pacific petroleum project phase 1 - a bulk procurement initiative
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DESCRIPTIONPACIFIC 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
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
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
Market share (%)
Petroleum Market share of Pacific Island Countries
Papua New Guinea, 49.6
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
Fiji Islands (Fijian Dollars)Litres22,987,052.69$30,422,185.00
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
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 (%)
Federated States of Micronesia49,205,00030,999,1502.5
Papua New Guines990,000,000623,700,00049.6
Republic of Marshall Islands96,250,00060,637,5004.8
Trade MatixVolume Consumption (L) Approx 2006Calculated $US 2007 Market ratesMarket share (%)
Federated States of Micronesia
Papua New Guines
Republic of Marshall Islands
Market share (%)
Petroleum Market share of Pacific Island Countries
Papua New Guines, 49.6
Fiji's Total Retained Imports of Petroleum Products
YearVolume (Litres)% IncreaseValue FJD
Shakil:Please note 2008 data has not been finalised yet by BOSTATS
Samoa Total Retained Imports of Petroleum Products
YearVolume (Litres)% Increase
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
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
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.
*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