Novorossiysk Gasoil Exports in Q1 Hit Multi-Year High
Vortexa Market Research Team
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Gasoil exports from the Russian Black Sea port of Novorossiysk rose to a multi-year high in the first quarter of 2019, as reductions in Russian duties applied to clean products supported outbound flows, including to more atypical destinations.
More than 3.1mn mt of gasoil — which includes ultra-low sulphur diesel (ULSD) — left the port of Novorossiysk during January-March, higher than any quarter seen by Vortexa since 2016. Novorossiysk exports almost half of all the gasoil exported by Black Sea Ports.
Lower duties lift exports
Novorossiysk gasoil exports from the Sheskharis and IPP terminals hit a multi-year high of close to 1.1mn mt in February. January and March exports were also high in the 900,000 mt - 1mn mt range each month. In contrast, gasoil exports from the Black Sea port averaged less than 900,000 mt per month during 2018.
Novorossiysk gasoil exports (mt)
One of the likely drivers behind the increased gasoil flows this quarter is a reduction in Russian duties applied to clean product exports. Russian tax policy has on the whole incentivised its refiners to upgrade/install conversion units to reduce fuel oil exports and boost clean product output in recent years. But the decline in export duties has been especially acute in recent months.
During the first quarter of 2019, clean product export duties were on average more than 35% lower than at the end of 2018, and more than 25% lower than a year earlier, according to information from the Russian Finance Ministry. Lower duties also boosted naphtha exports from Novorossiysk this year.
The reported December restart of Neftegazindustriya (NGI)-owned Afipsky refinery after maintenance during the fourth quarter may also have supported first quarter exports. The refinery is a major supplier of gasoil exported from Novorossiysk.
Exports to the Med
Novorossiysk accounts for almost 10% of all the gasoil/diesel delivered to Mediterraenan/Black Sea ports, making it the biggest single supplier in the region. It competes with the Russian Black Sea port of Tuapse, Greece’s Agioi Theodoroi and the Italian ports of Sarroch, Santa Panagia and Milazzo.
Arrival of Novorossiysk gasoil into the Mediterranean region (mt)
Turkey remains by far the biggest receiver of Novorossiysk gasoil so far in 2019, as was the case in previous years. The country received almost 1mn mt of gasoil in the first three months of 2019, down slightly from the previous quarter but more than 30% lower on the year.
In the coming months, Turkey’s gasoil imports could be tempered further by a ramp up in production at Socar’s recently launched Star Refinery in Aliaga. However, given that Turkey still is one of the biggest gasoil/diesel importers in the Mediterranean region, and its proximity to Novorossiysk, the Baltic port is expected to remain a major supply source.
As Novorossiysk’s total gasoil exports rise, so does the volume delivered to less traditional outlets. Cargo arrivals into west African outlets such as Mauritania, Senegal, Guinea have picked up this quarter.
The MR tanker Horizon Thetis was last seen floating offshore Conakry, Guinea laden with around 35,000t gasoil loaded from Novorossiysk in March. Meanwhile, another MR tanker carrying Novorossiysk gasoil is heading to Argentina. The Nord Skate loaded around 46,000t on 13 March and is expected to reach Campana in mid-April.