Platts amends Indonesia's Minas crude assessment methodology

S&P Global Platts has amended the methodology for its assessment of Indonesia's Minas crude oil from January 2, 2020, in response to changing physical market conditions.

From January 2, 2020, Platts calculates a daily value for Minas using a Market Parity Price or MPP model, instead of assessing the grade using its existing Market On Close assessment methodology. As a result of this change, Platts will no longer consider bids, offers and trades for spot cargoes of the grade in the assessment process. Platts will continue to publish any spot market transactions for Minas cargoes, but this information will not be used in the daily calculation of the MPP.

Platts announced the decision to change Minas crude assessment methodology in a subscriber note on November 13, 2019: https://www.spglobal.com/platts/en/our-methodology/subscriber-notes/111319-platts-to-amend-indonesias-minas-crude-assessment-methodology

Platts first proposed the change in Minas methodology in a subscriber note published October 7: http://plts.co/WVAS30pSC3w

The proposal followed consultation with the industry after Platts first opened a review for Minas assessment methodology in June 2018, taking into consideration the decline in spot market trading activity for the grade in recent years: http://plts.co/FmRS30pSC5A

BACKGROUND: Exports of Minas crude have fallen substantially in recent years as production has declined and much of the crude is now refined domestically in Indonesia. Platts' Minas assessment previously reflected cargoes of the grade loading FOB port and sold in the open market, but because of declining exports, Platts no longer observes sufficient spot information to sustain an independent Minas assessment.

Production from the Rokan oil block, which produces both Minas and Duri crude, in Sumatra is expected to decline to below 200,000 b/d by 2021, from around 210,000 b/d in 2018, according to data from Indonesia. Exports of Minas crude have fallen substantially following a directive from the Indonesian government in 2018 for domestic refiners to prioritize buying domestic crudes before imports. Latest data from Statistics Indonesia showed the country's crude oil exports over January to October this year dropped 66.8% year on year to about 68,000 barrels a day.

MPP MODEL: The MPP calculation for Minas is based on the grade's Gross Product Worth benchmarked to a reference basket of relevant crude grades that are actively traded in the regional spot market. These initially include Russia's ESPO, Abu Dhabi's Murban and Malaysia's Kimanis. The three basket grades, Minas and their gross product worth are normalized for delivery to Japan, accounting for freight and regional spot product prices.

The MPP model, which Platts also uses to assess certain illiquid crude oil grades from West Africa, will ensure that the assessment captures both the inherent refining value of the crude as well as the broader oil market demand-supply fundamentals reflected in the price of the reference basket.

The Platts MPP model for Minas incorporates the yield of the following products normalized for delivery to Japan:

Product Code

Propane Japan cargo (H2 Jan) AAVAM00

Butane Japan cargo (H2 Jan) AAVAP00

Naphtha Japan swap M02 AAXFF00

92 unleaded swap M02 AAXEM00

95 unleaded swap M02 AGUMM02

Jet swap M02 PJABT00

Gasoil swap M02 POAFG00

380 CST swap M02 AAPKD00

Marine Fuel 0.5% swap M02 FOFS002

Platts then subtracts additional costs, such as freight, labor, capital, power, insurance, and chemicals and catalysts from this GPW model. Finally, Platts applies an adjustment differential derived by averaging the difference between the cost-adjusted GPW and the daily assessed price of the following three actively traded crude grades:

Crude Grade Code

Kimanis AASCL00

ESPO M1 AARWF00

Murban M1 AAKNL00

Platts will review the MPP model for Minas annually to ensure it continues to reflect prevailing market conditions and quality of the crude grades.

To learn more about Platts Market Parity Price assessments, click on http://plts.co/FMFt30pSC5D

ASSESSMENTS IMPACTED: The Minas MPP assessment will be published under the existing code for Platts Minas assessment (PCABO00) in Platts Crude Oil Marketwire, Platts Oilgram Price Report and on Platts Global Alert on pages 2210, 2216, 2217, 2244, 2280, 2281, 1250, 0840, 0842 and 2810.

Alongside the change in Minas methodology, Platts has discontinued the following differentials assessments for the grade from January 2, 2020:

Assessment Code

Minas differential to ICP PCABP00

Minas differential to Asian Dated Brent AAPBA00

Please send all comments or questions to Asia_Crude@spglobal.com and pricegroup@spglobal.com.

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