Thailand’s largest refiner Thai Oil PCL announced that it will stop producing fuel oil from 2022, after completing a USD4 billion refinery upgrade to boost production of clean fuels.
The move is a global trend among producers due to the expected decline in demand for fuel oil from the shipping industry following the implementation of MARPOL Annex VI in 2020.
The upgrade will bring Thai Oil’s capacity nearly a Royal Dutch Shell’s 500,000 barrel per day (bpd) Bukom complex in Singapore, the oil major’s biggest wholly owned plant, while sharpening the Thai refiner’s competitive edge as brand new complexes go onstream in Malaysia and Vietnam.
“Competition in the cleaner, low-sulphur fuel space is set to balloon over the coming years, not least due to competition from established refiners in the region as well as completion of upgrades at many of China’s state-owned facilities,” said Peter Lee, oil and gas analyst at BMI Research.
Thai Oil plans to increase its refining capacity by 45% to 400,000 bpd in the next five years to turn fuel oil into more valuable low-sulphur products that will help meet growing demand in the region.
The upgrade is also designed to increase the refiner’s flexibility to process a wider array of heavier, less expensive crudes.
Thai Oil will install a new crude distillation unit (CDU) with a capacity of 200,000-220,000 bpd, after scrapping two older units with a combined capacity of 100,000 bpd.
Thai Oil has started a year-long bidding process for engineering, procurement and construction or EPC contractors. Thai Oil said it expects to make a final investment decision by the third quarter of 2018. Construction will take four years.
Another Thai refiner, Bangchak Petroleum PCL, also plans to debottleneck its refinery by 2020 to boost production by 20,000 bpd, increasing its total capacity to 130,000 bpd and boosting its output of light and middle distillates. The company did not disclose the project’s total cost.