Vietnam's PV Oil and Malaysian partner Petronas will start pricing spot cargoes for two Vietnamese crude grades on a Platts Dated Brent basis from August, marking a departure from their current Tapis crude related formula, sources familiar with the matter said Wednesday.
Spot cargoes for Bunga Orkid and Bunga Kekwa are currently priced off a formula that uses the monthly average of Platts assessments and Asia Pacific Petroleum Index for Malaysia's medium-sweet Tapis. But PV Oil and Petronas will offer two cargoes -- one Bunga Orkid cargo and one Bunga Kekwa cargo -- for August loading priced 100% off the monthly average of Platts Dated Brent quotes, the sources said.
This will be the first time that both grades will be offered directly from the sellers and priced against Dated Brent, they said.
For the other Vietnamese crude grades, the decision is still awaiting PetroVietnam's approval, one of the sources added.
Spot cargoes of new Vietnamese crudes -- Chim Sao and Te Giac Trang -- coming on stream in the third quarter of this year will likely also be priced on a Dated Brent basis, Platts reported earlier. Both crudes are high mercury, medium sweet grades, but Bunga Orkid is heavier in gravity and more rich in fuel oil than Bunga Kekwa.
Petronas has a 46.06% stake in block PM-3 CAA, together with operator Canada's Talisman Energy with 41.44% and PetroVietnam with 12.5%.
Petronas and PetroVietnam jointly market Bunga Orkid, and PetroVietnam would offer barrels loading in July, a source familiar with the operation said.
The Bunga Orkid field produced its first oil in late March 2009. In terms of quality, the grade is similar to medium sweet, but high mercury Bunga Kekwa, located in the same block. The latest preliminary assay on Bunga Orkid has shown it to be slightly heavier than Bunga Kekwa, and with a mercury content near Bunga Kekwa.
Bunga Kekwa has an API gravity of 37.6 and sulfur of 0.045%. The crude has a mercury content of 500-800 parts per billion.
According to the sources, PetroVietnam is still studying a proposal put forward by its crude oil export subsidiary, PV Oil, last year to switch the pricing for all Vietnamese crudes to a 100% Dated Brent basis, or alternatively, to a formula based 50% on Dated Brent and 50% on regional crude benchmark Minas.
While both options are being studied, a move toward a 100% Dated Brent basis has been touted as preferable, according to a source familiar with the matter.
With Malaysia's state-owned Petronas changing its crude pricing formula from the Asian Petroleum Price Index to a 100% Dated Brent basis from this month, buyers have increased the pressure on equity owners of Vietnamese crude to follow suit, market sources said earlier.
The current Vietnamese crude price formula is linked to Indonesian Minas crude, with the Minas price calculated based on an average of the Minas assessments published by Platts and the Asian Petroleum Price Index for Minas, published by Hong Kong-based Seapac Services. PV Oil currently sets monthly OSPs for Bach Ho, Su Tu Den and Rang Dong crude using this formula.
Vietnamese crudes typically have light to medium gravity, and are sweet.
APPI is run by Seapac, which uses a panel-based voting system to come up with twice-a-week quotes on regional crudes such as Tapis and Indonesia's Minas. In the first quarter of 2011, APPI Tapis ranged from nearly minus $11/barrel to plus $3/b to the front-line Dated Brent, APPI prices obtained from market sources showed.
Platts, a division of McGraw-Hill Companies, is a publisher of energy price benchmarks around the world.
