Refinery investment absent on VLSFO production. File image/Pixabay.
The capacity for very low sulfur fuel oil production to meet the gap in global bunker demand post-2020 may have been overplayed, an oil analyst has said.
Sri Paravaikkarasu, an Asia-focused analyst at Facts Global Energy, told a Singapore conference that it has been relatively easy for Asian refiners to increase their VLSFO output as regional plants process a lot of low sulfur crude. But when looking at investment in residual desulfurization capacity in the region and abroad, the picture is not so rosy.
"The market has tended to over read VLSFO production," the analyst was quoted as saying by SP Global Platts.
Apart from some small debottlenecking exercises, significant investment in VLSFO production has been absent.
According to Paravaikkarasu, the differential between high and low sulfur fuel oil will narrow over 2020 from $350-$400/mt early on, to around $300/mt by the end of the year.