Saturday, December 06, 2008

CAO exploring long-term jet fuel supplies

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Source: business times
They'll supplement those that the firm obtains through monthly tenders
By RONNIE LIM
CHINA Aviation Oil (Singapore) - with stronger controls in place after its restructuring - is discussing long-term jet fuel supplies for Chinese airports with parties including British Petroleum.

Top up: The new arrangements with BP gives CAO more flexibility in the procurement of jet fuel for receivers in China
These supplies will supplement those that CAO obtains through monthly tenders, which so far have been its sole source of fuel.
Pending the outcome of negotiations, BP Singapore will supply 'a small portion' of CAO's monthly fuel requirements for onward supply to China under a one-year arrangement from Jan 1 next year.
BT understands that CAO supplies about 10-12 cargoes a month, each of 30,000-40,000 tonnes, to Chinese airports including Shanghai Pudong. A CAO official declined to say what BP's 'small portion' amounts to, saying only that 'it is not significant'.
She also declined to say what volumes are being discussed for a long-term trading arrangement with BP.CAO chief executive Meng Fanqui said in a statement that the new arrangements with BP 'give us more flexibility in our procurement of jet fuel for PRC receivers'.
The interim deal ends the 'guardianship' role played by BP Singapore.

'Going forward, CAO will procure jet fuel through various means, instead of solely through regular monthly tenders,' he said.
'We believe this will enhance CAO's value proposition to its customers.'
Most of CAO's jet fuel is now sourced from Japan, South Korea and Taiwan through monthly tenders.
CAO is talking to traders, oil refiners and oil majors in these places and elsewhere about long-term supplies, a source said.
BP Singapore's chief executive for integrated supply and trading, Michael Bennetts, said that the interim agreement with CAO 'marks the beginning of a new stage of business cooperation' and that BP and CAO 'will continue to work together to explore and collaborate on new opportunities'.
BP Singapore, which has a 20 per cent stake in CAO, has been helping the jet fuel supplier get back on its feet after its US$550 million loss in a 2004 speculative derivatives trading scandal.
This help has included the secondment and subsequent transfer of several BP Singapore officials to CAO to help it put in place more checks and balances so that it can resume oil trading proper again. So far, CAO has ventured back into some jet fuel and petrochemicals trading.
CAO's interim trading arrangement with BP Singapore replaces an earlier business cooperation agreement. Under that agreement, BP Singapore advised CAO on jet fuel tenders and had pre-emptive rights to supply fuel on terms more favourable than those obtained by CAO through tenders. Pending a longer-term agreement, the interim jet fuel supply deal essentially ends the 'guardianship' role at CAO played by BP Singapore.

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