Petrotahlil - Taiwan’s Formosa Petrochemical Corp said on Thursday it will continue exporting very low-sulphur fuel oil (VLSFO), which it previously only sold at home, in response to strong demand driven by new global shipping regulations.
The rules, which came into effect this year, have resulted in levels of demand for VLSFO which have not been seen before.
Weak gasoline prices have led Formosa, which operates one of Asia’s ten largest refineries, to lower throughput at its residue fluid catalytic crackers (RFCC) and, since the fourth quarter of 2019, to start exporting VLSFO.
A spokesman for Formosa told Reuters it may shut a secondary unit sooner than planned if poor gasoline demand persists.
Even before the outbreak of the new coronavirus, which originated in Wuhan, China, gasoline profit margins were already weighed down by heavy supplies late last year.
Formosa had initially scheduled to shut an 84,000 bpd unit on March 10 for a 40 to 45-day maintenance.
“If the gasoline cracks (to Dubai) were to remain at an average of $4 to $5 a barrel like what they are now, we may bring forward the maintenance by about 10 days to March 1,” K.Y. Lin said, adding that it may extend the shutdown to 50 days.
Formosa will be operating its RFCCs at a reduced throughput of below 80% capacity in February and will be exporting approximately four to five medium range (MR) vessels of VLSFO next month, up from around 3-4 vessels this month.
“We will continue exporting VLSFO as long as gasoline is weak,” Lin said, adding it was hard to predict how gasoline fundamentals will turn out in the next month or so.
The severe acute respiratory syndrome (SARS) outbreak 17 years ago showed that a fast-spreading virus can hit not only transportation demand but the economy as a whole.
Formosa operates two RFCCs, each of which has the same capacity at its 540,000 bpd Mailiao refinery. It also operates three 180,000 bpd crude distillation units (CDUs), two sulphur remover units (RDS) and several other secondary units.
Scheduled maintenance at one CDU and one RDS will still take place from March 10, Lin said.
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