Kuwait has concluded a new 10-year deal with a China’s Sinopec Corp to nearly double its supplies by offering to ship the oil and sell on a more competitive cost-and-freight basis, according to a KPC official and a trading source on Monday.
State-run Kuwait Petroleum Corp will export 300,000 barrels per day (bpd) of crude oil under the agreement, which would amount to 15 per cent of Kuwaiti petroleum exports and estimated to be worth $120 billion, said Nasser al-Mudaf, KPC’s head of international marketing told Reuters.
Mudaf said the contract replaces a previous one for between 160,000 bpd 170,000 bpd that had expired.
A senior trading source with direct knowledge of the contract said KPC managed to increase the supplies to Sinopec because it offered “a good deal”, under which KPC will use its own oil fleet and sell the oil on a cost-and-freight basis.
“It will be the first cost-and-freight term deal between KPC and China,” said the source, adding it would be more competitive than previous contract that Sinopec bought on a free-on-board basis and shipped the oil by itself.
“We look for the best markets which has stability and gives high return to KPC,” said Mudaf, the marketing chief.
The agreement with China’s Sinopec’s trading arm, Unipec, was reached “in accordance with international prices and under purely commercial terms,” Mudaf said, adding the quantity was subject to increase, but did not specify by how much.
As Kuwait does not have spare crude production capacity, the incremental supplies to Sinopec would be diverted from other markets such as Japan and Europe, where demand has been weakening, said the trade source, who declined to be named as he’s not authorised to talk to media.
An official signing ceremony will be held in Hong Kong in three days, both said.
State news agency KUNA, quoting government data, reported in July that Kuwait’s crude oil exports to China in the first half of this year stood at 3.87 million tonnes, equivalent to around 157,000 bpd.
Most of Kuwait’s exports go to Asia. The Gulf Arab state pumped 2.81 million bpd in July, according to a Reuters survey.