Indian firms launch first Euro IV diesel tenders

Indian state refiners issued their first tenders to import Euro IV-compliant diesel to meet an April deadline for the roll out of cleaner fuel in 13 major cities, traders and company officials said. Indian Oil Corp (IOC) and Bharat Petroleum Corp Ltd. (BPCL) are seeking a total 180,000 tons of Euro IV diesel for delivery in February.
India's decision to import gas oil is expected to boost the diesel market at a time of tepid demand and burgeoning supplies on land and at sea.

India is keen to cut emissions as Asia's third largest economy expands rapidly and aim to catch up with fuel quality in Europe, which now follows Euro V standards. It has been gradually reducing sulphur from 2000, when fuel had 500 parts per mm (ppm). Motorists in major cities will now move to Euro-IV norms, locally known as Bharat Stage-IV, that allow up to 50 ppm sulphur.
Earlier, India decided to adhere to an April deadline for the Euro IV launch in major cities. The roll out of Euro III specifications in the restof the country has been staggered until October.

"Since we are switching to new grade, initially it will take about three months from refinery production to sale to end user... we need to import to manage a smooth transition," said an IOC official, adding his firm wants a working inventory of 10 days before April 1. He said IOC had floated a tender for supplies in southern India, as about a third of the 190,000 bpd plant operated by Chennai Petroleum Corp will be shut until March for upgrading.
Traders said India's increased demand for low-sulphur diesel buoyed gas oil fundamentals. Cracks surged to a near three-month high above $ 8.00 a barrel, and the prompt Feb./March time spread jumped to a four-month high.

Surging domestic demand
By bringing in tighter fuel standard to improve air quality, India is set to leapfrog China, which started using an Euro III-like norm for petrol from Jan. 1, with a Euro III diesel equivalent set to become a national mandate from June 2011.
How India handles the transition will be keenly watched by other Asian countries looking to improve air quality. Another IOC official said his firm might not further import Euro IV diesel.
"We were not expecting Euro IV diesel imports but now after seeing the demand supply scenario, we realised there could be a marginal import. I don't think we need to import more after the latest tender," he added.

IOC's major plants will start producing superior-grade fuel from April but its four smaller units will miss the deadline by three months, B.N. Bankapur, the company's head of refineries, said in December last year.
"We need to dilute Euro III products with Euro IV and our projects at Kochi have been delayed," said an official at BPCL. BPCL has sought two 30,000-ton cargoes of 40 ppm diesel -- one each in western and southern ports.

Mangalore Refinery and Petrochemical, which feeds part of the south Indian market, will also shut its diesel unit in February to March for 30 days to raise capacity and produce cleaner fuels. Officials at IOC and BPCL said surging diesel demand due to government cap on fuel prices have also made imports necessary.
India's annual diesel consumption rose 13.5 % in December, helped by higher demand from grain-producing states, where the fuel is used for water pumps and power generation.