Indonesia lowers sulfur content of subsidized diesel
SINGAPORE/JAKARTA (Reuters) -- Indonesia has lowered the sulfur content of its subsidized diesel in line with a global shift to move towards using cleaner fuel to curb pollution.
State-owned Pertamina reduced the sulfur in its diesel to 2,500 ppm from the current 3,500 ppm from this January, two Pertamina officials said on Thursday.
Indonesia remains one of the few countries in Asia to still use diesel with a high sulfur content, traders said. This is the first time in at least 10 years that the country has lowered the sulfur content of the fuel, mainly used to drive trucks and buses in the country.
But the tweak was unlikely to have a major impact on trade flows, said Energy Aspects oil products analyst Nevyn Nah.
"(Indonesia) is one of the few high sulfur (gasoil) shorts left, so changing from 3,500 or 5,000 ppm to 2,500 ppm doesn't change a lot," said Nah. "It's a very easy desulfurization step and much easier than getting down from 500 to 10 ppm, for example."
Pertamina's overall diesel imports have been falling in the past two years due to a hike in domestic retail prices and a higher local biodiesel mandate keeping a lid on demand, though demand for diesel use in the mining sector has increased.
The country's diesel demand fell to 480,000 barrels-per-day in 2016, from 483,000 bpd in 2015, said Nah. Imports of the fuel fell to 110,000 bpd in 2016 from 140,000 bpd, he added.
While Indonesia's imports of diesel are expected to be stable this year, shipments of higher quality diesel are expected to increase.
Pertamina is expected to import mainly diesel with a sulfur content of 350 ppm and 500 ppm this year, said Ahmad Bambang, deputy chairman of Pertamina.
Demand for high quality diesel and gasoline is going up due to the narrow price difference between lower quality and higher quality fuels, a Pertamina official said, declining to be named as he was not authorized to speak with the media.
"We will only need to import a small volume of 2,500ppm (diesel) if our refineries are running maximum and imports of 350 to 500 ppm will depend on demand," the official said.
Reporting by Jessica Jaganathan in SINGAPORE and Wilda Asmarini in JAKARTA; Editing by Himani Sarkar and Kenneth Maxwell
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