Refiner Saras looks east to replace Libya oil

Italy's No.3 oil refiner Saras is looking to Russia, Iran and other Caspian countries to replace crude oil shipments from Libya which have virtually halted amid growing turmoil, its general manager said on Friday.

Saras is traditionally a big buyer of Libyan crude with about 40 per cent of its oil supplies in 2009 coming from North Africa, mainly Libya. In recent years it has been shifting its supply focus more towards the Caspian area and Russia.

"Saras is looking at Kazakhstan, Azerbaijan, Russia, West Africa, Algeria and the North Sea for possible sweet crude replacements for Libyan oil," Dario Scaffardi told Reuters in an interview.

Saudi Arabia is not an alternative to Libya since its crude is not sweet, he said, adding however the company had slightly increased its sour oil shipments from Iran.

On Thursday, top world oil exporter Saudi Arabia said it was in talks with European companies affected by the disruption in Libyan supply and was willing and able to plug any gaps in supply.

An Iran official told Mehr news agency on Friday demand for Iran oil had increased after the Libya crisis.

Scaffardi said Saras was carefully assessing the alternative routes to avoid overpaying in a highly volatile market.

Worries over escalating unrest in North Africa have pushed up oil prices and compressed refining margins.

Scaffardi said that while the group was considering ramping up cooperation with Russia and Azerbaijan for crude oil supplies there was no intention to sell its 300,000 barrels a day Sarroch refinery in Sardinia, as speculated by the press.

"Absolutely not," he told Reuters.

Refineries in Europe have been closing down parts of their operations because of the global economic crisis and competition from Asia and the Middle East.

MARGINS IMPROVING

Earlier on Friday, Saras said its fourth-quarter adjusted net loss narrowed to 3.5 million euros ($4.8 million) from a loss of 24 million the year before, helped by stronger refining margins.

Its refining margin in the quarter rose to $4.1 per barrel from $0.5 per barrel the previous year.

While short-term bearish risks on oil supply exist the underlying trend for refining margins is positive with demand for middle distillates continuing to materially outpace supply, Saras said.

Top European refiner Total on Feb. 11 had reported a 23 per cent increase in full-year operating income from its downstream business due to an improvement in refining margins.

At 1152 GMT, Saras shares were up 1.12 per cent at 1.8 euros while the Stoxx Europe 600 Oil and Gas index was up 0.33 per cent.