Asian traders, refiners anticipate up to 10 cargoes/month of Malaysian Kimanis crude in 2023

Malaysia's Kimanis crude is poised to cement its position as one of East Asia's most liquid sweet crude grades available in the regional spot market after Malaysia's state-run oil and gas company Petronas announced successful production at the Gumusut-Kakap Phase 3 deepwater development project, industry and trading sources said over Oct. 3-4.

Refiners across Asia and Oceania regularly see around 7-8 cargoes of Kimanis crude in 600,000-barrel stems offered on a monthly basis in the Southeast Asian spot market. The growing output and continued investment in the Malaysian offshore projects could possibly yield supply of up to 10 spot cargoes per trading cycle next year, according to traders and refinery feedstock managers based in Singapore, Jakarta, Bangkok, Melbourne and Brisbane with close knowledge of daily light sweet Malaysian crude trades.

The Gumusut-Kakap Phase 3 deepwater development project, off the coast of Sabah, Malaysia achieved its first oil production on July 31, Petronas said Oct. 3.

"Two new oil producer wells and two water injector wells were drilled. Once fully completed in Q1 2023, the four wells will add around 25,000 barrels per day to Gumusut-Kakap's existing production capacity," the company added.

Kimanis crude is produced in the field, which is Malaysia's second deepwater development after Kikeh.

The latest loading program showed various field equity holders marketing a total seven 600,000-barrel cargoes of light sweet Kimanis crude for loading over November.

As many regional traders and refiners pay little attention to monthly supply of Far East Russian ESPO amid increasing trade, logistical, legal and financial complications ahead of Dec. 5 when shipping insurance and EU seaborne Russian crude import restrictions are due to take effect, Malaysia's Kimanis would stand out as East Asia's most abundant crude grade in the spot trading realm, trading and refinery sources said.

"The delivery of new production from Gumusut-Kakap Phase 3 represents yet another milestone in the development of this world-class field, further unlocking its full potential," said Mohamed Firouz Asnan, Senior Vice President of Malaysia Petroleum Management at Petronas.

"Whilst the shallow inboard areas continue to underpin the country's production, the future lies in the deepwater plays which makes up a quarter of our offshore acreages," he added.

Field operator Shell holds 33% interest in the Gumusut-Kakap development, while Petronas holds 20% interest. Other equity holders include ConocoPhilips, PTT Exploration and Production and Pertamina.

Premium grade

Kimanis crude remains widely considered within the Asian trading community as one of the most expensive crude grades in the world as the light sweet grade is coveted for its high yield of light and middle distillates, while low sulfur and mercury contents make it easier for many of the less sophisticated Southeast Asian and Oceania refiners to process, trading and refinery sources said.

In addition, the Kimanis port charge is very expensive, costing on average of about 20-25 cents/b in terms of Aframax tanker logistics expenses, a sweet crude trader at a Thai refiner with direct knowledge of the matter told S&P Global Commodity Insights previously.

Platts assessed Kimanis crude at an average premium of $10.70/b against Dated Brent to date in 2022, S&P Global data showed.

Australia relies heavily on Malaysian crude and Oceania refiners in general are hopeful that the increasing production in the Malaysian offshore fields would lead to premiums on the spot cargoes to ease over the longer term, a feedstock and operation management source at an Australian refiner, who declined to be identified due to the sensitive nature of corporate trading relationship, said.

In the first seven months of this year, Australia imported 13.98 million barrels of crude oil from Malaysia, placing the Southeast Asian producer as Australis's top crude oil supplier, latest data from Australia's Department of Climate Change, Energy, the Environment and Water showed.