Russian crude to help Philippines cut dependence on Middle East oil

Pilipinas Shell formally launched the processing of imported Russian crude that is seen to reduce by 2 % the country's dependency on crude sources from Middle East (ME) countries. However, the number of barrels actually imported for the first five months of the year increased by 12.3 % as the government required oil companies to maintain a minimum level of inventory to cushion the impact of the US-Iraq crisis on oil prices and supply.
The Department of Energy (DOE) said crude imports reached 41,620 thousand-barrels in January to May this year from 37,074 MB during the same period a year ago. President Arroyo, through Executive Order 314, ordered oil companies to beef up their oil inventory to avert any disruption in oil supply stemming from the US-Iraq war. Oil refiners were required to maintain a minimum in-country inventory level of oil and oil products equivalent to 15 to 30 days while all oil companies and bulk suppliers were directed to keep a 15-day equivalent inventory.

Energy Secretary Vincent S. Perez, Jr. said the move to diversify sources of oil, this time in Russia, gives the country an alternative source in cases of collateral effects from threat or armed conflict in the Middle East.
"The entry of Russian crude oil to the country will certainly boost our oil supply, giving us a new alternative source. Over the years, we have relied heavily on Middle East oil such that we are always affected by any threat or conflict in the area. We want to diversify our oil sources and we are very pleased that the series of meetings with Russian oil companies have bore fruit," Perez said. The country has reduced crude imports from the Middle East from 99 % to 89 % in the first six months of the year, Perez said. Other sources of crude include Malaysia and Indonesia.

The first shipment of Russian crude oil arrived at the Caltex refinery in San Pascual, Batangas last May. ChevronTexaco Global Trading supplied about 570,000 barrels of Ural crude oil from Novorossiisk, Russia to Caltex on a spot-basis transaction. Another shipment from Russia for Shell arrived in Tabangao, Batangas.
A total of 680 MB of Vityaz crude oil from Sakhalin, Russia was loaded early last month supplied by Shell International Eastern Trading. This crude shipment was the one processed in a ceremony held in the presence of the Energy chief, House Speaker Jose C. de Venecia and Russian Ambassador to the Philippines Anatoli Novogatov.
Perez and De Venecia led a five-day oil diplomacy meetings in Russia October last year in a bid to secure adequate energy supply following the threats of US-Iraq war, which was seen to affect the security and sufficiency of oil supply. There were no indication, however that oil prices would be rolled back despite savings on the transportation cost of Russian crude as compared to the Middle East's.

Shell spokesman Roberto Kanapi explained that the source bulk of their crude requirements from the Middle East is making the price go down.
"The higher the volume, the lower the price," he said. He said what they will save from sourcing in Russia is the turnaround time wherein crude imports from Russia will be delivered in a week's time compared to the 22-day delivery if the crude will be coming from the Middle East. Shell expects the third shipment of Russian crude in October.
"I am hopeful that a more permanent arrangement between the Philippine oil companies and the Russian oil companies will be sustained to ensure continuous supply," the energy chief said.

Aside from winning the bidding against other local refineries, Shell said they have to win biddings against Japan and Korea who can offer higher prices to Russia.
Russia is the world's second largest oil exporter, behind only Saudi Arabia. The Russian oil industry has been on an expansion mode. Reports issued by the Russian Government last May this year noted that oil production is forecasted to reach 450 mm to 520 mm tpy by 2010.