Pricing Bitumen

The recent hike in Crude Oil prices which has softened to USD 117 per barrel
level has raised questions from the importers of bitumen across the region.
The recently concluded Bitumen Asia 2008 Conference did tried to justiy the
de-link between the crude oil price and the production of bitumen by the
refiners, although sounded more like the whole course was engineered by the
refiners of this region , who participated actively.

The reasons cited were,

The differential between the Light and Heavy crude is not good enough.
1.Refiners are focusing on producing Coke instead of bitumen.
Only 10% of the heavy crude is suitable for bitumen production.
2. China does not allow import of crude by small and medium term refiners except that of two or three oil majors
3. Pollution and environmental concerns.
4. Poor Output/ efficiency in most of the refineries in Afrcia.

The major Oil prices although justifies the fluctuation in the pricing of
bitumen, there is not an established mechanism to derive the bitumen price
till date. The bitumen market is getting mature and liquid. The majority of
the exporting nations include Singapore, Iran, Saudi Arabia, Egypt, Thailand
in this region has different inputs and the range varies significantly.

Recently the Cartel led by Shell was exposed by the European regulators and
the was fined to the tune of price fixing on various petroleum products.

For Bitumen, there are no posted prices except for some compiled prices from
some paid subscription services ; marketers rely on a number of pricing
formulas that reference various posted crude qualities.

The various pricing mechanism includes
1. Spot Pricing - Most prevalent
2. Term Contract - Fast Vanishing
3. Long Term Contract - Vanished
4. Index based pricing - yet to born
5. Not to exceed pricing- Dead a while ago.

Market pricing is seasonal with higher prices during peak season like summer
being the norm due to higher demand for bitumen and other bitumen derived
products.

Saudi arabia has almost banned the export of Bitumen 60/70 , which considered as the raw material, obtained from the fractional distillation process, from
Saudi Aramco . The penetration grade bitumen 80/100, prepared from the
aforesaid raw material by adding additives, is the value added , before being
exported. The price sensitive Saudi bitumen industry, an unorganized industry, commands the most market value among the third world countries including
India, Pakistan and Bagladesh.

Singapore, Malaysia, Thailand, although except for Singapore, the rest of the regional economies , being net importer, the pricing is closely followed with each other, and which is not affordable for re-export for the developing nations.

By necessity, bitumen is regularly blended with diluent (typically in the
form of C5+ or synthetic light crude) in order to facilitate its transportation via pipeline to tankers.

As such, the effective field price for bitumen is also directly impacted by
the input cost of the diluent required, the demand and price of which is also seasonal in nature (in winter as colder temperatures necessitate more diluent for transportation).

Consequently, bitumen pricing is notoriously high in summer and during major
shutdown by the refineries and not reflective of the annual average realized
price or the economics of the business overall.

The strong bitumen demand disturbs the effective field prices during peak
season for a variety of reasons. In addition to the usual seasonal issues,
increase in bitumen demand and the premium for diluent was significant as a
consequence of various events such as production interruptions at a regional
refinery.

With billions of barrels of potential and billions of dollars of planned
capital investment, the bitumen resources are widely understood to be a cornerstone of future energy requirements and are attracting notable attention from overseas jurisdictions as well.

In fact, the adoption of the proposed methodology for all crude qualities
would have little or no effect on reported proved reserve quantities for all categories, bitumen excepted. For no other reason than bitumen alone is subject to the extreme seasonality in realized prices around calendar.

Article Source: http://myarticlezine.com

www.benzeneinternational.com bitumenexporter.blogspot.com

Please Rate this Article

5 out of 54 out of 53 out of 52 out of 51 out of 5 

Not yet Rated