China to ban high-sulfur diesel used by tractors, ships from November 1

BEIJING (Reuters) - China said it would stop domestic sales of diesel with sulfur content higher than 10 parts per millions (ppm), typically used by tractors and ships, from Nov. 1, in its latest effort to clean up the nation’s air.

The move, announced just ahead of the winter season when pollution levels spike as more coal is used for heating purposes, could prompt oil companies in the country to ship overseas surplus higher-sulfur diesel in the coming months.

“Companies may have extra high-sulfur diesel to sell as they replace storage tanks with cleaner fuel,” said a fuel marketing manager with PetroChina.

However, the official pointed out that refiners had been mostly expecting this move and were ready to produce diesel adhering to the so-called “national five” standard that allows a maximum sulfur content of 10 ppm.

The challenge will be in the execution of the ban, an oil analyst said, which follows a move earlier this year to stop sales of diesel with more than 50 ppm of sulfur and a 10-ppm cap on diesel used by automobiles.

The government’s quality inspectors can only run random checks, and both dealers and users will be tempted to stick to dirtier and cheaper supplies, said Seng-Yick Tee, oil analyst with consultancy SIA Energy. “Margins could be pinched if you produce more lower-sulfur fuels,” said Tee.

Enforcing the ban on diesel used by fishing boats is likely to be even more difficult, with most of these small consumers using marine gasoil containing 5000-ppm sulfur, traders said.

To cope with the changing fuel quality, refineries have ramped up imports of lower-sulfur crude oil, a reason why shipments of Russian grades into China soared to a record high in September with a 60 percent year-on-year rise.

China’s National Development & Reform Commission said in a statement on Tuesday that it would crack down on the production and distribution of oil products that do not meet government standards, and increase its supervision of major refiners and rural gas stations.

Reporting by Josephine Mason and BEIJING news monitoring desk; additional reporting by Chen Aizhu and Roslan Khasawneh; Editing by Kenneth Maxwell and Himani Sarkar