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SAUDI ARABIA: Jubail refinery output will weaken global diesel prices in 2014, says US consultant

(EnergyAsia, April 26 2013, Friday) — Global diesel prices will weaken when state-owned Saudi Aramco starts up its 400,000 b/d refinery in Jubail in Saudi Arabia next year, said US consultant ESAI Energy.

The sophisticated plant will add to the supply of clean diesel in Saudi Arabia and Europe, markets currently supplied by India, said ESAI in its recently published Global Transport Fuel Outlook.

India’s private refiners exported close to 1.2 million b/d of products in 2012, 485,000 b/d of which was diesel. Due to its geography, India’s refiners have access to markets from the Atlantic Basin to Asia.

The penetration of diverse markets is particularly evident in the amount of diesel that India exported to key markets in 2012, said ESAI.

The Jubail refinery, a joint venture between Saudi Aramco and France’s Total, will have the capacity to produce 235,000 b/d of ultra-low sulphur diesel. From being a buyer of 85,000 b/d of diesel from India last year, Saudi Arabia will become a supplier and a competitor.

Additionally, Total is likely to export 70,000 b/d of its share of diesel production from the refinery to Europe, threatening the hold of India’s Reliance Industries on that market, said ESAI. India’s private refiners will have to look to other markets such as South Africa, Latin America and Asia.

“There are direct consequences for all key diesel markets,” said Vivek Mathur at ESAI Energy.

“Jubail will add to the availability of clean diesel to Europe, where demand continues to collapse. In 2014, the growing supply-demand mismatch will weaken the diesel spread to Brent. Unless India’s private refiners cut runs, they will have to target the Asian market. But with China’s emergence as a diesel exporter, competition among suppliers will likewise be bearish for Singapore gasoil spreads to Dubai.”

 

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