Recent Developments in Russian Production and Exports of Low-sulfur Diesel Fuel: Can Russia Satisfy Europe's Growing Import Requirements?

Spurred by tightening product standards in Europe, the principal market for their exports of diesel fuel (gasoil), Russian refineries are now producing (and exporting) significant amounts of low-sulfur diesel fuel: production of low-sulfur grades reached 12.3 million metric tons (mt) (252,000 barrels per day [bd]) in 2005, or 20.5 percent of Russia's total diesel output.

* The low-sulfur diesel moves to export destinations entirely by rail to avoid being blended with Russia's more generic high-sulfur product (exported largely through the refined product pipeline system). The low-sulfur exports move almost entirely to Baltic ports, with low-sulfur gasoil now comprising up to a third of total Baltic Sea gasoil exports (supplied by both Russian and non-Russian refineries).
* Total Russian product exports (and their sulfur composition) to Europe remain uncertain and are subject to anticipated rationalization of the refining industry. With refinery restructuring, refinery operations are expected to shift closer to domestic demand trends. Lower product exports are likely to result, but a greater proportion of exports is likely to consist of low-value residual fuel oil.
* Still, Russian gasoil exports are likely to drop only slightly from 2005's all-time high of 33.9 mt (695,000 bd). By 2010, exports are expected to still be around 32.4 mt (665,000 bd)-insufficient to meet Europe's increased anticipated import requirements.

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