Bahrain Petroleum Co (Bapco) has signed a rare term deal for ultra low sulphur diesel with at least one buyer for this year, joining other Middle East refiners competing to produce fuel that meets European standards, traders said.

Refiners such as Saudi Aramco, Abu Dhabi National Oil Company (Adnoc) and Qatar Petroleum produce and export the ultra low sulphur fuel, and with East African countries tightening diesel specifications from this year, there is now more incentive to adjust production to match demand.

“It makes sense for them to do this if you look at the main demand outlets like Europe and Africa. They are all on low sulphur,” a Gulf-based trader said.

While Bapco has sold diesel with 10 parts per million (ppm) sulphur before, this could be the first time it has signed a term contract for this fuel grade, traders said.

Bapco signed a January to December 2015 term contract with Emirates National Oil Company (Enoc), at a premium of about $2.50 a barrel to Middle East quotes, traders said, adding that another buyer might also be involved.

Bapco and Enoc not typically comment on their business activities.

The volumes finalised for the deal could not be confirmed but are likely lower than Bapco’s term volumes for its 500 ppm sulphur gasoil grade, traders said.

“If this works out well, it could be something (Bapco) will consider on a regular basis for next year,” a source close to the matter said, referring to Bapco’s term exports of 10 ppm sulphur diesel.

The Bahrain company has existing term agreements to sell 500 ppm sulphur gasoil for 2015 with several buyers.

Enoc is likely shipping the fuel to its own system in the USE. Its requirements for low sulphur diesel increased following a move towards Euro 5 standards in the region in mid-2014, one of the traders said.

Source: Trade Arabia