State-owned Abu Dhabi National Oil Co (ADNOC) plans to offer cleaner diesel fuel for export through its 2013 term contract, a delay of about a year from its initial target, industry sources said on Wednesday.
The move would make ADNOC the first Middle Eastern producer to export ultra-low sulphur diesel outside the region on a term basis, with most of the shipments expected to go to Europe.
It will also help position the Middle East as a viable competitor to India, which is now the main supplier of diesel to Europe from Asia.
ADNOC’S plan for regular shipments comes as Europe faces a growing shortfall of diesel and jet fuel, thanks to lower refinery use rates.
The company plans to offer diesel cargoes with 10 parts-per-million (ppm) sulphur to export customers for term contracts for next year, traders said.
It has been offering the cleaner diesel fuel for exports in the spot market since late June.
ADNOC had term contracts to export about 600,000 tonnes of gasoil a year with a higher sulphur content of 5,000 ppm until the end of last year.
This year, it skipped term exports of gasoil as it was trying to meet specifications required in new markets, especially in Europe, but faced some unspecified difficulties.
Diesel exports to Europe have to meet very stringent criteria, among them the cold weather properties of the fuel used as heating oil in winter.
While ADNOC is only able to meet the summer specifications of diesel in Europe now, it aims to meet winter specifications by the middle of next year, a source close to the matter said.
This will make ADNOC’s diesel cargoes more attractive for traders targeting the European market.
Volumes available for term exports have not been firmed up yet, the source added.
The company might continue to supply 500 ppm sulphur diesel to domestic refiners ENOC and Emarat, due to the uncertainty in a fuel regulation shift within the United Arab Emirates (UAE), traders said.
Abu Dhabi, the main crude producer in OPEC member the United Arab Emirates, planned to switch its diesel supply solely to the ultra low-sulphur variety by 2012, under a strategic plan running until 2013, in line with a global shift towards cleaner fuel.
But this is still awaiting government approval and is likely to be delayed to next year, the traders added.