Singapore utility Sembcorp Cogen has terminated its gasoil supply and storage agreement with troubled oil trading firm Hin Leong.
Under the deal, Hin Leong sold gasoil to the utility and provided storage and management services for the fuel. The agreement had been in place since 2009.
Volume details are unclear, but Sembcorp Cogen said the carrying book value of the gasoil reserves stored with Hin Leong was S$94mn ($66mn) as of 31 December 2019. It did not say how it valued the reserves, but the price of Singapore 500ppm sulphur gasoil — a higher-sulphur grade more likely to be used for power generation — averaged $78.24/bl in December.
Sembcorp Cogen said it moved to end the deal to protect its interests after news emerged last week that Hin Leong had applied to the Singapore High Court for bankruptcy protection.
Singapore's Energy Market Authority's (EMA) requires Sembcorp Cogen to have sufficient gasoil reserves for at least 60 operating days under the terms of its electricity generation licence. At least 30 days of these reserves must be located at the utility's generating premises or at a site approved by the EMA.
Hin Leong applied for bankruptcy protection after running into financial difficulties following the slump in oil prices. It had assets of $714mn but total liabilities of $4.05bn as of 9 April, according to a court filing by its sister company Ocean Tankers, which has also filed for protection from its creditors.
