Singapore Petroleum's profit to soar
Singapore Petroleum's profit to soar
Bloomberg, Singapore
Singapore Petroleum Corp., the smallest oil refiner in the
island-state, said earnings this year will reach a record because
of rising demand for fuels and higher profit from processing
crude oil into fuels.
The profit, or refining margin, from processing a barrel of
crude oil into fuels is "robust" as supply and demand of fuels
are "finely balanced," Choo Chiau Beng, chairman of Singapore
Petroleum, said in an interview yesterday, without giving a
forecast for 2005 profit.
Asian oil refining margins have surged since Hurricane Katrina
more than two weeks ago disrupted refinery operations and created
fuel shortages in the U.S. Gulf Coast, resulting in imports from
Asia and Europe.
Fuel prices have risen to records this year on increased
demand from China and the rest of Asia, because of economic
expansion.
"Next year, we still see a good year for the refining
business," Choo said. "As more people drive cars, more trucks on
the roads, they use more oil."
The company's refining margin in the second quarter this year
rose to US$4 a barrel compared with $3.50 from the same period a
year earlier.
Singapore Petroleum's 2004 net income rose more than fourfold
to S$252.9 million ($151 million), or 59.2 Singapore cents a
share, from S$59 million, or 13.9 cents.
Singapore Petroleum plans to invest more in exploring for oil
and gas because it's more profitable, Choo said. The company has
oil and gas exploration and production projects in Indonesia,
Vietnam and Cambodia.
"That's where the big margins are," Choo said.
In Southeast Asia, energy exploration and production are
mostly conducted by companies under so-called production-sharing
contracts with governments.
Singapore Petroleum has oil and gas exploration and production
projects in Indonesia, Cambodia and Vietnam.
Indonesian President Susilo Bambang Yudhoyono's plans to cut
fuel subsidies and raise prices may make it more attractive for
companies such as Singapore Petroleum to expand in the Southeast
Asian country.
"We will expand our market in Indonesia as Indonesia
liberalizes, and subsidies get reduced," Choo said.
It's "more difficult" for investors or overseas refiners to
buy a stake in Singapore Petroleum after the company's share
prices rose, Choo said. Singapore Petroleum shares have risen
almost threefold from a year ago.
Hindustan Petroleum Corp. and Bharat Petroleum Corp, India's
second- and third-largest state-run refiners, are planning to buy
a stake in Singapore Petroleum Co., the Financial Express
reported on Aug. 29, citing officials it didn't identify.
"Unfortunately, when it was available a few years ago, nobody
was really interested," Choo said. "They have to pay the market
price if they really want to buy a share."
Shares of Asian oil refiners have risen because of higher
earnings from processing oil. Profit from turning crude oil into
gasoline, diesel and other products surged to a record last week,
Bruce Lanni, a senior analyst at A.G. Edwards & Sons Inc., said
in a note on Sept. 12.
The refining margin at Singapore refineries gained 20 percent
to $13.17 a barrel in the week ended Sept. 9 compared with a week
earlier, Lanni said.
Keppel Corp. holds a 49 percent stake in Singapore Petroleum,
which owns half of Singapore Refining Co.
Chevron Corp. owns the remaining 50 percent in Singapore
Refining, with the capacity to process as much as 285,000 barrels
of oil a day.