Kuwait terminates naphtha contracts for December-November with Japanese buyers

11-Nov-09

After ardous negotiations, Kuwait Petroleum Corp (KPC) has terminated contracts for December-November annual naphtha contracts with all Japanese buyers, in a never before move. This has left naphtha users in Japan with no term supply from KPC for the first time for a one year period. Market grapevine estimates that KPC has limited supplies since much of its full-range naphtha will be diverted to its new aromatics plant. This has resulted in the need to terminate the contract. These customers that include producers Mitsubishi Chemical Corp, Mitsui Chemicals Inc, Idemitsu Kosan Co and Maruzen Petrochemical Co; and traders Marubeni and Petro-Diamond, together held a total of at least 575,000 tons of full-range naphtha for the period. Earlier, about 10-14 days ago, KPC had terminated contracts with Marubeni and Petro-Diamond, owned by Mitsubishi Corp. Despite deal conclusion at premium of US$14/ton with CPC, Kuwait Petroleum Corp (KPC) brought down premiums on term naphtha to US$13/ton. Fervent buyers’ resistance from the likes of Hanwha Petrochemicals, Samsung, YNCC, Mitsui Chemical, Maruzen as well as Haldia Petrochemicals, could have triggered the termination. This unparalleled move could affect rival Abu Dhabi National Oil Co's (ADNOC) ongoing term talks, as it usually takes its cue from KPC. ADNOC will have about 3 mln tons of new naphtha supplies a year from 2010, as it is expanding its gas projects. Qatar has an additional 200,000 tons/month of naphtha since October, after it started a new condensate splitter. It was not clear if KPC will continue selling high spot volumes after its aromatics plant is operating at a 60 percent rate and is set to run at full capacity by early December. It is unclear whether KPC could seal new term deals for its excess supplies with other customers. Kuwait is also committed to supply naphtha to Oman, which is receiving less than 30,000 tons of the feedstock a month.