Pacific Islands

Fuel Pricing
Manual
 Pacific Islands
Fuel Pricing
Manual

Prepared by the Energy Programme, Economic Development Division

Secretariat of the Pacific Community

Suva, Fiji
2015
 ©Copyright Secretariat of the Pacific Community (SPC) 2015
All rights for commercial/for profit reproduction or translation, in any form, reserved. SPC
authorises the partial reproduction or translation of this material for scientific, educational or
research purposes, provided that SPC and the source document are properly acknowledged.
Permission to reproduce the document and/or translate in whole, in any form, whether for
commercial/for profit or non-profit purposes, must be requested in writing. Original SPC artwork
may not be altered or separately published without permission.

Original text: English

Secretariat of the Pacific Community cataloguing-in-publication data

Pacific Islands fuel pricing manual / prepared by the Energy Programme, Economic
Development Division,
Secretariat of the Pacific Community

1. Fuel — Oceania.
2. Fuel trade — Law and legislation — Oceania.
3. Automobiles — Motors — Exhaust gas — Oceania.
4. Gasoline — Oceania.
5. Motor fuels — Taxation — Oceania.
6. Gasoline — Taxation — Oceania.

I. Title II. Secretariat of the Pacific Community

662.60995 ACCR2

ISBN: 978-982-00-0900-4

Disclaimer: While reasonable efforts have been made to ensure the accuracy and reliability of the material in this document, SPC
cannot guarantee that the information contained in the report is free from errors or omissions. SPC does not accept any liability,
contractual or otherwise, for the contents of this report for any consequences arising from its use.
 Pacific Islands Fuel Pricing Manual

Contents
Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Crude Oil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1. Benchmark Crudes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.1 Brent Blend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.2 Dubai Crude . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.3 Tapis Crude . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.4 West Texas Intermediate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2. General global crude oil markets outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3 Crude oil refining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Fuel pricing options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1. Non regulated fuel markets.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2. Tender national fuel supply.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3. Regulate fuel price.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4. The major components of the FPT:.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Fuel pricing templates (FPT) elements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
1. Free-on-board (FOB) cost of the fuel based on a regional price.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.1 Regional reference fuel prices.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.2 Fuel price Premium.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
1.3 Shipment related pricing period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2. Freight and freight related costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.1 Medium Range (MR) Freight.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.3 LCT Shipping.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.4 Freight related charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.5 ISO containers and drums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3. Government taxes and charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4. Operating costs allowance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.1 Market volume.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.2 Operating cost scrutiny. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5. ROCE allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.1 ROCE allowance rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.2 Assets.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.3 Stock.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.4 Debtors.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.5 Creditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
LPG pricing template. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Petroleum glossary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Appendices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Appendix A : Sample Fuel Pricing Template . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Appendix B : Sample LPG Pricing Template.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

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 Pacific Islands Fuel Pricing Manual

Foreword
Pacific Island Forum leaders (Leaders) have periodically called for increased
and continuous effort to address the heavy reliance of the region of fossil
fuel and its economic and environment implications.

In 2008, Leaders raised their concerns over the rapid increases in fuel
prices as imports and inflation rose to close to 20%. As a result some
Pacific Island countries and territories (PICT ) economies contracted,
dependence on remittances were exposed and the value of Trust Funds
declined. Leaders reaffirmed in 2009 that energy remains one of the
region’s key priorities, and urged members to remain vigilant in the face
of rising world oil prices, not least because of their potential to place
pressure on scarce national resources and fragile budgets. This led to
the Leaders’ endorsement in 2010 of the Framework for Action on Energy
Security in the Pacific (FAESP). In 2011, Leaders agreed on the value of
energy audits and of developing credible whole-of-sector plans such
as energy road maps and structures to improve energy security, reduce
dependency on fossil fuel for electricity generation and improve access
to electricity.

The Regional Energy Programme hosted by SPC at its Economic Development

Division is coordinating the implementation of the FAESP and its
whole-of-sector and many-partners-one-team approach. While there is
increasing focus and effort being placed on renewable energy and energy
efficiency, there is no denying that the dependence on fossil fuel cannot
be removed overnight. The Pacific Islands region fuel industry, with an
estimated value of up to USD 6 billion per annum will continue to thrive
for some decades to come. PICTs therefore need to ensure their fuel
industries are safe and hazard-free as they continuously look for means
to individually and/or collectively negotiate more cost-effective supply
and logistics, while also implementing better monitoring and regulation
of their fuel prices.

The SPC effort on petroleum safety and pricing is seen as complementing

the effort on renewable energy and energy efficiency. With economies
that are highly sensitive to volatile fuel prices, any gains achieved in RE
and EE can easily be eroded if fuel prices are not fair and reasonable. It is
therefore the purpose of this manual to assist in the understanding of the
various elements of the Pacific Islands fuel industry and to unlock some
of the myths and misunderstandings surrounding petroleum pricing as
it applies to the Pacific Island region.

Solomone Fifita
Deputy Director (Energy)
Economic Development Division

6

Overview
This manual has been prepared to inform and support
the work of officials of Pacific Island countries and
territories (PICTs) that regulate or monitor the price
of fuel in their respective jurisdictions.
One of its key objectives of this manual is to
demonstrate how the cost of Pacific Island fuels
can be better understood by referring to its various
components, which are both internationally and
locally influenced. It is meant to assist PICTs to
maintain the balance between the national need for
energy supply at a fair cost to government industry
and consumers and supply companies that need
to make a fair and reasonable profit to encourage
them to continue their commercial activities.
Chart 1 Average retail fuel prices including tax and duty
It is therefore important that PICT governments fully
understand the background and basis for the pricing
of petroleum products, that they are confident that
they are getting the best deal available and that
Pacific Islands Fuel Pricing Manual
Imported petroleum fuels account for 95% of the
commercial energy needs of PICTs, about 75% of
which is used for transportation and the majority
of the balance for electricity generation. The
cost of fuel has a high multiplier effect on PICT
economies, directly and indirectly impacting all
parts of the economy.
There is a very large variance in the price of fuel
between PICTs (Chart 1), some of which can be
explained by market size, remoteness and differing
government taxes, but there are some crucial
anomalies related to how the fuel is purchased, the
degree to which PICT governments are involved
in the process and what systems are being used.
the cost of energy that is passed to consumers is
fair and reasonable in the context of their markets.
Petroleum fuel for PICTs is generally supplied from
7
 Pacific Islands Fuel Pricing Manual
major Asian refining centres such as Singapore,
Korea, Japan and India, with very limited petroleum
refining taking place in the region, apart from limited
refining in Australia, New Zealand, Hawaii and PNG
which is focussed on supplying domestic markets.
Fuel supply to the PICT region is achieved by medium
range tanker (MRT) ships from Asian refining centres
that supply major demand ports such as American
Samoa, Fiji, French Polynesia, Guam, New Caledonia,
Samoa, Solomon Islands and Vanuatu. Smaller
demand ports are supplied by local coastal tankers
(LCT ) which in turn load fuel at PICT MR ports. By
world standards, the Pacific region is a relatively
small fuel market and the supply lines are long,
with each of those factors directly contributing to
the cost of fuel that is paid in the islands.
Petroleum fuel is an internationally traded commodity
and as such its price varies on a daily basis. It is
influenced by a large number of factors including
the underlying cost of the crude oil used to produce
it, the supply/demand balance of the Asia Pacific
region and also of other world markets, significant
world-wide weather events and geo-political
conditions in oil producing countries.
8
Crude oil is produced by many different countries
and refined at numerous refineries around the world.
Many different qualities of crude are produced,
each with specific properties that make it more or
less suitable to be processed or refined into a wide
variety of different possible products which include
industrial and energy gases, chemicals, liquid fuels,
plastics, lubricants, process oils, tar, bitumen and
other residual products.
Focussing on the refining process for fuels, there
are numerous products produced from a barrel of
oil, including liquefied petroleum gas (LPG), motor
gasoline, kerosene, diesel fuel and residual fuels,
to a wide variety of quality specifications including
distillation range, vapour pressure, flash point, sulphur
content, low temperature sensitivity. Fuel qualities
vary between the different regions of the world and
indeed between the industries and market sectors
that use the fuel. For example, the quality of diesel
fuel can be very different depending on whether it
is used for land transport, marine shipping, fishing
fleets or electricity generation. There are technical
factors and often regulatory limitations in many
countries which determine what fuels can be used
in which markets and/or end use.

The cost of all fuel that is supplied to PICTs is
made up of five basic components being;
1) Regional price of fuel (which changes on
a daily basis),
2) Freight and related charges to transport
the fuel,
3) Government charges and taxes,
4) Supply company operating costs, and
5) Margin for the supplying company.
Within those five components, are in turn, a number
of elements that need to be considered when
calculating the cost of fuel within a specific market.
These elements will be examined in some detail in
the following chapters.
Many cost components such as the regional price
of fuel, freight and government charges and taxes
can generally be independently verified using third
party published information. Other cost components
such as product premiums, operating costs and
Pacific Islands Fuel Pricing Manual
supply company margins need to be negotiated
based on documented evidence to determine that
they are reasonable.
The price of fuel within individual markets is
affected by;
• how these fuel cost components are taken
into account,
• the degree to which governments become
involved with fuel terminal asset ownership,
• the degree of involvement and investment
by the private sector,
• whether governments take control of supply
tendering and
• the degree to which they regulate fuel pricing.
The different systems that are being used by
individual PICTs contribute greatly to the wide
variance in fuel prices that can be observed within
the Pacific region, beyond the obvious factors of
market size and distance from suppliers. This can
be seen in Graph 1.
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 Pacific Islands Fuel Pricing Manual
Crude Oil
The pricing basis of all petroleum based fuels,
lubricating oils and a variety of other petroleum
based products is crude oil, which is a naturally
occurring substance produced over geological
time, it is thought from decaying plant and animal
matter. There are many different types of crude
oil produced in many different parts of the world.
Crude oil quality is measured in terms of density
(light to heavy) and sulphur content (sweet to sour).
Density is typically classified by a system adopted
by the American Petroleum Institute (‘API’). API
gravity is defined based on density at a temperature
of 15.6 ºC. The higher the API gravity, the lighter the
crude is. Light crude generally has an API gravity
of 38 degrees or higher, while heavy crude has an
API gravity of 22 degrees or less. Crude with an
API gravity between 22 and 38 degrees is generally
referred as medium crude.
Sweet crude is commonly defined as oil with a
sulphur content of less than 0.5%, while sour crude
has a sulphur content of greater than 0.5%.
1 Benchmark Crudes
There are many varieties of crude oil with a wide
variation of physical properties, all of which add or
detract from their value for processing into useful
commercial products. Energy reporting agencies
have identified nearly 200 distinct crude streams
or blends in recent years.
As a way to enable trading of these crudes in
international markets, a system has been devised
whereby the crude oil market is divided into a
limited number of ‘benchmark’ or ‘marker’ crudes.
These have defined characteristics or are derived
from a broad geographic area. Individual crudes
are then physically traded at values that take into
account their similarities or differences compared
with the marker crudes. Prices for individual crudes
are often quoted as a premium or discount to a
marker crude.
10
Some marker crudes used in the Pacific region are
Brent Blend, Tapis and Dubai. Other well-known
blends include the OPEC Reference Basket, West
Texas Intermediate, Bonny Light used in Nigeria,
Russian Export Blend and Mexico’s Isthmus.
1.1 Brent Blend
Brent Blend is a light, sweet North Sea crude with
an API gravity of approximately 38 and a sulphur
content of approximately 0.4%. Most Brent Blend
is refined in Northwestern Europe, but significant
volumes are also shipped to the US and Mediterranean
countries.
Brent Blend is used for pricing around two-thirds
of the crude traded internationally. Rolling price
assessments are based on physical Brent-Forties-
Oseberg crude oil cargoes loading not less than 10
days ahead and loaded free on board at the named
port of shipment (Brent Dated).
1.2 Dubai Crude
Dubai Crude is a medium sour crude oil extracted
from Dubai. Dubai Crude is used as a price benchmark
or oil marker because it is one of only a few Persian
Gulf crude oils available immediately. Dubai Crude
is generally used for pricing Persian Gulf crude oil
exports to Asia.
1.3 Tapis Crude
Tapis is a very light Malaysian crude oil with an API
of 43°-45° and very sweet with only about 0.04%
sulphur. Historically, Tapis was used as a pricing
benchmark in Singapore, Asia Pacific and Australia,
however this has changed in recent years since
Tapis is no longer traded on the open market in
significant volume.
1.4 West Texas Intermediate
West Texas Intermediate (WTI), the US benchmark
crude oil, is a light, sweet crude oil with an API
gravity of approximately 40 and a sulphur content of
 Pacific Islands Fuel Pricing Manual

approximately 0.3%, making it ideal for producing spot price of West Texas Intermediate is reported
products like low-sulphur gasoline and low-sulphur at Cushing, Oklahoma.
diesel. WTI is used primarily in the U.S.A, and the

2 General global crude oil markets outlook

A brief history of the Dubai oil prices from 1984- crisis. Increases in oil prices from 2004 as a result
2012 (Chart 2) shows how oil prices are affected of factors such as growth in supply, supply squeeze
by significant world events such as the Iran – Iraq and price rebound.
War, the invasion of Kuwait and the global financial

Chart 2 World events impact on Dubai Crude Oil Price

(Source: Sharmilpal Kaur, Platts, 2012)

3 Crude oil refining

Crude oil is processed through a purpose built oil naphtha, gasoline, kerosene (incl. for jet fuel) , gasoil
refinery and undergoes processes such as distillation, (incl. for diesel fuel), lubricating oils, chemicals,
cracking reforming and hydrotreating to convert plastics, wax, residual fuels and bitumen in various
it into a wide range of products including LPG, proportions as per figure 1.

Figure 1 Range of products refined from crude oil

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 Pacific Islands Fuel Pricing Manual
The quality of crude oil and other feedstock dictates
the level of processing and conversion necessary
to achieve an optimal mix of products.
Light, sweet crude has traditionally more expensive
than heavier, more sour crude because it requires
less processing and produces a slate of products
with a greater percentage of value-added products,
such as gasoline, diesel, and aviation fuel.
Figure 2 Typical portions of fuel available by crude type
More detailed information on the refinery process
can be found on-line at the websites of American
Fuel and Petrochemical Manufacturers: http://www.
afpm.org/the-refinery-process/
or Australian Institute of Petroleum: http://www.
aip.com.au/industry/fact_refine.htm
Refiner margin
The value-add in the refining process (referred to
as the refiner margin) can vary significantly on a
daily basis according to the relative supply demand
12
Heavy sour crude typically sells at a discount
because it produces a greater percentage of low
value-added products after simple distillation and
requires additional processing to produce higher
value, lighter products.
Different crude oil characteristics produce portions
of fuels and other refined petroleum products, as
per figure 2 below.
balance of each individual product.
Typical examples of refiner margin for products
in Asia Pacific when compared to the benchmark
Brent Crude can be found in Chart 3.
At times, the price of some refined fuels can be
valued at just over or even less than the value of
the crude oil from which is produced, indicating
significant supply imbalances. The refiner margin
for motor gasoline has in recent years tended to be
less than the middle distillates (kerosene and diesel).
 Pacific Islands Fuel Pricing Manual

This imbalance is reflected in the relative prices of the fuels and in severe cases can lead to arbitrage
positions that encourage the physical trade of some grades of fuel between regions.

Chart 3 Refiners Margin compared with Brent Dated Crude

Refiners Margin compared with Dated Brent price

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 Pacific Islands Fuel Pricing Manual
Fuel pricing options
Governments have options when it comes to
determining fuel pricing within a market. Three of
those options that are used in the Pacific region are:
1. No price regulation, leave the market to
find its own level (Australia, Vanuatu and
Palau)
2. Tender out national fuel supply
(American Samoa, Samoa, Kiribati and
Nauru)
3. Regulate fuel prices (Fiji, Tonga, Cook
Islands)
1. Non regulated fuel markets
Some markets such as Australia have chosen to
de-regulate fuel prices on the basis that there
are multiple independently owned fuel import
terminals and a low barrier to entry for potential
new fuel suppliers.
In that situation, it can be expected that there
will be adequate competitive pressure to ensure
that fuel markets will be contested, and thus
create reasonably competitive prices. In addition,
safeguards and severe penalties are in place which
expressly prohibit predator-pricing (aimed to drive
out small competitors) or price collusion between
suppliers, thus discouraging unethical behaviour
between suppliers and distributors.
In smaller PICT markets, especially those that have
limited or non-existent options for the entry of
potential new suppliers, non-regulation of fuel
markets can lead to unnecessarily high fuel prices.
At the very least, PICTs that find themselves in
this position should be regularly monitoring the
situation to determine whether it would be in the
national interest to introduce fuel price regulation.
2. Tender national fuel supply
The ultimate competition for a fuel market in the
Pacific Islands can be achieved by periodically
tendering out the entire market. Typical examples
of this are American Samoa, FSM, Kiribati, Nauru
and Samoa and the local oil companies in Solomon
14
Islands. Using this process, American Samoa and
Samoa both enjoy some of the lowest fuel prices
in the Pacific region.
A pre-requisite for achieving competitive national
fuel tendering is that the fuel import and storage
terminal(s) are to be owned or controlled by national
interests, thus allowing a new supplier into the market
with minimal investment. Terminal management
should be highly professional and handled by
the private sector on an ongoing contract basis.
This may be regularly tendered out either with, or
independently of, fuel supply.
National tenders must be carefully prepared and
take into account all of the legal and regulatory
considerations that need be catered for as well
as operating needs such as training, technical
support and service supply. Tenders are typically
for multiple (3-5) years with a possible extension
period if both parties agree.
Tendering companies that propose to supply fuel
must be pre-qualified in terms of having a proven
track record in other comparable markets, multiple
supply points or alternative supply options that
will cater for unusual supply circumstances such as
shipping delays or unfavourable weather conditions.
The fuel pricing formula at the centre of any
tendering arrangement will typically involve a price
build-up starting with a regionally published price
based on defined fuel qualities and include all costs
to market as well as an agreed supplier margin.
The formula should allow for the accumulation of
adequate funds, to be held in trust, to cover the
government cost of managing the tender and the
ongoing relationship with the supplier, operational
requirements such as maintenance and training,
adequate capital for terminal asset replacement and
mandated requirements such as oil spill equipment.
3. Regulate fuel price
Regulating fuel prices in a Pacific Islands context
is about reaching agreement with suppliers about
 Pacific Islands Fuel Pricing Manual

what constitutes a fair pricing formula that will multi-national oil company suppliers to improperly
periodically set the fuel prices at a fair level for exploit PICTs.
consumers and still allow suppliers to achieve an
The theory is that FPTs enumerate the actual costs of
acceptable level of profits that will encourage them
the fuel supply chain, recognising that oil company
to continue to supply the market.
suppliers need to recover those costs and also
A formulation methodology is used as opposed allow them to make a reasonable return on their
to a static price system in recognition that fuel is investments without making exorbitant profits.
an internationally traded commodity and as such,
FPTs recognise that oil company suppliers often
prices fluctuate on a daily basis. The pricing formula
have significant assets and/or other capital invested
that has been developed for the Pacific region is
within a market and need to make an acceptable
commonly referred to as a Fuel Pricing Template
return on that investment, taking into account the
(FPT) which can be used for either price regulation
risks of operating in a small remote market and the
or price monitoring. FPTs are meant to be used in
challenges involved with conducting their business
cooperation with oil company suppliers. In the case
to high international operating standards.
of regulation, this requires negotiation (ideally on
an annual basis). It is recognised that the fuel pricing template
has limitations, including that it relies on historic
FPTs were first developed for use in Pacific Island
operating costs (typically the previous year’s actual
Countries in the 1980s, in response to the question
values). FPTs allow full recovery of reasonable
of what constitutes a fair price for imported fuel
operating costs and overheads but do not include
supplied by large multi-national oil companies
any direct incentive for companies to reduce their
when they supply fuel to economically vulnerable,
costs. FPTs must also be reviewed regularly to
relatively small and remote Pacific Island markets.
ensure that only those costs and allowances that
The world had been through the oil price shocks
are directly associated with the business or the
of the 1970s and the resulting greatly increased
specific market are recovered.
cost of fuel was directly impacting the ability of
some PICTs to be able to afford their fuel supplies. The FPT is however, a useful tool for PICTs to manage
There was also some concern that without adequate their fuel prices if used properly. It is absolutely
pricing transparency, there would be potential for essential for example that the template parameters

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 Pacific Islands Fuel Pricing Manual

are reviewed annually and that that FPTs parameters

are based on the most recently available company
and market information.

Each FPT is PICT specific and reflects the individual

company costs of doing business in that market.

4. The major components of the FTP

The cost of all fuel supplied to the PICTs is made
up of five basic components being:
1. Free-on-board (FOB) cost of the fuel based
on a regional price.
2. Freight and freight related costs.
3. Government taxes and charges.
4. Operating cost recovery.
5. Allowed profit contribution, often calculated
as a percentage return on capital employed
(ROCE Allowance).

Within those five components are in turn a number

of elements that need to be considered when
calculating the cost of fuel within a specific market.
These are discussed in detail in the next section.

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 Pacific Islands Fuel Pricing Manual

Fuel pricing templates (FPT) elements

1. Free-on-board (FOB) cost of the fuel
based on a regional price
1.1 Regional reference fuel prices
Petroleum based fuel is an internationally traded
commodity, with prices published daily. Singapore
is used as the most relevant market for the PICT
region, since Singapore is a large petroleum refining
centre, it is a market where fuel is freely traded and
where traded fuel prices are regularly reported.
The actual fuel shipments may be sourced in
Singapore, which is a major oil refining centre,
however this is not always the case, with a growing
number of Asian export refineries being built in
recent years, including in Korea, Japan, India and
Russia. Historically, many of the Pacific Islands were
supplied from Australian refineries, however over
the past ten years Australia has closed a number of
its older, less efficient refineries, because they could
not compete with much larger new Asian refineries
and is now a major importer of refined fuel.
Some limited fuel supplies are still sourced from
New Zealand, but mainly in ISO-containers to take
advantage of container shipping opportunities to
small PICTs.
The international fuel market can be quite variable,
with SPOT market traded prices changing every day,
as can be seen from Chart 4. The Singapore traded
fuel price, as reported by Platts is based on observed
prices in the last hour of each trading day, with the
values reported in a high-low range. Hence, the
price that is used as the reported daily SPOT price
is an average of the daily high-low reported range
or the Mean of Platts Singapore (MOPS) price.

Chart 4 Singapore traded fuel prices

Daily mean of Platts Singapore from January 2008 – April 2015

Singapore traded SPOT fuel prices are obtained by subscribing to an industry specific reporting service
such as Platts or Argus, with an example of daily report prices in Figure 3.

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 Pacific Islands Fuel Pricing Manual
Figure 3 Daily reported Singapore fuel prices
Documents required to verify regional
fuel prices
• Platts quotations for required grades of fuel
products for the specific period required
(available from SPC Economic Development
Division).
1.2 Fuel price Premium
Historically, some PICTs fuel pricing was based on
either the Singapore SPOT (ie traded) fuel price
or the Singapore quoted POSTED price or some
blended percentage of the two. Posted pricing
has since been discredited as a valid market price
since it was essentially an artificially constructed
price that was used by individual oil companies
as a communication tool to publicly indicate,
amongst other things, their perceived future supply
imbalances.
The practice of including Singapore POSTED price
resulted in PICTs paying an effective set premium
over the traded (SPOT ) price of their fuel. With
the removal of POSTED price as a premium over
Singapore SPOT prices, some suppliers choose to
charge a set premium over the Singapore SPOT
price for PICT fuel supplies. The rationale for this
surcharge is that it is an added incentive for the
18
supplier to maintain regular supply to relatively small
and remote Pacific Island markets. This surcharge
is negotiable with individual suppliers.
Grades of fuel are priced individually and it is
necessary to specify the grade of fuel that is being
supplied to each PICT market and then use the
appropriate price. Generally, cleaner lower sulphur
content fuels grades attract relatively higher prices.
1.3 Shipment related pricing period
The basic mechanism for determining the free on
board (FOB) value of a PICT fuel shipment is generally
the average of the regional price for that grade of
fuel over an agreed time frame.
The starting point is typically the published Singapore
SPOT price on the day of loading the PICT bulk
fuel ship at the Asian supply port. Given, however
that the price of fuel can vary significantly on a
daily basis, it has become normal that the agreed
price be determined as an average over a broader
time scale rather than simply accepting the daily
published price. Examples of this are;
• (+/- 2 days), being the FOB loading date
calculated as the average of the market
price of five days, being two days prior to

loading, the day of loading and two days
after the loading.
• (+/- 5 days), being similar to the above but
using marker prices five days on either side
of the loading date.
• (+/- 10 days), using ten days on either side
of the loading date
• Month average – where regulated prices are
calculated once per month, and shipments
are of a similar frequency, then the loading
date in Singapore can be ignored, and
instead, the average price of the month is
used, being defined by agreed dates (i.e. 16th
of each month to the 15 th of the following
month).
• Multiple month average. This is similar to
the month average equation. It results in
high risk for both parties (both suppliers
and PICTs) especially at those times when
international fuel prices are volatile.
Price averaging systems will result in some anomalies,
favouring one party or the other for a period of
time, however by using a constant and predictable
Figure 4 Typical MR and LCT fuel shipping routes
Pacific Islands Fuel Pricing Manual
methodology, these are expected to even out over
the long run. The price average used in specific PICT
should in some way relate to the actual frequency
of shipping to that port.
Normally, the period over which the FOB price is
calculated is agreed in advance with the oil company
supplier and kept constant for an extended period,
with adequate notice given for any changes.
2. Freight and freight related costs
Refined petroleum fuels are bulk shipped in what
are termed ‘Clean Tankers’, (to make a distinction
with ‘dirty’ bulk crude oil carriers). Two types of
bulk freight are used for PICT fuel shipments, being
medium range (MR) tankers and local coastal tankers
(LCT), with typical PICT shipping routes illustrated in
figure 4 below. The tankers typically have multiple
cargo holds and as such can carry different grades
on fuel on the same vessel, however, there is a need
to guard against cross contamination of products,
since the loading and unloading manifolds are
usually common to all or many of the cargo holds.
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 Pacific Islands Fuel Pricing Manual
Cross contamination is minimised by using physical
barriers (or PIGS) and water to flush fuels down
discharge pipelines product discharges. The use of
water in this process necessitates that on receiving
the fuel into shore tanks, that it is allowed to settle
for a determined number of hours (depending on
the shipment size and other factors) to allow the
water to adequately separate and settle out before
the newly delivered fuel is suitable for use.
PICT fuel can also be delivered in ISO-containers of
16-20,000 litres or in 200 litre drums, often shipped
in containers.
2.1 Medium Range (MR) Freight
Medium range tankers, 25-45,000 Metric Tonnes
(MT), are those that deliver fuel directly from major
supply centres such as Singapore. They typically
service deep water ports such as those in American
Samoa, Fiji, French Polynesia, Guam, Marshall Islands,
New Caledonia, Papua New Guinea, Samoa, Solomon
Islands and Vanuatu. MR tankers are the most cost
effective way to transport bulk in this region and
significant economies of scale are available for
those markets that have adequate port facilities
to receive MR shipments and sufficient on-shore
tankage to make MR shipments viable.
Figure 5 Platts Clean TankerWire
20
MR tanker charges have two specific components
being the WorldScale Rate (WSR) and the WorldScale
Assessment (WSA). The WSR is a nominal figure
that is published annually, is route specific and is
an indication of the relative freight rate that would
apply, compared to other shipping routes.
The WSA is published daily and provides an indication
of the short term availability of shipping on specific
routings. It is generally a number that is greater
than 100 and less than 1,000 and when divided by
100 and multiplied by the WSR, yields the actual
freight rate (in US$ per MT ) that should apply for
a given shipment.
WorldScale Assessments are published on a daily
basis by reporting agencies such as the Platts Clean
TankerWire (Figure 5).
Essentially, for any given route,
WSR x WSA/100 = Freight rate (US$ per MT)
For PICTs, there is no specific WSR, with the rate
Singapore –Japan often being used as a reasonable
proxy. Care should be taken that the WSA average
used in FPTs is for the same period as the FOB fuel
price loading.

2.3 LCT Shipping
LC Ts (4-7,000 MT ) are smaller vessels with a
comparatively shallow draught, which are used to
service smaller PICTs where port or anchorage water
depth is limited. These ships typically load fuel
at a PICT MR port and tranship it to other smaller
ports such as Funafuti, (Tuvalu), Tarawa (Kiribati),
Rarotonga (Cook Islands) and Tonga.
LCT freight rates usually have two components,
being a fixed contract component and a bunker
fuel surcharge.
2.4 Freight related charges
Freight charges related to both MR and LCT freight are
Ocean Loss and Insurance, which are both legitimate
costs of shipping. Both are recovered directly
through the FPT on a cents per litre (cpl) basis.
• Insurance is typically calculated as a very
small (0.05%) percentage of the costs and
freight (C&F) value of the fuel.
• Ocean loss is related to the loss in transit of
fuels that are transported in the bulk holds
of ships and which are loaded and unloaded
by ships manifolds and pipelines. Typical
values used in the Pacific have been in the
order of 0.3-0.4 % of the cost insurance
freight (CIF) value of the fuel. Claimed
values should be justified by the supplier.
Ocean losses do not necessarily apply for
ISO-tainers (info below).
• Charges that might also be incurred at the
destination port, whether or not they are
government or private charges include
demurrage, wharfage, storage and handling,
as follows:
• Demurrage is voyage related and charged at
a daily rate for actual delays in off-loading the
shipment. This charge is shipment and event
dependent and therefore less predictable.
It should therefore be recovered in arrears
through the annual operating cost accounts
in the next financial year.
Pacific Islands Fuel Pricing Manual
• Wharfage is the port charge for the use of
the wharf at landing. It is usually a defined
and predictable charge and can easily be
recovered directly through the FPT
• Storage and handling refer to actual charges
incurred or charged related to offloading and
temporarily storing the stock. It is usually
defined and predictable and as such can
be recovered through the FPT.
NOTE: Company operating costs can be legitimate
from a legal perspective, but may still need to
be scrutinised and adjusted for the purposes
of their inclusion in the FPT to exclude those
costs that have been claimed through the FPT
and those costs that are not DIRECTLY related
to the price regulated market. Care must be
taken to verify that duplicate or inappropriate
cost recovery does not occur to ensure that
PICT fuel prices are fair and reasonable.
2.5 ISO containers and drums
Freight charged for delivering ISO containers and
drummed fuel is generally based on the actual
charges, as evidenced by invoiced documentation.
Documentation required to verify freight rates:
• World Scale Rate
• World Scale Assessment for the period
• LCT freight documentation
• Actual charges relating to shipments of ISO
containers and drummed fuel.
It should be noted that in the case of ISO-tainers,
it is NOT normally necessary to allow ocean losses
since the tankers are self-contained and do not
require pipeline discharge and it is possible to
efficiently drain the tank, thus ensuring that the
full shipped quantity is accessed. Furthermore,
for ISO-tank loaded in relatively cold climates such
as New Zealand, there is a natural fuel expansion
factor which means that in practice, typically more
litres per the set weight of fuel (calculated at 15
degrees centigrade) are received in PICTs than were
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 Pacific Islands Fuel Pricing Manual
originally loaded. This will normally more than
offset any losses through pressure venting of the
ISO-tainer in transit.
3. Government taxes and charges
Government charges are usually related to the use
of public facilities such as ports and harbour, as well
as import duty, excise and value added tax (VAT ).
These taxes and charges are a matter of public
record, vary greatly between PICTs and need to
be included in PICT specific FPTs as a legitimate
charge against the cost of imported fuel.
Care should be taken that government charges
and taxes, if claimed through the FPT, are not also
included in company operating costs that are
claimed through the FPT.
Documents required to verify government charges
and taxes
• Audited company operating accounts for the
previous financial year relating to operations
in the specific PICT.
4. Operating costs allowance
Fuel suppliers incur legitimate operating costs and
company overheads in providing their services.
Supplier operating costs are usually recovered
directly from the market on a cents per litre (or
other volume unit) basis.
4.1 Market volume
For the purpose of determining allowances for
both operating costs and for profit margin (ROCE
allowance) it is necessary to agree on the volume
denominator in the equation. Larger volumes will
result in lower allowance values for any Opcost or
gross ROCE allowance value. The simplest way to
determine this volume denominator is to use the
total volume sold by the company in question.
The opcost allowance is determined as:
OA = (Adjusted Opcost / Volume) / 100
22
Where OA is the Opcost allowance in cents per litre.
A similar equation applies to the ROCE allowance.
Non-regulated fuel volumes:
If however, it is determined that non-regulated fuel
volumes should be removed from the equation (e.g.
if aviation fuel was not a price-regulated fuel), it
will be necessary to adjust both the operating costs
values and the ROCE related values for all costs
and assets pertaining to the non-regulated market.
4.2 Operating Cost Scrutiny
There is a need to verify the legitimate value
of company operating costs and allocate a fair
proportion of overheads toward the price regulated
market. The volume of fuel supplied to the price
regulated market within each PICT needs to be
confirmed, taking into account that the entire
market may not be price regulated. In that case,
it may be necessary to segregate operating costs
between the various market segments.
Legitimate operating costs and overheads that can
be allowed for recovery through the FPT include all
those direct and indirect costs that are demonstrably
related to providing fuel to a specific market.
Depreciation of assets should be allowed as an
operating cost for the purpose of the FPT, on the
basis that the value of the assets allowed in the
ROCE allowance will refer to the depreciated value
of assets.
Claimed operating costs should not include those
costs that have already been claimed through the
fuel pricing template, such as international freight,
port loading and discharge costs and government
taxes.
Nor should allowed operating costs include major
abnormal costs for events that could reasonably
been insured against or any costs that have occurred
through the previous negligence of company
management.

Operating cost allowance is not meant to include
any level of extra revenue or profit, which will be
calculated as an agreed percentage of Return on
Capital Employed (ROCE).
Documents required to verify Operating Costs
• Audited company operating accounts for the
previous financial year relating to operations
in the specific PICT.
5. ROCE allowance
ROCE allowance is a level of extra revenue that is
allowed to fuel suppliers through the FPT as their
contribution to profit. The ROCE allowance is
calculated as an agreed percentage of the capital
that is employed to provide the services that the
fuel suppliers employ in supplying fuel to a specific
market. Elements of that capital employed include
assets employed, stock and debtors, which is offset
by creditors.
Care must be taken to ensure that the most
appropriate level of the various ROCE elements
is agreed, which reasonably reflect the market in
which the fuel is supplied.
5.1 ROCE Allowance rate
The agreed ROCE allowance will vary by market
and should reflect the prevailing market conditions
of the time. Factors that should be taken into
account should be the underlying no-risk bond
rate of major markets, country risk and prevailing
business conditions.
Historically, fuel pricing templates in PICTs have been
subject to ROCE allowance levels of between 12-
15% after tax. This will translate into a significantly
higher pre-tax value for those supply companies
that actually pays tax within the PICT offering the
allowance.
5.2 Assets
Assets allowed should be directly relevant to the
business of the specific market in which the fuel
is sold. The depreciated value of assets from the
previous financial year, as per the audited company
accounts from the previous financial year.
Pacific Islands Fuel Pricing Manual
Scrutiny of the company asset register on an annual
basis is highly recommended and care should be
taken to note and remove from the allowance the
value of assets that have been retired or that are
no longer relevant to the direct operation of the
fuel supply business.
NOTE: Similar to company operating costs,
company asset registers can be legally legitimate,
but the details should still be scrutinised and any
adjustments made for those assets that are not
directly relevant to the PICT price regulated fuel
market.
5.3 Stock
The value of stock to be allowed in the FPT can
be either an average actual value of stock or a
theoretical value based on calculated minimum
desired stock holding balances, after taking into
account stock levels needed to satisfy energy
security considerations.
Stock values are usually calculated in days of stock
cover, the value of which is the landed cost of the
stock in the current template.
Theoretical stock day calculations should include
required minimum stock levels (say 10-15 days
emergency stock at all times) and should factor in
the normal replenishment cycles to establish an
average stock level that can be claimed through
the FPT.
For example, for a 30 day replenishment cycle
with a 10 day minimum stock level, the allowance
would be;
10 days + (30/2) = 25 days
The actual days cover should periodically be verified
against the theoretical value, which will assist in
determining whether adequate stock is being held
in-country and to determine whether adequate in-
country tankage is in place to satisfy energy needs
in an emergency situation.
Some suppliers have in past insisted that some PICTs
allow the value of stock supposedly held on their
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 Pacific Islands Fuel Pricing Manual

behalf in other countries, but it is hard to justify 5.5 Creditors

this argument since it does nothing to ensure in-
Creditors refers to the credit that oil companies
country stock security.
receive for the purchase of their fuel from related
companies and should be taken into account to
Stock value calculations (calculated by product)
reduce the value of capital employed whenever
are as follows;
that is a clear factor in the supply chain.
(A/365) x B, where Documents required to verify ROCE Allowances:
A= days stock and B = landed cost of stock
• Audited company capital asset register,
including original and depreciated value
5.4 Debtors of assets for the previous financial year.
This element refers to the capital employed by fuel • Audited company balance sheet from previous
supply companies that offer credit to consumers financial year.
in the market place. Claimed values need to
be thoroughly scrutinised, given the practice of
many suppliers to limit or not allow credit for fuel
purchases.

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 Pacific Islands Fuel Pricing Manual

LPG pricing template

LPG pricing templates operate on the same principles as the fuel pricing template when
deliveries are made by bulk tankers to an existing infrastructure operated by third part private
company, such as is the case in Fiji, New Caledonia, Solomon Islands, Tonga, Vanuatu and others.

One major difference is that International LPG pricing tend to be set on a monthly basis and
are based on the Saudi Contract Price, which is published by various media outlets.

Chart 5 S audi contract Price for LPG (Butane and Propane)

Saudi LPG Contract Price

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 Pacific Islands Fuel Pricing Manual

Petroleum glossary
A

ADO Automotive diesel oil or diesel fuel.

After –tax price Prices including tax and duty.

API The American Petroleum Institute (API) is a United States trade association that represents 400
corporations in the petroleum industry.

Asset An economic resource, tangible or intangible, which is expected to provide benefits to a

business.

ASTM American Society for Testing Materials. This is the group that develops products for testing
grade of petroleum products.

Aviation gasoline A complex mixture of relatively volatile hydrocarbons with or without small quantities
of additives, blended to form a fuel suitable for use in aviation reciprocating engines. Fuel
specifications are provided in ASTM Specification D 910 and Military Specification MIL-G-5572.

Backwardation A market situation in which prompt physical crude or refined product sells at a premium
to forward months’ prices for the same commodity. An ‘inverted market’. The opposite of
contango.

Barge Motored or motorless vessel used to carry oil products, often along a river. Barges vary in
capacity, mainly from 1,000 to 5,000 tons.

Barrel A unit of measurement most commonly used for crude oil.

A barrel of crude oil is equal to approximately 42 US gallons or 159 litres.

bbl  Abbreviation for barrel.

One barrel of oil; 1 barrel = 35 Imperial gallons (approx.), or 159 litres (approx.); 7.5 barrels = 1
tonne (approx.); 6.29 barrels = 1 cubic metre

bcf  Billion cubic feet; 1 bcf = 0.83 million tonnes of oil equivalent.

bcm Billion cubic metres (1 cubic metre = 35.31 cubic feet).

Bill of lading (B/L) Documentation legally demonstrating a cargo has been loaded. The bill of lading is signed by
the captain of the ship and the contract supplier. Abbreviated as B/L.

Benchmark Crude Benchmark crude oils are used as references for pricing oils. There are approximately 161
different benchmark oils, of which the main three are West Texas Intermediate, Brent Crude,
and Dubai Crude.

Brent crude A light sweet crude oil produced in the UK North Sea; a major benchmark for pricing of many
foreign crude oils.

British Petroleum The former name of petroleum company currently called BP. It is the third largest publicly
traded oil company in the world with oil reserves up 18 billion barrels and the annual revenues
of $308,000,000,000. It is headquartered in London, England.

British thermal unit A measure of the heating value of a fuel.

(BTU)

Buying hedge Also called a long hedge. Describes the buying of futures contracts to protect against possible
increased costs of commodities that will be needed in the future.

Bulk sales Wholesale sales.

Bulk station  A facility used primarily for the storage and/or marketing of petroleum products, which has a
total bulk storage capacity of less than 50,000 barrels and receives its petroleum products by
tank car or truck.

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 Pacific Islands Fuel Pricing Manual

Bulk terminal A facility used primarily for the storage and/or marketing of petroleum products, which has a
total bulk storage capacity of 50,000 barrels or more and/or receives petroleum products by
tanker, barge, or pipeline.

Capex  Capital expenditure.

C&F – Cost & Freight Basis for sale of a cargo, in which the price reflects both the cost of the cargo and the cost of
freight to its agreed destination. Title and risk of loss or damage to the oil passes from the seller
to the buyer when the oil passes the ship’s rail at the load port.

CIF (cost, insurance, This term refers to a type of sale in which the buyer of the product agrees to pay a unit price
freight) that includes the f.o.b. value of the product at the point of origin plus all costs of insurance and
transportation. This type of a transaction differs from a “delivered” purchase, in that the buyer
accepts the quantity as determined at the loading port (as certified by the Bill of Lading and
Quality Report) rather than pay based on the quantity and quality ascertained at the unloading
port. It is similar to the terms of an f.o.b. sale, except that the seller, as a service for which he is
compensated, arranges for transportation and insurance.

Compressed natural gas Compressed natural gas used in vehicles and in other applications not attached to a pipeline.

Contango Description for an energy market where the anticipated value of the spot price in the future is
higher than the current spot price. When a market is in contango, market participants expect
that the spot price will go up. The reverse situation is described as backwardation.

Contract price Price of fuels marketed on a contract basis covering a period of one or more years.

Cpl Cents per litre.

Crude oil Liquid petroleum as it comes out of the ground as distinguished from refined oils manufactured
out of it.

Cubic Foot A standard unit used to measure quantity of gas (at atmospheric pressure); 1 cubic foot =
0.0283 cubic meters.

Demurrage The sum agreed by charter to be paid as damages for delay beyond the contracted time for
loading or discharging from a transportation vessel.

Downstream Usually refining and the marketing and distribution operations that occur after refining as
opposed to Upstream which covers exploration, production and transport prior to refining

DPK Dual purpose kerosene (i.e. jet fuel and domestic use).

Dubai crude A high-sulphur sour crude oil which serves, either by itself or averaged in with Omani crude
oils, as the marker grade for many of the Persian Gulf crudes exported eastward into Asian
markets.

DWT Deadweight tonnage.

Economies of scale Economic functions and results relative to size and the ways in which economic values change
as the size of the economy changes.

ESPO Blend A light, medium sour Russian crude popular with Asia-Pacific refiners. API approx 33, sulphur
content 0.65-0.75%. Named after the East Siberian-Pacific Ocean ESPO pipeline.

ExxonMobil The largest of the “Supermajors” publicly traded oil companies. It has reserves of 72 billion
barrels of oil and revenue of over $383,000,000,000. It is headquartered in Houston, Texas.

Flash Point The lowest temperature at which a liquid will generate sufficient vapor to ignite.

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FOB – Free On Board The basis for sale of a cargo in which the price covers only the cost of the crude. The seller fulfils
its obligation to deliver when the goods have passed over the ship’s rail at the named port of
shipment. The buyer bears all costs and risks of loss or damage to the oil from that point.

Force majeure A term or clause in a contract designed to protect a contracting party against uncontrollable
events such as natural disasters, wars or climatic conditions that could prevent the fulfilment
of some or all of the terms of the contract.
Denotes circumstances beyond the control of a company, which force the breaking of a
contract.

FPSO Floating Production, Storage and Offloading vessel. A floating vessel used offshore for the
processing and storage of oil and gas.

Fuel Any substance that can be burned to produce heat.

Materials that can be fissioned in a chain reaction to produce heat.

Fuel oil A heavy distillate oil used for power stations, industry and ships boilers.

Futures contract
When an agreement is made to acquire goods or services on the futures market, the buyer
and seller enter into a futures contract. This contract assures the seller that the buyer will pay
the agreed-upon price for a predetermined quantity of the commodity. In return, the buyer
can lock in a price for the commodity regardless of the market price when the commodity is
delivered.
Technically speaking, when a purchase is made on the futures market, the only thing bought or
sold is the contract. Since the seller doesn’t sell the commodity until the date on the contract,
no actual commodity is sold under the contract until that date.

Gallon Generally accepted across the oil industry to refer to a US gallon.

There are 42 US gallons in a barrel.
There are 3.78541 litres in a gallon.
There are 1.2 US gallons to the British imperial gallon.

Gross Tonnage The volume of the interior of a crude oil tanker, including all enclosed spaces except the space
between a double hull. It is imperially expressed in tons per 100 cubic feet.

Gasoil A refiner term used to describe diesel fuel in all of its various specifications.

Medium distillate oil, used to produce diesel fuel and to burn in central heating systems. It
derives its name from its original use in the manufacture of illuminating gas. The term gas oil
is used interchangeably with No. 2 heating oil.

Gasoline A light fraction of petroleum distillation commonly used as a motor fuel in internal combustion
engines. Gasolines are complex mixtures of relatively volatile hydrocarbon liquids, with or
without small quantities of additives, which have been blended to form fuels suitable for use
in spark-ignition engines. Also known as motor gasoline, mogas or petrol.

Heavy Crude Heavy crude oil has an API gravity of less than 20. The largest deposits of heavy crude are
found in Canada and Venezuela.

Hedge accounting The practice of deferring gains and losses on financial market hedges until the corresponding
gain or loss in the underlying exposure is recognised. Allows companies to incorporate the
cost of hedging into the cost of the exposure. Gains are thereby offset against losses. This
reduces the volatility of earnings.

Hedging contract A type of contract used to establish a predetermined price that will be paid for a given amount
of electricity regardless of what the actual market value of that energy might be at the time it
is delivered to the customer. This type of contract provides the purchaser with the certainty of
a fixed price for the commodity and ensures a guaranteed sale price for the seller.

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 Pacific Islands Fuel Pricing Manual

Hedging Taking a derivatives position that is equal and opposite to a physical position with the sole aim
of controlling price risk.

Henry Hub Henry Hub is a physical location in Louisiana USA where a number of key natural gas pipelines
meet. Natural gas prices there are often quoted as a reference for US natural gas buy/sell
contracts and future trade arrangements.

High Sulphur Diesel  Diesel fuel containing more than 500 parts per million (ppm) sulphur.
(HSD) fuel

Hormuz The Strait of Hormuz is the sea-passage out of the Persian Gulf between Iran on the eastern
shore and the UAE and Oman on the west.

HSFO High Sulphur Fuel Oil which is a residual fuel that is left over in the refining process once the
lighter, more valuable fuels are extracted from crude oil.

Integrated hedge A hedge that combines more than one distinct price risk. For example, crude oil is usually
priced in US dollars. A producer of crude oil whose home currency is the Euro would be
exposed to both US dollar currency risk and crude oil price risk. A possible integrated hedge
would be a quanto product, which would hedge the price of crude oil in Euros.

Iraqi National Oil Com- The National Oil Company of Iraq. It was founded in 1966 and is capable of production capacity
pany (INOC) of three million barrels of oil per day.

Jet fuel A quality fuel in the kerosene boiling range, used primarily in commercial aircraft. It needs to
satisfy strict international regulations and usually has a freezing point of lower than -40°C to
cope with cold temperatures at high altitude. Aircraft powered by piston engines run on a
different fuel – Aviation gasoline (avgas).

Kerosene Medium-light oil used for lighting, heating and aircraft fuel.

KI Kilolitres (thousand litres).

Kuwait Petroleum Cor- The state oil company of Kuwait. It is proven reserves of 111 billion barrels of oil and estimated
poration revenue of $67,000,000,000.

Landed cost The total cost of oil off-loaded at a port, including duties, fees and taxes.

Light Crude Light crude is any crude with and API gravity of greater than 31. It is valued for the ease with
which it can be converted to gasoline.

Liquefied natural gas Natural gas (mainly methane) that has been liquefied for ease of storage and transportation.
(LNG) The gas is liquefied either by reducing the temperature or by increasing pressure or both.

Liquefied petroleum This is a type of refinery gas, which can be either propane or butane or a mixture of the two
gas (LPG) that is liquefied under pressure or refrigeration. Often known as bottled gas. LPG can be used
to run vehicles such as lorries and buses, and for domestic cooking and heating in remote
areas that lack alternative fuel sources.

Litre A measure of capacity in the metric system.

LR Large/long range tanker, 45,000-159,999-dwt. Divided into LR1 (45,000-79,999-dwt), and LR2
(80,000-159,999-dwt)

LSFO Low sulphur fuel oil, usually 1% sulphur or less. A residual fuel (similar to HSFO) that is left over
once the lighter more valuable fuels are extracted from crude oil.

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 Pacific Islands Fuel Pricing Manual

Lubricants Substances used to reduce friction between bearing surfaces, or incorporated into other
materials used as processing aids in the manufacture of other products, or used as carriers
of other materials. Petroleum lubricants can be produced either from distillates or residues.
Lubricants include all grades of lubricating oils, from spindle oil to cylinder oil to those used
in greases.

mmcf million cubic feet

mmcfd million cubic feet per day

mmscfd million standard cubic feet per day

mmmcf billion cubic feet

Mean of Platts MOPS is an acronym that stands for the Mean of Platts Singapore, and refers to the daily average
Singapore (MOPS) of a fuel price range that is reported by Platts. Typically refers to any contract mechanism that
derives its value by referencing the average of a set of Singapore-based oil price assessments
published by Platts.
The time frame can be over a week, a month, or any agreed period of time.

Metric Ton Measurement equal to 1000 kg or 2204 pounds

Middle Distillate Heating oil, diesel fuels, and kerosene fill this category, which constitutes the elements of
crude with medium density.

Mogas Used in some markets as a substitute term for gasoline/unleaded.

MRT Medium Range tankers, generally 25-45,000 metric tonnes

Natural Gas Gas, predominantly methane which occurs naturally and is often found in association with
crude petroleum.

Natural gas liquids The portions of gas from a reservoir that are liquefied at the surface in separators, field facilities,
(NGLs) or gas processing plants. NGL from gas processing plants can include a portion of liquefied
petroleum gas (LPG). Also known as condensates.

National Iranian Oil The National Oil Company of Iran with oil reserves of 138 billion barrels and revenues of
Company (NIOC) $78,000,000,000. It has a production capacity of four million barrels of crude per day.

National Oil Company Any oil company controlled by a state and which is not publicly traded.
(NOC)

National Oil The state oil company of Libya. It controls reserves of 50 billion barrels of oil. Annual revenue
Corporation (NOC) is estimated at roughly $45,000,000,000.

Nigerian National The state oil company of Nigeria. It controls oil deposits of 64 billion barrels and earned roughly
Petroleum Corporation $12,000,000,000 in profit and in 2006. It has production capacity of 2.39 million barrels of oil
(NNPC) per day.

Octane number A measure of the detonative quality of gasoline, or otherwise expressed its tendency to cause
“engine knock.”
The higher the octane number, the higher the resistance to engine knock.
Octane numbers come in two forms: Research octane number reflects fuel performance under
moderate driving conditions, while the tests for motor octane number reflect high speed
driving conditions. Tests for both numbers are in fact performed in the laboratory.

Oil Tanker Ships used for transporting petroleum across water. Oil tankers can be double-hulled or
single-hulled. Oil tankers, the variety of sizes ranging from a those that can safely carry tens of
thousands of barrels of oil to those that can carry over two million barrels of oil.

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 Pacific Islands Fuel Pricing Manual

OPEC The Organization of Petroleum Exporting Countries is an intergovernmental organization of

12 nations that export oil. The countries that make up OPEC are: Algeria, Angola, Ecuador,
Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela.
OPEC is headquartered in Vienna.

Opex Operating expenditure.

Day-to-day costs of doing business.
Primarily of labour costs and costs for fuel used in energy production. Operating costs do not
include interest and debt payments; these are considered to be fixed costs.

Oseberg An internationally traded Norwegian sweet crude oil. API approx. 37.3, sulphur content 0.24.

Pacific- wide All surveyed Pacific Island countries (excluding Australia and New Zealand)

Pacific Energy South Pacific Energy South West Pacific Limited was formerly known as BP South West Pacific Ltd. As
West Pacific Limited a result of the acquisition of BP South West Pacific Ltd. by Pacific Petroleum Company SA, BP
South West Pacific Ltd.’s name was changed. The company was founded in 1948 and is based in
Suva, Fiji. As of May 25, 2010, Pacific Energy South West Pacific Limited operates as a subsidiary
of Pacific Petroleum Company SA.

Petroleos de Venezuela The state owned petroleum company of Venezuela. It has 77 billion barrels of conventional
(PDVSA) crude oil and an estimated 235 billion barrels of extra-heavy crude.

Petroleum Generic term for fluid (gaseous or liquid) hydrocarbons.

Pipeline Pipelines are used to transport a number of substances including natural gas, fuels, hydrogen,
water, and petroleum.

Platts Platts is a leading global provider of energy, petrochemicals, metals and agriculture information,
and a premier source of benchmark price assessments for those commodity markets. Since
1909, Platts has provided information and insights that help customers make sound trading
and business decisions and enable the markets to perform with greater transparency and
efficiency.

Physical market The forum for the trading of oil with specific loading or delivery dates, which are scheduled to
load within 21 days’ time. Producers and refiners are the primary participants in this market.
Also known as wet or dated market.

ppm Parts per million. Typically used to designate amount of metals or other impurities in refined
oil products.

Premium An additional amount agreed between buyer and seller over and above an existing benchmark.
Also, the price paid by an option holder to an option grantor.

Qatar Petroleum (QP) The state oil company of Qatar with total recoverable reserves capacity of 170 billion barrels
of oil and production capacity of one million barrels per day. Profits of roughly nine billion
dollars.

Rate of return The percentage of an investment that can be recovered or returned as profit in a given amount
of time, usually a year.

Reference month The calendar month and year to which the reported cost, price, and volume information
relates.

Refiners Margin Refiners margin is the value differential between crude oil and refined petroleum fuels and can
be an indication of the relative supply demand balance between fuels that are co-produced
from crude within a region.

Refinery A manufacturing plant where crude oil is distilled and otherwise separated into various
components such as usable products or feedstock.

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 Pacific Islands Fuel Pricing Manual

Residual fuel oil A general classification for the heavier oils, known as No. 5 and No. 6 fuel oils, that remain after
the distillate fuel oils and lighter hydrocarbons are distilled away in refinery operations.

Retailer A firm (other than a refiner, reseller, or reseller/retailer) that carries on the trade or business
of purchasing refined petroleum products and reselling them to retail consumers without
substantially changing their form.

RON Research octane number. See octane number.

Saudi Aramco The largest oil company in the world and perhaps the world’s most valuable privately held
company with an estimated total worth in excess of 2  trillion in U.S. dollars. It has total
estimated petroleum reserves of 260 to 303,000,000,000 barrels of oil and production capacity
of 8.3 million barrels per day. Revenue has been estimated at $233,000,000,000 per year.

Saudi Aramco Contract Price of Butane and propane that is set by State-run Saudi Aramco. The prices provide a
LPG price benchmark against which Middle East sales of liquefied petroleum gas (LPG) to Asia are priced

Sour Crude Sour crude has a sulphur content of greater than 0.5% by weight.

South Pacific Oil LTD SPOL  purchased Shell Pacific’s business and assets in Solomon Islands in 2006 and is 100%
(SPOL) owned by the Solomon Islands National Provident Fund.

SPOL supplies Aviation and Marine Fuel, Petroleum, Oils and Lubricants in Solomon Islands.

Spot purchases A single shipment of fuel or volumes of fuel, purchased for delivery within one year. Spot
purchases are often made by a user to fulfil a certain portion of energy requirements, to meet
unanticipated energy needs, or to take advantage of low fu el prices

Storage capacity The amount of gas or fuel that can be stored to cover peak demand.

Sulphur An element that is present in crude oil and natural gas as an impurity. The greater the
percentage of sulphur the more “dirty” the fuel is considered.

Sweet Crude Sweet crude has a sulphur content of less than 0.5% by weight.

Tankers Size is typically measured in deadweight tonnes (cargo capacity for carrying water).
Here are tanker sizes and typical abbreviations (in deadweight tonnes)
GP General Purpose 16,500 - 24,999
MR Medium Range 25,000 - 44,999
LR1 Large/Long Range 45,000 - 79,999
LR2 Large/Long Range 80,000 - 159,999
VLCC Very Large Crude Carrier 160,000 - 319,999
ULCC Ultra Large Crude Carrier 320,000 - 549,000
Also:
Handysize 35,000
Panamax 65,000
Aframax 80,000
Suezmax (Million barrel) 130,000
Capesize: Any vessel, usually carrying dry bulk cargoes, that is too big to navigate the Panama
or Suez Canals.

Tapis This is often referred to as “the world’s costliest oil.” It comes from a single field in Malaysia and
has an API gravity of 45.2° and a sulphur content of 0.0343%, making it an exceptionally light
and sweet.

Tank farm An installation used by trunk and gathering pipeline companies, crude oil producers, and
terminal operators (except refineries) to store crude oil.

Tanker and barge: Vessels that transport crude oil or petroleum products.

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tcf  Trillion Cubic Feet (of gas).

Thermal cracking A refining process in which heat and pressure are used to break down, rearrange, or combine
hydrocarbon molecules. Thermal-cracking of gas oil includes visbreaking, fluid coking, delayed
coking, and other thermal cracking processes (e.g., flexicoking).

Total SA The fourth largest publicly traded oil company in the world with oil reserves of 10.5 billion
barrels and revenue of $229,000,000,000. It is headquartered in Paris, France.

Turnaround A refinery is said to be “in turnaround” when it is taken out of service of maintenance, usually
planned.

ULCC Ultra large crude carrier; with a capacity of 320,000-550,000 dwt.

ULP Abbreviation for unleaded petrol.

Upstream Oil and gas exploration and production, as opposed to downstream, which covers the areas of
refining and marketing.

Unit price Total revenue derived from the sale of product during the reference month divided by the
total volume sold; also known as the weighted average price. Total revenue should exclude all
taxes but include transportation costs that were paid as part of the purchase price.

Utility Any private company, publicly-owned organisation or other regulated entity that provides an
essential service in a given area directly to end-use customers, and that has exclusive rights
to provide that service or acts as a natural monopoly in the region it serves. Gas, water and
electric companies all qualify as utilities.

Variable cost Costs that vary. Includes costs of fuel, operating expenses, equipment and facility maintenance
charges, and depreciation from wear and tear on equipment among others.

VITAL FSM PetroCorp VITAL FSM PetroCorp is located in the Federated States of Micronesia (FSM). It is owned by
the FSM government and was formed after it acquired the terminal facilities of Mobil Oil
Micronesia Incorporated (MOMI) in the States of Chuuk, Yap, and Pohnpei in 2008. In 2009
Vital assumed operations in Kosrae and Yap Aviation.

VLCC Very large crude carrier; with a capacity of 160,000-320,000 dwt.

Volatility A measure of the variability of a market factor, most often the price of the underlying
instrument.

WACOG Weighted average cost of gas.

West Texas Intermedi- US crude oil used as a benchmark for pricing much of the world’s crude oil production. WTI is
ate (WTI) light, sweet crude with and API gravity of 39.6° and a sulphur content of 0.24%.

Wholesale The sale of any commodity to a party who intends to resell that commodity to other resellers
parties is referred to as a wholesale transaction.

Working storage capac- The difference in volume between the maximum safe fill capacity and the quantity below
ity which pump suction is ineffective (bottoms).

Xetra The Xetra system is one of the trading systems used on the EEX Spot Markets.

Zeebrugge Belgian port. The terminus point of The (European) Interconnector, a gas line linking to the UK
to continental Europe, and thus a major European gas delivery hub.

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References
Information for the glossary was sourced from the following websites:

1. http://www.oilandgasuk.co.uk/glossary.cfm
2. http://www.eia.gov/tools/glossary/index.cfm?id=petroleum
3. http://www.petroleum.co.uk/glossary
4. http://www.platts.com/glossary
5. https://www.pwc.com/gx/en/energy-utilities-mining/pdf/
eumcommoditiestradingriskmanagementglossary.pdf

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Appendices
Appendix A: Sample fuel pricing template

Submission Verification
Product ULP Kero ADO ADO Power ULP Kero ADO ADO Power
1 Period xxxxx based on xxxx actuals
enter
2 Exchange Rate CCC/F$ 0.7800 0.7800 0.7800 0.7800 0.78 0.7800 0.7800 0.7800 calculated
US$/F$ 0.6200 0.6200 0.6200 0.6200 0.62 0.6200 0.6200 0.6200 fixed
CCC/US$ 1.2581 1.2581 1.2581 1.2581 1.2581 1.2581 1.2581 1.2581

3 Rate of Return After Tax 12.00% 12.00% 12.00% 12.00% 12.00% 12.00% 12.00% 12.00%
Tax Rate 35.00% 35.00% 35.00% 35.00% 35.00% 35.00% 35.00% 35.00%
Before Tax 18.46% 18.46% 18.46% 18.46% 18.46% 18.46% 18.46% 18.46%

4 Conversion Factors litres/USgal 3.785 3.785 3.785 3.785 3.785 3.785 3.785 3.785
litres/barrel 158.987 158.987 158.987 158.987 158.987 158.987 158.987 158.987
litres/MT 1335 1270 1190 1190 1335 1270 1190 1190

5 Duty Rate cents / litre 50 0 50 0 50 0 50 0

Wharfage cents / litre 2.20 2.20 2.20 2.20 2.20 2.20 2.20 2.20
Consumption Tax % 15% 15% 15% 15% 15% 15% 15% 15%
Ports & Services * CIF 0 0 0 0 0 0 0 0

6 Ocean Loss %CIF 0.40% 0.40% 0.40% 0.40% 0.40% 0.40% 0.40% 0.40%
7 Insurance %C&F 0.05% 0.05% 0.05% 0.05% 0.05% 0.05% 0.05% 0.05%
8 Wharfage sss / litre

Offshore Costs
MOPS 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
Premia 2.00 1.00 1.00 1.00 2.00 1.00 1.00 1.00
11 FOB $/bbl 102 101 101 101 102 101 101 101
USc/l 64.15619 63.52721 63.52721 63.5272066 64.15619 63.52721 63.52721 63.52720663

MR Shipping
WorldScale Rate 15.35 15.35 15.35 15.35 15.35 15.35 15.35 15.35
WS Assessment 325.05 325.05 325.05 325.05 325.05 325.05 325.05 325.05
Clean Premium 20% 20% 20% 20% 20% 20% 20% 20%
WS/Vuda Port Charges 0.58 0.58 0.58 0.58 0.58 0.58 0.58 0.58
12 Freight rate US$/MT 60.454 60.454 60.454 60.454 60.454 60.454 60.454 60.454
US cpl 4.528 4.760 5.080 5.080 4.528 4.760 5.080 5.080
13 C&F Fiji US cpl 68.685 68.287 68.607 68.607 68.685 68.287 68.607 68.607
Insurance US cpl 0.034 0.034 0.034 0.034 0.034 0.034 0.034 0.034
14 CIF Fiji US cpl 68.719 68.322 68.642 68.642 68.719 68.322 68.642 68.642
Ocean Loss US cpl 0.275 0.273 0.275 0.275 0.275 0.273 0.275 0.275
15 Landed Cost Fiji US cpl 68.994 68.595 68.916 68.916 68.994 68.595 68.916 68.916
F cpl 111.280 110.637 111.155 111.155 111.280 110.637 111.155 111.155
MR demurrage F cpl 0.240 0.240 0.240 0.240 0.240 0.240 0.240 0.240
Fiji Onshore Costs
Wharfage F cpl 0 0 0 0 0 0 0 0
Security Fee F cpl 0 0 0 0 0 0 0 0
Storage & Handling F cpl 0 0 0 0 0 0 0 0

16 FOB Fiji F cpl 111.520 110.877 111.395 111.395 111.520 110.877 111.395 111.395
LCT Freight
17 Unit cost of LCT
Charter F cpl 3.1 3.1 3.1 0 3.1 3.1 3.1 0
Bunkers F cpl 2.2 2.2 2.2 1.7 2.2 2.2 2.2 1.7
18 C&F LCT F cpl 116.820 116.177 116.695 113.095 116.820 116.177 116.695 113.095
Insurance F cpl 0.058 0.058 0.058 0.057 0.058 0.058 0.058 0.057
Sp 19 CIF LCT F cpl 116.879 116.235 116.754 113.152 116.879 116.235 116.754 113.152
Ocean loss F cpl 0.468 0.465 0.467 0.453 0.468 0.465 0.467 0.453
20 Landed cost Nuku'alofa F cpl 117.346 116.700 117.221 113.604 117.346 116.700 117.221 113.604
cents / litre 150.444 149.615 150.283 145.647 150.444 149.615 150.283 145.647

21 Duty cents / litre 50.00 0.00 50.00 0.00 50.00 0.00 50.00 0.00
Ports & services tax cents / litre 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Fuel sales tax cents / litre 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
22 Wharfage cents / litre 2.20 2.20 2.20 2.20 2.20 2.20 2.20 2.20

23 FIS Cost cents / litre 202.644 151.815 202.483 147.847 202.644 151.815 202.483 147.847

24 Distribution cents / litre 15.9 15.9 15.9 6.4 15.9 15.9 15.9 6.4
25 Return on Investment cents / litre 8.91 7.48 8.90 7.27 8.91 7.48 8.90 7.27

26 Pre-tax Wholesale Price cents / litre 227.45 175.20 227.28 161.52 227.45 175.20 227.28 161.52

Value Added Tax cents / litre 34.12 26.28 34.09 24.23 34.12 26.28 34.09 24.23

Wholesale Price cents / litre 261.57 201.47 261.38 185.74 261.57 201.47 261.38 185.74

Guaranteed Return on Capital Employed (GROCE) Calculation

GROCE allowance rate 18.46% 18.46% 18.46% 18.46% 18.46% 18.46% 18.46% 18.46%

Assets
residual value '000 $ 5,200 5,200 5,200 5,200 5,200 5,200 5,200 5,200 35
Return Req'd '000 $ 960 960 960 960 960.00 960.00 960.00 960.00
Sales Volume kl 32,000 32,000 32,000 32,000 32,000 32,000 32,000 32,000
 21 Duty cents / litre 50.00 0.00 50.00 0.00 50.00 0.00 50.00 0.00
Ports & services tax cents / litre 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Fuel sales tax cents / litre 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
22 Wharfage cents / litre 2.20 2.20 2.20 2.20 2.20 2.20 2.20 2.20
Pacific Islands Fuel Pricing Manual
23 FIS Cost cents / litre 202.644 151.815 202.483 147.847 202.644 151.815 202.483 147.847

24 Distribution cents / litre 15.9 15.9 15.9 6.4 15.9 15.9 15.9 6.4
25 Return on Investment cents / litre 8.91 7.48 8.90 7.27 8.91 7.48 8.90 7.27

26 Pre-tax Wholesale Price cents / litre 227.45 175.20 227.28 161.52 227.45 175.20 227.28 161.52

Value Added Tax cents / litre 34.12 26.28 34.09 24.23 34.12 26.28 34.09 24.23

Wholesale Price cents / litre 261.57 201.47 261.38 185.74 261.57 201.47 261.38 185.74

Guaranteed Return on Capital Employed (GROCE) Calculation

GROCE allowance rate 18.46% 18.46% 18.46% 18.46% 18.46% 18.46% 18.46% 18.46%

Assets
residual value '000 $ 5,200 5,200 5,200 5,200 5,200 5,200 5,200 5,200
Return Req'd '000 $ 960 960 960 960 960.00 960.00 960.00 960.00
Sales Volume kl 32,000 32,000 32,000 32,000 32,000 32,000 32,000 32,000
Asset allowance cents / litre 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00

Debtors
Average days 30 30 30 30 30 30 30 30
Selling Price cents / litre 261.57 201.47 261.38 185.74 261.57 201.47 261.38 185.74
Debtors allowance cents / litre 3.97 3.06 3.97 2.82 3.97 3.06 3.97 2.82

Stocks
Average days local 20 20 20 20 20 20 20 20
entrepot 30 30 30 30 30 30 30 30
Into Store cost local 202.64 151.82 202.48 147.85 202.64 151.82 202.48 147.85
value in cents entrepot 142.97 142.15 142.81 142.81 142.97 142.15 142.81 142.81
local 2.05 1.54 2.05 1.50 2.05 1.54 2.05 1.50
in fj $ entrepot 2.17 2.16 2.17 2.17 2.17 2.16 2.17 2.17
Stock allowance cents / litre 4.22 3.69 4.22 3.66 4.22 3.69 4.22 3.66

Creditors
Average days 30 30 30 30 30 30 30 30
FOB Price cents / litre 150.44 149.62 150.28 145.65 150.44 149.62 150.28 145.65
Creditors allowance cents / litre -2.28 -2.27 -2.28 -2.21 -2.28 -2.27 -2.28 -2.21

Total Unit Rate cents / litre 8.91 7.48 8.90 7.27 8.91 7.48 8.90 7.27
check forward 8.91 7.48 8.90 7.27 8.91 7.48 8.90 7.27

Verification Summary ULP Kero ADO ADO Power ULP Kero ADO ADO Power

Previous Approved Price 259.79 237.09 283.22 216.04 259.79 237.09 283.22 216.04

New Price as Verified 227.45 175.20 227.28 161.52 227.45 175.20 227.28 161.52

Change -32.34 -61.89 -55.94 -54.52 -32.34 -61.89 -55.94 -54.52

Comment Selling Price prior to Value Added Tax

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 Pacific Islands Fuel Pricing Manual

Appendix B: Sample LPG pricing template

enter value
Period Submission Date Calculated
Verification Date Set value
recommendations

Gas Company Data

Annual volume yr end 30 June tonnes 1,000
Operating Cost yr end 30 June local $ 400,000
Net Asset Value yr end 30 June local $ 500,000

LPG Base Data

Duty %CIF 12.0%
Ports and Services Tax %CIF 20.0%
Wharfage local $ / T 37.85
Distributor Margin local $ / T 200
Retail Sales Tax % 5.0%
Allowed margin USD 100
Target ROCE before tax

Summary Submission Verification

00-Jan-00 00-Jan-00

Total Volume Tonnes 1,000

Wt Avg CIF US$/T

Landed Cost local $ / T

Operating Cost local $ / T 400 400
Margin local $ / T 0

Previous Calculated Recommend Previous Calculated Recommend

Selling Prices Period New New Period New New

Wholesale local $ / T
Retail local $ / kg

check 400 check 400

Calculations

CIF and Exchange Rate

Load Receipt Quantity FOB FOB Freight Freight CIF CIF Exch Rate
Date Date Tonnes US$/t US$ US$/t US$ US$/t US$ T$/$US
Date Date weighted weighted weighted
0.000 0.00 0 0 0 0.00 0 0.0000
0.000 0.00 0 0 0 0.00 0 0.0000
0.000 0.00 0 0 0 0.00 0 0.0000
0.000 0.00 0 0 0 0.00 0 0.0000
0.000 0.00 0 0 0 0.00 0 0.0000
0.000 0.00 0 0 0 0.00 0 0.0000
Total 0.000 0 0 0
Wt Avg
check 0.00
Operating Cost Comments

Sales Tonnes 1,000

Annual Operating Cost local $ 400,000
Less abnormal item local $ 0.00
Net operating Cost 400,000
Operating Cost local $ / T 400.00

Wholesale Price Submission Verification

Submission
Wt Avg FOB US$/t 0.00 0.00
Wt Avg Freight US$/t 0.00
Wt Avg CIF US$/t 0.00 0.00

CIF Nuku'alofa local $ / T

CIF Vava'u local $ / T
Duty local $ / T 0.00 0.00
Port and Services Tax local $ / T 0.00 0.00
Wharfage local $ / T 37.85 37.85
Total Landed Cost local $ / T 37.85 37.85

Operating Cost local $ / T 400.00 400.00

Return on Investment local $ / T
Wholesale Price local $ / T 438 438

Retail Price Submission Verification

Wholesale Price local $ / T 437.85 437.85

Distributors Margin local $ / T 200.00 200.00
Pre tax price local $ / T 637.85 637.85
Sales Tax local $ / T 31.89 31.89
Calculated Selling Price local $ / T 669.74 669.74
Retail Selling Price local $ / kg 0.67 0.67

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CONTACT DETAILS

Energy Programme
Economic Development Division E energy@spc.int

Secretariat of the Pacific Community T +679 3370733

Private Mail Bag, Suva, Fiji F +679 3370146

www.spc.int/edd