List of actions to develop a ticket market in a non-IEA country

8.4List of actions to develop a ticket market in a non-IEA country

Establish interest of the host government to allow tickets to be sold on stock held in the country;

Establish interest of commercial operators in the host country to sell tickets on stock they hold;

Develop a set of rules around the ticket structure including who is able to offer tickets, stock type that can be offered, who is able to purchase tickets, treatment of stock still in tankers (but within host country’s territorial waters), etc;

Get IEA agreement to accept ticket stock in the host country as part of Australia's stock holdings based on the proposed structure;

Develop and agree a bilateral agreement between governments which would set the governance rules for any stock held (whether physical or ticket stock); and

Implementation - this will depend on who is likely to purchase the tickets which will depend on the model Australia choses for implementing any stockholding system.

9.Case Study: Republic of Singapore as an example of a non-IEA country providing ticket stock

During consultation for the 2012 Report, Australian petroleum industry participants noted “that Singapore could be a logical storage location for Australian emergency stock but confirmed that no other IEA country provides a logical location”¹⁰. Singapore is a logical location as there is a ready supply of shipping available, it is easy to transport product to where the need for product is in Australia and it is already a key component in Australia’s supply chain with established commercial relationships. This is shown in the map of Australia’s product supply routes (Figure ).

Figure : Australia’s import product supply routes



Source: Hale & Twomey Australia’s Maritime Petroleum Supply Chain Report (pg. 23)

Note: Width of the arrows represents approximate volumes from each import location (2011-12 data). Dotted arrow represents imports from India, currently less than 1% of total imports. India could become an important import origin in the future.

Emergency stocks held in Singapore could be physical stock owned by Australian entities or held through a ticket construct where the Singapore companies offering the tickets continue to own the stock. This section concentrates on Australian entities holding ticket stock in Singapore as that is viewed as a more likely construct for holding stocks offshore.

Key Singapore statistics¹¹

Three refineries with approximately 1.4 million bbl/day distillation capacity.

Over 8 million m³ of independent oil storage (around 20 million m³ storage in total).

Over 800 oil traders.

Bulk of local petroleum demand is for feedstock (naphtha) to petrochemical complexes rather than normal transport fuels (petrol, diesel).

Local consumption of petrol, jet fuel and diesel is only around 20% of refinery output of these products (with the majority of that being jet fuel and bunkers for the maritime market).

A similar volume of petrol and diesel is imported for blending and export compared to that produced in the domestic refineries.

Developing cavern storage to add to storage capacity (first phase – 1.47 million m³); possible second phase of 1.32 million m^3.

Investigating Very Large Floating Structure (VLFS) for storing petroleum.

Singapore – Australia relationship¹²

Singapore and Australia have had close trade and security ties since Singapore’s independence in 1965. The agreements and shared membership of international organisations include the following.

Singapore–Australia Free Trade Agreement (SAFTA) – entered February 2003.

ASEAN–Australia–New Zealand Free Trade Agreement (AANZFTA) – entered January 2010.

Member of APEC along with Australia.

Singapore–Australia Joint Ministerial Committee (biennial established in 1996).

Memorandum of Understanding between the Government of Australia and the Government of the Republic of Singapore Concerning Defence Cooperation – entered August 2008.

Australia and Singapore are both members of the Five Power Defence Arrangements (together with Malaysia, New Zealand and the United Kingdom).

As a net energy exporter, Australia also plays a key role in providing energy security in the region, as identified in the Australian Defence Force Posture Review 2012.

9.1Assessment of Singapore as a ticket location

Requirement for bilateral agreement and IEA approval

This is not something that can be readily assessed without the benefit of discussions with the Singapore Government and an understanding of its laws relating to petroleum. However the strong ties between Singapore and Australia mean that there is a logic for Singapore being considered.

Singapore, while not a member of the IEA, is a geo-politically stable country playing a key role in Asia’s petroleum market. The IEA might see value in the development of an emergency stocks market in Asia, especially as most petroleum demand growth is projected to be in the Asian region.

Locational factors

The locational factors identified as important for choice of a non-IEA country are as follows.

1. 
   Availability of petroleum infrastructure
   

While Singapore has substantial storage facilities, due to limited land availability, the cost of access to these facilities is high. Storage rental costs were indicated at USD1/bbl/month¹³; this is around three times higher than indicated in an IEA paper on storage costs¹⁴ which was based on discussions with commercial storage operators (which is assumed to be reflective of European storage rental costs). The storage facilities are also in high demand for trading activity – it may be there is little desire to tie them up holding emergency stocks.

In preliminary discussions with traders there were contrasting views; some felt that Singapore’s storage expense would make holding emergency stock too expensive while others saw it as a valuable additional component in storage strategies that they would be considering anyway.

2. 
   Ease of transport of stock to Australia in an emergency
   

Singapore is only 6-14 days sailing from Australia (noting that loading, discharge and port operations usually take around an additional three to four days) so is a logical choice of country to hold emergency stocks. With stocks in Singapore, all of Australia’s coast can be easily accessed as ships can go either to the west and then south, or to the north and then east coast.

3. 
   Access to shipping
   

Singapore is the key centre of product trading in the Asia Pacific region and also close to a number of crude producing areas. It also sits on the main shipping routes between the Middle East and North Asia. Therefore it is the centre of shipping activity in the region so access to shipping is not likely to be an issue even in disruption events.¹⁵

4. 
   Stability of the country and rule of law
   

Singapore is considered a stable and low risk country in which to do business. Its stability along with clear commercial law is considered one of the reasons that major petroleum companies use Singapore as their regional base.

5. 
   Suitable counterparties operating in the country
   

All the major international oil companies and major trading companies operate in Singapore to varying extents. This includes the major international companies also operating in Australia. ExxonMobil and Shell both have large refineries in Singapore, and Caltex Australia’s 50% owner, Chevron, has a share of another refinery. BP is an active trading in Singapore as is Trafigura (owner of Puma Energy Australia). The opportunity to contract ticket stock from companies that also have a presence in Australia would be a strong benefit in having Singapore as a provider of tickets.

Benefits and issues

All the benefits listed in 8.2 would apply to Singapore. In particular Singapore is an importer of LNG which would provide a strategic fit with Australia being an exporter. Singapore would need to consider the issues – in particular on what stock it would allow tickets to be sold such that it did not risk compromising its supply security. The issue as to whether a bilateral agreement fits within current Singapore law also needs to be considered.

Contract operation

Any contracts between entities in Australia and entities in Singapore would operate in line with the structure laid out in section 8.3. Singapore has the possibility of using counterparties which are also operating in Australia, which may give additional assurance that contracts will be honoured. Singapore is also closer than most other possible offshore storage locations meaning the shipping route is shorter.

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