HPCL Expects Gross Refining Margin To Improve After IMO 2020 Takes Effect
Demand for low-sulphur fuel and diesel should increase diesel cracks as well as HPCL’s gross refining margins, MD MK Surana says.
Hindustan Petroleum Corporation Ltd.’s gross refining margin—the amount a refiner earns from converting every barrel of crude oil into fuel—could improve after IMO 2020 regulations come into effect, according to its Chairman and Managing Director MK Surana.
International Maritime Organization mandates shipping vessels to use low-sulphur fuel from Jan. 1, 2020, a move that’s seen affecting oil markets globally.
“We hope that from January onwards, when the high-sulphur fuel oil will not be used for bunker, the low-sulphur fuel oil and diesel demand as an alternative should improve,” Surana told BloombergQuint. “That should increase the cracks on diesel, and so the refinery margins.”
Asian refiners have been increasing their output of fuel on expectations that demand will rise once the IMO 2020 comes into force. Ships will be banned from using high-sulphur fuel oil and will have to switch to either very low-sulphur fuel oil or perhaps even liquefied natural gas in order to curb emissions.
“Right now, people are trying to liquidate their high-sulphur fuel oil which is available with them,” Surana said. Since diesel offtake as an alternative to fuel oil will pick up only from January, diesel crack has not picked up to the extent expected, thereby weighing on gross refining margins, Surana said.
WATCH | HPCL’s MK Surana on India’s fuel comsumption in November