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(MENAFN - Kuwait News Agency (KUNA)) Kuwait has no plans to set up strategic oil reserves in China, Vietnam or elsewhere in Asia, said Abdullatif Al-Houti, Managing Director of International Marketing at state-run Kuwait Petroleum Corporation (KPC).
"We have no plan to discuss anything about crude oil stockpiles abroad, especially when oil prices go down," Al-Houti said in an interview with Kuwait News Agency (KUNA) in Tokyo, denying speculation that KPC is considering the establishment of crude oil bases in Asia in anticipation of international conflicts. Al-Houti is currently on his Asian tour that has also taken him to South Korea and Singapore.
"The lower the crude price is, the more it will be unattractive to store petroleum abroad," explained Al-Houti, citing a recent downward trend in international prices.
Crude oil fell to a 13-month low in Asia last week on mounting distrust in the future of global financial markets.
Asked about the possibility of holding joint crude oil reserves in Vietnam and China, where the Gulf emirate has set up refining ventures with state-run oil firms in their respective countries, Al-Houti said that KPC may only consider making commercial storage facilities available for the relevant refineries.
"That will 100 percent depend on the outcome of the joint venture projects there. If the parties concerned find it more advantageous to secure a stable supply for the refineries, we would consider the storage plan only for that purpose." Earlier this year, Kuwait Petroleum International (KPI), KPC's international refining unit, established a joint venture with a major Japanese refiner Idemitsu Kosan Co. and two other firms to construct a USD 6 billion refining and petrochemical complex in northern Vietnam. According to Al-Houti, in August, KPC signed a contract with the Vietnam-based joint venture to supply 200,000 barrels per day (bpd) of crude for the planned refinery, which is expected to be operational late 2013. KPI is also leading a joint venture with Asia's top refiner Sinopec for a 300,000 bpd refinery in China's southern Guangdong Province. By 2010, China plans to maintain a strategic oil reserve equivalent to 30 days of imported oil, or about 10 million tons.
In October 2006, KPC and the state-run Korea National Oil Corp. launched a three-month pilot prgram to stockpile 2 million barrels of crude oil till December, in an attempt to examine how the scheme would work. The deal was South Korea's first stockpiling agreement with a member of the Organization of Petroleum Exporting Countries (OPEC). Given that South Korea is located in the heart of Northeast Asia, the use of its reserve facilities enabled Kuwait to deliver oil to the broader Asian region in a few days. In return, South Korea obtained a preferential right to purchase the oil reserves in times of emergency.
"Eventually, crude oil prices went down in 2006 and economic was not also favorable. Thus, after the completion of a three-month trial period, both parties concluded a renewal of the stockpiling agreement was not economically beneficial," he said. Meantime, Al-Houti said a series of talks between a high-level KPC delegation and their Japanese counterparts on the future demand for crude oil and petroleum products helped OPEC's fourth-biggest oil producer map out its strategy for refinery and infrastructures, as well as form a clear vision of the future where to allocate Kuwaiti products.
Referring to Japan's long-term economic decline, low population growth and a diminishing number of drivers, Al-Houti anticipated a further slowdown in oil demand from Kuwait's top crude oil buyers. "Some Japanese oil firms informed us that they are now in the process of shutting down small or inefficient refineries," he noted.
On the other hand, Al-Houti reaffirmed KPC's readiness to explore the possibilities for expanding its alliance with Japanese firms by utilizing their surplus refining capacity or forming a joint venture in the fast-growing Asian market.
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