The first barrels of Johan Sverdrup sour crude, the newest North Sea grade that is quickly becoming a favourite among Asian refiners, have reached the Mongstad terminal in Norway as tankers are readied for its long voyage east.
“The first cargo is expected to leave for customers in Asia this week and contains 1 million barrels with a market value of around $60 million,” field operator and largest shareholder Equinor said in a statement. “Future cargoes are expected to contain between 600,000 and 2 million barrels."
Market sources said that Equinor’s statement on cargo sizes raises the prospect of shipments via very large crude carriers (VLCC), which is typically the preferred mode of transportation for traders seeking to move barrels from the North Sea to Asia.
“Equinor’s traders are already experiencing high demand for the Johan Sverdrup oil. It is highly suitable as raw material for many refineries and will be available in large volumes in a long-term perspective,” it said in a fact sheet.
So far, shipping fixtures show a handful of Suezmax bookings to pick up the cargoes, which are currently scheduled in 600,000 barrel lots apart from the first 1 million-barrel parcel that was bought by Unipec, market sources said.
Two cargoes will be shipped in October, followed by about 15 lots in November, according to a loading program and sources.
The first tanker to load will be the Suezmax Orpheas, which was chartered by Unipec to load on Oct. 26 from Mongstad for Ningbo in China at a cost of $6.7 million, according to a fixture list released on Oct. 9 and Equinor.
According to IHS Markit’s Market Intelligence Network (MINT) ship tracker, the Orpheas is currently in the North Sea and signaling Mongstad as its next destination, arriving in two days.
Shipping fixtures show Equinor booking the Marlin Singapore and Marlin Shikoku to load in early November for Sikka and Jamnagar respectively, with both located in the west coast of India.
The Marlin Singapore is in the English Channel signaling Rotterdam as its next destination while the Marlin Shikoku is off the Iberian Peninsula on its way to Novorossiysk, MINT data shows.
Johan Sverdrup, a medium heavy and medium sulfur grade with 28 API and 0.8% sulfur, is a much needed source of sour crude for Asian refiners who are already missing barrels from Iran, Venezuela as well as cuts in OPEC production.
Asia is already a big consumer of another North Sea sour blend, Forties, taking in 140.5 million barrels of the 181.3 million shipped over the past two years, according to data from IHS Markit’s Commodities At Sea (CAS).
According to the CAS data, China imported 100 million barrels while South Korea purchased 36.2 million barrels, making them the two biggest importers of the North Sea blend that has 38.7 API and 0.79% sulfur.
North Sea Forties Crude Flows to Northeast and Southeast Asia
Over the past two years shipments of other North Sea grades to Asia, including India, have been sporadic with flows stopping between January to July this year, according to CAS data. A total of 6.9 million barrels of Ekofisk and 5.5 million barrels of Oseberg were exported during this period.
The data show that 1.6 million barrels of Oseberg and 1 million barrels of Ekofisk were shipped out in September and due to arrive in Asia in October and November.
Johan Sverdrup, with 2.7 billion barrels of recoverable reserves, is the largest North Sea field to come on stream in decades. Crude from the field is piped over a distance of 283 kilometres to the Mongstad terminal, which is also the site of a 190,000 barrels-a-day (b/d) refinery.
Under the first development phase, production is expected to reach 440,000 b/d in the summer of 2020, with output rising to 660,000 b/d under a second phase that will be completed in 2022, Equinor said in the statement.
Other partners in the field are Lundin Norway, Petoro, Aker BP and Total.
-- Raj Rajendran, Rajendran.Ramasamy@ihsmarkit.com
Copyright, Oil Price Information Service
