REVIEW OF BASIC PETROLEUM SITUATION IN SOUTHEAST ASIA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001900010112-3
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 26
• Document Creation Date: December 19, 2016
• Document Release Date: May 23, 2006
• Sequence Number: 112
• Publication Date: January 15, 1974
• Content Type: MF

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MEMORANDUM FOR: John Bushnell
National Security Council
Program Analysis
Room 365 OEO13 20506
CIA No. 7962
15 January 1974
SUBJECT Review of Basic Petroleum Situation in
Southeast Asia
1. As agreed in December, we are forwarding (see
attachment) a general review ui' the petroleum production and
trade situations in the respective Southeast Asia countries.
This package is one we will update and elaborate informally
for our own purposes, and we would greatly appreciate any
additions or emendations you can make. This week we are looking
into aspects of foreign exchange budgeting for petroleum in
1974; and, should this research result in any clearly defined
conclusions, we will share the results Tlith you.
2. The tabulation at the start of each country section
requires a few words of explanation. We thought it appropriate
to distill some of the key aspects of trade status, domestic
output, and consumption into'a short tab. Nevertheless, this
sort of thing has the defect of fitting different situations
rather imperfectly. In order of reliability, the data presented
descend from fair certainty for production and aggregate trade
through information on Arab-source imports to rather weak
material on consumption patterns.
3. I have never been as sure in any intelligence effort
that progress would depend on note-swapping and successive
drafts than in this one. As you are aware, every successive
commodity question the community turns up yields still more
evidence of fragmented coverage. If you know of others with
wi1C.,m we should be in contact on this issue, please let me know.
WASIiINCTON 25, D.C.
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OER/S/InC
Addressee
D/OER
ch/D/S
S t/P
S t/CS
SA/ER
S/EC
1.5 January 1974
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,;:
12eview of Basic PeL?r.oleum Situation
in Sout.lic~cos-t!03-"IT-17C73 ntrie=s
Introduction
1. Regional petroleum shortages in S o:theabt Asia
generally are a function of the level of shortages experienced
by Singapore, the major refining center supplying the region.
Cutbacks in the supply of crude oil flowing to Singapore
(over 90% from Arab sources) announced by the oil companies
in late November were to be 10 to 15% of the levels then
current. The i;:gional impact of the November cutbacks
was probably mitigated slightly by the termination of contracts
involving US military installations that were supplied through
Singapore. The Singapore government has made substantial
efforts to maintain supplies of crude oil by courting Arab
interests in the last several mon.as; and the oil companies,
which possess a large complement of recently installed
facilities in Singapore, are similarly interested in keeping
this market open.
2. There is wide variation among the nations of Southeast
Asia with respect to reliance on external petroleum supplies.
The dependence of individual nations is conditioned not only
by their possession of domestic supplies of crude, but also
by the extent of their refining capacity and -- in the
cases of those nations that have domestic crude production --
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the importance of crude oil in their external trade position.
South Vietnam, Laos, and Cambodia have neither indigenous
supplies of crude nor any domestic refining capacity. Burma
produces and refines about three-fourths of its dcmestic
requirements. Thailand and the Philippines have, the capacity
to refine their domestic requirements, but are almost
completely dependent on external feedstocks.* Indonesia
is the only major oil producer in the Southeast Asian
group, and it refines nearly all of its domestic requirements.
Interestingly, a portion of the crude oil refined by
Indonesia for its domestic needs comes from the Middle East
because it is more profitable for it to ma4ket its oil
to the developed countries, which pay a premium for sweet
crude. A similar situation prevail;; in Malaysia, where
Middle Eastern crude replaces domestic crude that is
valuable as an export product. Malaysia possesses sufficient
refining capacity to provide for only about half is
domestic needs.
* Although Thailand and the Philippines are bath dependent
on external sources of petroleum, the Philippines has since
November been substantially more aggressive in attempting
to obtain direct commitments from Arab governments. The
Thai government, faced with domestic difficulties and
inertia in the face of rising shortages, only recently took
action to raise domestic prices and to secure sources of crude
for the coming year.
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3. Trading patterns in the region have been somewhat
altered by the prevailing shortages of petroleum, but
there have as yet been no shifts dramatically affecting
the position of any individual nations. Indonesia has
been approached by a number of the other Southeast Asian
nations as a potential supplier; and, while the Indonesian
government has expressed a desire to support the others
in this aspect, its production is largely committed to
industrial countries. The Philippines formerly received
most of its petroleum through the international oil
companies operating there, but it is in the process of
nationalizing the domestic industry and will probably get
most of its crude oil for the co tiing year direct from
the Arab nations. Thailand has entered discussions with
the PRC for the purchase of diesel fuel but the amounts
involved represent a small percentage of Thailand's total
requirements.
4. The impact of the shortages on the economies of
the individual nations in the region has thus far been
fairly modest. All of them except Singapore are primarily
dependent on agriculture, which relies principally on human
labor and draft animals. Shortages of petroleum products
will likely impact most strongly on domestic commerce in
the region, for road transportation is the principal means
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0 L?41.ia 11
of getting goods from producing areas to market and assuring
steady inflows of such needed inputs to farms as agricultural
chemicals and textile fabrics. Most of the nations have
instituted some set of conservation measures targeted primarily
at oil consumption in large cities. There has as yet
been little information to indicate that the shortages
have disrupted life in smaller towns or the countryside,
where some two-thirds or more of the region's population
lives.
5. Cognizance of the potential impact of the shortages
has been much more evident in Singapore than elsewhere,
a result cf its industrialized base and dependence on
foreign trade. As the ..argest refining center for export in
Southeast Asia, Singapore would lose valuable foreign
exchange earnings if unable to supply petroleum products.
Its requirements for petroleum, which include bunkering
fuel needed to service the international shipping, are
substantial. Singapore possesses a large manufacturing
sector that needs a steady source of electric power, the
supply of which is entirely oil-fired.
6. The prognosis for Southeast Asia seems good based
on the attitudes of most of the nations toward the situation
in the Middle East and the behavior of the Arab supplying
countries toward the region in the last several months.
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Many of the nations have significant Moslem populations,
and the pro-Arab attitude has found increasing support of
late, particularly in Singapore. Malaysia has been on
the Arab favored list, the Philippines have managed to
obtain a temporary sanction from one of the supplying nations,
and while the attitude of the Singaporean government
has previously leaned toward the Israeli side, it has been
evident in the past months that Singapore will not
jeopardize the domestic economy for the sake of ideological
L%uJit1,.
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Burma
Country Status
Arab Imports (bpd)
Unfavored
5,000
Arab Imports as % of Total Oil
Imports :,
100%
Total 01.1 Imports as % of Total
Oil Supply
25%
Oil as % of Total Energy Consumption:
30%
Arab Oil Imports as % of Total
Energy Consumption
10%
Energy Consumption by End Use
Agriculture
.15
Industry. .
.15
Transport . .
.25
'
Household . .
.40
Other . . . .
. 5'
Burma is now experienci4.g severe shortages of most
petroleum products, but these are unrelated to Arab actions.
Although the nation normally meets about three-fourths of
its requirements from domestic production, a scarcity of
foreign exchange has generally rationed imports. The
government and the national oil company Myanina drastically
cut back sectoral allotments of products in October F ,d
December. Kerosene and fuel oil were available at levels
about 40% less than a year ago, and tht. overall shortage
of all petroleum products was about 35%: Because of the
backwardness of the nation, the economic impact is difficult
to measure and may be less than the extent of the shortages
would imply. The situation will worsen, however, as the 'rising
prices of oil make it more difficult for Burma to purchase
its requirements.
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C,.n,
Cali bodi a
Arab Imports (bpd)
5,000
Arab Imports as % of Total Oil
Imports
100%
Total Oil Imports as % Total
Oil Supply
100%
Oil as % Total Energy Consumption:
25%
Arab Oil Imports as % Total
Energy Consumption
25%
Energy Consumption by End Use .
Agriculture.. .
.35%
Industry. . . .
.15%
Transport . . .
.25%
?
Household . . .
.25%
Petroleum supplies on hand or scheduled to arrive
in Cambodia probably will cover consumption requirements over
the next three months, but rapid deterioration of supply
may take place in late spring. Shell, Caltex and Summit
have been supplying the nation's modest petroleum demands,
but Summit -- accounting for 30% of domestic requirements --
defaulted on its 1974 shipments. Contracts with the other
two companies expire in May, and the companies remain uncommitted
on renewal. The government's oil distribution monopoly --
Tela Khmer -- has been importuning the Indonesian government
to supply Cambod:.an requirements, but it is doubtful that
Indonesia will be able to act as a routine supplier.
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Cambodia is completely dependent on imported refined
products because the only refinery is currently out of
operation. At present, stocks are adequate to cover.
2 to 6 weeks' civilian and 8 weeks' military consumption,
but the situation could change radically if supply sources
cannot be confirmed by May.
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I:ulona:a i a
Country Status : Non-favored
Arab Imports (bpd) Negligible
k
Arab Imports as % of Total. Oil
Imports Nggli gi.ble
Total Oil Imports as % Total
Oil Supply Negligible
Oil as % Total Energy Consumption: 30%
Arab Oil Imports as % Total
Energy Consumption Negligible
Energy Consumption by End Use Agriculture .
.20%
Industry . . . .
. 30%
Transport . .
.25%
Household . . .
.25%
Indonesia, which supplied over 300 million barrels
of crude oil to Japan and the US during 1972, is the only
nation in Southeast Asia riding the current crest of the
world petroleum shortage. Although the country imports some
Arab crude for its own refineries as well as a small number
of refined products, it is not in a position where it can be
adv-rsely affected by any Arab actions.
While the Indonesians openly support the Arab cause
and were instrumental in promulgating the November ASEAN
statement against the Israelis, they are dependent upon their
petroleum exports as a source of foreign exchange earnings,
and they have been notably soft-spoken in discussions. In
the most recent round of oil price increases, Indonesia's
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selling price of $3.0.00 a barrel. was ccmewhat below the
lead taken by the Arab states despite the high quality of
its crude. The government and Pertamina -- the state-owned
oil company -- are taking a moderate position on the current
crisis, despite domestic criticism that the nation should
be making the most of it. Indonesia apparently wishes
to expand its position as a supplier to markets in developid
countries, but ii:s current production is at capacity and
any substantial:.nereasu in output will be at least a few,
years in coming.
Various Southeast Asian nations have solicited Indonesia
for the supply of crude oil*, but, despite the government's
expressed desire to be of assistance, the bulk of its
output over the next few years has Y?eon contracted
for in advance by Japan and the US. Only a small amount
of Indonesia's total production is not exported by the major
companies, and the sale of this residual is likely to be
limited to priority transactions, such as the swap agreement
reportedly being arranged with Burma for foodstuffs.
* These include Cambodia, Thailand, the Philippines and Burma.
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Laos
Country Status :
Non Favored
Arab Imports (bpd)
3,700
Arab Imports as % of Total Oil
Imports
100%
Total Oil Imports as % Total
Oil Supply
100%
Oil as % Total Energy Consumption:
20%
Arab Oil Imports as % Total
Energy Consumption
20%
Energy Consumption by End Use
Agriculture.. .
.35%
Industry. . . .
. 15%
Transport . . .
.250.
Household . . .
.25%
Laos is dependent on US assistance programs for
the entire~_j of its petroleum requirements. Although Shell
informed officials in Vientiane in late November that supplies
to resident US agencies would be terminated as of 1 December,'
the comapny recanted and later served notice that supplies
would be continued at their current levels. Diesel fuel
may .:e available only at levels 15% below those previously
in effect. Because of its minimal requirements, the
backward character of the nation and assurances from Shell
that supplies will be sustained, the economic impact on the
country will probably be minimal.
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L~ Ilu~
blalay!L
Country Status
Arab Imports (bpd)
Favored
160,000
Arab Imports as % of Total
Oil Imports .
90%
Total OD Imports as % Total.
Oil Supply
50%
Oil as % Total Energy
Consumption
45%
Arab Oil Imports as % Total
Energy Consumption :
20%
Energy Consumption by End Use
Agriculture . . .
.20%%
Industry. . . . .
. 35%
.Transport .
.25%
Household .' .
.:201-
Malaysia has fared well thus far in the energy crisis and
will probably continue to be little affected by the world
petroleum situation. Normally, Malaysia exports nearly all
of its production of sweet crude (some 30 million barrels from
Sarawak) and receives half of its refined products from
Singapore. Because domestic consumption is about the same as
its crude oil exports, however, it is in a good bargaining
position with suppliers and could in an emergency arrange for
refinement of its own crude on-consignment. Moreover, as a
Moslem state, it is on the Arab's favored list and can expect
some cooperation from these traditional sources. Finally, it
has enjoyed improving terms of trade that give it the e:.change
reserve capacity to cover soaring petroleum import costs.
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The Malaysian economy has been booming the last several
years as world prices for rubber and tin have continually risen
and the domestic economy has received substantial impetus from
the influx of foreign manufacturing firms. The biggest worry
at present is that the inflation being experienced by the
rest of the world will impact on Malaysian economic performance.
The magnitude of any recession from this factor is not esti-
mated to be large.
The Malaysian government raised the prices of gasoline by
10 percent on 21 December, but there have been no other wide-
spread conservation measures instituted. The price of
kerosene -- used by rural Malaysians for heating and cooking was maintained at previous levels to lessen the impact on
lower incorr.-t groups. A full cost increase was accorded the
oil companies operating in Malaysia, probably as a result of
the government's interest in inducing oil company investment
i
in the possibly large reserves of crude oil that remain untapped.
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Phi.lip;cs
Country Status
Favored (temporary)
Arab imports (bpd)
180,000
Arab Imports as % of Total Oil
Imports
90%
Total Oil Imports as % Total
Oil Supply
100%
Oil as % Total Energy Consumption:
60%
Arab Oil Imports as % Total Energy
Consumption
55%
Energy Consumption by End Use
Agriculture
.15%
Industry. . . .
. 20%
Transport . . .
.35%
Household . . .
.20%
Other . . . . .
.10%
The Philippine government has moved forcefully on
three fronts to assure minimum impact to its economy from
the present oil crisis. In late 1973 President Marcos took
steps to place the government in charge of national procurement
of crude oil. Before and since, his administration has made
various political concessions to the Arabs to assure continued
supply. Finally, a fairly extensive set of conservation measures
has been promulgated and retail fuel prices raised twice in
the last three months.
On 10 December, President Marcos issued a general order
that authorized the administration to assume overall control
of crude oil and oil products. Since that time, arrangements
have been worked out for tho government to take over the
ESSO operation in.the islands, but this has not been finalized
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due to the question of control over a refinery owned jointly
be Esso and Mobil. Although the oil companies operating
in the Philippines have wanted out for some time because
of low profitability, it is not yet clear whether the
government will assume complete control over the~"mndustry
or if the oil companies presently there will continue
operations.
Vigorous international politicking has secured temporary
placement on the Arab's favored list and some assurance that
the Philippines may be confirmed as a friendly country.
The significance of this is that the nation will be able 25X1
to obtain supplies of crude on a direct basis from the
Arab supplying nations.
Conservation measures invoked by the government have
been primarily aimed at the transport sector, which is
responsible for over 30% of total domestic consumption.
Gas rationing went into effect early in November, and prices
for gasoline were raised later in the month and again in
December. Other conservation measures have 'included a
four day work week for government employees, closing of
schools, and restrictions on domestic consumption of electricity.
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Despite there me w ures, however, the future may be
somewhat rocky for the Philippines. A contract between
Gulf and Filoil to supply over 7 million barrels of crude
annually expires at the end of January, and the prospects
for renewal are bleak. Without this contract, and because
of the growth in demand for oil, shortages during the
coming year could result in a 30% reduction from the level
of available supplies in 1973, and serious economic disruptions
are anticipated if this occurs.
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Singapore
Country Status
Arab Imports (bpd)
490,000
Arab Imports as % of Total Oil
Imports
90%
Total Oil Imports as % Total
Oil Supply
100%
Oil as % Total Energy
Consumption
90-100%
Arab Oil Imports as % Total
Energy Consumption
85-90%
Energy Consumption by End Use
Industry . . .
.60%
Transport . . .
.22%
Household . . .
.12%
Other . . . . .
. 6%
As the major refining center and the most advanced
economy in Southeast Asia, Singapore faces the greatest
potential damage from a cessation of Arab oil supplies.
Singapore receives small amounts of crude oil from Brunei
and Malaysia, but is almost wholly dependent on Arab imports
for domestic consumption and for export of refined products
(which accounted for 18% of total exports in 1972). There is
no capability to convert electric power generation to alter-
nate energy sources, and the large percentage used by trans-
port and industry leaves small margin for personal consumption,
where cutbacks can be most easily applied. Singapore also
requires extensive supplies of marine bunkering fuel to sustain
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the entropot trade vital to its econatuy (probably about 25
million barrels in 1973).
Because of its unique circunnstances among Southeast Asian
countries, Singapore showed the most visible signs of nervousness
after the cutbacks were announced. Although trying to maintain
a facade of equanimity and independence, the Singapore govern-
ment readily acquiesced to Arab demands when it pressured oil
companies to cut off supplies to US military forces in the
area, and. later recanted its announced position of neutrality
when it supported the ASEAN statement of late November condemning
Israel for occupation of Arab territories. .
The major oil companies owning the refineries in Singapore
announced in November that supplies of crude would be cut back
by 10-15%, but as yet there has been no evidence that the
economy was immediately affected. A program instituted on
15 November contained voluntary measures designed to reduce
t
consumption of electricity and gasoline by 10 percent and reports
of mid-December indicated that a five percent reduction had
been achieved. An additional tax was levied in late December
on the purchase of gasoline, raising the price of a gallon by
Singapore $0.11. There is continuing concern in the government
on the destabilizing effects of the cutbacks and further
conservation measures are likely to be enacted.
Srb iIL'.i
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Country Status
Arab Imports (bpcl)
Arab Imports as % of Toi:al Oil
Imports
100%
Total Oil Imports as % Total
Oil Supply
100%
Oil as % Total Energy
Consumption
30%
Arab Oil Imports as ? Total
Energy Consumption
30%
Energy Consumption by End Use
Agriculture . . .
.30%
Industry. . . . .
. 20%
Transport . . . .
.30;
Household . . . .
. 20%
Because of domestic political turmoil and bureaucratic
inertia, the Thai government was slow to react to the worsening
petroleum shortage in the country. Oil prices were, however,
raised twice between November and December, and there now
appears to be substantial cognizance of the problem. As of
late December, the government had taken action to deal with the
oil crisis by extending emergency powers to the prime m.`-ister.
Nevertheless, the shortage may worsen substantially before
any measures can take effect. The nation has sufficient
refining capacity to supply most of its domestic requirements,
some 40% of which previously came from the state-owned refinery
at Bangchak. Feedstock for this refinery was supplied by
Summit, a small American-owned company that purchased supplies
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on a spot basis and had no long-,term contracts. The Thai
government is now faced with lining up other long-term
sources and thus far has had little `access in dealing with
the Middle East supplying nations. 'The discussions with the
PRC for the purchase of diesel fuel are the only' evidence thus
far of substantive activity, and the quantities involved
represent only a small part of Thailand's total requirement
.for this product.* In Thailand's favor is its position as a
major supplier of rice to Saudi Arabia, a factor that may be
helpful in eventually procuring the needed crude oil.
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South Vi('tlni1111
Country Status
Arab Imports (bpd)
Arab Imports as % of Total Oil
Imports
].00%
Total oil Imports as % Total
Oil supply
Oil as % Total Energy Consumption:
35%
Arab oil imports as % Total
Energy Consumption
35%
Energy Consumption by End Use
Military . . .
.35%
Industry . . .
.15%
Agriculture .
.10%
Transport . .
.25%
Household . .
.15%
To meet the nation's petroleum requirements for both
civilian and military uses, the government of South Vietnam
has had to adjust to new arrangements that minimize the
apparent US involvement in funding. Before November 1973,
military requirements were supplied through DOD contracts.
Under pressure from the Arabs, these were terminated by
the oil companies, and South Vietnam's military was supplied
out. of US war reserve stocks for the remainder of 1973.
Since the first of the year, military petroleum requirements
have been met by a contract negotiated directly between
Saigon and Shell-, there has been no apparent disruption to
military supplies.
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South Vietnam's already-tight pei.r.ol.eum ,apply ci.tuaLion
took a sharp turn for the worse in early December when
the nation's largest storage tank fac''aLy at Nha Be was
attacked by the Communists and largely destroyed. In
response the Saigon government took immediate convervation
s!:eps beyond earlier (20 November) provision3 of a 25%-47%
increase in the administered prices of oil products and
cutbacks in civilian and government consumption. The
new measures included restricting the amounts in single
gasoline transactions, gas station closures, and reduction
of electric power to government and residential buildings.
The large-scale destruction of civilian si-Ocks and
storage capacity places additional short-run strains on
an economy highly dependent on imported petroleum products.
South Vietnam consumers some 55,000-60,000 barrels of refined
products daily. Of this amount, civilian consumption is
about 35,000 bpd (13 million' barrels annually) , with roughly
30 days' civilian supply normally on hand in the country.
These products, consumed primarily in Saigon, go to electric
power production, transportation, domestic cooking and
industrial uses.
l~d~.'- i.d.
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Brunei
Brunei produce; a substantial amount of crude oil
(about 70 million barrels in 1972) nearly all of which is
shipped to Japan. Refined products are obtained from
Singapore -- most of which are consumed by motorized vehicles --
and in turn Brunei supplies about five percent of Singapore's
input of crude petroleum. Because of small domestic require-
ments and a bargaining position based on relatively signi-
ficant supplies of crude, Brunei should suffer little from
the current situation.
UCLI~ f J.
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Approved For Release 2006/09/26 : CIA-RDP85T00875R001900010112-3