State-controlled Saudi Aramco's trading arm ATC is set to start loading ultra-low sulphur diesel (ULSD) cargoes for May and June from Aramco's 400,000 b/d Jizan refinery on Saudi Arabia's Red Sea coast, according to market sources. This suggests that the refiner has started commercial production of the product since at least this month.
Market sources said that around 250,000t (1.86mn bl) will be loaded in May — one Long Range (LR) 2, which has the capacity of more than 75,000t and two LR1s with a capacity of 55,000t — and around 250,000-300,000t of ULSD will load from the refinery next month. Aramco has yet to respond to a request for comment.
So far, ship tracking data from Vortexa shows that ATC has already booked the Tavistock Square to load 30,000t on 27 May. Market participants expect the ULSD cargoes to head to Europe, but so far Vortexa shows east Africa as the final destination.
Meanwhile, shipping fixtures show that ATC placed the same tanker on subjects to load 90,000t of ULSD instead from Jizan on 23-24 May to head to east Africa. ATC also placed the Torm Sara on subjects to load 60,000t of ULSD from Jizan on 22-23 May to Egypt's Ain Sukhna, according to fixtures lists.
Arbitrage to Europe from east of Suez has been uneconomical since mid-April because of the significantly narrower gasoil east-west spread, or front-month Singapore gasoil swaps against front-month Ice gasoil futures. But given the refinery's strategic location, flows from Jizan to Europe and Africa are more economical than from other exporting countries like south and east Asia, which could impact the volumes out of India, a leading exporting country.
Market sources said this suggests that Aramco has likely only been able to commission its diesel production units fully this month — most likely hydrocracking units — as it has been producing high-sulphur diesel (HSD) since at least February 2021. This has not been confirmed by the firm.
The refinery began operations last year and has been operating at 50pc of capacity since at least December. It is unclear what capacity it is operating at the moment. But at full capacity the facility will produce more than 200,000 b/d of ULSD. It can also produce more than 70,000 b/d of gasoline and more than 48,000 b/d of fuel oil at full capacity. A gasoline cargo loaded in mid-March from Jizan — the Altesse — which suggests that the isomeration and reformer units had already started operations at that point. But this could not be confirmed with the refiner.
Jizan is an integrated refinery and is one of the country's most complex, producing low-sulphur fuels, petrochemicals from naphtha as well as housing gasification and power facilities. It began tests in January 2021 after an eight-year build, having been planned for start-up in 2018.
