LONDON, Dec 5 (Reuters) - Portuguese oil company Galp Energia began testing a new diesel producing unit this week at its 220,000 barrel per day Sines refinery near Lisbon and aims to start production before the end of the year, trading sources said.
The start up of this new unit will allow Portugal to become a diesel exporter, reversing its current position of importer.
The installation at Sines of a new hydrocracking unit, which produces middle distillates, is part of an overall conversion project to maximise diesel production, which began in 2008.
The conversion will not significantly increase the refinery's total capacity, as the rise in diesel output is at the expense of other products. Fuel oil production at Sines will fall by 1 million tonnes per year.
Although testing has begun it is still too soon for a spot sale of diesel, one trading source said.
"They are already doing the testing so as to begin production as soon as possible," a Portuguese industry source said.
A Galp spokesman said "all process units are in the final stage of commissioning with the start of production forecast to take place before the end of the year".
Portuguese diesel exports outside of Iberia are expected to be around 1 million tonnes per year after the start up, said another Portuguese industry source, 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, is also undergoing a conversion but on a much smaller scale.
Spain recently became a diesel exporter after multiple refinery upgrades and a drop in domestic demand. (Reporting by Julia Payne and Andrei Khalip; Editing by Anthony Barker)