LISBON Jan 17 (Reuters) - Portuguese oil company Galp Energia expects its new diesel unit that will make Portugal a net diesel exporter to reach maximum capacity this quarter after it started commercial output at its Sines refinery on Jan. 10.
It said the hydrocracker, which can process up to 43,000 barrels of vacuum gasoil per day, is operating "at normal processing conditions, having already reached a commercial production level with a utilisation rate above 60 percent."
"Production stabilisation at the maximum capacity is expected during the current quarter," Galp said in a statement issued late on Wednesday.
Net exports of diesel will help Portugal reduce its trade deficit as the country struggles through its worst recession since the 1970s, from which it hopes to emerge next year.
Galp said the upgrade, which cost 1.4 billion euros ($1.9 billion), will allow it to improve refining margins from this quarter and boost the refining system's profitability.
The 220,000 bpd Sines refinery near Lisbon will retain its overall capacity as the rise in diesel output is at the expense of other products, mainly fuel oil.
Trading sources said earlier the unit will allow Portugal to export around 1 million tonnes of diesel per year outside of Iberia, with roughly the same amount allocated to the Iberian market from the new production.
Galp's middle distillates output in 2011 was 4.5 million tonnes and is expected to rise by 2.5 million tonnes with the Sines conversion alone. Galp's second refinery, Matosinhos, has also undergone a conversion but on a much smaller scale.
Spain recently became a diesel exporter after multiple refinery upgrades and a drop in domestic demand. ($1 = 0.7521 euros) (Reporting By Andrei Khalip; editing by James Jukwey)