ERRATIC movements in Singapore posted prices for petroleum products, including periods when crude oil was listed as being more expensive than petrol and diesel, eventually forced InterOil to raise its PNG prices, sources said.
Industry sources told The National InterOil’s bankers had threatened to withdraw financial support unless its Napanapa refinery was able to obtain import parity prices for petroleum products rather than incur massive losses.
Meanwhile, InterOil’s chief executive Phil Mulacek said he was confident that an impartial expert would ensure a fair outcome for all stakeholders during a review of the company’s 30-year oil agreement with the PNG Government.
Mr Mulacek told The National that what InterOil was seeking was a fairly calculated import parity price for petroleum products from Napanapa, which had been adversely impacted by an illiquid Singapore benchmark pricing system.
Mr Mulacek said InterOil was not seeking any Government subsidy for petroleum products.
The Singapore posted prices, on which PNG’s import parity prices are set, have been highly erratic for the last five months.
A government source said they had been briefed that Malaysia’s benchmark Tapis crude oil – very similar to the oil refined at Napanapa – had risen in price from just over US$70 a barrel in August to US$98 a barrel in November.
However, the import parity price for petrol, largely reflecting Mobil Singapore’s price setting role as a market leader, had fallen from US$98 a barrel in August to US$95 a barrel in September, October and November.
The source said this meant the refining margin had dropped from around US$22 a barrel in August to US$15 in September and to less than US$10 in October.
By November, assuming there was any credibility in the Singapore posted price, Tapis crude was about US$3 more expensive than oil that had been processed to produce petrol, one source said, adding that this was a ridiculous situation.
When this happened, bankers associated with InterOil threatened to withdraw finance unless the price anomaly was rectified with refinery product getting import parity prices that reflected market realities.
Mobil is also the only international oil company regularly shipping petroleum products into PNG with a significant cargo unloaded at Port Moresby on Wednesday.
One source said this went against the spirit of the InterOil agreement with the PNG Government.
Besides being unable to claim the flow-on costs of higher crude oil prices due to questionable posted prices in Singapore, Napanapa has also been losing market share to imported products, he said.
The source said InterOil had been placed at a further disadvantage because diesel containing 0.5% sulphur was being dumped on the market with major buyers including both the Porgera and Lihir gold mines.
Diesel from Napanapa contains 0.05% sulphur – ten times less than imported product – is sold to InterOil’s local customers, including the copper-gold mine at Ok Tedi which wants to use a cleaner fuel.
One industry source said diesel imports were a key factor threatening the viability of Napanapa with the more recent pricing anomalies almost acting “like a killer punch”.