PERGAMONTSTEKOČ VEROV)
HONG KONG
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(a). Market price levels in Hong Kong.
(b) Cost of alternative product supply sources e.g. ex
Singapore.
(c) Fuel oil demand growth in Hong Kong.
(d) Access to moderately priced crude oil.
(e) The supply/demand equation forecast for refining capacity
in the Far East region.
(f)
The extent to which strategic considerations might outweigh purely economic assessments.
It would appear that acquisition of relatively cheap crude oil is by far the most important factor, and one to which any further studies would need to pay much attention.
Processing Chinese crude oil (of the quality presently known) is not especially advantageous either in terms of relative. crude price or of quality. The extra plant needed to process Taching grade would increase the capital cost significantly.
Based on the forecasts used in this report, the heavy Hong Kong demand barrel also reduces the attractiveness of the investment (i.c. fuel oil is relatively less profitable to manufacture and sell).
Further studies would be needed to determine whether or not the inclusion of Chinese and/or Japanese demand and the consequent requirement for a larger refinery should increase the attraction of the project.
It is conceivable that the refinery might be subsidised in one way or another in Hong Kong; if so it must be borne in mind. that it cannot compete in a free market outside Hong Kong on the same basis.
The degree of demand shift required (i.e. out of fuel oil into gas oil) in Hong Kong to make the project viable under current pricing conditions appears substantial.
If a refinery project was put in hand, and assuming it was justified on strategic rather than commercial grounds, it would be illogical to close off any potential avenues for acquiring crude. This argues a case for spreading the investment to include those existing marketing companies which currently refine their own competitively priced crude
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