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SEAOIL Philippines finalizes 2014 gasoil, gasoline term contracts

SINGAPORE– Fuel retailer SEAOIL Philippines has finalized its term contract to buy gasoil and gasoline for 2014, with term volumes 50 percent higher from the previous year, industry sources said on Thursday.

The company will buy 1.8 million barrels of 92-octane gasoline from SK Networks and 1.8 million barrels of gasoil with 500 parts-per-million (ppm) sulphur from PTT Singapore this year, one of the sources said.

This is higher than the 1.2 million barrels of each product it bought through term contracts in 2013.

Term volumes will comprise 80 percent of its total fuel needs for this year, with the rest to be imported in the spot market, the source said.

Exact prices for the 2014 contracts are not clear, but gasoil was likely concluded at a premium of lower than 50 cents a barrel to Singapore quotes, while gasoline was done at a premium of less than $5 a barrel, the source added.

The gasoil term was negotiated on a free-on-board (FOB) Taiwan basis, while the gasoline was on a cost, insurance and freight (CIF) basis, the source said.

Gasoline prices were likely higher than 2013 due to a change in domestic gasoline specifications, the source said. The company is now importing gasoline with a reid vapor pressure (RVP) of 8 PSI instead of 9 PSI as it did previously, the source said.

RVP is the vapor pressure of gasoline measured at 100 degrees Fahrenheit. Fuels with higher RVP evaporate more easily and hence are cheaper than those with lower RVP, and typically result in more air pollution.

SEAOIL Philippines is one of the largest independent fuel companies in the Southeast Asian nation where it operates more than 340 petrol stations, according to the company website.

It plans to add 120 new stations in 2014, and expects to have 500 stations by 2015, which is likely boosting its demand for diesel and gasoline imports.

The company also announced in December that it is strengthening its oil distribution network by adding a second oil depot with a capacity of 40 million liters in January.

Strong economic growth and rising car sales are also likely boosting domestic demand for the oil products, industry sources said.

Domestic demand, buoyed by strong remittance inflows, and higher government spending have kept the economy growing by at least 7 percent for five straight quarters, making the Philippines the fastest growing nation in Asia, next to China.