In response to changing physical market conditions, S&P Global Platts proposes to amend the methodology for its assessment of Indonesia's Minas crude oil from January 2, 2020.
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 reflects cargoes of the grade loading FOB 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 last year 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 June this year plummeted 64.9% year on year to about 68,000 b/d.
Under this proposal, from January 2, 2020, Platts would calculate a daily value for Minas using a Market Parity Price or MPP model, instead of assessing the grade through its existing Market On Close assessment methodology. As a result of this change, Platts would no longer consider bids, offers and trades for spot cargoes of the grade. Platts will continue to report on any spot market transactions for Minas cargoes, but this information would not be used in the daily calculation of the MPP.
The proposed change follows 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: https://www.spglobal.com/platts/en/our-methodology/subscriber-notes/062518-pl atts-to-review-indonesias-minas-crude-assessment-methodology
The MPP calculation for Minas would be 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 would initially include Russia's ESPO, Abu Dhabi's Murban and Malaysia's Kimanis. The three basket grades, Minas and their gross product worth would be 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, would 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.
To learn more about Platts Market Parity Price assessments, click on https://www.spglobal.com/platts/plattscontent/_assets/_files/en/our-methodolo gy/methodology-specifications/market-parity-price-faq.pdf
Platts would review the MPP model for Minas annually to ensure it continues to reflect prevailing market conditions and quality of the crude grades.
The Minas MPP assessment would 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 page 2238.
Alongside the change in Minas methodology, Platts also proposes to discontinue the following differentials assessments for the grade from January 2020: Assessment Code Minas differential to ICP PCABP00 Minas differential to Asian Dated Brent AAPBA00
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