"Full impact to the products market will likely be felt in H2 2023," FGE's Asia refining head Ivan Mathews said. The Al Zour refinery is operated by Kuwait Integrated Petroleum Industries Company, a subsidiary of Kuwait Petroleum Corporation, which did not immediately respond to a request for comment.
DIESEL AND JET FUEL Al Zour is working on producing diesel that meets European specifications, one of the sources said. Annual diesel exports could reach up to 7 million tonnes (143,000 bpd), while jet volumes could hit 4.5 million tonnes (97,000 bpd) once the refinery reaches full capacity. Most of the diesel supplies will be directed towards Europe, while exports to the Americas and Oceania are also rising, according to trade sources and Kpler data.
Oil majors, short of products in Europe after the embargo on Russian oil, are keen to lift Kuwaiti cargoes, the first source said. Europe is short of about 3 million tonnes per month (745,000 bpd) of Russian diesel after the EU embargo, based on Refinitiv estimates.
"Diesel inventories have been tight for much of the past 18 months, but a slew of refining capacity additions pushing 2 million bpd is expected this year in regions ranging from Mexico to the Arab Gulf to North Africa means more refined product supply," RBC Capital's Mike Tran said in a note. FUEL OIL
The surge in very low sulphur fuel oil (VLSFO) exports from Kuwait has already depressed the product's margins in Asia to seven-week lows. Kuwait stepped up VLSFO exports early this year by offering more cargoes at bigger volumes, traders said. The refinery has issued at least 10 VLSFO supply tenders, including seven spot cargoes and three semi-term tenders that each offered one cargo per month for three months. At full capacity, Al Zour can export between 400,000 and 500,000 tonnes of VLSFO per month (85,000 to 106,000 bpd), meeting 8% to 10% of monthly fuel oil demand in Asia, a region that is structurally short on finished 0.5% VLSFO products. "We anticipate most of Kuwait's VLSFO will flow to Singapore as it is a key maritime hub for fuel replenishments," Refinitiv analyst Emril Jamil said. Asian refiners are unable to match Kuwait's production volume, while Chinese refiners have the production capacity but supply only to their domestic bunkering market, he added. More of Kuwait's VLSFO is also expected to be blended at bunkering centre the United Arab Emirates' Fujairah, traders said.
NAPHTHA
KPC exported about 150,000 tonnes of light full-range naphtha from Al Zour between November and January, mostly to Asian countries like South Korea and Japan, data from Vortexa and Kpler showed. Shipments are also going to other destinations in Asia like Taiwan, Singapore and Thailand.
This volume could rise to 3.5 million tonnes per year (86,000 bpd) at full capacity, the first source said, which means if the refinery exports the entire volume to Asia, it will be able to meet half the region's import demand. Asia is structurally short of naphtha and typically depends on imports from the Middle East, Russia, Europe and the United States, which account for an average 6 million to 7 million tonnes of monthly naphtha supplies to the region. The company is expected to ship out 176,000 tonnes of naphtha in February from Al Zour, while total exports in the month are likely to hit 407,000 tonnes, Kpler data showed. The refinery's second phase is also under study for a residue fluid catalytic cracker and a petrochemical complex. Once onstream, it will process fuel oil and naphtha from Al Zour, the first source said. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Kuwait crude exports Kuwait refined products exports Low-sulphur fuel oil margins at six-week lows Kuwait diesel, jet fuel exports Kuwait's naphtha exports excluding Al Zour ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Reporting by Florence Tan and Jeslyn Lerh in Singapore, Mohi Narayan in New Delhi;)
Jeslyn.Lerh@thomsonreuters.com; Mohi.Narayan@thomsonreuters.com))