Premiums for medium-sweet crudes grades might come under further pressure once the Cossack field starts production in October, trading sources said Friday.
The North West Shelf oil redevelopment project, which includes the installation of the Okha floating production, storage and offloading facility to replace the Cossack Pioneer, has been delayed due to bad weather, the company said in a statement Friday.
It is now scheduled to start up in October 2011, instead of late in the second quarter.
Although delayed, once output begins, prices of medium-sweet grades like Tapis, Miri and Labuan will likely be pressured down amid ample supply, traders said.
Premiums for Tapis, Miri and Labuan have dropped, after hitting all-time highs in mid-May, due to weak regional demand.
For instance, the premium for Tapis was down $2.08/barrel in a month, and was assessed at $5.29/b to Dated Brent Friday.
At the Thursday Asian close, the flat price for Cossack crude was assessed by Platts at $118.20/b and Tapis at $120.92/b. Nigerian Bonny Light, which is assessed after the London market close, was at $116.20/b.
With freight from Nigeria to Southeast Asia remaining weak at $2.25/b since May, refiners in Asia have been turning to buy the African grade, which is thought to have similar quality as Tapis.
Traders estimate that about one-two spot cargoes are expected to be offered initially when Cossack production starts.
"On ramp-up, production will likely be around 35,000-40,000 b/d, which will amount to one or two cargoes a month," said a source. But this could not be verified. The Cossack Pioneer FPSO was shut in January after a Category 3 cyclone passed the area along the northwest coast of Australia. Since then, crude production from the Cossack Pioneer FPSO ceased and it moved off station on March 7, the company had said in its Q1 report this year.
