UAE diesel exports rise as local demand falls

Diesel consumption growth has stagnated across the Gulf, which last year led the world in the rate of demand growth.

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Diesel exports from Abu Dhabi have picked up sharply as supplies that were previously diverted to fuel the once-booming local construction sector are now being sent abroad, according to a new study. Exports of the fuel, used in lorries, compressors and other heavy equipment on construction sites, hit a two-year high in May, and will spike again in August, according to estimates by PFC Energy, a Washington-based consultancy. The UAE consumed nearly all the diesel produced at Abu Dhabi's two refineries for much of last year, but delays at property developments and industrial projects have shrunk the domestic market, pushing up exports, analysts say. "A 34 per cent expansion in Abu Dhabi's distillate market last year amounting to a 15,000 bpd increase seems like a distant memory," PFC said. Over the course of the year, exports are expected to double to an average of 16,000 bpd, from 8,000 bpd last year. Domestic consumption will still grow by 2,000 to 3,000 bpd this year, but the Abu Dhabi National Oil Company (ADNOC) has expanded diesel production capacity by 10,000 bpd. ADNOC has offered diesel cargoes to international markets several times this year. Late last month, traders told Reuters that ADNOC had tendered two August shipments, comprising about 560,000 barrels. "Normally ADNOC is digging through the market for any fuel it can find in the summer," one trader said. "It is usually very tight at this time of year." Total consumption of all oil products, including diesel, petrol and jet fuel, is expected to increase by 2 per cent in the UAE, a sharp drop from the 11 per cent growth registered last year. The new figure also represents a downwards revision of forecasts: in April, PFC expected UAE demand to increase by 4.1 per cent in 2009. Consumption will continue to grow in Abu Dhabi, but will shrink by 2 per cent in Dubai and the other emirates as a result of the economic recession and a fall in the population of expatriates, PFC said. Diesel consumption growth has stagnated across the Gulf, which last year led the world in the rate of demand growth. Qatar's market, which was growing by 30 per cent per year, will shrink by 1,000 bpd, while Oman will also fall. Saudi Arabia, which saw consumption increase by 35,000 bpd last year, is now forecast to register an increase of 10,000 bpd. In Iran, where the market grew so quickly that the country began importing fuel, demand has fallen by 50,000 bpd, and imports have ceased altogether. cstanton@thenational.ae