Iraqi SRFO moving via Syria is no longer theoretical — and Europe’s refiners are already positioning around the yield economics.
A proxy for Iranian as opposed to an Iranian proxy.
Trucking by road from Iraq to Syria and then having a tanker load these cargoes from Banias has now been proven as a concept.
100,000 metric tons loaded on an Aframax is the collective effort of 4,000 trucks, each doing a 15-hour trip from Basrah.
We’ll have done five 100kt loadings by end this month.
What happens thereafter…
| ARRIVAL | VESSEL | QTY | CGO | LAYDAYS | LOAD PORT | RATE | CHARTERER |
|---|---|---|---|---|---|---|---|
| DISCHARGED | ALBERTA | 100 | SRFO | 07-09/05 | SYRIA | RNR | ARAMCO-SUEZ STS! |
| 22 MAY | MINERVA VERA | 100 | SRFO | 12-14/05 | SYRIA | RNR | ARAMCO-SUEZ STS! (POSS MED/NWE DISCHARGE!) |
| 22 MAY | MINERVA KYTHNOS | 100 | SRFO | 17-19/05 | SYRIA | O/P | VITOL-SUEZ STS! (POSS MED/NWE DISCHARGE!) |
| 22 MAY | MINERVA ALICE | 100 | SRFO | 17-19/05 | SYRIA | RNR | ARAMCO-SUEZ STS! (POSS MED/NWE DISCHARGE!) |
Because SOMO will always prioritise selling to another Oil company, Aramco got first bite of the apple.
And because of their short into the Red Sea, they are better positioned to roll the dice on a barrel that very few can take advantage of beyond throwing it into a furnace themselves.
The first 100kt lifting on Aframax ‘Asahi Princess’ was one such cargo.
It went to those who took it straight into their HDUs:
Repsol at Tarragona, Vitol at Sarroch and now the final parcel to GALP at Sines.
When all is said and done after the HDU in question has worked its magic, those refiners are left with 55% LSVGO and 10% middle distillate from what initially entered the system as a 3.5% HSFO.
If you already have ready-made LSVGO that is unencumbered by sanctions — as Aramco do from Gizan — then that is currently landing in NWE, Rotterdam to be precise.
VARO Energy, who bought Sweden’s Preem AB in January of this year, including the Lysekil refinery, are following that SRFO-through-HDU proforma but doing so with Venezuelan SRFO.
VARO Energy’s ownership structure is 66.6% Carlyle / 33.3% Vitol and that will effectively be the same vehicle that runs the Lukoil European asset portfolio once that sale concludes.
Vitol then becomes Europe’s largest refiner with approximately 1.4 million barrels per day of refining capacity, overtaking Total, who sits around 1.1-1.2 million barrels per day.
Inconveniently for Carlyle, one of their downstream European investments that is forced to compete with Vitol is MOEVE.
They would inevitably have preferred to use Vitol plumbing had they had the choice, but the transaction involved inheriting the entire CEPSA + GALP front and back office structure.
The MOEVE deal captures a particularly important catchment area — Portugal and Southern Spain, Atlantic-facing only.
Refineries at Sines, Cadiz & Huelva total approximately 710,000 barrels per day and sit within earshot of Vitol’s Sardinian engine.
When that Lukoil sale completes, from the North Sea to the Black Sea, Vitol will effectively have hotels on all their properties, to use a Monopoly boardgame metaphor.
For them, it creates the perfect derivative surface area for Europe, giving almost infallible pricing awareness.
For everyone else, competing becomes significantly harder than usual.
There are however a select few that sit in a very convenient pocket.
Repsol at both Tarragona (186kbpd) and Cartagena (220kbpd), but also BP with Castellon (110kbpd) sitting between those two on the same Balearic coastline.
All become witnesses to the MOEVE/VITOL tussle on ICE Low Sulphur Gasoil Futures and CIF Med swaps amongst other things.
If you can get clever with cheap SRFO, that is where the distillate edge will come from — particularly alongside relatively cheap Brazilian heavy sours.
Aggressive middle-distillate recovery.
DIY sulphur removal.
The Chinese proforma.
