Asian refineries face critical winter season<\/p>\n
SINGAPORE (Reuters): Singapore refiners, entering the most
\ncritical winter season for years, are braced for more bearish
\nnews in the wake of the regional economic crash, analysts and
\nindustry sources said.<\/p>\n
The twin prospects of a mild winter and an economic slowdown
\nin Southeast Asia are expected to result in lower demand for oil
\nproducts during what is normally the peak demand season, they
\nsaid.<\/p>\n
The fourth and first quarters are traditionally the most
\nprofitable period for oil companies because of rising demand for
\nheating oil, such as diesel, kerosene and fuel oil, from the
\nnorthern hemisphere.<\/p>\n
But this year South Korea, Japan and China are slowing imports
\nbecause of bigger domestic refining capacity, high stocks and
\nexpectations for below average temperatures.<\/p>\n
\"The market is headed for an unusually warm northern
\nhemisphere winter on the back of El Nino,\" said James Brown,
\nanalyst at Merrill Lynch, referring to the unusual weather
\npattern.<\/p>\n
As a result all these factors, Brown said Merrill Lynch had
\ncut its 1997 growth forecast for oil product consumption in the
\nAsia-Pacific region by 100,000 barrel-per-day (bpd) to 700,000-
\nbpd.<\/p>\n
Asia-Pacific demand for 1997 was estimated at 18.45 million
\nbpd before the revision, compared to a regional refining capacity
\nof 18.1 million bpd.<\/p>\n
However, Brown said the fallout in the oil sector from the
\neconomic chaos in Southeast Asia will be limited by the economies
\nof the really big consumers--China, India and Japan--which have
\nbeen relatively unscathed from the turmoil.<\/p>\n
\"India, China and Japan are the engine for Asian growth and I
\ndo not see a downturn for these countries,\" he said.<\/p>\n
\"The downturn is affecting the ASEAN nations, and is not going
\nto have huge effect on regional demand.\"<\/p>\n
Analysts East-West Center based in Hawaii said at worst, the
\neconomic turmoil could reduce oil product demand growth to 3.1
\npercent. At best, it would reduce growth to 3.9 percent from a
\nprevious forecast of 4 percent.<\/p>\n
The Association of Southeast Asian Nations (ASEAN) groups ten
\nsoutheast Asian countries including Thailand, Philippines,
\nMalaysia and Indonesia, which have been badly affected by a
\ncurrency and equity crisis.<\/p>\n
The industry will watch Singapore's 1.3 million-bpd refinery
\nsector for signs of how the oil market is coping with a mild
\nwinter and economic slowdown.<\/p>\n
The Singapore refining sector relies on exports to keep going
\nand so makes an excellent barometer for the state of the regional
\nrefining business.<\/p>\n
In the third quarter, the island's four refineries saw profit
\nmargins for basic refining range between a loss of 50 cents and a
\nprofit of 50 cents per barrel -- levels considered too low to
\nsupport future investment.<\/p>\n
But analysts said they estimated margins were at the lower end
\nof the range, or below, through the third quarter because
\nrefineries were selling kerosene and gas oil at huge price
\ndiscounts to entice buyers.<\/p>\n
In addition, the refiners were forced to cut output between
\nfive and 20 percent on at least three separate occasions in 1997
\nto improve economics.<\/p>\n
Currently, Shell Singapore is operating its 435,000-bpd
\nrefinery about 15,000-bpd below capacity.<\/p>\n
The prolonged down turn in prices has forced refineries to
\nreview operations and trim any fat.<\/p>\n
Last week, Shell Singapore said it would cut refinery staff 25
\npercent in the next few years.<\/p>\n
In January, Caltex Petroleum Corp, equally owned by Texaco Inc
\nChevron Corp said it was cutting staff in Singapore 15 percent.<\/p>",
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