Malaysia utility Tenaga buys over 200KT Apr-Aug fuel oil

SINGAPORE - Malaysia's national power producer, Tenaga Nasional, has bought more than 200,000 tonnes of power-generation fuel oil, for delivery between April and August, in addition to buying electricity from Singapore utility PowerSeraya, industry sources said on Wednesday.

The fuel oil volumes are the largest Tenaga has purchased in at least five years, traders said, linked to natural gas supply disruptions that resulted from the maintenance shutdown of gas production platforms owned by state oil company Petronas.

"Tenaga has not imported fuel oil in these relatively large amounts for a long time. They do buy now and then, but in small volumes of not more 15,000 tonnes each time, and the last time I saw them buy was about two years ago," a Singapore-based Western trader said.

"That they have bought such large amounts would imply that the supply disruption could well be quite severe. But there are no indications so far how long their requirements would last."

Tenaga last bought three low-0.98-density cargoes, totalling 65,000 tonnes, for August delivery on a cost-and-freight Malaysia basis at premiums of above US$20.00 (S$24.63) a tonne, via tender that closed on Monday.

The first of the 180-centistoke (cst) parcel, totalling 15,000 tonnes, is for Aug. 1-3 delivery to the Sultan Iskandar Power Station in the southern port of Pasir Gudang.

Another two lots, of 20,000 tonnes and 30,000 tonnes, are for delivery to Kapar in Selangor state further up north in the first week of August and in the middle of the month respectively.

Tenaga had also bought another five similar cargoes totalling about 145,000 tonnes, for delivery in the second quarter, at steady price levels from oil major Shell and European trader Mercuria.

These included six lots of 16,000-17,000 tonnes each and another three parcels of 15,000 tonnes each.

UNCERTAIN HOW LONG DEMAND WILL LAST

"Their requirements are not so easy to meet and their specs the commonly-traded ones, that's why the premiums are quite high. It's almost like tailor-making the cargoes for them," another trader said.

"Not many players in the market can make this grade and those who can would certainly build in a good margin to their offer price."

The unexpected requirement contributed to keeping fundamentals strong in a tightly-supplied June market, that had already been suffering from a lack of density cutters among the 16-month low Western arbitrage supplies at 2.8 million tonnes.

Reflecting the market's strength, its front timespread has been firmly at a backwardation of US$4.00 a tonne since end-May, although levels are expected to come off during the July pricing month, due to heavier inflows.

While it is unclear for how long Tenaga's requirements will last, traders said it may not be for much longer, pointing out that the utility reduced the volume of its requirements in the tender for the August-delivery cargoes.

It had initially sought seven cargoes totalling 115,000 tonnes, for delivery in July and August, instead of the three parcels that it will buy, cutting its requirement by 50,000 tonnes.

"They probably had more than they needed from the Q2 parcels and could push some of the cargoes into the following month, reducing their requirements," another trader said.

Tenaga also has not extended its power-purchase deal with Singapore utility PowerSeraya, a unit of Malaysia's YTL Power, beyond its current June 15 deadline, in the first cross-border commercial sale of power between the two countries.

The maintenance shutdown of gas production platforms has affected gas supplies to the utility, forcing it to turn to oil-fired thermal plants to make up for the lost capacity.