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      • Sudan's Dar Blend crude debuts to limited audience

Sudan's Dar Blend crude debuts to limited audience

Sudan's new Dar Blend crude will make its debut this week when the first shipment sets sail after more than a year of delays, but refiners may give it a frosty reception due to its poor quality and political baggage.

Swiss-based trading house Vitol, which has a contract to market Dar Blend on behalf of the field's operators, is slated to load the 750,000-barrel crude tanker Stena Antarctica on Aug. 30, shipbrokers said on Tuesday.

Five cargoes are expected to load in September, a port source said, for a total of 4.29 million barrels, or 143,000 barrels per day (bpd).

But traders and refiners in Asia said they had not heard of the grade trading yet, leaving open the question of where the difficult-to-refine acidic crude will find a home.

"It seems it has not been sold yet," one Asian crude oil trader said. Most crude cargoes from Africa trade more than a month before lifting.

A Vitol official declined to comment on what had happened to the first shipments of Dar Blend, which had discharge options in Singapore as well as East Asia

Shipments will eventually rise to 200,000 bpd, making it one of the year's 10 biggest new oil projects. It comes just weeks ahead of the launch of exports from Russia's 250,000-bpd Sakhalin-1 development on the Pacific Coast.

Because export facilities at a new terminal are only due to be completed at the end of the year, the Dar Blend cargo will load from the Nile Blend terminal, port sources have said.

Dar Blend, produced from Sudan's Blocks 3 and 7 in the Melut basin by a group including China National Petroleum Corp. (CNPC), Malaysia's Petronas [PETR.UL], and state oil Sudapet, has taken far longer than expected to start pumping crude.

CNPC said production had finally begun in late July after more than a year of delays due to problems importing equipment, installing a pipeline and building up port infrastructure.

Vitol, one of world's three largest private energy trading firms, has been waiting to begin selling the grade since August last year, when it won a tender to sell up to 3.6 million barrels a month of the heavy-sweet grade. But selling the first few cargoes is proving a headache.

ACID TEST

Dar Blend has an API gravity of 26.42 and a low-sulphur content of 0.116 percent, very similar to Sudan's flagship Nile Blend crude, which has found a ready market in Japan and China.

But its 2.4 total acid number (TAN) limits the number of refineries that can handle the crude, as it makes the grade corrosive. Some refiners fear the acid number may be even higher.

Chad's Doba Blend crude, which came on stream in 2003, has a higher 4.1 TAN and faced a tough time finding buyers, trading at discounts of as much as $15 a barrel to dated London Brent crude.

Even when heavily discounted, only a few refiners run Doba crude on a regular basis in Asia, including South Korea's SK Corp. and GS Caltex, plus India's Reliance . Most European refiners avoid the grade.

SANCTIONS WEIGH

Political hurdles will also make life difficult for Dar Blend sellers, as the United States has had sanctions against imports of Sudanese goods for almost a decade and has blocked financial dealings with Sudan for U.S. citizens.

Sanctions widened after a United Nations resolution was passed, condemning the continued violations of human rights and international humanitarian law in Sudan's Darfur region.

GS Caltex, 50 percent-owned by U.S. major Chevron , will not take the grade, sources said.

Even non-U.S. companies with interests in the United States may shy away. European majors Royal Dutch Shell and BP , for instance, do not regularly participate in tenders to buy Nile Blend crude, market sources say.

While China may seem a natural market given CNPC's 41 percent stake in Petrodar -- the consortium that operates blocks 3 and 7 -- refiners there rarely buy non-Chinese acidic grades though they process Chinese Shengli crude. Petronas has hefty domestic output for its refineries.

With limited options in the east and much tougher competition for the more distant Western market, some traders said Dar Blend might be best suited for blending with other grades or another feedstock, minimising its objectionable qualities. (Additional reporting by Jiwon Chung)

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