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19 June 2019 
 
 

Algerian Fuel Oil Well-Positioned 

Ahead of IMO-2020 
 
Algerian state refiner Sonatrach is set to be one of the key beneficiaries of the MARPOL IMO-2020 
sulphur cap on marine bunkers. Low sulphur fuel oil (LSFO) exports from Algeria’s ports of Skikda 
and Arzew will be highly sought after by fuel oil traders seeking to blend compliant 0.5% sulphur 
bunkers.  
 

Skikda, Arzew LSFO Flows  

 
The Skikda refinery is the largest on the African continent with a nameplate capacity of 350,000 
b/d. The primary feed is the domestic light sweet Saharan Blend crude stream and the refinery 
accordingly produces low density, low sulphur fuel oil.  
 
In 2018, low-sulphur straight run exports from Skikda port were around 400,000 mt per month; in 
the first five months of this year outflows have been relatively stable, also around 416,000 mt per 
month. Skikda accounts for most of the country’s fuel oil exports. 
 
 
 19 June 2019 ​Algerian Fuel Oil Well-Positioned Ahead of IMO-2020 2 

The Sonatrach refinery at Arzew also exports LSFO but the volumes are far smaller; around 
118,000 mt per month on average in 2018. This has fallen to around 80,000 mt per month in 2019, 
during January-May.  
 

 
Skikda and Arzew LSFO exports
 

High-quality Skikda output 

 
The Skikda output is a high-quality straight run fuel oil​.​ It is low in density, sold with a .900d to 
0.930d tolerance but normally around .910d (24 API). Sulphur is typically 0.2%, and sediments and 
metals are very low.  
 
With the usual density and sulphur specifications a long way from the RMG bunker constraints 
(.991d and 0.5% respectively), the stream lends itself well to being blended with higher density, 
higher sulphur grades of fuel oil, perhaps even certain slurry streams. 
 

 
Top destinations for Skikda and Arzew LSFO - Last 12 months
 
The stream is processed as a refinery feedstock. Skikda exports over the past 12 months show that 
over 70% of it (3.7mn mt) went to the US – with Chevron’s Richmond and Valero’s St. Charles 
refineries taking almost half of the total export volume between them.  
 
 19 June 2019 ​Algerian Fuel Oil Well-Positioned Ahead of IMO-2020 3 

 
India is the second biggest receiver, but with only 7% of the volume, that is, just under 350,000 mt 
over the same 12 month period. This has gone to Reliance’s 1.24mn b/d refinery at Jamnagar. 
 
In terms of freight, LSFO is typically lifted from Skikda (and Arzew) by Panamax and Aframax 
tankers, and the cargo clips are generally 50,000-90,000 mt. Occasionally smaller 30,000 mt 
cargoes are exported on Handymax freight and these tend to trade locally in the Med. 
 
Vortexa data shows cargoes chartered by a variety of US buyers including ExxonMobil and 
Chevron, as well as Reliance for Jamnagar; indicative of FOB terms of sale. 
 

Blending Skikda to 0.5% Bunkers 

 
Market sources say the 0.5% to 3.5% fuel oil differential is around $200 for the calendar 2020 
monthly strip. For illustrative purposes, Vortexa has devised a theoretical blend of the expensive 
Skikda stream with cheaper components, that approach the RMG contractual specifications. 
 

 
In the calculation above, the Pembroke slurry increases the density of the mix, whilst not being too 
high a proportion to make the final blend breach the aluminium and silicon allowance. 
 
Another refinery feedstock, light cycle oil (LCO), cuts down the viscosity to below 380cst. Finally, a 
small volume of relatively cheap HSFO increases the overall blend’s sulphur from an otherwise 
0.35% to the maximum 0.5% limit. Giveaway on specifications usually means a giveaway of value. 
In this example the density giveaway cannot be cut further without over-doing the metals.  
 
Accordingly, one can expect that the Skikda stream will increase in value as very low sulphur 
streams are pulled into the blending pool for 0.5% bunkers and effectively price itself out of the 
feedstock market. In such a scenario, it will likely be more economical for US refiners to process 
domestic crudes instead.  
 
 
 
 
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