EU duty-free jet fuel sets new battle for world refiners

Wed Nov 13, 2013 11:25am EST
 
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By Ron Bousso

LONDON (Reuters) - U.S. refiners are expected to ship large volumes of jet fuel across the Atlantic starting in 2014 after the European Union scrapped an import duty on the product, opening a new battleground for the world's largest refineries, traders said.

U.S. Gulf refiners that have been pumping at record levels will offer stiff competition to established exporters to Europe from Asia and the Middle East, long exempt from a 4.7 percent duty due to a preferential trade status.

"The removal of the tariff will definitely make jet fuel from the United States more competitive," said Andrew Reed, analyst from the U.S.-based ESAI Energy consultancy.

Despite diminishing demand for jet fuel due largely to more-efficient aircraft engines, Europe has been a key market for refineries in Gulf Arab countries, India and South Korea.

In 2012, Europe imported around $20 billion of jet fuel, or one third of its total jet fuel needs of 1.2 million barrels per day (bpd), according to the International Energy Agency and traders.

However, the European Commission's move this month to remove duty on all jet fuel imports "regardless of their country of origin" opened Europe to the U.S. Gulf Coast refiners that benefit from proximity as well as cheap and abundant shale oil.

The decision is largely expected to be approved by the year's end, an EU official said.

U.S. exports to Europe have risen sharply in recent years but remain marginal at around 20,000 bpd in 2012, according to the U.S. Energy Information Administration.   Continued...