OMCs switch to diesel at ATF demand falters
Mint, Delhi 24-Jun-2020
India's three state-owned refiners have changed their refining configurations, replacing aviation turbine fuel with diesel in a reflection of the troubles faced by the airlines industry.
With airlines flying at a third of their capacity, Indian Oil Corp. Ltd, Bharat Petroleum Corp. Ltd (BPCL) and Hindustan Petroleum Corp. Ltd (HPCL) have cut aviation turbine fuel or ATF production, anticipating a revival in demand only by next fiscal year, said three senior executives from the companies.
Aviation turbine fuel, or ATF, is used to fly aircraft. Based on their configuration, refiners can substitute ATF with either kerosene or diesel. ATF spiked with diesel is used in automotives.
"Given the lack of demand from aviation sector, we are producing less of ATF now. Normally, ATF is 8-10% of the total crude throughput. But today, we are producing only around 1% ATF and the rest is diesel," said the first person cited above. He spoke on the condition of anonymity as he is not allowed to talk to the media.IOCL, BPCL and HPCL, also known as oil marketing companies, or OMCs, did not reply to email queries sent on 12 June.
ATF demand currently is 7-10% of what it was in June 2019. While ATF consumption was at 645,000 tonnes in April 2019, it fell 91% to 56,000 tonnes in April 2020. The fall in the year to May was 83%, from 679,000 to 111,000 tonnes.
"In April and May, we shut down ATF production to zero. Now, it has gone up to 7%-8% of normal demand. It will obviously increase as flights resume. However, we do not see it going up to the pre-covid-19 levels at least for the next one year," said the second official
Demand for fuel plummetted after the outbreak of covid-19 and the subsequent lockdown, forcing refiners to reduce production of refined products by up to 30%.
India's crude oil processing picked up pace in May, increasing 7.3% from April to around 3.87 million barrels per day (bpd) owing to an easing of lockdown restrictions on transport and resumption of industrial activity.
According to the International Energy Agency, global demand for oil in 2020 is expected to fall by 8.1 million barrels of oil per day (mbpd), the steepest in history, with the biggest declines seen in the first half of the year.
Reduced jet and kerosene deliveries will impact total oil demand until at least 2022. IEA's first forecast for 2021 as a whole shows demand growing by 5.7 mbpd, which, at 97.4 mbpd, will be 2.4 mbpd below the 2019 level.
"The industry will continue to be a drag on oil demand through 2021, with IEA's first estimate showing that, having fallen by 3 mbpd in 2020, jet/kerosene demand will rebound by only 1 mbpd in 2021, leaving it below the pre-crisis level," said IEA in its oil market report June-2020.
