Thai-RI planned oil swap a perfect match

Thai-RI planned oil swap a perfect match

SINGAPORE (Reuters): A plan to swap Thai diesel for Indonesian crude and naphtha is a perfect match, but it could only work if suitable grades of oil can be found, traders said yesterday.

They said Thailand is structurally long diesel and short naphtha and crude oil, while Indonesia's position is just the opposite.

The deal would allow the countries, both fighting their worst economic slump in decades, to avoid the costs involved in normal imports and exports and would help divert scarce funds to finance other imports.

Oil traders welcomed the deal because it could also take away a stress point in the market. Thai sellers have, at times, entered the market suddenly when prices were in a down swing causing prices to fall further.

"That (the deal) will balance up the region, and we won't see some of the crazy prices of the past," a trader said.

But for the plan to work, Indonesia must be able to find just the right crude, a light grade with low sulphur content to match Thailand's refinery slate.

Indonesia does not produce enough heavy naphtha, a type needed by Thailand, for a straight swap with the diesel.

On Thursday, a Petroleum Authority of Thailand (PTT) official said that details of the counter trade had yet to be finalized.

"We plan to go to Indonesia next week to look at the possibilities for the counter trade deal. PTT has not set any target prices or amount yet. We need to talk to them first," a senior official at PTT International told Reuters.

Traders estimated that Indonesia has at most 15,000 barrels- per-day (bpd) of naphtha available for the swap, while Thailand has more than 30,000 bpd of diesel exports. Crude sales could make up the difference.

Figures covering the first five months of 1998 showed Thai diesel exports at 31,343 bpd.

Thai diesel exports are expected to remain high for at least another year due to the country's economic slowdown, which has seen diesel consumption plummet 17.4 percent in the first half of this year to 271,750-bpd from a year earlier.

Thailand produced around 320,000-bpd of diesel in the first half of 1998.

Indonesia meanwhile, imports around 100,000-150,000-bpd of diesel.

Traders said the main source of Indonesian heavy naphtha, of the quality Thailand is seeking for processing in an aromatics plant, would be the 260,000-bpd Balikpapan refinery in East Kalimantan.

The refinery normally exports two 30,000-ton sized cargoes per month, usually into the Singapore market.

Naphtha from Indonesia's other export source, the 300,000-bpd Cilacap refinery in central Java, is a lighter grade which is not suitable for use in aromatics plants.

So, traders said Indonesia would have to find sufficient surplus light sweet crude to make up the difference.

They said that would probably mean exporting Belida crude to Thailand, the only grade which meets the Thai refinery requirements, if it wants to maximize diesel purchases in the deal.

Thailand processes mainly light Middle East sour crudes and light sweet regional crudes but currently processes very little Indonesian crude.

Belida production capacity is about 80,000 bpd but state-owned Pertamina has not allocated any of the crude for export since last November.

"The two countries have the basic match, but I wonder if Thailand can change their crude slate," a trader said.

Traders said Belida availabilities are small, which was another factor that could limit the volumes involved in the deal.