* India top diesel supplier to Turkey in 2011
* Italy, Greece boost sales, Russia loses
* Diesel shortage to persist until 2020
* Booming demand to gobble up new refinery supplies
DUBAI, Feb 23 (Reuters) - Turkey's shift to cleaner
diesel has cut adrift its former top supplier Russia and opened
up its booming market, with a projected near decade-long diesel
deficit, to imports from India and Europe.
Turkey moved to ultra low sulphur diesel (ULSD) in 2011 in
line with European Union standards and Russia's older
refineries, although hurriedly modernising, are geared to lower
grade fuel. Russia had accounted for more than half of Turkey's
diesel imports.
Energy-hungry Turkey consumed 300,000 barrels per day (bpd)
of diesel in 2011, posting a 5.7 percent rise compared with 2010
and around 170,000 bpd of that was imported, Turkish industry
figures and data from its energy watchdog EPDK showed.
But Russian diesel imports slumped to less than 40,000
barrels per day (bpd) last year from the 110,000 bpd in 2010.
Instead India, whose competitive refining economics enables
it to offer cheaper cargoes, emerged as a winner, accounting for
around 25 percent of Turkey's near 170,000 bpd of diesel imports
in 2011.
"Turkey constitutes a superb market for various ULSD
exporters," said Cuneyt Kazokoglu, research associate at FG
Energy, whose upcoming study on Turkey's oil market will show
Turkey's diesel shortage will prevail until 2020, leaving it
reliant on imports.
The Mediterranean market is generally short of middle
distillates but Turkey's strong appetite and geographical
proximity make it an attractive outlet for refiners in Greece
and Italy.
"Greece, being close by and not a major diesel consumer,
would have some advantage in terms of placing marginal product
into Turkey," said Stephen George, principal consultant at KBC
Energy Economics said. "Greece has been upgrading its refineries
and will have some marginal distillate to export, as does
Italy."
Italy and Greece followed India as the second and the third
biggest diesel suppliers to Turkey in 2011 by exporting around
28,330 bpd and 25,044 bpd, according to EPDK figures.
Supplies of clean distillate from the Middle East will also
be on the rise with major producers like Saudi Aramco and Abu
Dhabi National Oil Company (ADNOC) looking to complete their
upgrades and start selling ULSD barrels.
"We're looking for a new outlet and Turkey looks like they
will be importing a lot of diesel in the years to come. It could
be a good match for us," a Gulf-based middle distillates trader
said.
But Russia is also upgrading its refineries, George from KBC
said, and added it could recover market share.
"Russia is starting to invest in its downstream sector and
likely will start to have higher quality distillates for export
to the Black Sea markets, which would include a significant part
of the Turkish hinterland. So I wouldn't completely write Russia
off," he said.
CHRONIC SHORTAGE
Turkey offers a lucrative import market as its structural
diesel shortage is expected to persist, especially after the
global economic crisis of 2008 slashed its ambitious refinery
investment plans.
In 2006, there was a drive which involved several companies
such as Italy's ENI, Turkey's Calik Energy, Austria's
OMV, Indian Oil Corp and Azeri SOCAR to
build three new oil refineries in Turkey's southern oil terminal
Ceyhan in a bid to turn it into an energy hub.
Currently, Azeri SOCAR's $5 billion refinery investment,
along with Turkey's Turcas and an upgrade project by
Tupras which will add around 53,000 bpd of diesel are the main
refinery investments.
But demand, boosted by robust vehicle sales and increasing
shift towards diesel-consuming cars, is expected to gobble up
the supplies from both.
"When both projects (Tupras upgrade and SOCAR refinery)come
onstream around 2014/2015, the supply/demand gap will narrow to
less than half of today's level but only temporarily, and widen
again thereafter on the back of rising demand," Kazokoglu said.
Diesel demand jumped by some 50 percent between 2000 and
2010, when Turkey's fuel demand only rose by a mere 5.3 percent.
The next decade is set to be another growth story, albeit at
a slower rate, estimates from Tupras show.
By 2020, the refiner estimates diesel demand to rise to 18
million tonnes, from an estimated 15.8 million tonnes in 2015
and 14 million tonnes in 2010, posting a near 30 percent between
2010 to 2020, when the total fuel demand is expected to rise
only by 14 percent.
"Turkey's requirement could be met with imports of course.
But such a shortage could even justify a new refinery," a
Turkey-based oil industry source said.
(Additional reporting by Evrim Ergin in Istanbul, Editing by
William Hardy)
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