, the Yangtze River ECA went to 0.5% with the Pearl River Delta and Bohai Rim area to follow by January 1, 2019. Currently, vessels are meeting China’s local ECA requirements by burning more expensive Low Sulfur Marine Gas Oil (LSMGO) when transiting those areas.
The sulfur cap of 0.5%, set by the International Maritime Organization (IMO), becomes effective in January 2020 and will be enforced worldwide.