Colonial Pipeline said Friday that its shippers have shown interest in purchasing high sulfur interface, commonly known as transmix between grades, which may delay its planned elimination of high sulfur jet and heating oil shipments.
"Many shippers expressed a desire to purchase high sulfur distillate interfaces, which may provide an outlet that will allow Colonial to revise our solution to deal with high sulfur interface," the pipeline operator said in a statement sent to shippers. Colonial is conducting a request for proposals to solicit bids on purchasing the transmix.
One trader active in the jet swaps market said that, whatever Colonial eventually decides to do, the process is taking too long. "They need to expedite a decision on this one way or the other," he said. "Until they do, it really hampers forward paper hedging, as no one really knows what spec will be assessed in 2018."
The pipeline in October said it planned to halt shipments of high sulfur products by January 2018.
However, Friday's statement indicated that timeframe could be revised.
"Colonial will continue with plans to lower sulfur content on the system, but the shippers' desires to purchase the interface may allow for changes to our transition timing," Colonial said. "While hopeful an outlet for the interface can be found, we continue to stress the proposal to limit sulfur to 500 ppm may still be required."
Many were taking a wait-and-see attitude after Friday's announcement.
"I think they are trying to see if there are any better ideas for it," a second source said.
"I think it's too early to say, it will depend on the feedback they are getting," said another.
Kinder Morgan handles a large volume of their transmix, and Motiva handles the Linden, New Jersey, volumes.
"Some accumulates at the Dorsey Junction. Linden is the larger share," another source said.
A distillates trading source said that if Colonial goes with the plan to sell its transmix, the purchaser would likely export it from Linden, New Jersey, with the aim of selling it to a refinery abroad with spare hydrotreating capacity.
Market sources said in October that the high costs of transmix processing were pushing the pipeline to lower sulfur content specs for refined products shipped on the line. Sources also protested that refineries would be unable to meet the more stringent sulfur specs by January 2018 and called for another solution for the mounting transmix costs.
Colonial's proposed eventual elimination of high sulfur products would affect products with a sulfur content greater than 500 ppm, including 54 Grade jet fuel and the 70, 71, 77 and 88 grades of high-sulfur heating oil.
Colonial's 1.16 million b/d distillate Line 2 is the main artery moving distillate product between the Gulf Coast and the Northeast.
