Pertamina will face temporary problems in getting gasoil from Kuwait: Report

State-owned oil and gas company PT Pertamina will face problems in getting gasoil from Kuwait in the short term and may turn to the bullish spot market to meet any supply shortfall.

Fires broke out at two of Kuwait’s three refineries late on Monday and they will stop output for at least one week, Dow Jones reported on Tuesday quoting sources at Kuwait Petroleum Corp (KPC).

Indonesia imports 240,000 metric tons of gasoil, or 50% of its monthly requirement, from Kuwait on a term basis.

An extended production shortfall in Kuwait could mean that Pertamina may temporarily need to look for other alternate supply sources.

The sources at KPC foresee shortfalls in the supply of naphtha and middle distillates particularly gasoil as a result of the unplanned refinery outages, and disruption to the company's export program.

The fires were sparked by a fire at a power generator. It is still unclear whether they have been extinguished.

Sources said it will take 2-3 days for KPC to assess the damage, and normal refinery operations will resume within 3 days in the best case scenario at one of the three refineries, and longer if the damage is extensive.

"We are assessing the situation now, but it's most likely that the refinery will be working again fully within three days," said Mohammed al-Shatti, an official at KPC's marketing department.

Another company source said that in the best case scenario, refineries could resume operations in a week or two.

KPC may have to defer a couple of export cargoes because of the refinery outages, but the situation on potential delays remains unclear at this stage, al-Shatti said.

"Hopefully, it's all under control and we have storage," said al-Shatti. "There's no talk of force majeure yet."

Prior to Monday's fire, all three refineries were running at a combined rate of 920,000 barrels a day, at full capacity.

A company official dismissed talk of Shuaiba refinery undergoing a turnaround, clarifying that the planned January turnaround had been postponed to April.

In the worst-case scenario, the bulk of KPC's refinery capacity - namely fire-struck Mina al Ahmedi and Mina Abdullah - won't be operational for an extended period, and this will affect exports from Kuwait, industry sources said.

Kuwait exports a substantial amount of naphtha, gasoil, jet-kerosene, and fuel oil to Asia where prices of light and middle distillates are already hovering at pre-Iraq war highs.

Any cut in exports from Kuwait will squeeze an already tight market, tilting the demand-supply conditions more in favor of suppliers, in the Middle East as well as Asia.

Sources expect naphtha and gasoil exports from Kuwait to be hardest hit, boosting premiums for these products from already high levels. (*)