ANTWERP, Belgium (Reuters) - Essar UK, one of Britain’s biggest oil refiners, will buy more U.S. crude this year after testing it last year, showing how rising output from the United States is squeezing out traditional European suppliers from the North Sea and Africa.
Essar took at least three cargoes U.S. crude in 2017 for its 200,000 barrel-per-day (bpd) Stanlow oil refinery.
“We will continue to take U.S. cargoes because we find value in them,” Chief Executive Officer Srinivasalu Thangapandian told Reuters at a Platts middle distillates conference in Antwerp.
“The blend was quite fine with the existing crudes and yields have also been very stable,” he said.
Stanlow mainly processes North Sea crude grades, including Forties, Ekofisk, Gullfacs, DUC, Brent, while also taking more volumes from West and North Africa. But rising oil prices have spurred U.S. output, challenging the usual suppliers.
U.S. exports hit a record 1.73 million bpd in October, compared with an average 591,000 bpd for 2016, according to Energy Information Administration data.
The $250 million upgrade of Stanlow, which will increase crude throughput by more than 10 percent to 75 million barrels a year, would lift aviation fuel production by 15 percent, the Essar CEO said, adding that the project was almost complete.
“Jet is a big focus area and we’re pushing more into jet because the UK imports a good quantity,” he said, adding Stanlow was close to airports in Manchester, Liverpool, Leeds and Birmingham where demand is expanding.
The refinery, which is shut until March for maintenance, would increase crude throughput and petroleum product production once it restarts, he said, adding that production would stabilise by June.
The upgrade would lead to increased output of diesel and propylene by 10 percent each and gasoline by 7 to 8 percent.
The refinery now produces 16 percent of the Britain’s road transport fuels, including 3 billion litres of gasoline, 4.4 billion litres of diesel and 2 billion litres of jet fuel per year, according to its website.
The upgrade would boost Essar UK’s profit margin by 70-85 cents a barrel from its current average level of $4.50 a barrel above the northwest European benchmark refining margin.
Thangapandian said Stanlow was well positioned to face the IMO sulphur restrictions on shipping fuel coming into force in 2020 because it produced very little heavy fuel oil, although the firm was still assessing the possible impact.
Reporting by Ahmad Ghaddar; Editing by Edmund Blair