Japan's JXTG seeks flexible crude oil commitments amid beari
- Source: chemnet
largest refiner JXTG Nippon Oil & Energy is looking to boost
flexibility in its crude oil procurements by reducing its term
commitments in this low-price environment, while expanding its
products exports to account for 20-30% of its refining capacity in the
next few years, a senior company executive told S&P Global Platts.
term crude commitments 'around 60%' of imports
buyer of US, Mexican, Colombian and Ecuadorian crude
export 20-30% of refining capacity
the current bearish market, we are trying to increase our freedom and
flexibility [in procurements] by lowering our term ratio,"
executive vice president Takashi Hirose said in an interview Wednesday
on the sidelines of the Platts Asia Pacific Petroleum Conference in Singapore.
Nippon Oil & Energy, the refining arm of JXTG Holdings, was
established in April as a result of the merger between JX Holdings and
TonenGeneral and has a combined refining capacity of 1.93 million b/d
across 11 refineries in Japan.
said JXTG's consolidation of JX and TonenGeneral's crude procurement
operations has been "surprisingly smooth."
we were not very different from each other," Hirose said.
"Both our companies had been trying to increase flexibility to
process various crude grades, not only [grades] from the Middle East."
active buyer of US crude oil, has been taking cargoes from the US
every few months whenever economics are favorable, and it has also
been buying from other producers in the Americas, including Mexico,
Colombia and Ecuador, Hirose said.
weakness in NYMEX WTI prices this year has played a key role in
boosting US-Asia crude flows this year, industry executives said
during the APPEC conference.
spread between front-month Dubai crude swaps and same-month WTI swaps
flipped into positive territory on January 4, when it was assessed at
4 cents/b, for the first time since October 28, 2015, when it was
assessed at 48 cents/b, Platts data shows.
spread has remained positive for most of this year, averaging $2.14/b
so far in the third quarter, compared to $1.29/b in Q2 and $0.51/b in
Q1, after having spent Q4 2016 at a discount of $1.62/b.
WTI versus Dubai spread typically makes various North American crude
grades priced against WTI more competitive in Asia.
TERM CRUDE IMPORTS AT 60%
forward, JXTG will continue to emphasize flexibility in its crude
procurement contracts until market conditions change, Hirose said,
adding that the company's current term crude procurement ratio stands
"at around 60%."
about the balance of JXTG's crude imports, Hirose said "it comes
from a combination of spot [and] framework -- under which we agree to
take a certain volume if prices are right."
way we have freedom," he added.
term ratio in its crude oil procurements is among the lowest in Japan,
where some local refiners have also increased their spot crude
procurement ratio by cutting term imports in recent years to increase
ratio of spot purchases in Japan's total crude oil imports rose to
32.5% in the first half of 2017, from 30.5% a year ago, driven by
increased arbitrage procurements from the US and Kazakhstan, according
to oil industry information obtained by Platts.
PRODUCTS EXPORTS 20% OF REFINING CAPACITY
meanwhile, has been actively exporting oil products in recent months,
and its exports comprising gasoline, gasoil and jet fuel averaged
380,000 b/d in September, Hirose said.
exported volume was huge as it equated to the capacities of more than
two refineries," said Hirose, adding that its exports accounted
for roughly 20% of its refining capacity.
added that JXTG's oil products export volumes in September increased
compared to the same month a year ago due to the impact of recent US
hurricanes that took several US Gulf Coast refineries offline.
Asian jet fuel market was firmly supported by an open arbitrage window
to move cargoes from the region to the US West Coast in the aftermath
of Hurricane Harvey.
differentials on the FOB Singapore jet fuel cargo climbed for six
straight sessions into positive territory over the last week of
August, peaking at 16-month high of plus 20 cents/b on August 30. The
cash differentials last dived into negative terrain on July 10.