Thailand’s equity Oman crude may help reduce PTT’s 2022 spot trading burden
Thailand’s PTT Exploration and Production, or PTTEP, plans to bring home most of its equity crude barrels from its overseas upstream operations in 2022 rather than trading the oil, taking some pressure off domestic refinery feedstock procurement managers who constantly seek top-up barrels in the expensive spot market.
Major refiners across East Asia are scrambling to tie up as many term crude supply deals as possible for next year as they ramp up throughput levels and refinery run rates to serve rapid recovery in consumer and industrial fuel demand. The higher demand comes at a time when major OPEC producers are maintaining a cautious approach in raising crude supply, while prices extend uptrend.
In addition to term supply deals, Thailand is looking to make the most of its upstream investment portfolios, with PTTEP’s subsidiaries PTTEP Oman E&P Corp. and PTTEP MENA set to provide state-run refiner PTT at least 5 million barrels of Oman crude for delivery over January-June 2022, PTT said in a statement.
Apart from the equity Oman barrels, PTTEP aims to supply domestic refineries its equity barrels from Algeria, Australia and the Americas, a marketing source at the state-run upstream company told S&P Global Platts. The source declined to share information on the specific crude grades and volumes.
“PTTEP’s equity barrels in Oman and other regions will allow local crude traders to take some breather as it’s been rather troublesome and expensive to seek spot cargoes to cover short positions because of tight OPEC+ supply,” a feedstock manager at PTT said.
PTTEP kicked off its Oman upstream operations in 2019 through the acquisition of Partex Corporation which later transformed into PTTEP Oman E&P Corporation and acquired two onshore producing petroleum blocks.
The Petroleum Development Oman, or PDO, Block 6 project has a total oil production volume of around 610,000 b/d and Mukhaizna Block 53 project holds approximately 120,000 b/d. In February, PTTEP had acquired 20% in Block 61 through its subsidiary PTTEP MENA Limited which adds on condensate production volume around 65,000 b/d.
PTTEP’s equity portion of the three projects equates to approximately 23,000 b/d of crude oil, according to PTT.
“The projects have allowed PTTEP further investment, create energy security, as well as generate revenue to the country,” it said.
Spot market premiums
Southeast Asia’s state-run oil and refining companies typically secure around 70%-75% of crude oil requirements via term deals and their own upstream operations, while the rest is sourced from spot purchases. However, the refiners are looking for every means possible to reduce their spot procurement ratio recently as market premiums extend rally amid tight supply conditions, according to trading sources at Vietnamese, Indonesian and Thai refiners.
OPEC and its allies are standing firm on increasing crude output quotas by a modest 400,000 b/d each month.
The pace and scale of the supply increase continues to disappoint many Asian end-users and consumers, with nine major Asian refiners surveyed by Platts — including PTT, BPCL, Petronas, ENEOS, SK Innovation and PetroChina — indicating the producer group should ideally raise supply by at least 800,000 b/d as current oil prices appear too high and consumer sentiment is hurt by prices at these levels.
The physical Dubai crude market structure strengthened sharply in recent trading cycles, with the spread between front-month Platts cash Dubai and same-month Dubai swap averaging $3.62/b to date in November, on course to possibly set the record-high monthly spread, Platts data showed.
Various Middle Eastern sour crudes, as well as sweet grades in Southeast Asia and Oceania are commanding lofty premiums in the spot market, with a South Korean refiner buying 2 million barrels of Iraq’s Basrah Heavy crude for loading in November at a premium of around $1/b to the grade’s official selling price, while a Taiwanese refiner paid a premium of around $2.22/b to Dubai for a cargo of Abu Dhabi’s Upper Zakum crude for loading in December, Platts reported earlier.
Australia’s heavy sweet Van Gogh crude for loading in Dec. 8-12 was recently sold at a premium of more than $7/b to Dated Brent and a Chinese refiner paid a premium of more than $4/b for a cargo of Qatar’s low sulfur condensate for delivery in January, according to traders based in Singapore with direct knowledge of the Asian spot market deals.