NewsBase Downstream Asia Monitor

For analysis and commentary on these and other stories, plus the latest downstream developments, see inside…
Copyright © 2012 NewsBase Ltd.
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08 February 2012
Pilot Issue
News
Analysis
Intelligence
Published by
NewsBase
COMMENTARY 2
ExxonMobil downsizes downstream
footprint in Japan 2
Eastern Promise: Asia emerges as global
downstream powerhouse 3
POLICY 4
Indonesia abandons plans to cut fuel
subsidies 4
PTT drops fuel prices 5
REFINING 5
Kuwait closes in on China refinery deal 5
Chinese plan Myanmar refinery 5
Sinopec rewards refineries for higher fuel
production 6
Petrovietnam plans expansion 6
FUELS 7
Chinese petroleum product imports up
30% in December 7
Japanese petroleum product sales up in
December 8
South Korean petroleum product exports
up in 2011 8
PETROCHEMICALS 9
Asian traders in determined mood on Iran
petchem volumes 9
Sabic signs MoU with Sinopec 9
TERMINALS & STORAGE 10
Pertamina to build US$450m crude
terminal 10
NEWS IN BRIEF 10
STATISTICS 15
NEWS THIS WEEK…
Downstream downsize
ExxonMobil’s decision to downsize its
downstream business in Japan is indicative of the
tough conditions in the fuel market and refining
sector in the country.
Exxon is to reduce its stake in TonenGeneral
Sekiyu from 50.5% to 22%, which could spur a
wider realignment among Japan’s oil refiners. (Page 2)
The US super-major feels it cannot improve its
Japanese oil refining and sales businesses
because of the weak market, hence its retreat. (Page 2)
Pricing paranoia
Southeast Asian countries such as Indonesia and
Thailand remain wary of the political implications
of cutting fuel subsidies despite high oil prices.
The Indonesian government has abandoned plans
to cut fuel subsidies in April. (Page 4)
Thailand’s state-run PTT and other fuel retailers in
the country have reduced pump prices for petrol,
diesel and gasohol. (Page 5)
Thailand has used its state oil fund to pay for the
cuts. But the fund is in the red and the
government is borrowing money to make the cuts,
which has been criticised as unsustainable. (Page 5)
NewsBase
Downstream Monitor
–– ASIA ––

Downstream Asia 08 February 2012, Pilot Issue page 2
ExxonMobil is to reduce its stake in
TonenGeneral Sekiyu, its Japanese
subsidiary and major oil refiner, from
50.5% to about 22% on a voting rights
basis.
The announcement means the US
super-major will drastically reduce its
Japanese business by scaling down
locally based oil refining and sales
operations.
Under the deal reached between the
two parties, in June TonenGeneral will
acquire a 99% stake in ExxonMobil’s
Japanese division, which currently holds
50.5% of TonenGeneral shares, for 302
billion yen (US$3.9 billion). ExxonMobil
will then acquire about 22% of
TonenGeneral voting shares, thus
effectively reducing its overall stake in
the Japanese firm.
TonenGeneral will continue its
partnerships with three domestic petrol
station brands – Esso, General and Mobil
– and will also procure crude oil from
ExxonMobil.
Rationale
The rationale behind ExxonMobil’s
decision is that the company feels it
cannot improve its Japanese oil refining
and sales businesses owing to a softening
domestic market.
“Oil demand in Japan has declined in
recent years and the domestic operating
environment has been characterised by
continuous pressure on both margins and
volumes,” said TonenGeneral Sekiyu.
“Through this newly formed integrated
production-distribution operation, the
company will be able to execute more
effectively locally driven investments
and other business decisions that will
help the company adapt to the
challenging operating environment.”
ExxonMobil said: “This will result in a
single, integrated downstream business
better positioned to meet Japan’s energy
needs.”
Ruthless retreat
For ExxonMobil, the world’s largest
energy company, the transaction is the
biggest divestiture since the 1999 deal
with Mobil Corp. that created the
company.
The deal, which ExxonMobil called a
“restructuring” of its Japan business into
a single asset, does not involve the US
company’s liquefied natural gas (LNG)
marketing and sales or its speciality
chemicals operations in the country. But
the deal does mark a de facto retreat from
the world’s third largest economy by
ExxonMobil, which is focusing its
resources on emerging markets and the
development of natural resources.
Moreover, while the company said it
would keep its 14.2% outstanding stake
in the Japanese company, Sherman
Glass, vice president of ExxonMobil,
told a press conference that it might
restructure its oil refining operations or
even sell its stake in TonenGeneral.
ExxonMobil is known for ruthlessly
cutting off operations that yield low
investment returns. In recent years, the
US company has aggressively invested in
oil and natural gas exploration projects,
while streamlining its refinery and sales
operations in the US and Asia.
Realignment
The TonenGeneral move could
encourage realignment among Japan’s oil
refiners, which have been cutting
capacity to cope with falling demand
caused by a weak economy and a shift to
more efficient and environmentally
friendly forms of energy.
This is because their oil manufacturing
capability reached excessive levels
owing to a decline in the demand for
petroleum products, partly caused by the
economic slowdown, an ageing
population and the increasing popularity
of fuel-efficient cars. The 27 refineries in
Japan owned by oil distributors were
capable of processing about 4.5 million
barrels per day as of the end of
September. But the average daily amount
of crude processed was about 3.6 million
bpd in 2010, only 77% of the supply
capability. Furthermore, Japan’s
petroleum product demand is expected to
decline at a rate of 3.5% per year until
March 2015, according to an estimate by
the Japanese Trade Ministry.
COMMENTARY
ExxonMobil downsizes
downstream footprint in Japan
ExxonMobil’s retreat from Japan’s downstream is indicative of the tough conditions in the
fuel market and refining sector in the country
By Andrew Mollet
ExxonMobil is to reduce its stake in TonenGeneral Sekiyu from 50.5% to 22%
Exxon feels it cannot improve its Japanese oil refining and sales businesses because of the weak market
The TonenGeneral move could encourage a wider realignment among Japan’s oil refiners

According to the Natural Resources
and Energy Agency, demand in 2014 is
likely to drop by more than 30%
compared to 2009.
All this has led to a drastic
streamlining of refiners’ downstream
operations in the past decade in an
attempt to boost profitability, with the
number of petrol stations affiliated to the
five major refiners falling by over 30% to
little over 27,000.
Ironically, spearheading the
streamlining has been ExxonMobil itself.
At the end of last year, there were 3,800
petrol stations affiliated with
ExxonMobil, down 45% over the past 10
years. By contrast, Japan’s biggest
refiner, JX Nippon Oil and Energy, has
cut its petrol station network by just
31%, with Idemitsu Kosan, Cosmo Oil
and Showa Shell Sekiyu reducing their
retail chains by similar percentages.
There is much talk about trying to
boost margins through expanded services
beyond traditional petrol pump sales by,
for example, installing chargers for
electric vehicles, tying up with
convenience stores or building cafe-style
petrol stations. But ExxonMobil’s
decision to downsize in Japan’s
downstream would suggest it holds out
little hope for such moves.
The US and Europe used to bestride the
oil refining world but their dominance is
on the wane as Asia’s growth skyrockets
and traditional Western markets for
petroleum products suffer the fallout
from the economic meltdown.
Europe’s downstream in particular has
seen immense change in recent years,
which has shifted the centre of gravity in
the global downstream industry towards
Asia.
“Stringent efficiency measures and the
introduction of biofuels into the energy
mix is putting pressure on consumption
levels in Europe,” Jean-Jacques Mosconi,
a senior vice president of strategic
planning at Total, said recently at an
industry conference in Abu Dhabi.
“European refiners will also be suffering
from Phase 3 of the CO2 [carbon
dioxide] emission trading system and by
2013 they could end up paying for an
average 20% of their total emissions.”
Although there are pockets of malaise
in the downstream industry in Asia (such
as in Japan, see previous story), the
potential for growth in emerging
economies in the region is phenomenal.
Eastern promise
With demand for petroleum products
growing significantly in Asia since 2002,
it was inevitable that the region would
spawn several major refining hubs.
Leading such development is China,
which is expected to boost its crude oil
refining capacity by one-third to more
than 12 million barrels per day by 2015
to feed economic growth. (See: Chinese
petroleum product imports up 30% in
December, page 7)
China’s growing demand for crude oil
and petroleum products was highlighted
in a recent report by the University of
Calgary, which concluded that over the
10-year period beginning in 2000, the
country’s net growth in demand for crude
stood at 91%, while the US and Europe
registered negative growth rates of 3%
and 4% respectively.
But with the price of oil also soaring,
Asian countries became wary of
importing vast amounts of petroleum
products and instead started making
moves towards creating their own
refining infrastructure.
“The Asian states … desperately want
to reduce soaring import bills of refined
products whilst also seeking investments
in their domestic refining sectors,” noted
Total’s Mosconi.
Chain reaction
Traditional suppliers of crude to Asia
have had to react to the change in
dynamic in the downstream market, and
the world’s largest crude oil producer,
Saudi Aramco, was an early mover in
this respect.
In 2007, the Saudi giant put pen to
paper with Sinopec and ExxonMobil on a
deal to triple the crude processing
capacity of the Fujian refinery in
southern China to 240,000 barrels per
day and also to integrate it with a
petrochemical unit. Aramco has
subsequently sought to expand its
downstream footprint in Asia, both in
China and elsewhere.
COMMENTARY
Eastern Promise: Asia emerges as
global downstream powerhouse
Strong economic growth in Asia has catalysed a revolution in the refining industry that has
seen the region emerge as the major force in the global downstream sector
By Ashok Dutta
The recession has dampened demand for petroleum products in the West, focusing attention on Asia
Asian countries are building their own downstream infrastructure to avoid expensive fuel imports
Middle East oil producers are investing in Asian refineries to guarantee a market for their crude

Last year, it signed an agreement with
PetroChina to build a 200,000 bpd crude
refinery in Yunnan Province whilst
simultaneously making a joint
announcement with South Korea’s S-Oil
that the Onsan refinery expansion project
had been completed.
Its success has been replicated by
Kuwait Petroleum Corporation (KPC),
which in March last year set up a joint
venture with Sinopec to build a 300,000
bpd world-class refinery and
petrochemical complex in southern
China. Located on Donghai Island in
Guangdong Province, the new refinery is
expected to be operational from 2014-15
and will carry a price tag of US$9 billion.
Petroleum products from the refinery are
to be marketed locally to meet the fast
growing demand in Guangdong Province
and across the rest of China. (See:
Kuwait closes in on China refinery deal,
page 5)
Furthermore, KPC will soon award the
engineering, procurement and
construction (EPC) contract for a
200,000 bpd refinery it plans to build in
partnership with Petrovietnam around
180 km south of Hanoi in Vietnam.
China has also signed a series of
agreements with Qatar Petroleum that
will see the establishment of a 400,000
bpd refinery in the eastern Zheijang
province.
The Chinese refinery projects all share
a common feature in that they will
receive crude feedstock under long-term
deals from Aramco, KPC and QP.
“Gulf producers are looking closely at
demand dynamics and participating in
refinery projects in Asia to improve
access to markets there amid the region’s
increasing consumption of fuel and
crude,” said John Sfakianakis, chief
economist at Banque Saudi Fransi in
Riyadh, in a research note. “Asia,
including China, is a very strategic and
important demand driver. Aramco is
aware that China and Asia are the
markets that drive demand given the
macro fundamentals.”
Yet Asian refiners are facing fresh
challenges this year. A pressing political
concern is the imposition of tighter
sanctions on crude supplies from Iran by
the US and EU. The EU-imposed ban on
Iranian exports that is due to come into
effect on July 1 means many Asian
refiners will be forced to open up new
crude supply channels in order to avoid
fiscal issues with Washington and
Brussels.
That said, the ongoing recession in the
West means the paradigm shift witnessed
in the global downstream over the past
decade is unlikely to be reversed and
Asia will remain the fulcrum of refining
activity for years to come.
The Indonesian government has
abandoned plans to cut fuel subsidies in
April.
It said the scheme, which would have
seen subsidies slashed for fuel sold to the
owners of larger vehicles, would have
been difficult to administer. The energy
ministry has now proposed a subsidy
decision that will apply to all vehicles,
but said it would allow pump prices to
rise according to international crude
costs. In the past, the subsidy was
increased if oil prices rose. In 2011, the
subsidy went 30% over budget and hit
US$18.35 billion.
The budget allocation for subsidies this
year has been set at US$13.75 billion;
however, this will still be over 70% of all
government subsidies and is the second
largest in ten years, according to The
Jakarta Globe.
A decision on a price rise for petrol
and diesel and other fuels has not yet
been made in a country that is notorious
for bureaucratic delays.
“We have to study it first and establish
a decent price increase that will not
shock the public,” Indonesian Energy
Minister Jero Wacik said in a statement
to Parliament. There should be a decision
before April, he said. That was originally
the deadline when all car owners in Bali
and Java, two of the richest provinces,
were to be excluded from subsidised fuel
rates.
Only motorcycles and public transport
vehicles in Java and Bali would have
been allowed to use subsidised fuel.
Premium pump fuels are currently being
sold for just US$0.50 per litre.
A new report on energy by the World
Bank published on February 6 criticised
Indonesia and other Southeast Asian
countries like Thailand (see next story)
for subsidising fuel for the poor, saying
the move actually benefited the rich
more. The country and its peers in the
region must eliminate fuel subsidies to
“ensure an efficient, sustainable, and
secure energy sector,” the report said.
“The price of fuel is a sensitive issue
because it constitutes a large proportion
of household budgets,” The Jakarta
Globe commented. “Price hikes can lead
to social unrest.”
COMMENTARY
POLICY
Indonesia abandons plans
to cut fuel subsidies
“Price hikes can lead to
social unrest”

Thailand’s state-run PTT and other fuel
retailers in the country have reduced
pump prices for petrol, diesel and
gasohol, bucking the general trend of
price hikes in other Asian countries.
The reduction, which brings the cost of
diesel to below US$1 per litre, is in line
with election promises made by the
government last year. Petrol is now
priced at US$1.25 per litre and diesel
only US$0.99, a drop of over US$0.01.
Thai fuel prices are heavily subsidised
by a state oil fund that is deeply in the
red. In an admission that the price cuts
are a political move, Thai Energy
Minister Arak Chonlathanont said the
government was looking at securing
loans to support the fund. Subsidies on
LPG and CNG will also continue, the
minister said.
“It’s fair to say that fuel pump prices in
Thailand are highly politicised,”
Bangkok-based energy analyst, Collin
Reynolds, told Downstream Asia. “The
oil fund is over US$480 million in debt
but in order to keep retail prices down
last year the government suspended oil
levies that are normally paid to maintain
the fund’s health. It doesn’t look like a
sustainable policy.”
PTT operates one of Thailand’s biggest
petrol station chains.
Kuwait Petroleum Corp. (KPC) has said
that it is close to signing a contract that
would see France’s Total join its US$9
billion refinery project in China’s
Guangdong province.
“They have accepted and we are
advancing on an [memorandum of
understanding (MoU)] now,” KPC CEO
Farouk al-Zanki said on January 31. “We
are in the process of signing,” he added.
He went on to say that the French
energy giant would take part of KPC’s
50% share in the development. No
precise figure was given, but industry
sources have estimated that the stake is
likely to be in the region of 20%. Sinopec
owns the remaining 50% interest.
Construction of the project, which
includes a 300,000 barrel per day
refinery and a 1 million tonne per year
ethylene cracking unit, began in
November 2011. Previously, Sinopec has
said that it is expecting both facilities to
come on line in 2015. In addition, al-
Zanki said that KPC was looking to
expand its production and refining
capacity at home and abroad. Currently,
he said Kuwait was pumping about 2.9
million bpd against a full capacity of just
over 3 million bpd. Alongside the
Guangdong refinery, Kuwait also has
plans to build a 200,000 bpd facility in
Vietnam as it looks to secure a market
for its substantial heavy oil reserves.
These are likely to form a key part of the
country’s plans to raise output to 4
million bpd by 2020. However, al-Zanki
said that in the shorter term, Kuwait was
unlikely to be able to meet any demands
from its customers for additional crude
supply. Neighbouring Saudi Arabia has
indicated that it may step up production
to meet any shortfall stemming from a
drop in exports from Iran. “It would be
difficult to do that on a sustainable basis.
We will remain where we are,” he
said.
A Chinese fuel trading company
involved in the construction of new fuel
storage capacity in Myanmar has
revealed it is also considering developing
a US$2.5 billion refinery in the country.
Guangdong Zhenrong Energy said it
had joined up with local partners to look
for a site for a 5 million tonne per year
(100,000 barrel per day) refinery.
“Myanmar has a rickety and inadequate
refining infrastructure and currently
imports most of its fuel, some of it in tax-
dodging cross-border deals with
neighbours,” China energy analyst Jeff
Mead told Downstream Asia.
POLICY
PTT drops fuel prices
REFINING
Kuwait closes in on
China refinery deal
Chinese plan Myanmar refinery

“A refinery such as that proposed by
Zhenrong would certainly deliver more
than half of Myanmar’s current and
short-term domestic demand.”
Guangdong Zhenrong is based just
across the border from Hong Kong in
Guangzhou, where it mainly operates as
an oil and fuel commodities importer and
trader. The Myanmar project would be
the Chinese firm’s first foray into
refining. The company’s CEO, Xiong
Shaohui, said that one of its partners in
Myanmar was the Htoo Group of
Companies, a construction conglomerate
with close ties to the country’s army.
Xiong said one possible site for the
proposed refinery was the new special
economic zone at Dawei on Myanmar’s
southeast coast on the Andaman Sea.
Thai companies such as state-run oil
and gas giant PTT are gearing up to
develop refining and petrochemical
plants in Dawei. However, the plans for a
major industrial complex at the site were
recently dealt a blow when Myanmar’s
government objected to the construction
of a 4,000-MW coal fired thermal power
plant (TPP) that was supposed to provide
electricity for the area.
Dawei is isolated from Myanmar’s
major cities and population centres,
which has led critics to say it would
primarily benefit Thailand by providing a
new trading route and conduit for oil and
gas.
“If you look at the map, Dawei is
actually the middle of nowhere in terms
of Myanmar,” said Mead. “If I was
Myanmar’s energy minister, I would
want my first new refinery somewhere
around Yangon.”
Sinopec, China’s largest refinery
operator, has reportedly continued to
provide its oil-processing subsidiaries
with incentives for exceeding their
production targets.
According to a source inside the state-
owned company, Sinopec allowed its
refineries to charge a higher price for the
extra volumes they produced in January.
This served to encourage the firm’s
downstream subsidiaries to ensure
supplies of refined fuels to the domestic
market, he said.
The source told the C1 Energy
research service that Sinopec had set ex-
refinery prices at 8,720 yuan
(US$1,381.9) per tonne for 90-Ron petrol
and at 8,090 yuan (US$1,282.1) per
tonne for zero-pour-point gasoil in the
first month of 2011. He explained,
though, that these prices only applied to
output up to the target levels. By
contrast, he said, ex-refinery prices for
production in excess of the target were
set at 8,280 yuan (US$1,312.2) per tonne
for 90-Ron petrol and at 7,380 yuan
(US$1,169.5) per tonne. No word was
available as of press time as to whether
the pricing incentives would remain in
place in February. C1 Energy noted that
January was the 11th month in a row that
Sinopec had followed this policy.
Guangdong ex-refinery prices
Separately, the research service reported
that Sinopec refineries were charging
more for higher-quality motor fuels
meeting GB-3 and GB-4 standards in
Guangdong Province. They are doing so
even as use of lower-quality GB-2 grades
is declining in the area, it said.
Specifically, C1 Energy quoted a
company source as saying that the ex-
refinery price for 90-Ron petrol meeting
GB-3 specifications topped GB-2 rates
by 180 yuan (US$28.5) per tonne in
Guangdong. Meanwhile, the source said,
ex-refinery prices for GB-3 zero-pour-
point gasoil are 160 yuan (US$25.4) per
tonne above the GB-2 level.
In Guangzhou, the provincial capital,
Sinopec’s prices for GB-4 petrol are 380
yuan (US$60.2) per tonne above GB-2
rates, the source added.
China has yet to phase GB-2 standards
out fully, but GB-3 fuels have been in
wide usage in Guangdong Province since
2010.
State-run Petrovietnam is in discussions
with foreign partners on the possible
expansion of Vietnam’s only refinery.
The company wants to boost crude
processing at the Dung Quat refinery
from 6.5 million tonnes per year
(130,000 barrels per day) to 10 million
tonnes per year (200,000 bpd).
The refinery, which is at Quang Nam
on the central coast of Vietnam, is
currently only able to meet around 30%
of the country’s demand for petroleum
products.
“To accommodate the increased
production capacity, the People’s
Committee of the Quang Ngai Province
has asked the government to expand the
Dung Quat Economic Zone to 45,332
hectares – four times the current area –
and transform the zone into an
industrialised city complete with urban
areas and ports,” the government-backed
newspaper Nhan Dan reported last
week.
REFINING
Sinopec rewards refineries
for higher fuel production
Petrovietnam plans expansion

Petrovietnam and its foreign partners
are looking at the feasibility of ramping
up the refinery’s throughput to the
200,000 bpd of crude mark by 2016.
Dung Quat was built by French firm
Technip, which still provides technical
maintenance, but the plant is operated by
Petrovietnam subsidiary Binh Son
Company.
Although Vietnam is a net exporter of
crude oil, the country still has to import
the bulk of the diesel, petrol and other
petroleum products it consumes.
Dung Quat produces liquefied
petroleum gas (LPG), propylene and
kerosene, as well as unleaded petrol and
diesel oil.
Two other refineries have been
proposed in Vietnam but their
construction has been held up repeatedly
owing to a lack of funding. Foreign
investors have been wary of pumping
money into the projects because of
concerns about their profitability, given
the Vietnamese government’s strict
control of fuel prices.
The groundwork for a second refinery,
also with a 10 million tonne per year
(200,000 bpd) capacity, is almost
complete at Nghi Son in central Than
Hoa Province. The project is a joint
venture between Petrovietnam, Kuwait
Petroleum International and Japanese
firms Idemitsu Kosan Company and
Mitsui Chemicals. The US$6.2 billion
Nghi Son refinery is due for completion
by late 2014.
Negotiations for a third refinery at
Long Son in southern Ba Ria-Vung Tau
province are continuing between
Petrovietnam and Japan’s JX Holdings.
Vietnam’s state-run fuel distribution
company, Petrolimex, is also in talks
with South Korean firm Daelim
Industrial about a possible fourth
refinery, at Nam Van Phong near Hai
Phong on the country’s northern coast.
China’s petroleum product imports grew
by 30% year-on-year in December as
domestic refiners struggled to meet
growing demand. The surge in demand
was largely driven by increased car
usage.
The country imported 2.64 million
tonnes of petroleum products in
December, according to statistics from
the General Administration of Customs.
Singapore blended products were the
preferred fuels during the month owing
to a shortage of domestically produced
low-sulphur, low-density fuel oil, said
Shanghai-based market analysts C1
Energy.
The sharp rise in December was in part
linked to stockpiling ahead of the long
Lunar New Year holiday, during which
tens of millions of Chinese take to the
road for family reunions.
Imports in the first two months of this
year are likely to be driven by South
China bunker traders, with 200,000
tonnes booked for January, said C1
Energy. Almost 95% was drawn from
Singapore.
China’s demand for refined products is
forecast to grow by an average of 5.5%
per year up to the end of 2015, according
to a statement issued by the Industry
Ministry last week.
By 2015, annual fuel demand will have
reached to 320 million tonnes per year,
compared with 245 million tonnes in
2010, said the ministry.
Capacity ramp-up
Plans are being drawn up to increase
China’s refining capacity to about 600
million tonnes per year (12.5 million
barrels per day) by 2015, although state-
run refiners, led by Sinopec, continue to
operate at a loss because of the
government’s tight grip on retail prices.
By 2015, the average refinery’s
capacity will have grown to at least 6
million tonnes per year (120,000 bpd),
the ministry revealed.
China is working to consolidate its
refineries, focusing on building large-
scale plants and closing down less
profitable smaller facilities – so-called
‘tea-pot’ refineries – that are mostly run
by private companies.
Domestic petroleum product demand is
likely to reach 320 million tonnes by the
end of 2015, marking a compound annual
growth rate of 5.5% for the five years to
2015, the Industry Ministry said. This is
slower than the 7.8% annual growth
witnessed in the five years to 2015.
The anticipated slowdown is partly
because of weak demand for petrol, Lu
Ying, an oil analyst, told state-run China
Daily.
China’s petrol demand is expected to
stagnate at around 3% to 4% in the
period up to 2015, while diesel demand
will also probably experience slowing
growth, Lu said. “The major demand
engine will be jet fuel,” he added.
Meanwhile, ethylene demand in China
is rising at over 5% per year and will
reach 38 million tonnes per year in 2015,
although domestic production capacity at
that time is forecast to be only 27 million
tonnes.
REFINING
FUELS
Chinese petroleum product
imports up 30% in December
“The major demand
engine will be jet fuel”

A cold weather snap helped lift Japan’s
petroleum product sales by 2.7% year-
on-year in December, while petrol sales
recorded their first increase since
February, government data showed on
January 31.
During the month, total petroleum
product sales rose to 19.59 million
kilolitres, or 3.98 million barrels per day,
according to a release by the Ministry of
Economy, Trade and Industry (METI).
The figures marked the fourth rise in
petroleum product sales over the past 11
months, but could prove to be a bit of a
blip amid a longer-term decline in
demand, analysts said.
Japan’s strong yen, combined with the
economic blow dealt by last March’s
earthquake and tsunami, have hit oil
demand that was already slowing in
Japan owing to preferences for cleaner
fuel plus a shift to more energy-efficient
cars.
Sales of petrol, which accounts for
more than a fifth of total fuel use in
Japan, rose 1.4% year-on-year in
December, while sales of kerosene for
heating increased 6.3%.
Sales of B- and C-type oil, which are
mostly used for power generation, leaped
58.3% as utilities were forced to make up
for idled nuclear power capacity by
making greater use of thermal power
plants (TPPs).
Utilities also used seven times as much
crude oil for direct burning in December
2011 as in December 2010, getting
through 1.64 million kilolitres, or
332,000 barrels per day.
Northern Japan experienced average
temperatures in December that were 1
degree Celsius lower than usual. Coastal
districts facing the Sea of Japan in
western and northern areas meanwhile
were hit by heavier than usual snowfall,
Japan’s national weather agency said.
For the whole of 2011, however,
Japan’s total petroleum product sales
were down 2.4% to 192.48 million
kilolitres, or 3.32 million bpd. This was
the lowest level since 1987, when annual
petroleum product sales stood at around
187 million kilolitres, according to
METI.
All types of products reported sales
declines last year, apart from B- and C-
type fuel oil.
South Korea said its petroleum product
exports rose in value by 64% last year,
with those to Japan reaching a record
high.
Over the course of 2011, South Korea
exported 457 million barrels of oil, up
17% on the previous year. Overseas sales
of bunker C-oil reported the biggest
increase, jumping 34%, while those of
petrol and diesel were up 33% and 22%
respectively, according to figures from
the South Korean Ministry of Knowledge
Economy.
It was in terms of value that the growth
was really striking, however, with
exports of petroleum products hitting
US$51.6 billion in 2011, making fuel
South Korea’s second largest export item
after ships. The main driver for the value
increase was high crude oil prices.
Japan was a major buyer of South
Korea’s petroleum products last year,
with its imports storming ahead to
US$7.39 billion –72.5% higher than the
previous high of US$4.08 billion in
2006, according to data from state-run
Korea National Oil Corp. (KNOC).
On top of high crude oil prices, Japan’s
extra demand was triggered by the
shutdown of some Japanese refining
capacity following March’s devastating
earthquake and tsunami.
This made Japan South Korea’s second
biggest market for petroleum products
after China. South Korea exported
petroleum products to 48 countries last
year.
By volume, South Korea’s petroleum
product exports to Japan reached 64.9
million barrels, roughly equal to the
volume in 2005.
“The biggest reason for the increase
comes from soaring international crude
prices that spiked up production costs of
such products as petrol and diesel,” an
unnamed industry source told South
Korea’s Yonhap news agency.
South Korea’s domestic sales of
petroleum products were virtually flat in
volume terms, edging up just 0.9%, the
government said.
The country’s shipments of petroleum
products amounted to 49% of the crude it
imported last year, ministry figures
showed. South Korea imported 926.76
million barrels of crude oil last year,
mostly from Saudi Arabia, Kuwait and
Qatar. Iran was the country’s sixth
biggest petroleum products supplier.
Last year saw the average import price
paid by South Korean refineries for a
barrel of crude oil jump to US$106.30,
up from US$78.70 in 2010.
FUELS
Japanese petroleum product
sales up in December
South Korean petroleum
product exports up in 2011

Despite tightening sanctions and political
pressure making trade with Iran
increasingly difficult, Asia-based traders
are finding creative ways of doing
business with the Islamic Republic.
Sources in Iran’s downstream sector
have confirmed that alternative payment
solutions are being used to facilitate
petrochemical deals when necessary.
These measures have seen Pakistan as
well as Iran’s Middle Eastern neighbours
used as payment routes, with the
currencies used varying from deal to
deal.
A report by ICIS news service said that
many buyers have started using non-
traditional currencies, including the
Japanese yen and the UAE dirham, for
letters of credits (LC) to pay for Iranian
cargoes.
“They prefer it this way as well, so
they save on the interest charges of not
obtaining credit,” a source from an
Iranian petrochemical producer was
quoted as saying.
“We accept any method of payment
that works,” another producer said.
The report added that most payments
for benzene and styrene, base oils,
polyethylene (PE) and chemicals such as
methanol were now paid in dirhams.
“I have been paying through dirham-
denominated [telegraphic transfer (TT)],”
one Indian trader was quoted as saying.
This is a more direct alternative with
trade finance increasingly difficult to
obtain, but appealing only to those with
healthy cash flow. The scramble for
payment and trade solutions among
Asian buyers follows a tightening of
Western-backed sanctions early this year,
ultimately designed to unhinge Iran’s
controversial nuclear research.
In November 2011, a UN report said
there was good evidence to believe Iran
is seeking to develop a nuclear weapon,
something Tehran has always denied.
Saudi Basic Industries Corp. (Sabic) and
China’s Sinopec recently signed a
memorandum of understanding (MoU)
on forming a strategic partnership that
builds on existing close ties between the
companies.
In March 2011, the firms signed an
initial agreement in which they
committed to invest around US$1 billion
in the construction of a 260,000 tonne
per year polycarbonate plant in Tianjin.
The complex is due to be commissioned
in 2015.
The facility is to be located in a
complex developed by Sinopec Sabic
Tianjin Petrochemical Company
(SSTPC), an existing joint venture
between both firms. The SSTPC
complex, which came onstream in 2010
at an estimated cost of US$2.7 billion,
has a capacity of 3.2 million tonnes per
year and comprises a 1 million tonne per
year ethylene cracker and eight
downstream units.
Polycarbonate is a plastic that is
utilised in the manufacture of car
components, compact discs and various
other products.
An unnamed Dhahran-based analyst
told Downstream Asia: “Sabic and
Sinopec have been working on setting up
a strategic partnership for a long time …
For the former, the primary interest is to
get a footing into a major consumer
market like China, while for the latter it
is a case of accessing cheap feedstock
ethane that will make products
competitive to produce.”
The price of feedstock gas in Saudi
Arabia is US$0.75 per million British
thermal unit, making it the most
competitive globally.
“Sabic has a strategic agreement with
ExxonMobil for the US and European
markets and now is keen on
strengthening its ties with Asia-Pacific
using China as a gateway,” he added.
Saudi Kayan recently awarded a
US$131 million engineering,
procurement and construction (EPC)
contract to Sinopec Engineering of China
for its distilled natural alcohol plant at
the industrial city of Jubail.
The scope of works covers the detailed
EPC, testing and commissioning of the
plant, which will have a capacity of
50,000 tonnes per year. The plant is
scheduled to enter commercial
production in the second half of 2013 and
will utilise natural gas as feedstock.
Sabic has a 35% stake in Saudi Kayan.
PETROCHEMICALS
Asian traders in determined mood
on Iran petchem volumes
Sabic signs MoU with Sinopec

Indonesian state-run oil and gas firm
Pertamina is to begin constructing a
centralised crude terminal (CCT) in
Lawe-Lawe, in East Kalimantan, at a
cost of US$450 million.
The CCT is to be built on an area
covering 750 hectares in Lawe-Lawe,
Penajam Paser Utara regency, and is
scheduled to be completed in 2014,
Pertamina said.
The Lawe-Lawe CCT will have 25
storage tanks with a total capacity of 25
million barrels of oil, which is equivalent
to a 25-day supply for the country’s
refineries, local media reported last
week, quoting a Pertamina spokesman.
Mochamad Harun said that Pertamina
had already completed an environmental
impact study for the CCT construction
project and that the regional
administration had also expressed its
support for the project by accelerating
the issuance of required permits to
execute it.
“We’re going to start the tender
process for the terminal. The Lawe-Lawe
CCT will provide a crude blending
facility, including domestic crude with
high contaminant, so that it will allow
Pertamina to buy various types of crude
oils at competitive prices,” Harun said.
“By maximising the absorption of
domestic crude, we can reduce imports,
which will allow us to cut high shipping
costs,” he was quoted as saying by The
Jakarta Post.
Indonesia is the largest crude oil and
natural gas producer in Southeast Asia.
But the country pulled out of OPEC in
2008 as ageing fields and declining
output turned the nation into a net oil
importer.
Pertamina currently operates six
refineries, which have a combined
processing capacity of about 1 million
barrels per day. But the firm supplies
only 70% of the petroleum products that
are consumed in Indonesia and imports
the remaining 30% from abroad.
Last December, the Indonesian
government unveiled plans to build a
new oil refinery in Tuban, East Java,
with a total capacity of 300,000 bpd to
process oil from the giant Cepu block.
The Indonesian Energy Ministry’s
director-general for oil and gas, Evita
Herawati Legowo, said at the time that
Pertamina was now seeking investors to
fund the project. She also said that the
development of the planned refinery
could be started in 2013.
POLICY
Saudi oil price cut for
Asia refiners
It may be tempting to view the cut in the
premium Saudi Arabia charges Asian
refiners for oil as proof the world’s
largest exporter is doing its best to show
it can supply the biggest-consuming
region as much crude as it needs. This is
especially the case when the currently
heightened tension over the increasingly
likely disruption of shipments from Iran
is making refiners in Asia nervous about
where they will get all the crude cargoes
they need. But that may be reading too
much into the Saudi action and it’s
always a risk to assume geo-political
motives are at work when talking about
the oil market.
REUTERS, February 6, 2012
COMPANIES
ONGC, OIL to pay
higher subsidy
The Indian government has asked
upstream oil companies to compensate
state-run oil refiners for 37.91% of
revenue losses on fuel sales during April
to December 2011, a government source
told reporters. “Together, upstream
companies’ subsidy share will be 368.94
billion rupees,” said the source, who
declined to be identified. For the first two
quarters of the current fiscal year,
upstream companies had compensated
33.33% of the losses due to state-set fuel
prices.
ET, February 4, 2012
Goldman upgrades
RIL
Goldman Sachs has upgraded India’s
Reliance Industries (RIL) to buy from
neutral, citing a potential lift in margins
on increased refining and recovering oil
demand, sending the refiner’s shares up
in pre-open trade on Tuesday. “We
believe that an upcycle in refining will
lift margins and is likely to drive an
earnings surprise for RIL over the
medium term, by offsetting lackluster
E&P performance,” the bank said in a
report dated on Monday. Goldman raised
its target prices for the oil and gas major
to 970 rupees (US$19.77) from 960
rupees previously.
TNN, February 7, 2012
TERMINALS & STORAGE
Pertamina to build
US$450m crude terminal
NEWS IN BRIEF

Japan’s JX looks to
Africa
Japan’s biggest refiner, JX Holdings, is
in talks with African nations in addition
to Saudi Arabia, the United Arab
Emirates and other oil producers to
replace crude oil imports from Iran, a
company executive said on Friday. Japan
is under pressure from the United States
to cut back on Iranian oil imports to
secure a waiver from a U.S. law
imposing sanctions on financial
institutions that trade with Iran’s central
bank.
REUTERS, February 3, 2012
Bangchak’s green
push
Bangchak Petroleum (BCP), the majority
state-owned refinery and retailer, expects
its earnings before interest, tax,
depreciation and amortisation (EBITDA)
from renewable energy will nearly triple
to 30% in the next six years from 12%
last year.
President Anusorn Sangnimnuan said
Bangchak plans a huge long-term
investment of 20 billion baht in
renewable energy from 2012-17
including solar farms and
ethanol/biodiesel production.
The lion’s share, 15.4 billion baht, will
be used for solar farms, for which the
company holds licences from the Energy
Ministry for combined capacity of 118
megawatts.
Solar farm development will be divided
into three phases from 2011-14.
The 4.5-billion-baht first phase
encompasses 38 MW in Ayutthaya’s
Bang Pa-in district, with commercial
operations slated by the middle of this
year.
The first phase was originally expected
to be fully operational by the end of last
year but became delayed due to flooding
at the project site in October. The second
phase will cover a combined 32 MW
capacity worth 4.5 billion baht and is
scheduled to go online next year.
Of that capacity, 16 MW will be from a
plant in Chaiyaphum province and 16
MW from one in Ayutthaya’s Bang
Pahan district. The third phase, to be
located in the central region, will
comprise 48 MW and become
operational in 2014.
Mr Anusorn said the remaining 4.6
billion baht will be slated either for new
development or mergers and acquisitions
involving ethanol and biodiesel
production.
Last year, renewable energy accounted
for 6% of Bangchak’s EBITDA, with the
proportion expected to enjoy strong
growth, reaching 30% soon.
BCP shares closed yesterday on the
Stock Exchange of Thailand at 20.70
baht, down 10 satang, in trade worth 178
million baht.
BANGKOK POST, February 8,
2012
REFINING
Tianjin refinery to
process 1.1m tonnes
of oil in January
The Tianjin refinery of China’s largest
refiner Sinopec Corp. is estimated to
process a total of 1.1 million tonnes of
crude oil in January. The refinery’s
product oil output is estimated at around
54,000 tonnes. Its output of chemicals is
also likely to hit a record high.
XINHUA, January 30, 2012
Essar starts bitumen
production at
Vadinar refinery
Essar Oil announced starting production
of viscosity grade (VG) bitumen from its
Vadinar refinery in Gujarat. “Essar Oil
has successfully produced superior
performance VG grade bitumen (VG 30)
by processing a judicious mix of crudes
and blending components,” the company
said in a press statement. The 300,000
barrels per day refinery is equipped with
a state-of-the-art laboratory, which is
dedicated to developing superior grade
petro products that find acceptance in
both domestic and international markets.
ET, January 27, 2012
HPCL to shut Vizag
refinery unit
Hindustan Petroleum Corp plans to shut
a 60,000 barrels per day (bpd) crude unit
and fluid catalytic cracker at its Vizag
refinery in southern India for
maintenance in April-May, a company
source said on Tuesday. The planned
maintenance shutdown will continue for
about 45 days, said the source. HPCL
earlier had planned to shut the two units
at its 166,000 bpd Vizag refiner in
November.
REUTERS, January 31, 2012
MRPL worried about
crude supply
disruption
India’s biggest importer of Iranian crude
oil, Mangalore Refinery &
Petrochemicals Ltd (MRPL), is
concerned about possible supply
disruption because of international
sanctions and is keeping all options open,
Chairman Sudhir Vasudeva said on
Wednesday.
ET, January 25, 2012
MRPL buys first
Libyan cargo
Mangalore Refinery and Petrochemicals
bought its first cargo of Libyan Mellitah
condensate in a tender as it seeks to
diversify oil sources to feed its growing
refining capacity. Traders said that
MRPL bought 650,000 barrels of the
super light oil from European trader
Totsa at a premium of USD 1 a barrel to
dated Brent for March. MRPL’s refinery
has a capacity of 236,400 barrels per day
which could be raised by 27% to 300,000
bpd by March and to 360,000 bpd by
2015/16. The refiner had said it may buy
less oil from Iran in 2011/12, citing
shutdowns, but crude processing data
showed the cutback may reflect payment
problems with sanctions hit Tehran.
ET, February 6, 2012
NEWS IN BRIEF

Refinery planned for
Balochistan in
Pakistan
An investors group will establish an oil
refinery at a cost of US$600 million in
Balochistan’s coastal Gaddani area, the
chief executive of Biko Oil and
Petroleum Group (Pakistan) said in a
meeting with Chief Minister Nawab
Aslam Raisani on Friday. “Our group
will also invest Rs5.5 billion in another
project in connection with movement of
cooking oil through Balochistan,” Amir
Abbasi said. He emphasised the need to
build road infrastructure in Lasbella
district so that the province attracted
more investment. Abbasi said his group
would provide import and export facility
of cooking oil at Gaddani under a “single
point” mooring project.
DAWN, February 5, 2012
Thai Oil scouting for
investment
Thai Oil (TOP), PTT’s flagship refinery
business, is ready to expand to Asean
countries, chief executive officer Surong
Bulakul said. He said TOP and the PTT
group had conducted a joint study on
possible investment destinations in
Asean, especially Burma, Indonesia,
Vietnam and Cambodia. TOP will focus
its investment on the refinery business in
these countries. The study focuses on
upstream petroleum investment, natural-
gas and oil pipelines, gas-separation
plants, refineries, and the petrochemical
business. He added that there was
potential for investment in Burma, which
is opening up its economy. TOP is also
interested in investing in refinery-related
businesses in Vietnam when there are
favourable opportunities. He forecast that
the Dubai crude oil price this year would
be in the range of US$105-$106 per
barrel, almost the same as last year,
despite global economic problems. TOP
has devised a risk-management plan to
deal with the volatile global oil price. As
part of its five-year investment plan, TOP
will spend $1 billion (Bt31 billion), part
of which would be poured into the
expansion of its seaport capacity to
enable transport of 50,000 tonnes per
year, up from the present 5,000 tonnes
per year. It will also expand its
paraxylene production capacity by
100,000 tonnes per year from the present
400,000 tonnes. The expansion is
expected to be completed in the third
quarter. It will also invest in setting up
two small power plants, each with
capacity of 120 megawatts, and costing
Bt10 billion per plant. They will sell
90MW to the Electricity Generating
Authority of Thailand, starting in 2014 or
2015.
THE NATION, February 3, 2012
FUELS
CNPC raised oil
product sales in 2011
China National Petroleum Corporation
(CNPC), China’s largest oil and gas
producer, said on Monday that it sold
115 million tonnes of petroleum products
in 2011, 12.49 million tonnes more than
in 2010. The parent company of the
listed PetroChina sold 102.51 million
tonnes of products in 2010. Sinopec
Group, China’s second largest oil and gas
producer and the parent company of
Sinopec Corp., sold 100.1 million tonnes
of products in 2011, according to the
company’s website.
XINHUA, January 30, 2012
Shell Hong Kong
bumps price of LPG
Shell Hong Kong Limited announces that
there will be a price increase on Shell
domestic LPG of HK$1.99 per kg and
HK$4.85 per cubic metre according to
the current pricing mechanism. Effective
from 0000 hours on January 28, 2012,
the new wholesale price for domestic
cylinder LPG will be HK$13.66 per kg,
and the listed price for domestic piped-in
LPG will be HK$40.23 per cubic metre.
“Same as before, we adjusted the
domestic LPG price according to the
established pricing mechanism to reflect
the trend of import costs within the
review period,” said Ms. Anne Yu,
General Manager for Shell Gas (LPG) in
Hong Kong and Macau. The current
pricing mechanism has been in place
since January 1999. The price is
reviewed every quarter.
The adjustment reflects mainly the
difference between the forecast and
actual import prices for the past quarter
and the forecast price for the coming
quarter. Prudent adjustment is made for
every price review based on the latest
import price figures. An annual review of
operating cost is incorporated and
reflected every January. Shell will
continue to closely monitor the import
prices, and will certainly reduce LPG
prices through the pricing mechanism
should import costs decrease.
CHINA BUSINESS NEWS,
January 29, 2012
Diesel fuel price
lowered
State-run oil refiner CPC Corp, Taiwan
yesterday said it would keep gasoline
prices unchanged, reflecting lower costs
after global crude oil prices rose by a
slight 0.77%.
However, CPC will cut its diesel price by
NT$0.1 per liter, according to a
statement posted on its Web site.
Global crude oil prices increased by
US$0.84 per barrel to US$109.95 last
week, up from US$109.11 the week
before, on the expectation that Greece
was close to reaching an agreement with
creditors to fix its debt problems, CPC
said.
In addition, the strong New Taiwan
dollar also offset rises in importing
crude, CPC said. The NT dollar rose
1.73% last week to NT$29.525 against
the US dollar.
Formosa Petrochemical Corp, yesterday
also said it would keep gasoline prices
stable, while lowering prices for its diesel
by NT$0.1 a liter, according to a
company statement.
TAIPEI TIMES, February 6, 2012
NEWS IN BRIEF

Indian jet fuel prices
slashed
State-owned oil companies today slashed
jet fuel prices by over 3% as an
appreciating rupee made imports
cheaper. The price of aviation turbine
fuel (ATF), or jet fuel, in Delhi was cut
by Rs 1,974 per kilolitre (kl), or 3.02%,
to Rs 62,908 per kl with effect from
midnight tonight, an official of the
nation’s largest fuel retailer Indian Oil
Corporation said.
PTI, January 31, 2012
Oil companies
resume jet fuel
supplies
State-owned oil companies have resumed
jet fuel supplies to Air India after the
national carrier promised to pay Rs 2.68
billion in dues. Oil company officials
said the supplies are being resumed after
Air India promised to clear dues by
tomorrow evening. All the three oil
companies - Indian Oil, Bharat
Petroleum and Hindustan Petroleum -
had jointly stopped Air Turbine fuel
(ATF) supplies to Air India at Delhi,
Mumbai, Kolkata, Chennai, Trivandrum
and Kochi from 1600 hours.
PTI, February 2, 2012
Indonesia preparing
fuel station loans
The government will prepare Rp500
billion in soft loans for 295 petrol
stations to sell non-subsidized pertamax
petrol as part of the government’s
program to limit the use of subsidized
fuels in Java and Bali starting April 1.
The funds would be incorporated in the
revised 2012 state budget, Director
General of Oil and Gas at the Energy and
Mineral Resources Ministry Evita
Legowo said here on Tuesday.
“We have got assurance from the
Finance Ministry that there is Rp500
billion in funds for soft loans to petrol
stations,” she said. But she added that she
did not know yet the scheme of the soft
loans which was now being drawn up at
the Finance Ministry. The loans would
make petrol stations in Java and Bali
more prepared to implement the
government’s program on limitation of
subsidized fuels, she said. So far, only
petrol stations in and around Jakarta had
been ready to implement the
government’s program as of April 1,
2012, she said. “If all petrol stations in
Java and Bali are obliged to sell
pertamax petrol as of April 1, 2012,
Pertamina will not yet be ready. They
can do so in stages,” she said.
Yet the number of petrol stations selling
pertamax petrol this year was higher than
that of 2010, she said. Earlier, Pertamina
spokesman M Harun said the state oil
and gas company needed soft loans as
new investment to develop more petrol
stations selling pertamax petrol. He said
the investment need of 295 of
Pertamina’s petrol stations reached
Rp115.9 billion or Rp393 million each.
In Java and Bali, 2080 of 3,062
Pertamina petrol stations had sold
pertamax petrol, 687 needed to replace
their ground tanks and 295 others need
new investment to sell pertamax petrol,
he said.
ANTARA, January 31, 2012
Nepal’s fuel crisis
deepens
Desperate times call for desperate
measures. Residents of Sallaghari in
Bhaktapur neighbouring Kathmandu did
just that on Wednesday. Angered at
continuing scarcity of cooking gas, they
intercepted five vehicles carrying LPG
cylinders and distributed among
themselves after paying for them and
handing over empty containers. Apart
from daily power outage of 14 hours,
Nepal is at present going through an
acute fuel and cooking gas crisis.
Wednesday’s incident was a reflection of
the grim situation. PM Baburam
Bhattarai met petroleum and LPG dealers
on Thursday. News reports say he has
requested India to increase supplies to
ease the problem.
HT, February 6, 2012
Group presses Thai
Energy Minister on
ethanol
Thai Energy Minister Arak Chonlatanon
is being urged to speed the use of ethanol
to replace petrol, as capacity utilisation
remains low. Sirivuthi Siamphakdee,
chairman of the Thai Ethanol
Manufacturers Association, said his
group will soon call on the new minister
to discuss how seriously he takes phasing
out pure petrol by October to stimulate
demand for locally produced ethanol.
“We want to know for sure that the plan
to phase out pure petrol will be on
schedule. Otherwise we’ll export the
ethanol surplus,” Mr Sirivuthi said.
Since the government cut levy collection
from petrol last October, the spread
between petrol and gasohol has narrowed
to 1.20 a litre from 3 baht. The use of
ethanol for blending in gasohol dropped
accordingly, to 1 million litres a day
from 1.3 million. The cut has also led the
existing 16 ethanol producers to cut their
production in half from a full capacity of
2.4 million litres per day. The Alternative
Energy Development and Efficiency
Department earlier estimated use of
ethanol would rise to 2 million litres per
day once pure petrol was removed from
the domestic market. Anusorn
Sangnimnuan, president of the state
majority-owned refiner and retailer
Bangchak Petroleum Plc, said the
company plans to shift crude oil
purchases to new resources in Russia and
Africa, which offer a better refining
quality to produce diesel and jet oil
instead of petrol.
BANGKOK POST, January 28,
2012
PTTEP sets sights on
fuel in Lebanon
PTT Exploration and Production
yesterday confirmed reports that it plans
to explore for energy resources in
Lebanon.
NEWS IN BRIEF

PTTEP president and chief executive
officer Anon Sirisaengtaksin said
countries on the Mediterranean
constituted one of the firm’s strategic
locations for pursuing exploration and
production (E&P) business. The
company is conducting a geological
study of Lebanon’s resources, Anon said.
It might ask the Lebanese government
for permission to send a team to explore
the country after the study is complete.
Anon’s comments follow recent remarks
by fugitive former prime minister
Thaksin Shinawatra that he had spoken
with Lebanese officials to pave the way
for PTT to conduct exploration in that
country and cooperate with the
government there to promote growth in
the energy sector. Anon said the
company had conducted studies aimed at
promoting E&P businesses in many
countries deemed to have high energy
potential, including Lebanon and other
countries in the eastern Mediterranean, as
well as in East Africa. He said it was
normal for the Thai government to
support the company’s exploration
efforts and offshore business activities.
PTTEP is willing to cooperate with the
government - or any person involved
with the government - who helps the
company in order to promote Thailand’s
energy industry, the CEO said.
Meanwhile PTTEP, in cooperation with
the Meechai Virivaidya Foundation and
Business for Rural Education and
Development (BREAD), yesterday
introduced a new brand of packaged rice,
School Rice, designed to promote
farmers’ incomes and benefit society.
THE NATION, February 1, 2012
PETROCHEMICALS
Sinopec Jingmen
plans EB-SM plant
start-up
An industry source based in China
informed a polymerupdate team member
on the startup plans of a new
ethylbenzene-styrene monomer (EB-SM)
plant operated by Sinopec Jingmen
Petrochemical. The source said, “located
at Jingmen, Hubei province in China, the
EB-SM plant will have a production
capacity of 80,000 mt per year.”
POLYMERUPDATE, January 30,
2012
IVL in landmark
chemical buy
Thai-listed Indorama Ventures (IVL) is
practising backward integration by
acquiring two ethylene makers for
US$795 million, a move that should
boost its bottom line by 25% this year.
The world’s No.1 integrated polyester
chain producer yesterday announced it
would buy Old World Industries I and
Old World Transportation, owners of the
largest ethylene oxide and ethylene
glycol facilities in the US.
Monoethylene glycol (MEG) is a key
component, together with purified
terephthalic acid (PTA), in producing
polyethylene terephthalate (PET), as well
as the polyester fibre and yarn that IVL
produces, the company said in a
statement to the Stock Exchange of
Thailand.
The Texas-based Old World has annual
capacity of 435,000 tonnes of ethylene
products, including 385,000 tonnes of
MEG.
Old World’s earnings before interest,
taxes, depreciation and amortisation
reached $150 million last year.
Aloke Lohia, IVL’s chief executive, said
the acquisition will be completed this
quarter, subject to customary approvals.
“The acquisition makes IVL the only
global player in the polyester space with
integration in both PTA and MEG,” he
said.
“It represents a rare opportunity to
integrate into MEG, the most competitive
zone for feedstock availability.”
PTA pricing is weak with oversupply,
while MEG is seeing demand outstrip
supply, allowing IVL to enter during the
upcycle and maximise value from the
PET chain to contribute to earnings.
An industry source said the acquisition of
Old World will increase IVL’s net profit
by 25% year-on-year in the remaining
three quarters, with the company
securing raw materials at very low cost.
MEG spread is $550 per tonne in the US
or about $100 per tonne higher than in
Asia, as demand has outstripped supply.
The industry utilisation rate is nearly
90%.
The PTA spread, by contrast, is at a
record low of $150 per tonne.
“Restocking of PET is under way. PTA
producers are not achieving high
utilisation due to tight paraxylene,” IVL
said.
Mr Lohia said the competitiveness of
petrochemicals in the US has been
bolstered by favourable gas prices
relative to oil due to the abundance of
shale gas.
“By entering MEG now, IVL will be able
to capture the premium margins that are
expected to remain firm for the next four
or five years, when new capacity is likely
to enter the market,” he said.
The deal is being financed partly by new
credit facilities granted by Siam
Commercial Bank and cash available.
IVL’s net debt-to-equity ratio now stands
at 0.7 times, a figure expected to remain
below one despite the acquisition.
The company reported liabilities totalling
78.2 billion baht as of last Sept 30, up
from 45.6 billion baht in 2010.
Evercore Partners and HSBC are the
financial advisers to IVL. Allen & Overy
are acting as legal advisers.
Shares of IVL closed yesterday on the
SET at 34.75 baht, up 1.50 baht, in heavy
trade worth 2.47 billion baht.
BANGKOK POST, February 6,
2012
PIPELINES
IPI gas by 2014
The National Assembly’s Standing
Committee on Petroleum and Natural
Resources was informed that the supply
of natural gas through the Iran and
Pakistan pipeline would start by
December 2014.
SG, February 5, 2012
NEWS IN BRIEF

STATISTICS
Asian refinery capacity 2000-2010
0
5000
10000
15000
20000
25000
30000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Other Asia
Thailand
Taiwan
South Korea
Singapore
Japan
Indonesia
India
China
Australia
Source: BP Statistical Review of World Energy

Downstream Asia 08 February 2012, Pilot Issue Back Page
For further details on the stories above and NewsBase’s entire product range:
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HEADLINES FROM A SELECTION OF NEWSBASE MONITORS THIS WEEK
Oil and Gas Sector
AfrOil
Eni has begun drilling the Nunya-1X well on Ghana's Keta
block.
AsianOil
ONGC plans to invest US$33 billion over the next five
years, with a heavy emphasis on the upstream.
ChinaOil
ConocoPhillips and CNOOC have agreed to pay US$160
million in compensation for the Bohai Bay oil spill.
FSU OGM
KazMunaiGaz now says it expects the Karachaganak gas-
processing plant to cost US$3.7 billion.
GLNG
Sinopec is confident of state approval for its Beihai LNG
terminal, which is to take LNG from Queensland.
LatAmOil
Peru has pledged to invest US$3 billion in oil and gas
projects over the next four years.
Downstream MENA
Sabic and Sinopec have signed an MoU on forming a
strategic partnership that builds on existing close ties.
NorthAmOil
Gulf Coast LNG Export has applied to export LNG from
Brownsville, Texas.
Unconventional OGM
Ukraine will hold a tender this month covering shale gas
exploration and extraction in the country.
CUSTOMERS INCLUDE
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