India Rushes to Import Distillates Before April 1 Rule
Date: 17-Jan-05
Country: SINGAPORE / INDIA
Author: Felicia Loo and Mia Shanley
State-run Indian Oil Corp. (IOC) has returned to the import market in a big way, buying via tender a total of 90,000 tonnes of 0.25- and 0.035- percent sulphur gas oil, as well as 15,000 tonnes of 91-octane gasoline, traders said.
"This (diesel imports) has not happened in the last five or six years. The specifications will be tougher this April and most of the Indian refiners are not fully prepared for the change," a trader said.
India, which had been a major buyer of diesel with monthly imports of more than 200,000 tonnes, switched into a net exporter after 1999 as 2.1 million barrels per day (bpd) of new refining capacity came onstream, industry sources said.
IOC, the country's largest refiner, still has an outstanding tender seeking a minimum of 30,000 tonnes of low-sulphur gas oil and is expected to take at least two more gasoline parcels ahead of the April 1 deadline.
"India's (gasoline) purchase volume isn't so big yet. Besides, Singapore is not the best supplier because India needs cargoes sent to the west coast," a trader in Singapore said.
But bigger imports from April up until refinery upgrades are complete -- between February this year and the third to fourth quarters of 2006 -- could tighten regional gasoline supply.
At least one trader said Indian refiners could raise imports each month to three medium-range cargoes, or about 90,000 tonnes, from April.
"India could help tighten the pool of gasoline in the region. We could see prices in Singapore take support from demand there," he said.
Sources have said most Indian refiners would not meet the deadline to produce cleaner fuels and have lobbied the government to delay the legislation.
BEHIND SCHEDULE
Industry officials have said refiners would gain financially if the deadline was extended as they would not need to import fuels and could keep processing the cheaper sour, or high sulphur, crudes.
India's Reliance Industries Ltd., who runs the 660,000-bpd Jamnagar refinery, has had some problems in its hydrogen unit, making it difficult for the company to produce adequate low-sulphur fuels to meet domestic demand, traders said.
"The Indian refiners won't have time to tank up greener stuff in adequate quantities," said one trader, adding that some of IOC's plants would not be ready to produce cleaner fuels until late 2006.
"It looks like some Indian refiners will continue to import low-sulphur gas oil until they are ready to produce their own," another trader said.
India is imposing strict emission rules to curb pollution in its cities, where car sales are booming and doctors report an increasing incidence of breathing ailments.
For the 14 largest cities and adjoining areas, the sulphur content in petrol will be cut to 0.015 percent from 0.05 percent and the mandatory octane number will be raised to 91 from 88.
The new norms will also specify restrictions on the olefin, aromatic and lead content of the fuel.
The sulphur content in diesel will be cut to 0.035 percent from 0.05 percent, the cetane number will be raised to 48 from 41 and limits will be prescribed for polyaromatic hydrocarbons.
Smaller towns and rural areas -- where emission standards are less stringent than for the urban centres -- will adopt the fuel specifications currently prescribed for big cities.
(Additional reporting by Himangshu Watts in New Delhi)
