JEDDAH/SINGAPORE – A huge increase in Saudi Arabia's capacity to produce cleaner diesel will reduce its reliance on fuel imports from next year, making current suppliers of the fuel to find new buyers in an over-supplied Asian market, said experts. The majority of new refineries and upgrade projects in the Middle East are designed to produce ultra-low sulfur diesel that meets European environmental standards, so they can export some of it to Europe or Asia. The multi-billion dollar investments are also likely to transform fuel trade flows in the Gulf as the extra capacity will allow Saudi Arabia to reduce its diesel imports and even become a net exporter in winter when its own fuel needs are lower. Saudi Aramco's Jubail joint venture with France's Total, the first of a trio of 400,000 barrels per day (bpd) refineries due to open over the next five years, will refine Saudi heavy crude into fuels ranging from gasoil, including diesel, to gasoline and petroleum coke for domestic consumption and export. Jubail alone is expected to increase Saudi cleaner diesel production capacity by around 176,000 bpd once it is fully operational, while two more projects are expected to boost Saudi diesel capacity by a total of 461,000 bpd by 2017. Traders said Saudi Aramco Total Refinery and Petrochemicals Company (SATORP), the joint venture that owns the Jubail refinery, will also be offering cleaner diesel for export as early as the second quarter of next year. “What we might see happen in the short term is Reliance shifting its barrels into tanks, which could depress margins, and eventually it might adjust its production to maximize gasoline or higher sulfur gasoil,” a source in India said. “Saudi Arabia has been a substantial net importer of gasoil for several years, but as Jubail is commissioned in 2013, this trend should reverse itself by the end of the year if not earlier,” remarked Robert Smith, a consultant at FGE Energy. The startup of the three refineries will nearly double Saudi diesel output, helping it become a net exporter in the cooler months. Its diesel imports will not stop completely, analysts say. — SG/Reuters
