Saudi Aramco and Royal Dutch Shell's joint-venture refinery will reach full production of ultra-low sulphur diesel by the end of this month after starting trial production, a company source said.

Industry sources said on Friday that the joint-venture Sasref refinery in Jubail postponed the start-up of the hydrotreating unit for the third time to March or April due to teething problems. A Sasref source said the unit has started trial production.

'We are producing low sulphur ... It is trial production. The unit we commissioned can produce 500 ppm (parts-per-million) low sulphur diesel, less than we were producing before,' the source said on Saturday.

'We do not have problems operating the unit, there was a delay in the construction ... To have the units performing 100 percent, you have to go through a lot of tests,' added the source who declined to be identified.

The new unit at the 305,000 barrels per day (bpd) Sasref crude refinery has the potential to produce about 100,000 bpd of ultra-low sulphur diesel, making it among the first producers of diesel in the kingdom with sulphur less than 10 ppm.

'There is big demand in Saudi for 500 to 800 ppm diesel, we do not need 10 ppm,' the source said.

The new unit is designed to produce 10 ppm sulphur diesel but this depends on demand especially from Europe, the source said.

'We are operating the unit to test the equipment. Before the end of the month, we will reduce the low sulphur diesel to the lowest,' he added.

The cost of the upgrade was valued at more than $400 million, Sasref's chief executive, Abdulhakim al-Gouhi said last month.

Earlier on Saturday, Sasref reiterated in an emailed statement it started commissioning the unit. The statement quoted al-Gouhi as saying 'this investment will protect Sasref's long-term margins in the world refining markets.'-Reuters