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Asia traders mixed over Philippine oil storage

SINGAPORE: Traders are re-cassessing the strategic importance of oil strorage terminals in the Philippines but Thailand is keen to use Subic Bay to help it meet its increasing oil demand, industry sources said on Monday.

"We are currently conducting feasibility studies to lease the Subic Bay storage due to the lack of domestic oil storage facilities," said a source from the Petroleum Authority of Thailand (PTT). "We are also looking at Hainan island, China, and the possibility of having a joint venture with a western company to build storage there."

"We are short of the legal reserves, the government requires that we keep a stockpile that amounts to five percent of our total sales. Thailand's domestic oil demand growth has been escalating at eight to nine percent per annum, and hence our sales volumes are also rising at the same rate, but oil storage facilities are not keeping up with such growth rates," he said.

Thailand's current total product consumption is estimated at 670,000 barrels per day (bpd) while crude demand is 470,000 bpd.

"It is still at a very premature state and the go-ahead is subject to what Petronas and Coastal (CGP.N) will decide."

"This is an internal decision between Petronas and Coastal which we have no involvement," said the PTT source.

The Philippines' Subic Bay storage is operated by a joint venture between Malaysia's state oil firm Petronas and US-based Coastal Corp. Both companies have been selling oil products stored in Subic Bay into the Philippines, China, Korea, Thailand and Vietnam.

The former US naval base, north of Manila has total storage capacity of about 2.4 million barrels, of which about 60 percent is for middle distillates.

Subic Bay is no longer deemed as strategic to supply the Phillippines as it used to be a year or two ago, said a source from Petronas.

Increasing oil refining capacity in the Philippines, to 380,000 bpd currently, is more than sufficient to meet demand estimated at about 320,000 bpd.

"Demand into China has also been unpredictable sporadic these days. With more competition, it is increasingly difficult to export volumes from Subic to south China, and Thailand has also increased its refining capacity," an oil company trader said.

"While we used to purchase oil products from Subic Bay storage operators, we hardly do so now," said a source from Philippines National Oil Company (PNOC).

"However with the deregulation of Philippines oil industry next year, traders may want to reconsider the strategic importance of Subic," he said.

A trader from Japanese trading house Itochu Corp operator of an oil storage terminal in Nonoc in southern Philippines, off Mindanao, since last October.-Reuter