22-05-2018

Analysis: Indonesia’s TPPI seen set to struggle to procure Australian NWS condensate

Indonesia’s Trans-Pacific Petrochemical Indotama refinery may struggle to procure a regular supply of Australian condensate in coming months as competition among regional buyers for the ultra-light crude oil intensifies due to the US’ efforts to limit Iran’s crude and condensate exports.

Over the past couple of years, Indonesia’s state-run Pertamina had regularly bought Australia’s North West Shelf condensate cargoes in the spot market, preferring it to other regional ultra-light grades, for TPPI’s condensate splitter and petrochemical complex at Tuban in East Java.

However, it has only managed to procure around 500,000-1 million barrels/month of NWS condensate so far this year, compared with three to four 650,000-barrel cargoes/month in 2017, as other buyers from Northeast and Southeast Asia flock to the Oceania market.

Asian trading sources noted that Oceania ultra-light crude grades have been gaining popularity amid dwindling South Pars condensate exports from Iran, and more buyers could switch focus to Australia following the US’ decision to re-impose sanctions on Tehran earlier this month.

“[Naphtha] margins look weak so buyers are not willing to pay high premiums for Australian or any other regional condensates … but Asian refiners will heavily depend on Australia because it is one of the very few reliable condensate supply sources,” said a sweet crude trader based in Singapore.

Australia typically exports around 2.5 million-3 million barrels/month of NWS condensate and multiple buyers from Thailand, China, South Korea and Singapore have been sharing the supply pool so far this year — unlike in 2017, when TPPI took a majority of the grade’s monthly exports.

Among some of the spot trade deals concluded in recent months, Thailand’s PTT bought a June-loading cargo of NWS condensate from Shell, in what was likely the company’s first purchase of the grade this year.

Earlier, ExxonMobil and Hanwha Total each picked up a 650,000-barrel cargo of NWS condensate for loading in May. ExxonMobil typically buys regional condensate to feed its aromatics facilities on Jurong Island in Singapore, while Hanwha runs 180,000 b/d condensate splitter in Daesan, South Korea.

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TPPI will likely find securing NWS condensate cargoes even more difficult going forward as the company may need to fend off fierce competition from Chinese and South Korean end-users later this year.

South Korea is expected to increase its dependency on Oceania for ultra-light crude supply as Asia’s biggest condensate consumer plans to continue cutting imports from Iran, adhering to sanctions that have been re-imposed by the Trump administration.

Hanwha Total Petrochemical recently said it had reduced condensate imports from Iran in the past few months, while increasing intake from Australia and Qatar.

In China, Fuhaichuang Petrochemical, formerly known as Dragon Aromatics, plans to restart operations at its 4 million mt/year condensate splitter in July following a lengthy three-year closure, a company source told S&P Global Platts in April.

The company indicated that the feedstock condensate grades under consideration for its petrochemical plant in Fujian province are mostly regional ultra-light oils including Australia’s NWS and Pluto and Indonesia’s Senoro.

Earlier this month, the preliminary July-loading program for NWS condensate showed that four 650,000-barrel cargoes of the ultra-light grade are scheduled for export in the month.

BHP holds the first cargo for loading over June 30-July 4, Woodside Petroleum the second for loading over July 10-14, BP the third for loading over July 17-21 and Chevron the fourth for loading over July 24-28.

Two of the July cargoes have already found new homes, with PetroChina’s trading arm Chinaoil taking the early July-loading cargo from BHP.

Sources said Chinaoil, which rarely buys NWS, plans to sell the cargo on to Fuhaichuang.

“It’s either already sold to them [Fuhaichuang] or they are planning to sell to them,” said a Singapore-based condensate trader.

The July 10-14 cargo from Woodside was heard to have been sold to European trading house Trafigura, trade sources said.

Source: Platts

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