[ROCKMAN]

Another 400,000 bbls per day of exported Saudi oil removed indefinitely from the market place. This time with the help of the French instead of China.

http://www.downstreamtoday.com/news/art ... a_id=40662

[h2]

Awesome info rockman, my favorite thread here.

I have one question, a bit up thread you said that the US is exporting, or set to export, 2.8 million barrels a day of refined fuel, which with the dreaded 'refinery gains' I assume means about 2.5 million barrels a day of feed crude to the refineries.

I assume though I don't know that total US consumption numbers includes this 2.5 million bpd, ie, it's part of the roughly 19 mbpd we are said to use, but it struck me, does this mean that in fact, if you exclude the 2.5 mbpd from the total, that we in fact use 'only' 16.5 mbpd? And that the numbers are actually that far off? And that we'd need to drop the part of the 2.5 mbpd we import from our imports? Then one wonders as well how much of that 2.5 mbpd is imported and how much is domestically produced.

Exported fuel obviously isn't going to 'count' when adding up the daily production + imports, so are we actually using quite a bit less than 19mbpd? I don't know why I never saw this question up to date.

By the way, I've decided, with some pain, to follow your strategy of just ignoring the posters who insist on making no sense whatsoever, or who are just confused by wishful thinking, or who seem to be unable to separate their own material / economic interests from what more closely corresponds to 'objective reality'. It's too bad in a way, because some of them, like a broken clock being right twice a day, actually do make sense when there are no direct conflicts with their biases and dreams and, most important, pay checks.

I think you are onto something here in terms of where to watch, and which balls to follow as they bounce around the globe, sorry I don't have anything of interest to add beyond this.

[ROCKMAN]

H2 - that's a great point. Despite my posts I'm not relay much of a numbers guy so I never thought about the specifics of exactly how such stats are generated. It would be easy to get the mix wrong especially when you add refinery volume gains as you say. I'll start digging for those details. In the mean time maybe some of our resident smarties can offer some details.

[h2]

the more I think of it, that's really the point of this thread in general, how oil numbers are going to get harder to track as locked in jv type refinery deals are made. After all, say Saudi Arabia puts online the 400k bpd refinery, that removes that from exports, and for those who follow oil production numbers and exports, suddenly it's a bit harder to track it all, you can't just look at export/imports, as westtexas has focused on, suddenly it becomes more complicated, in a sense, hidden, easier to disguise the end buyers.

That's why I think you're onto something with this thread, this could be a real step in global supply/demand dynamics, floating along with POD, to form this weird and hard to analyze network of trade/refining.

I keep thinking back to one of the few long term good points jay hanson made, long term socialized distribution networks and control over resource production look like the way forward, China certainly believes this is the case, seems to be working very well for them, ie, ignore today's cost/benefit, and look long term at value of procuring the bpd you need as an industrial state. The US model is looking pretty much like a full on failure as far as I can tell, except for our local production, where it's I guess about as good as it can be, seems to work well in our system, but doesn't do anything to lock in future import production here, a failing China is taking full advantage of, the only interesting thing is just how fast they are moving, I think they are fully aware that the faster they get rid of the play money and turn it into real commodity access and assets, the better off they will be long term.

Thanks for tracking this stuff. I think now and then I wondered about, say, vz 'exports' to us but vz owned, pdvsa, refineries in texas, who then ship it back to vz, same for mexico I guess, but it never really hit me that these are parts of the baseline numbers. Or are they? It seems like they shouldn't be, but that doesn't mean they aren't, just like SA will produce x per day when they refine y, then ship out z of the refined, that z will not be counted I assume as an export of the crude. Going to mess up westtexas numbers I think.

[sparky]

.
Yep there is a bit of churning in the hydrocarbon business ,
some crude is re-exported back to the producing country as lubricant or whatever
the EIA has some reams of stats but picking the thread is not too simple .
especially that this concern only the oil industry some manufactured fall under chemicals

I look at the world crude export number ..... ~ 42 Mbd , pretty much flat for a while too
it is simple and really is the closest one can get to a simple picture of the world oil market
as long as one understand that the internal production can be rising with the internal demand

[ROCKMAN]

Sparky - in addition to export numbers not being too transparent I suspect we won't see a significant very noticeable shift for a while. Most of those refinery JV's are either in the planning stage or construction is just beginning. Seems like many will come to fruition between 2015 -2018. It may also mimic the frog in the pot dynamic: small individual losses here and there that individually don't seem very significant. I imagine the worse case scenario might be as US/global production begins to retreat the combination might cause a sudden panic. The Chinese seem to have the timing of their move just right IMHO. Exporters, even though some like the KSA, are seeing record incomes, know their future depletion picture better than anyone as well as their increase in domestic consumption. Thus a good bit of motivation to use China's fat checkbook move the farther down the value line of their production.

[ROCKMAN]

This is more about exerting territorial control over resources as opposed to JV’s and direct ownership. It’s difficult for me to imagine China and the US eventually getting into an all-out conventional shooting war (let alone going nuclear) over energy. But there will certainly be tense times between the two as there has been in the past. And times where at least the threat of attack will be used as a strategic chip. So this bit from aol caught my eye this morning.

“It’s difficult enough for one ship to find and sink another ship. It may not be quite as hard for planes flying from an aircraft carrier to find enemy ships and sink them, but it’s not easy. The hardest task for a plane — especially a land-based plane — may be to find a small boat and sink it while it’s moving. But that’s just what one of America’s B-1B bombers accomplished earlier this month. Future wars might not all be on land, some may include surface combat, so we are evaluating the way we employ the B-1 to aid in completing the mission

Why is the Air Force experimenting with the B-1B, capable of flying between continents at high speed and low altitude? The most likely answer is anti-access/area denial (A2/AD) warfare, embedded most solidly in what the Pentagon calls Air-Sea Battle. The B-1B is not truly stealthy, but it does have a relatively smaller radar cross section, great range and the ability to loft the larger weapons payload in the Air Force, making it useful for A2/AD conditions. (We’re also in the early stages of building the successor, called the Long Range Strike Bomber – to the venerable B-52 and the B-1 and its cousin, the truly stealthy B-2.)

Add to that mix something the Chinese have been working on, a hypersonic anti-ship missile called the DF-21. Designed primarily as an aircraft carrier killer, the DF-21 has prompted the United States to work harder on its own ability to strike war ships at sea.”

So now for the pure speculation on my part. For decades the US has effectively used aircraft carriers to transmit its “authority” in distant regions. But large warships have had their vulnerability shown years ago when a rather cheap French missile from a lone fighter jet took out a large British warship in the Falklands battle. And now the Chinese are developing what sounds like the capability to take out an aircraft with a single missile potentially fired from a rather small sea or air borne platform. Would it ever come down to this? As the folks at the Pentagon say: Hope for the best…prepare for the worse. They do seem intent on preparing for long distance sea battles. We don't need that potential to protect our shorelines. We don't own major over seas assets to protect. But we do have some vested interest in keeping seaborne commerce protected. Especially commerce that involves the transport of energy.

[sparky]

.
Any confrontation between the U.S. and China would focus on the sea lanes , not on Chinese territory
the Panama canal , the Singapore , Timor passage , Shri Lanka at the tip of the Indian landmass and the cape
are the points of control ,
China has its second island chain strategy , basically all the China sea including Taiwan
some back door access through Russia and some seasonal possibilities via the Arctic sea ways
ships can sail from Northern China to the North Atlantic completely within Russia territorial waters
they have a side door via Burma but all those paths cannot carry enough cargo to keep their economy healthy

it should be noted their strong development of reconnaissance drones
hundreds could be in the air seeking the carriers battle groups location
at a pinch they could even be sacrificed by not returning , a one way trip double their range
they also have developed some submarine drone , they can dive deeper than subs and are tricky to counteract


Chinese have played with anti sat launches even bringing down an old satellite
much to the fury of NASA , since it increased troublesome space debris
Nasa is worried the debris could collide with other sats creating even more loose junk in an avalanche fashion

[ROCKMAN]

Sparky - It's still difficult to imagine it would come down to a shooting war between the US and China over oil. OTOH stories of Russian generals demanding attacks on US ships during the Cuban missile crisis eventually leaked out. Read a story recently about one Russian general who refused direct orders to attack because he felt it could ramp the situation up to nuclear levels. Don't know if he got a medal or executed for his decision.

There's an old movie, The Bedford Incidence, that gives a rather plausible story line IMHO as to how such situations can get out of hand to frightening levels. All it can take is one nervous weapons control officer to make it happen.

[sparky]

.
We are Sooooo digressing but the guy was Vasili Arkhipov ,

For days they had stood position , with the Us Navy looking for subs
the crew was severely suffering from extreme heat , they ahad pretty much run out of food
they had no contact with headquarters
US commercial radios were frothing at the mouth with doom ,
the Cuba crisis was building up to hysteria and US destroyers had found them and were dropping depth charges on them
they had to come up anyway , the engagement protocol requested the use of their nuclear tipped torpedoes
a two out of three decision had to happen for a nuclear launch without explicit order to do so .
the captain and the political officer voted for it , Arkipov voted against and convinced the captain to switch.
they surfaced , contacted headquarters who had forgotten about them !!!
Arkipov had a very good career, ending up an admiral
he was deemed to have done his job ,no more no less

[ROCKMAN]

Sparky - A little digression on Saturday night is OK. The only ones here are those of us with no other life. LOL.

Glad you filled in the blanks. Interesting real life event since it was a nuke tipped torpedo that took our the U.S.S. Bedford in the movie. But the Navy and Chinese may mutually recognize the potential for accidental weapons release. In 2014 the Chinese and USN with have a joint exercise in the Pacific. I'm guessing they at least what to work out com protocols between the two forces. One badly translated message could be disastrous.

And not that much of a digression given the thread is about "control".

[ROCKMAN]

Responding in another thread it occurred to me that we might be focused on the wrong number: global oil production. What’s important, at least for us importers, is how much oil is being exported. For the last 8 or so years oil exports have been flat to slightly declining in the 40 to 45 million bopd range. IOW only about half the oil produced on the planet today has the potential to be imported by anyone. For one thing this helps to put US imports into perspective: the US, by importing 10 million bopd, has to acquire more than 20% of all exported oil to just maintain our current consumption rate. Just the top 6 importing countries (US, China, Japan, India, Germany and S. Korea) import a combined total of about 27 million bopd. Or about 60% of all the exported oil. We’ll call them the Big 6.

For simplicity let’s assume exports hold flat around 42 million bopd. Any new production will offset losses due to ELM and depletion. That may be a tad optimistic but what the hell…I’m feeling generous this morning. Projecting the future would be simple if all the importers remained static but I’m not feeling that generous. Both China and India have proven their desire to increase oil consumption. Under these assumptions in the future 4 of the Big 6 won’t have as much import oil available as they have today.

But there’s another potential reduction in exported oil availability. It’s those pesky refinery JV’s China and a few others are doing. This would be an additional reduction in availability. A portion of the refined products will still make it to the other oil importers but not necessarily all of it. Equally important is that this also represents a loss of revenue for refiners in some of those importing countries. One bright note for the US is the massive Motiva refinery in Texas which could presumably get its oil from one of its owners...Saudi Arabia. OTOH there wouldn’t be a requirement for any of that plant’s products to be sold in the US.

And then there’s a couple of more components. Consider the oil export numbers of Angola as one example. They may export X bopd but a certain amount of that oil was owned by China even before they got it out of the ground. All of the oil is counted in Angola’s export ledger but not all of it is available for purchase. IOW some of that oil is counted in the 42 million bopd exported category. And lastly there’s those long term purchase contracts. Venezuela is a major exporter but a significant volume of their production has already been contractually committed for many years to China among others. But, again, that volume of oil is counted in the global oil export number. Not enough discloser to add up all this exported but not available on the open market oil but I think it’s a significant amount.

We chat a lot about global peak oil production. Perhaps it’s time to focus not only on global peak oil exports but also potential peak oil imports by the US and other countries. The key word of this thread's title is "Control" after all.

[ROCKMAN]

First Exporting Vessel Due at Total's Jubail Refinery

One more dot in an exporter’s plan to reduce the amount of oil it sells and shift to exporting products as well as supplying their internal demand. From RigZone:

Reuters - The first vessel to export fuel products from Total's 400,000-barrels-per-day Jubail refinery in Saudi Arabia is due to arrive at the plant on Monday. Parts of the Aramco-Total complex have started up over the last few months and the giant refinery is expected to reach full capacity by the end of the year. Jubail will refine Saudi heavy crude into a range of fuels - from gasoline to petroleum coke - for domestic consumption and export. The first 200,000-bpd crude distillation unit is operational but the other has yet to start up, a source close to the matter said. The first product transport vessel is due to arrive today. No details on the vessel's destination or the size of the shipment.

The multi-billion-dollar project is central to Saudi plans for boosting refining production to meet the region's growing demand, and is expected to replace most imports by 2014. A source familiar with the matter told Reuters earlier this month that Aramco would offer up to 80,000 tonnes of fuel oil for export in late September and that Total would likely have one or two cargoes available by the end of the month.

The refinery will produce mostly gasoline and gasoil for domestic use. It is not expected to export any jet fuel this year but may produce some next year, depending on demand. Most of the exported diesel is expected to be shipped to Europe, a move traders say will dramatically alter the market by pushing Indian diesel out of Europe and into Asia.

[ROCKMAN]

Sounds like Japan may be angling for a possible joint venture with China. Maybe having a piece of the pie is preferable to having to get into a fight for the whole pie.

Reuters - Japan will make no concessions on sovereignty over Pacific islets also claimed by China, but Tokyo will not make any moves to escalate the situation, Prime Minister Abe said on Friday. Tokyo is locked in a territorial dispute with Beijing over a group of East China Sea islets.

Abe told reporters that he told Chinese President Xi Jinping during a brief meeting at the G20 summit in Russia this month that the two sides should restore dialogue. "The door to dialogue is always open and I really hope the Chinese side would take the same mindset." The uninhabited islands under dispute are near rich fishing grounds and potentially large oil and gas reserves.

They are administered by Japan, but Chinese paramilitary vessels approach them routinely in what is seen as Beijing's effort to challenge Japan's control. Taiwan also claims the islands, but Taipei and Tokyo struck a fishing agreement in April covering the waters around the islands that has eased tensions.

[ROCKMAN]

Perhaps a few more bbls of oil that will be permanently removed from the market place. And maybe one more nail in the coffin of the struggling EU refineries.

Dubai has signed a memorandum of understanding with China’s Sonangol International to build an oil refinery to reduce their reliance on imported fuels. Noor Investment Group will act as the financial advisor to Dubai's Supreme Council of Energy on the project, it said, without giving any indication of the expected cost or the capacity of the refinery.

Dubai, part of the United Arab Emirates, a federation of seven Gulf emirates, produces very little oil and relies on costly imports of gasoline and Iranian light oil to feed its bustling international airport and a growing number of cars on its streets. The Dubai-government-owned Emirates National Oil Company (ENOC) loses hundreds of millions of dollars a year because it is obliged by federal law to sell gasoline at less than the international market price it has to buy it for.

[ROCKMAN]

From: http://www.rigzone.com/news/oil_gas/a/1 ... ea_by_2018

More oil but check last paragraph to see China working their nose under one more tent.

Reuters - Brazil's state-run oil company Petrobras will produce 100,000 barrels a day from its offshore Sergipe prospects by 2018, Chief Executive Maria das Graças Foster said on Friday about one of the company's most promising new discoveries. Early drilling results show that the area...likely holds more than a billion barrels of oil, government and industry officials told Reuters recently. If confirmed, the new find could make the region the country's biggest new oil frontier since the government unveiled the massive subsalt discoveries off the coast of Rio de Janeiro and Sao Paulo states in 2007.

Graças Foster said the company has begun talks with Chinese officials over possible partnerships in constructing new refineries in the region, once oil production picks up there with the development of the offshore wells.

[ROCKMAN]

Found someone who has attempted to tally China’s oil/NG acquisitions in recent years. From: http://www.ibtimes.co.uk/articles/50976 ... od-oil.htm

Bear in mind these are only purchases of producing assets. This doesn’t include all those refinery joint ventures and long term purchase agreements they’ve done with most of the oil exporters. Just my rough guess but they may have upwards of $100 billion committed to those refinery projects. And they have hopes of doubling asset and refinery investments in the next 7 to 8 years.

Several hundred $billion may sound like a lot but that’s only about 10% of the $3.5 trillion China holds in foreign currency reserves. A reserve that increased over $40 billion in just the last 12 months. BTW China’s latest move: CNOOC will develop the Ugandan Kingfisher oil field over a period of four years. The field itself is thought to hold some 635 million barrels of oil, of which 196 million are recoverable. The field will have an initial capacity to produce between 30,000 to 40,000 barrels of oil per day. Just one small piece of an ever expanding portfolio.

“Chinese companies have completed 83 overseas oil and gas purchases worth $100.7bn in the past five years, according to data compiled by Bloomberg. Cnooc's $15.1bn acquisition of Canada-based Nexen early in 2013 was China's largest overseas acquisition. Over the last five years, Sinopec and CNOOC, the country's second and third-biggest oil and gas producers, spent $41bn and $26bn, respectively, on overseas assets.

China National Petroleum Corp has invested more than $9bn to purchase overseas assets in 2013, including the $4.2bn purchase of a stake in Mozambique's Rovuma fields in July. The company is planning to double its overseas output by 2015. PetroChina, China's biggest oil and gas producer, is looking to invest $60bn on overseas acquisitions over the period to 2020. By that time, the company intends to raise its production abroad to more than 50% of its total."

[agramante]

Even if no one prominent in the press has tallied up in detail China's acquisitions of production and refining capacity, there are many who are aware that China's been on a spending spree to secure its energy supply. One such news service is a subscription site (reasonably expensive but worth it in my opinion), Stratfor.com. They've detailed (not counting up necessarily all of the bopd involved, focusing rather on the dollar value) the various energy and raw material deals China's been making, in mainland Asia and elsewhere. Their focus is not exclusively on energy, so I wouldn't expect analysis along the lines of yours, projecting how much crude will be left over once China's purchases are removed from the market.

And you're the one who recommended The Diplomat, which has published quite a bit about the US' developing Air Sea Battle strategy for use in the Pacific. Considering that China and the US need each other as trading partners, I don't see outright war developing between us until such time as the world economy is pretty degraded to begin with, and losing each other as a trading partner has ceased to matter much. In other words, by that time the mess will already have hit the fan.

[ROCKMAN]

agramante - I agree with you about the future relationship between the US and China. Long ago I tossed out another silly acronym: MADOR. Like the MAD (Mutually Assured Destruction) of the Cold War days, the Mutually Assured Distribution Of Resources envisions the US and China not so much fighting with each other for resources but managing the competition between them at the expense of all the other economies in the world. For example, Japan is our friend. But someday China and Japan will come toe to toe over resources in their part of the world. The US might offer verbal support for Japan in such matters but the MADOR concept dictates we won’t directly interfere.

[ROCKMAN]

Probably not as big a deal as the MSM is trying to spin it. But the current foolishness in DC isn’t helping us further our position in the global energy game.

“Chinese President Xi Jingping has held talks with Malaysia's leader Prime Minister Najib Razak as part of a Southeast Asian charm offensive, with analysts saying he had "the floor to himself" after Barack Obama scrapped his own Asia tour. A day after a new trade deal with Indonesia, the two men today agreed to nearly triple two-way trade. "We discussed about how we can achieve a new target in terms of our two-way trade between our two countries, which is set at 160 billion U.S. dollars by the year 2017," Mr Razak said. China is already Malaysia's largest trading partner, with trade between the two countries worth $US57 billion last year.”

We don’t hear much about Malaysia in the MSM so many don’t realize they are a major player not only in the region but becoming more so globally. The national oil company, Petronas, provides about 40% of the federal budget and the govt recognized their developing PO many years ago. Under the radar compared to China but Petronas has been quietly expanding their control of foreign energy resources.