The Auto Oil rules aim to cut pollution by improving vehicle technology and cleaning up fuels so petroleum products in Europe will be among the cleanest in the world by 2005.

In the meantime oil companies are working to meet the rules already decided for 2000, including lower sulphur and benzene content and particulates or soot.

Analysts say next year's specifications should not lead to any refinery closures though the costs of upgrading in the current tough market conditions will hurt.

But as the 2005 environmental noose tightens, up to nine European oil refineries risk closure, according to a recent report from energy consultants Wood Mackenzie.

The Petroleum Finance Company (Petrofinance) has identified 28 which are "in a particularly fragile position", including17 which would be logical candidates to be shut because of poor economics in meeting the new specifications.

The rules are also expected to change product flows within Europe and between the continent and other regions. Gasoline trade in northwest Europe has already been jolted by a German decision to run down strategic inventories of Euro grade ahead of the changes.

Petrofinance expects total European gasoline production to fall by about 3.2-3.8 per cent because of the stricter limits on benzene and sulphur and lower Reid vapour pressure.

The reduced production would be small compared to overall output, but would push up prices and increase the trade in gasoline components and butane.

Europe is likely to remain long in gasoline and supplies will continue to find their way out of the region, according to Wood Mackenzie consultant Sat Roopra.

"Those who can make the very high spec gasoline will still be surplus in Europe as a whole, so they will still look to the United States as a market," hesaid.

"In addition to that I think you're going to see more exports of lower quality gasoline going completely out of the EU, to markets where the products specifications are not as tight," he said, identifying Asia as a possible destination.

Refineries will have to limit sulphur in gasoline to 150 parts per million (ppm) by next year and in diesel to 350 ppm.

Europe is expected to remain with its current net shortage of middle distillates, and new trading patterns are likely.

Michel Bernard, of Royal Dutch/Shell, said the changes to diesel would drive more middle-barrel components into Europe's heating oil pool.

"The 10 degree lower end-point specification is worth a drop of two to three million tonnes in EN590 diesel production and gas oil 0.2 production should be increased by roughly the same amount," he said.

This would push up the price differential between the two products and reduce jet fuel production as renewed focus on higher quality diesel soaked up some lighter components.

"As aconsequence we will see much bigger jet imports, because refiners will have to reduce jet fuel production to produce more of the lower sulphur diesel," Bernard said.

BP Amoco's vice president for environmental affairs, Bernie Bulkin, said imbalances were unlikely to last too long, and some ultra-low sulphur diesel imports were also likely from suppliers in the Middle East and the United States.

"There are trade-offs and people have to make more and more ultra low sulphur diesel for road transport. But there's a market, and if the prices of jet go up, then people are going to want to make more jet."

Analysts agreed that it would take creative refinery management for many facilities to meet the new specifications.

Kees van Leeuwen, of the oil companies' organisation for environment, health and safety, Concawe, said one of the likely short-term solutions would be increased use of lighter crudes.

"We are currently in a phase of relatively availability of light low sulphur crude and that might very wellbe a contributory factor to reducing the shortage of gas oil in Europe -- producing a better light yield," he said.