ASEAN Oil Trading - A study on clean petroleum product flows in Southeast Asia

Abstract: In the world there are three main refining and trading hubs: Houston, Rotterdam and Singapore. In this research a historical perspective and outlook is given of clean petroleum product (CPP) trading in Southeast Asia, choosing the quickly developing region area around Singapore. The current circumstances and future outlook are based on the country situation of eight ASEAN countries: Brunei Darussalam, Indonesia, Cambodia, Malaysia, Philippines, Singapore, Thailand and Vietnam. The country situation describes politics, economics and business environment, amongst others, together with production and consumption of CPPs which influences international sea trading. The main question is what the developments are of international sea trading in ASEAN. Based on statistical data gathered from international and local sources, the trend of production and consumption is identified for six CPPs (motor gasoline, aviation gasoline, kerosene, jet fuel, diesel and naphtha) and what that entails for the countries’ imports and exports. The political situation is variable, with Singapore, Malaysia and Brunei being stable, with Singapore being under control of a strict but well organized political party, striving for big economic growth, Malaysia turning its country into a regional economic powerhouse and Brunei’s Sultan profiting from its abundance of natural resources. Indonesia, Philippines and Vietnam are developing, with Vietnam cutting down its long lasting corruption and all countries trying to peacefully end disputes with ethnic minorities. Thailand and Cambodia are considered unstable, due to respectively a military coup and big problems with its ‘democracy’. Looking at economic growth in the analyzed period, Vietnam is by far growing fastest whereas Brunei shows little progression. Singapore, Thailand, Indonesia and Malaysia were hit quite significantly in their economies with the Asian Financial Crisis in 1997-1998. Singapore is the least corrupted country in the region, followed by Malaysia by a long short. The most corrupted country according to the same source is Indonesia. High regulations, extensive red tape as well as inefficient legal and judiciary system is a common situation in most of the countries in the regionthat worsen the business environment, except for Singapore. Most ASEAN countries have a developed downstream oil industry, except for Vietnam and Cambodia. This is mostly aimed for national consumption. Singapore has a big surplus in refining capacity and has the best developed industry in the region. Looking at CPP production and consumption, Indonesia is the biggest producer and consumer. The production levels have remained rather stable, whereas the consumption has increased significantly. The biggest products are Diesel and MoGas. Looking at the trade flows, between 1996 and 2004, Singapore has been dominating the flows in the developing region, especially as exporter to the other ASEAN countries, even if its production output has been reduced. In the future, the political situation is not expected to show significant shifts. The economic growth will remain biggest in Vietnam and lowest in Brunei over the forecasted period. The business attractiveness in Vietnam is expected to increase significantly, in Singapore it will remain as attractive or even better, and countries like Indonesia and Thailand are trying to work on better procedures. The Philippines are working on privatization projects. The total CPP production is expected to remain rather stable in the projected period and the consumption is expected to increase in ASEAN. Due to regional deficit in production, Singapore is expected to remain a major refining and trading hub, but trading will become more important, because of tight refining margins and big expansions of the storage facilities. Big refining projects are undertaken in Vietnam, which will have influence on the inbound trade flows in this country. The trade flows are expected to come from or go to Singapore most of the time in the near future.