Saudi refinery to start exports by 2013

Singapore: A new refinery in Saudi Arabia that is a joint venture of Saudi Aramco and France’s Total is likely to start diesel exports from the second quarter of next year and is targeting the European market, industry sources said on Friday.

Both companies have started testing the 400,000 barrels per day (bpd) refinery at Jubail, and have indicated to potential buyers that diesel exports are likely to start by the second quarter next year, they said.

Saudi Aramco Total Refinery and Petrochemicals Company (SATORP) has fired up the boilers at the plant, designed to reduce Saudi reliance on imports and meet rapidly rising fuel demand, sources have said.

This indicates the refinery is expected to be fully operational ahead of an earlier schedule of December next year, traders said.

Aramco and Total will jointly market the diesel, though volumes are not clear yet, a source close to the matter said.

“There’s no clear picture yet, but marketing from both sides will own a share (of volumes),” the source added.

The majority of the diesel grade will have sulphur content of 10 parts per million (ppm), aimed at the European market, the source said. The rest will have sulphur content of 500 ppm, a grade widely used in the Middle East and imported by Saudi Arabia.

“(Aramco’s) diesel imports will likely reduce once the refinery has stable exports, so this will probably change the game plan for them next year,” a Gulf-based trader said.

Top oil exporter Aramco relies heavily on imported gasoil, especially in summer, when the fuel is used for power generation. It bought at least 750,000 tonnes for the whole of June and July this year.

While the new refinery’s exact diesel output is not known, it could be about 322,000 tonnes a month, taking as a yardstick an industry average of about 20 percent of total production to be diesel.

The Jubail refinery will be the second in the Middle East to target the European market with regular diesel exports.

Abu Dhabi National Oil Co (Adnoc) plans to offer cleaner diesel fuel for export through its 2013 term contract, making it the first Gulf producer to export ultra-low sulphur diesel outside the region on a term basis.

It will also help position the Middle East as a viable competitor to India, now the main supplier of diesel to Europe from Asia, as Europe faces a growing shortfall of diesel due to lower refinery use rates.

Saudi Aramco is building two more refineries besides SATORP; one near the Red Sea city of Yanbu, with China’s Sinopec, and another at Jizan, near the border with Yemen. All will produce cleaner fuels and some petrochemicals.