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Colonial Pipeline to stop shipping high sulfur heating oil in June

https://www.chemnet.com   Apr 24,2015 Platts
Colonial Pipeline will no longer ship high sulfur heating oil starting in June 2016 amid widespread reductions in sulfur specifications in the US Northeast, according to market sources and information from Colonial Pipeline.

Colonial plans to only support heating oil with a maximum sulfur content of 500 ppm, known as low sulfur heating oil, starting in June 2016, according to a Colonial slide presentation to market participants that was obtained by Platts.

Market sources said Wednesday that Colonial has confirmed the decision to stop shipping HSHO in June 2016. Colonial Pipeline spokesman Steve Baker did not provide a timeline but said Colonial will continue to ship the product as long as there is a market for it.

"Colonial will continue to ship heating oil as long as our customers are serving markets that allow the higher-sulfur product," Baker said Thursday. "We can see that some states are changing their requirements to a lower-sulfur heating oil. But as long as we have customers nominating the 2,000 ppm heating oil in sufficient quantities, we will continue to ship it."


High sulfur heating oil has between 500-2,000 ppm sulfur and has been the traditional heating oil grade in the US Northeast until specifications began changing to lower sulfur limits starting in 2012.

Colonial Pipeline's 1.16 million b/d distillate Line 2 is the main artery transporting distillate product between the Gulf Coast and the Northeast.

LSHO is the heating oil spec required in most Northeastern states. Connecticut, Rhode Island, New Jersey, Vermont and Massachusetts tightened their sulfur specifications for heating oil to 500 ppm in July 2014.

Maryland and Pennsylvania are lowering their sulfur specifications from 2,000 ppm to 500 ppm on July 1, 2015.

New York has required ultra low sulfur heating oil, which has a maximum 15 ppm sulfur, since 2012. This is the same specification as ULSD.

New Jersey is expected to further tighten sulfur specifications from 500 ppm to 15 ppm in July 2016.

Vermont, Massachusetts, Maryland, Maine and Connecticut will cap sulfur content at 15 ppm for heating oil by July 2018.

Colonial's presentation to market participants said heating oil with a sulfur specification greater than 500 ppm would be handled as blendstock destined for refiners.

One market source said blendstocks typically ship in 75,000-barrel batches.

"If they send it up as blendstock, then the molecules will still head north," one Northeastern broker said. "It will probably help the Philadelphia refiners who make heating oil. It'll give them a better shot at higher netbacks."

HSHO is typically the last distillate product to schedule on Colonial's shipping cycles, which means it works as a buffer batch between the jet fuel shipped on the next shipping cycle and ULSD.

Colonial's presentation said HSHO generally contains "significantly less corrosion inhibitor than ULSD grades" and with the transition to ULSHO, there was concern about corrosion inhibitors making it into jet fuel.
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