Tue, Jun 19, 2001 page18

• CPC readies for Iraqi crude disruption

  EXPECTING THE WORST The state-run firm has put contingency plans in place preparing for the possibility it may not receive its mid-July crude delivery form Iraq

  • BRIDGENEWS
  • • 
    • 
    • 

  Taiwan's state-run Chinese Petroleum Corp (CPC) has put contingency plans in place preparing for the possibility it will not receive the scheduled mid-July loading Iraqi crude. CPC will issue a monthly tender to buy August-loading Persian Gulf crudes as early as this week, in which it may also seek late-July loading crudes to offset the shortfall of Iraqi crude, according to sources yesterday.

  Through the July tender, CPC bought two million barrels of Iraqi Basrah Light crude at US$1.30 per barrel over the OSP, on a delivery basis to Taiwan. CPC, however, already had a concern over the smooth loading of Iraqi crude at the time of the tender, as the CIF-based purchase was a precaution against the possible demurrage costs if Iraq disrupts exports in July.

  Under the contract, CPC is entitled to cancel the deal if the seller fails to load the cargo during July, according to an official at CPC.

  As of yesterday, CPC still held the contract, as the supplier has not said it cannot load the Iraqi crude in July, according to the CPC official.

  CPC, however, remains cautious to deal with the Iraqi crude as it suffered from serious financial damage last year when Iraq ceased oil exports.

  The state-run CPC had to cancel its crude loading on Nov. 30 at Iraq's Mina al-Bakr port due to the "illegal surcharge issue" requested by Iraq.

  The FOB-based deal then was believed to have lead to a daily demurrage cost of US$70,000 per day.

  When CPC issues the August tender this week, it may accept crude offers for end-July loading Persian Gulf crudes, along with August-loading crudes, sources said.

  At the same time, CPC is ready to request its three term crude suppliers -- Iran, Saudi Arabia and Kuwait -- increase export volumes in July.

  Iraq suspended oil exports of about 2.2 million barrels per day as of June 5 to protest a one-month extension of the oil-for-food program. The one-month extension, instead of a regular rollover of six months, was to give the UK and the US time to work on the so-called "smart sanctions plan."

  Iraq, however, "will not resume oil exports under the UN oil-for-food program as long as a British-US proposal to overhaul the UN sanctions is under consideration," the Iraqi trade minister was quoted as saying on Saturday.

  Many industry sources expect the 10-member countries of Organization of Petroleum Exporting Countries (excluding Iraq) will decide to raise production when they meet in Vienna on July 3 to offset the Iraqi crude shortfall.

  "Iraq's export halt would give the OPEC 10 the perfect reason to raise their supply," a Middle East source said.

  Indeed Rilwanu Lukman, special advisor on petroleum issues to Nigeria's president, last week said OPEC will likely have to decide production increases at the July 3 meeting, regardless of whether Iraq resumes oil exports. "The Iraq situation aggravates and puts pressure on the market," Lukman said.

  Asian refiners see a good chance of the OPEC-10 supplying more crude to Asia, and CPC would request its three term suppliers lift the existing supply cuts in July if it fails to receive Iraqi crude.

  
• Most Popular

  • 1

    Chinese carrier group entered Japanese waters

  • 2

    Taiwan in Time: Snapshots of early Japanese-era Taipei

  • 3

    Think tank hosts war games in Taipei

  • 4

    Students rescued from Cambodia

  • 5

    Vigilance urged after five reported snakebite cases