Singapore — Japanese refiner Cosmo oil plans to start supply of 0.5% sulfur bunker fuel from October this year with the expansion of its coker at its 100,000 b/d Sakai refinery in Osaka, company sources said recently.

The coker's capacity will be increased to 31,000 b/d, from the current 29,000 b/d, when the refinery is shut for turnaround over July to September this year, the sources said.

Cosmo Oil will also expand desulfurization capacity at the same time, which will increase low sulfur products, the sources added.

The company's plans come ahead of the change in the International Maritime Organization's global sulfur cap to 0.5% in bunker fuels, from 3.5% currently, which will come into effect on January 1, 2020.

Cosmo Oil is Japan's third-largest refiner by sales after JXTG Nippon Oil & Energy and Idemitsu Kosan. Japan's total bunker fuel sales is around 300,000 mt/month, of which Cosmo Oil sells about 40,000 mt, the sources said. The other two refiners in the Japanese bunker market are Showa Shell and Fuji Oil.

Currently, shipowners who require low sulfur fuel at Japanese ports purchase low sulfur marine diesel oil. LSMDO volumes are estimated to be around 5,000 mt/month while MDO volumes are only about 500 mt/month.

Ocean-going vessels typically compare the price between US West Coast 0.1% low sulfur marine gasoil and Japan's low sulfur gasoil in making purchase decisions as the US is an emission control area.

Industry sources said refiners are expected to focus on the supply of low sulfur fuel to ships plying domestic routes in 2020.

"Refiners priority will be to supply LSMDO to domestic shipping lines before supplying LSFO to ocean-going vessels. Currently, there are samples of LSFO being produced but no commercial supply; there is no demand either," a trader said.

--Teo Su Ling, su.ling.teo@spglobal.com

--Atsuko Kawasaki, atsuko.kawasaki@spglobal.com

--Edited by Irene Tang, irene.tang@spglobal.com