India's privately owned refiner Essar Oil is planning to start exports of 10 ppm sulfur gasoil and gradually reduce 500 ppm gasoil exports from the end of this year or early next year after completing some upgrades at its Vadinar refinery, market sources said Tuesday.
"I think officially will be next year, where they will toggle between 500 ppm and 10 ppm. But I won't be surprised if they have a test cargo here and there before that," a Singapore-based trader said, adding that Essar Oil has not yet decided on the mix of 500 ppm and 10 ppm grades.
Essar has, idled its entire 20 million mt/year (400,000 b/d) refinery in Vadinar for a 30-day turnaround that is scheduled to end October 17. During the turnaround, the refiner will be converting the vacuum gasoil hydroteater to a mild hydrocracker unit, which will allow production of ultra-low sulfur diesel. An Essar Oil spokesman declined to comment.
Singapore-based traders said they have heard Essar is planning to sell 10 ppm sulfur gasoil, but have not seen any offers yet. "So far, I don't think Essar [is] offering 10 ppm for  term. I think they will be cautious and make sure their specs are OK [first]," another Singapore-based trader said. Reliance Industries is the only Indian refiner exporting 10 ppm gasoil. Essar has so far only been exporting 500 ppm sulfur gasoil. The main outlets for Indian exports of 10 ppm gasoil are Europe and East Africa.
Incentives to Upgrade
Traders said the premium that, 10 ppm sulfur gasoil commands over 500 Ppm currently is incentivizing refiners to upgrade their diesel production. As of October 10, the FOB Arab Gulf 10 ppm was $1.25/b above FOB AG 500 ppm sulfur gasoil, Platts data showed. Essar's move is also in line with a widespread adoption of cleaner fuels across the globe.
The push toward lower sulfur diesel in Asia Pacific and the Middle East has been accelerating in recent years. East African countries have also started shifting from 500 ppm gasoil to 50 ppm gasoil this year. India plans to shift toward the more environmentally friendly Euro-IV compliant, or 50 ppm sulfur diesel, from April 2017.