* EU scraps jet fuel import duty, opens door to US refiners
* Middle East, Asian refiners set to lose market share
By Ron Bousso
LONDON, Nov 13 U.S. refiners are expected to
ship large volumes of jet fuel across the Atlantic starting in
2014 after the European Union scrapped an import duty on the
product, opening a new battleground for the world's largest
refineries, traders said.
U.S. Gulf refiners that have been pumping at record levels
will offer stiff competition to established exporters to Europe
from Asia and the Middle East, long exempt from a 4.7 percent
duty due to a preferential trade status.
"The removal of the tariff will definitely make jet fuel
from the United States more competitive," said Andrew Reed,
analyst from the U.S.-based ESAI Energy consultancy.
Despite diminishing demand for jet fuel due largely to
more-efficient aircraft engines, Europe has been a key market
for refineries in Gulf Arab countries, India and South Korea.
In 2012, Europe imported around $20 billion of jet fuel, or
one third of its total jet fuel needs of 1.2 million barrels per
day (bpd), according to the International Energy Agency and
However, the European Commission's move this month to remove
duty on all jet fuel imports "regardless of their country of
origin" opened Europe to the U.S. Gulf Coast refiners that
benefit from proximity as well as cheap and abundant shale oil.
The decision is largely expected to be approved by the
year's end, an EU official said.
U.S. exports to Europe have risen sharply in recent years
but remain marginal at around 20,000 bpd in 2012, according to
the U.S. Energy Information Administration.
Most of this volume goes to Britain, where airlines avoid
duty on the jet fuel if used on aircraft heading out of the
European Union, traders said.
"We are already seeing increased jet fuel exports to Europe
and that just opens the gate wider. The U.S. has a steady
surplus of jet fuel and as Latin America needs less, refiners
will want to place it in Europe," ESAI's Reed said.
"South Korea has the most to lose. Those long-haul
deliveries are at risk," he added.
Chinese refiners, flush with surplus product, may also seek
a foothold in Europe.
WINNERS AND LOSERS
U.S. Gulf refiners, including Valero Energy Corp,
Exxon Mobil, Marathon Petroleum Corp and Royal
Dutch Shell Plc, are no newcomers to the transatlantic
trade route, which has seen diesel flows reach record levels
this year at above 2 million tonnes a month.
Neither are they strangers to competing in Europe's diesel
market with refiners such as Reliance Industries Ltd,
which operates the world's biggest refining complex in western
India at 1.2 million bpd, or Middle Eastern plants.
Those include the recently launched 400,000-bpd Jubail
refinery, a joint venture between Total and Saudi
"Valero has been working to expand its production of
distillates, including jet fuel but also diesel, because of
increasing demand for distillates here in the U.S. and
especially abroad," spokesman Bill Day told Reuters.
"We have the flexibility to take advantage of market
conditions as they present themselves," he added.
Though import volumes will not change due to the duty
reform, the price of jet fuel in Europe will likely decrease due
to growing competition from outside. That will further pressure
the region's refiners, which have seen profit margins slump in
2013 due to large diesel imports and weaker demand.
"This will give Europe another source of jet fuel and could
potentially bring down prices in Europe," a trader said.
Jet fuel flows from the United States will likely fluctuate
in 2014 because European traders and airlines have already
locked in most term deals with Middle Eastern and Asian
"I imagine there will be some fluctuations until a pattern
emerges, probably in 2015," he said.