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PACIFIC PETROLEUM PROJECT PHASE 1 - A BULK PROCUREMENT INITIATIVE. Presentation to STAR 2010 Shakil Kumar 16 th October 2010. Presentation Outline. SPCs role in the Petroleum sector Overview of Oil & Gas Industry. Overview of fuel Consumption & Supply Chain in PICs - PowerPoint PPT Presentation

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  • PACIFIC PETROLEUM PROJECT PHASE 1- A BULK PROCUREMENT INITIATIVEPresentation to STAR 2010

    Shakil Kumar16th October 2010

  • Presentation OutlineSPCs role in the Petroleum sectorOverview of Oil & Gas Industry.Overview of fuel Consumption & Supply Chain in PICsPacific Petroleum Project Status.Recommendation - Harmonizing fuel quality and its benefits.- Encourage more countries to Sign

  • SPCs role in the Petroleum SectorProvides petroleum data and advisory services to Pacific Island Countries for efficient use of fuel.Strengthening the existing petroleum database of PICs (Demand/Supply).Assist regulators in PICs to monitor price control instruments.Harmonize Fuel standardsSupport the Bulk Procurement Initiative which is retained by Pacific Islands Forum Secretariat currently.

  • Oil and Gas industry - Overview Oil and gas provide the world's 6.4 billion people with 60 percent of their daily energy needs. The other 40 percent comes from coal, nuclear and hydroelectric power, "renewables" like wind, solar and tidal power, and biomass products such as firewood.

  • Crude Oil Refining

  • Downstream Sector

  • OVERVIEW OF FUEL CONSUMPTION & SUPPLY CHAIN IN PICS

  • Consumption World - 82,000,000 barrels per dayPacific - 40,000 barrels per dayFiji - 11,000 barrels per dayPNG - 20,000 barrels per day

  • Chart2

    0.9

    2.5

    25.6

    1.1

    0.4

    0.1

    4

    49.6

    4.8

    4

    3

    2.3

    0.2

    1.5

    Market share (%)

    Petroleum Market share of Pacific Island Countries

    Fiji, 25.6

    Papua New Guinea, 49.6

    2007 data

    Pacific Islands Petroleum Imports Data 2007

    CountryUnitVolume ImportedValueTotal Value Country CurrencyUS Dollars (2007 average rate)

    Cook Islands (New Zealand Dollars)Litres26,144,520.35$24,843,431.54

    Kilogram265,773.60$956,512.42$25,799,943.96

    Fiji Islands (Fijian Dollars)Litres22,987,052.69$30,422,185.00

    Kilogram560,538,906.27$671,992,142.00$702,414,327.00

    Fedrated States of Micronesia (2006)N/A$27,621,236$27,621,236$27,621,236

    KiribatiLitres20,649,904.00AUD $ 20,849,000AUD $ 20,849,000

    NiueLitres2,289,472.00NZ $ 2,146,116NZ $ 2,146,116

    Solomon IslandsSBD $93,451,000SBD $93,451,000

    2005 Data

    Pacific Islands Supply and Demand

    Petroleum Markets in the Pacific and current value of trade in $US based on $US 90bbl

    Trade MatixVolume Consumption (L) Approx 2005Calculated $US 2007 Market ratesMarket share (%)

    Cook Islands18,888,00011,899,4400.9

    Federated States of Micronesia49,205,00030,999,1502.5

    Fiji510,219,000321,437,97025.6

    Kiribati21,000,00013,230,0001.1

    Nauru8,300,0005,229,0000.4

    Niue2,300,0001,449,0000.1

    Palau80,000,00050,400,0004

    Papua New Guines990,000,000623,700,00049.6

    Republic of Marshall Islands96,250,00060,637,5004.8

    Samoa80,000,00050,400,0004

    Solomon Islands60,000,00037,800,0003

    Tonga45,000,00028,350,0002.3

    Tuvalu4,000,0002,520,0000.2

    Vanuatu29,000,00018,270,0001.5

    Total1,994,162,0001,256,322,060

    Trade MatixVolume Consumption (L) Approx 2006Calculated $US 2007 Market ratesMarket share (%)

    Cook Islands

    Federated States of Micronesia

    Fiji

    Kiribati

    Nauru

    Niue

    Palau

    Papua New Guines

    Republic of Marshall Islands

    Samoa

    Solomon Islands

    Tonga

    Tuvalu

    Vanuatu

    Total

    2005 Data

    0

    0

    0

    0

    0

    0

    0

    0

    0

    0

    0

    0

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    Market share (%)

    Petroleum Market share of Pacific Island Countries

    Papua New Guines, 49.6

    Fiji, 25.6

    Fiji

    Fiji's Total Retained Imports of Petroleum Products

    YearVolume (Litres)% IncreaseValue FJD

    2000599,266,832217,641,974

    2001553,280,374-7.67270,689,623

    2002525,929,471-4.94232,381,306

    2003571,292,9388.63258,084,905

    2004686,883,81720.23393,203,726

    2005607,875,110-11.50487,298,983

    2006614,490,0321.09711,055,800

    2007537,551,854-12.52641,569,957

    2008459,640,478-14.49776,317,905

    Shakil:Please note 2008 data has not been finalised yet by BOSTATS

    Samoa

    Samoa Total Retained Imports of Petroleum Products

    YearVolume (Litres)% Increase

    200066,263,990

    200172,469,4009.36

    200277,385,3206.78

    200376,319,130-1.38

    200480,581,2605.58

    200579,371,730-1.50

    200680,464,8101.38

    200786,429,0807.41

    200880,281,690-7.11

  • SINGAPOREHub Ports /MRSecondary Distribution Ports

  • Fuel Supply Chain PICsExtraction of Crude Oil - MalaysiaCrude Oil refined in SingaporeSPOLShipped in MR

  • FDI & State Investment 2010MNOCSOERegional

  • Loss of Foreign Direct Investment (FDI)Exxon Mobil Divestment 2002.Shells Divestment 2005BP (SWP) Divestment 2010Reduction in level of competition.Additional players in the value chain.Strengthening of market power.Transfer of contaminated land liability.Transfer of operations and management.On going operation of grandfathered facilities.

  • PACIFIC PETROLEUM PROJECT STATUS

    PIFS ADVERTISED TENDERHALE & TWOMEYIMPLEMENTATION SINCE JANUARY 2010

  • PROJECT OUTLINEPacific Petroleum Project Phase 1 Milestone 1: Assessment of national standards and requirementsMilestone 2: A procurement strategyMilestone 3: A risk assessmentMilestone 4/5: A commercial contractMilestone 6: Associated tendering documentation (Expression of Interest & Cost benefit Analysis).

    First five milestones which have been completed with exception to Republic of Marshall Islands.

  • SUPPLY ROUTES TO PACIFIC ISLANDSMR tanker supply from Singapore

    LCT supply

    Possible LCT supply from Fiji

    Tanktainer supply from New Zealand

  • BULK FUEL PROCUREMENTWhat it isAchieving efficient supply into each countryAim to get price competition between suppliers Working with current suppliers and supply infrastructure Combining countries to leverage volumeLevering supply with other countries as appropriate.

    What it isntA single cargo purchased in Singapore delivering to all countriesForcing a certain delivery methodNationalisation of oil industryForcing a single supplier for all participants.Price cross-subsidisation.It cant change location and volume constraints.

  • PROCUREMENT STRATEGY: PRINCIPLESMaximise VolumeEncourage more participation as appropriateMutual dependences recognisedDependences exist between Signatories, non-Signatories and market participantsMarket approach will be followedInnovation from suppliers will be encouragedTransparency of pricing is essentialCosts will lie where they fall No cross-subsidisation between countries

  • PROCUREMENT STRATEGY: APPROACHRecognise different situations in different countriesGovernment or private sector control of petroleum supply infrastructure Will require voluntary participation of marketers; can be encouraged

    Cover full supply chain into country terminal(s)Covering both primary and secondary distribution

    Supply standards to be harmonised Tender can cover product quality and marine standards

    Standards within countries handled outside the tender Recommended managed through regional organisations

  • ISSUES TO MANAGE IN PROCESSVoluntary participation of private sector encouraged through maintaining competitive supply Countries dominated by a single supplier can be efficient but lacks price competitionCountries with only one supply option/single companyQuality of receiving assets ports/terminalsSuppliers who have interest in the in country facilitiesAvailability of funds for term supplyWillingness of donors to participateCommitments to existing suppliers

  • RECOMMENDATIONS - PPPEncourage more Pacific Islands to sign and participate in the Pacific Petroleum Project.

    Harmonisation of fuel quality, vessel and terminal facility standards are required across the region. Regional role recommended for supporting Pacific Island countries with petroleum standards

  • Fuel Quality in PICs

    Type of FuelGradesCountriesUnleaded Petrol (Mogas)Gasoline 97 unleadedGasoline 95 unleadedGasoline 92 unleadedAust/NZ

    Fiji and most PICsKerosene/JetDual Purpose KeroseneAll PICsGasoil (Diesel)Gasoil 10 ppmGasoil 50 ppmGasoil 500 ppmGasoil 2500 ppmGasoil 5000 ppmAust/ NZFrench TerritoryFijiAmerican SamoaSmall Is States e.g. TuvaluFuel OilHeavy Sulfur Fuel OilFiji Electricity AuthorityWaste Oil-Fiji & Nauru

  • Pacific Island Countries Diesel Quality

    CountryLand Transport ElectricityAmerican SamoaN/A 2500 ppmCook Islands10 ppm5000 ppmFiji500 ppm5000 ppm & Heavy Fuel OilNew Caledonia50 ppmN/ATonga5000 ppm5000 ppmTuvalu5000 ppm5000 ppm

  • Harmonising Diesel StandardsPacific Island Countries that are currently importing 5000ppm sulphur diesel to adopt 500ppm sulphur diesel as maximum quality.WHYPrice differential less than 1 cent/litre Low Sulphur fuel Reduces CO2 and sulphur Emission

  • Price Differential

    5000500FOB - Price of Gasoil for month of September (US$/Barrel)87.04287.639US cents per Litre54.74755.123Fiji cents per Litre105.83106.55Difference Fiji cents per litre0.729

  • Harmonizing ULP This area is difficult as it will require :Oil Industry ConsultationVehicle Suppliers Consultation Huge Capital Investment.Therefore this can be a long term objective for SPC to work towards with PICs.

  • THANK YOU

    *Role of SOPAC in the Petroleum Sector. SOPAC Community Lifelines Programme has worked on a number of projects in Energy sector including Petroleum . With the recent transfer of the Petroleum Project Officer

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