Demand for Low-sulfur Vessel Fuel Likely to Surge

A vessel chartered by SK Trading International (left) receives bunker oil from a crude carrier to produce low-sulfur vessel fuel.

SK Trading International (SKTI), a subsidiary of SK Innovation that specializes in trading of petroleum products, will expand its supply of low-sulfur oil to the Asia-Pacific region six-fold next year as demand for low-sulfur oil for ships is expected to surge due to the new environmental regulations of the International Maritime Organization (IMO).

SKTI announced on July 7 that it will expand its offshore oil blending business four-fold the current 23,000 barrels a day to 90,000 barrels next year. SKTI is the first company in Korea to engage in the offshore blending business. The company charters a large oil tanker and adds semi-finished products to produce low-sulfur oil. SKTI’s low-sulfur oil supply will increase to 130,000 barrels per day when SK Energy’s vacuum residue desulfurization (VRDS) facility goes into operation in April next year to produce 40,000 barrels of low-sulfur oil per day.

Low-sulfur oil refers to low-sulfur fuel oil (LSFO), diesel for ships and liquefied natural gas (LNG) which have low sulfur content.

The IMO announced that it would drastically slash the sulfur oxide content of marine fuel oil from 3.5 percent to 0.5 percent by 2020. Accordingly, beginning next year, the focus of the marine fuel oil market will shift to low-sulfur oil. The International Energy Agency (IEA) said demand for high-sulfur fuel oil will decline by about 40 percent from 3.5 million barrels a day this year to 1.4 million barrels next year, while demand for low-sulfur fuel oil will increase from 100,000 barrels per day to one million barrels during the same period.

SKTI is participating in a drive to create a new industry ecosystem to cope with changes sparked off by the IMO environmental regulations. In March, it signed an agreement with the Korea Ocean Business Corp., Hyundai Merchant Marine and other companies to build a win-win fund to support producers of eco-friendly facilities. SKTI plans to install scrubbers on 19 vessels through this project.

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