Power play

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The new Qatari gas oil is super-clean, meaning it can be diluted with lower quality oil and still produce large volumes of relatively clean diesel.

With the launch of the Ras Laffan facility, Qatar has sets its sights on the bulging middle distillates market. However, the tiny Gulf state may struggle to rival the muscle of export giants China and India.

The new oil refinery in qatar is pumping nearly 80,000 barrels per day of middle distillates, piling yet more pressure on to a market suffering serious oversupply.

The 146,000 barrels per day (bpd) Ras Laffan plant currently produces 24,000 barrels per day of gas oil and 52,000 bpd of kerosene and jet fuel. Global recession has hit these markets hard, leaving millions of barrels on ships waiting for buyers.

Refining profits for making middle distillates in Asia have slumped. Profits per barrel stand at around $8, a fifth of the $40 seen last year.

Even more bearish for diesel markets is that the new Qatari gas oil is super-clean, meaning it can be diluted with lower quality oil and still produce larger volumes of relatively clean diesel.

“This stuff is wonder-blend,” said Al Troner, president of Asia Pacific Energy Consultancy. “It is coming at the wrong time for the diesel market; you’ve got to wonder how quickly the market is going to be able to recover to absorb this high-end diesel.”

While oil prices have hovered at around $75 a barrel on the view the global economy will pick up, and with it crude demand, there have been few signs of a recovery in demand for diesel, the transport fuel for trucks worldwide. Most of the new Qatari supply would probably find its way to Europe, oil traders said.

Qatar will also soon boost its clean diesel supply even further with its new 140,000 bpd plant to produce gas to liquids, due online by the end of 2010. The two plants combined would pump around 60,000 to 65,000 bpd of ultra-clean diesel, Troner said.

Until now, Qatar had been a net importer of gas oil.

New plants like the Ras Laffan facility are also going to have to compete with China, which has been running its refineries at full throttle in recent years.

A growing share of Chinese refiners’ production has been sold overseas this year as fuel stocks have swelled. Gasoline exports hit the highest in 2.5 years in August, and diesel exports more than doubled from traders’ estimates in the same month, Chinese customs data showed.

“This is a concern even if demand picks up; globally what are you going to do with this monster,” a middle distillates trader based in Asia said. “China will eat you alive, and don’t forget you also have the giant refining complex of Reliance; this is very apocalyptic type stuff.”

Indian refiner Reliance Industries, which has doubled the size of its refining complex at Jamnagar to 1.24 million bpd, plans to add another 140,000 bpd in capacity in the next six to eight months.

Ras Laffan processes oil liquids that form at the surface when gas is produced for Qatar’s new liquefied natural gas facilities.

The biggest product stream at the plant will be the petrochemical feedstock and gasoline component naphtha, with 61,000 barrels per day.

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