[ROCKMAN]

there may be another minor reason for China to be building refineries overseas. From: http://www.bostonglobe.com/news/world/2 ... story.html

"Thousands protest China refinery plan - More than 2,000 people in southern China unfurled banners and shouted, ‘‘Protest! Protest!’’ on Thursday to oppose plans for a petroleum refinery, generating a large rally that local authorities allowed to go forward in order to let the public vent frustration. The gathering in downtown Kunming — the second one in the city this month — was largely peaceful, though there were minor scuffles with police. Witnesses said at least two people were briefly detained, though it was noteworthy that authorities made no effort to shut down the rally."

Given their existing world class air pollution and what will certainly follow as more vehicles hit the road better to outsource at least some of that pollution. Why didn't we think of that?

[Plantagenet]

$this->bbcode_second_pass_quote('ROCKMAN', 't')here may be another minor reason for China to be building refineries overseas....Given their existing world class air pollution and what will certainly follow as more vehicles hit the road better to outsource at least some of that pollution. Why didn't we think of that?

[ROCKMAN]

P - And now refineries on the east coast are ramping up so they don't have to import as much from EU refineries. And N Dakota is ramping up refineries a tad so they don't have to import from other states. And Gulf Coast refineries are ramping up with some of those products heading overseas. And lastly our Canadian cousins building a huge refinery in BC with a big Chinese loan so they can export product to other countries.

Seems like a bit of reversal in that old trend. Might be time to reopen some of those old textile sweat shops in the south.

[ROCKMAN]

China’s moves beyond oil. From: http://www.nytimes.com/2013/06/02/opini ... d=all&_r=0

“The combination of a strong, rising China and economic stagnation in Europe and America is making the West increasingly uncomfortable. While China is not taking over the world militarily, it seems to be steadily taking it over commercially. In just the past week, Chinese companies and investors have sought to buy two iconic Western companies, Smithfield Foods, the American pork producer, and Club Med, the French resort company. Europeans and Americans tend to fret over Beijing’s assertiveness in the South China Sea, its territorial disputes with Japan, and cyberattacks on Western firms, but all of this is much less important than a phenomenon that is less visible but more disturbing: the aggressive worldwide push of Chinese state capitalism.

By buying companies, exploiting natural resources, building infrastructure and giving loans all over the world, China is pursuing a soft but unstoppable form of economic domination. Beijing’s essentially unlimited financial resources allow the country to be a game-changing force in both the developed and developing world, one that threatens to obliterate the competitive edge of Western firms, kill jobs in Europe and America and blunt criticism of human rights abuses in China. Thanks to the deposits of over a billion Chinese savers, China Inc. has been able to acquire strategic assets worldwide. The Chinese government now controls oil and gas pipelines from Turkmenistan to China and from South Sudan to the Red Sea. Another pipeline, from the Indian Ocean to the Chinese city of Kunming, running through Myanmar, is scheduled to be completed soon, and yet another, from Siberia to northern China, has already been built. China has also invested heavily in building infrastructure, undertaking huge hydroelectric projects like the Merowe Dam on the Nile in Sudan — the biggest Chinese engineering project in Africa — and Ecuador’s $2.3 billion Coca Codo Sinclair Dam. And China is currently involved in the building of more than 200 other dams across the planet, according to International Rivers, a nonprofit environmental organization.

China has become the world’s leading exporter; it also surpassed the United States as the world’s biggest trading nation in 2012. In the span of just a few years, China has become the leading trading partner of countries like Australia, Brazil and Chile as it seeks resources like iron ore, soybeans and copper. Lower tariffs and China’s booming economy explain this exponential growth. By buying mainly natural resources and food, China is ensuring that two of the country’s economic engines — urbanization and the export sector — are securely supplied with the needed resources.”

So not only have the Chinese snatched “our” oil now they are going after our pork chops. The heck with PO…now it’s PPC. When will it end??? LOL.

[ROCKMAN]

China Reaps Biggest Benefits Of Iraq Oil Boom - NYTimes.com

http://www.nytimes.com/2013/06/03/world ... om.html?hp

“Since the American-led invasion of 2003, Iraq has become one of the world’s top oil producers, and China is now its biggest customer. China already buys nearly half the oil that Iraq produces, nearly 1.5 million barrels a day, and is angling for an even bigger share, bidding for a stake now owned by Exxon Mobil in one of Iraq’s largest oil fields. The Chinese need energy, and they want to get into the market. Chinese state-owned companies seized the opportunity, pouring more than $2 billion a year and hundreds of workers into Iraq, and just as important, showing a willingness to play by the new Iraqi government’s rules and to accept lower profits to win contracts.”

Again, not that the Chinese don’t care about profits, but they also look at the long game with regards to future access to oil. Which, obviously, free market US companies can’t.

“We lost out,” said Makovsky, a former Defense Department official in the Bush administration who worked on Iraq oil policy. “The Chinese had nothing to do with the war, but from an economic standpoint they are benefiting from it, and our Fifth Fleet and air forces are helping to assure their supply.” The depth of China’s commitment here is evident in details large and small. In the desert near the Iranian border, China recently built its own airport to ferry workers to Iraq’s southern oil fields, and there are plans to begin direct flights from Beijing and Shanghai to Baghdad soon. In fancy hotels in the port city of Basra, Chinese executives impress their hosts not just by speaking Arabic, but Iraqi-accented Arabic.

Notably, what the Chinese are not doing is complaining. Unlike the executives of Western oil giants like Exxon Mobil, the Chinese happily accept the strict terms of Iraq’s oil contracts, which yield only minimal profits. China is more interested in energy to fuel its economy than profits to enrich its oil giants. Chinese companies do not have to answer to shareholders, pay dividends or even generate profits. They are tools of Beijing’s foreign policy of securing a supply of energy for its increasingly prosperous and energy hungry population. “We don’t have any problems with them,” said Abdul Mahdi al-Meedi, an Iraqi Oil Ministry official who handles contracts with foreign oil companies. “They are very cooperative. There’s a big difference, the Chinese companies are state companies, while Exxon or BP or Shell are different.”

Problems are readily solvable by bashesh. We might call it a bribe in the US but in the ME it’s considered more like “lagniappe “…a little something extra that’s expected. It’s good to remember that US law is very strict when it comes to our companies bribing foreign officials. OTOH I once saw a written Chinese budget where one line item actually said: “ Bribes for Politicians”.

“China is now making aggressive moves to expand its role, as Iraq is increasingly at odds with oil companies that have cut separate deals with Iraq’s semiautonomous Kurdish region. The Kurds offer more generous terms than the central government, but Iraq and the United States consider such deals illegal. Late last year, the China National Petroleum Corporation bid for a 60 percent stake in the lucrative West Qurna I oil field, a stake that Exxon Mobil may be forced to divest because of its oil interests in Iraqi Kurdistan. Exxon Mobil, however, has so far resisted pressure to sell, and in March the Chinese company said it would be interested in forming a partnership with the American company for the oil field. If the United States invasion and occupation of Iraq ended up benefiting China, American energy experts say the unforeseen turn of events is not necessarily bad for United States interests. The increased Iraqi production, much of it pumped by Chinese workers, has also shielded the world economy from a spike in oil prices resulting from Western sanctions on Iranian oil exports. And with the boom in American domestic oil production in new shale fields surpassing all expectations over the last four years, dependence on Middle Eastern oil has declined, making access to the Iraqi fields less vital for the United States.”

Quit true…for the moment. But as we've seen the Chinese look way beyond the moment.

[pwallmann]

$this->bbcode_second_pass_quote('Plantagenet', '')$this->bbcode_second_pass_quote('pwallmann', ' ')I think perhaps the most unreported story of the past few years, was the marginal consumer of oil (the effective price maker) shifting from the American consumer to the Chinese consumer (to my eye a very positive thing for humanity).

[ROCKMAN]

p - Hopefully the rest of us will get the point that in order to compete with these upstart new consumers we'll need to modify our ways. The sooner we realize we can't compete with China perhaps the sooner we'll start making the necessary changes. Of course, me being me I don't think there's much chance of that happening fast enough to make a lot of difference. But that's just me.

[pwallmann]

pstarr - yeah you hit the nail on the head of what I'm saying. They have that ability now, for better or worse, and I think that is a great reflection on how far humanity has progressed (if we view humanity as being some sort of aggregate that places all human beings as being equal).

The economics behind them becoming the marginal consumer is also interesting because, given how relatively poor they are, it would appear that their marginal consumption of oil (or energy) is producing significantly higher economic return then it is for us. As our consumption tapers off (to levels still much higher then the Chinese in per capita terms) I'd argue that in a global sense, oil is being put to better use. It's a gross simplification, but rather then feed a second (or third, or fourth) vehicle, or ATV, or Ski-doo, or power a second (or third, or fourth) home. That energy is being used in an economic process that has (and is) pulling millions, upon millions, upon millions out of absolute poverty. This sure makes me happy!

[pwallmann]

pstarr, this is probably where i differ from most PODers:to me the upward price pressure, that are consistent with POD, are more likely to lead to some sort of innovation that brings about a new energy paradigm then to lead us into an all out war for resources.

My optimism stems from the fact that we have more people at the frontier of human knowledge, where these innovations occur then ever before. To oversimplify: until very recently innovation was largely driven by a bunch of white people in Europe and North America. Imagine a world where we can count on the participation of the Chinese in expanding our collective knowledge! How about India and the rest of developing Asia? South America? To say nothing of Africa's almost literally untapped potential. We may be running out of oil resources to tap economically, but we're just getting started developing humanities potential.

Either way, the race for more energy is going to be interesting to watch. Hopefully we can have something figured out before India builds up and into the old paradigm and wanders down China's current consumption path.

[ROCKMAN]

First: p & p - Good conversation..what PO.com is all about IMHO.

And:

Speaking of China’ buying frenzy it shows how prejudiced I’ve become. My first thoughts about this story: If the Chinese aren’t interested it can’t be a good deal. Either that or they just haven’t dropped the price low enough…yet.

“Mining group Rio Tinto has drawn up a shortlist of half a dozen suitors for its majority stake in Canada’s largest iron ore producer, sources with knowledge of the situation said on Monday. Rio values Iron Ore Co of Canada at around US$8 billion and is seeking between US$3.5 billion and US$4 billion for its stake, roughly double industry estimates when the asset was earmarked for sale earlier this year. Like some rivals, Rio has promised to focus on its key assets and sell non-core operations as it wrestles with a US$19 billion debt burden, sluggish demand and weaker prices.

The two sources said that after receiving 13 to 15 initial bids last month, the shortlist had been whittled down to five or six. One of the sources said it was unclear when binding bids were due, as Rio was still seeking additional interest in coming weeks from buyers including some of China’s largest players, so far absent.”

Sorta like the Hollywood A-List: if China ain’t going to the party then I’ll pass . LOL.

[ROCKMAN]

Pstarr – Well that model worked well for the USA during much of the 20th century. You know, back when the US produced most of the oil, virtually all of the NG, a large % of the crops exported around the world, produced most of the steel right after WWII, etc, etc. What do they say about imitation? Oh year…it’s a compliment. Well, on behalf of all our citizens I say: Thanks you, China!

[ROCKMAN]

China – Mexico…the next refining joint venture? From:

http://azstarnet.com/news/world/oil-lik ... c7f7f.html

“China has invested heavily in resource-rich Latin America in recent years, striking major trade deals with governments from Venezuela to Argentina. Now its president is reaching out to one of the few countries in the region where ties have been slow to develop: Mexico. China's president has said he plans to address Mexico's large trade deficit with the Asian power and discuss ways to increase Mexican exports. Analysts say that could mean oil, which Mexico has and China needs to fuel its expanding economy and the cars of its growing middle class. "Access to strategic raw materials is key to understanding the dynamic of relations with China," said Beteta, director for Mexico and Central America of the United Nations Economic Commission for Latin America and the Caribbean. "Clearly there is an interest by China in Mexican oil."

The trip is part of a four-country regional tour that ends in the United States. Xi started in Trinidad and Tobago, where he also met with leaders of other Caribbean countries, and he arrives Sunday night in Costa Rica. China and Trinidad have had diplomatic ties for almost 40 years, and Trinidad is a major trading partner in the Caribbean for China. Costa Rica is the only country in Central America to have diplomatic relations with China. China's trade with Costa Rica and with Mexico has tripled since 2006. President Enrique Peña Nieto has been aggressive so far about changing the relationship with China. The two new presidents reportedly hit if off on a personal level when Peña Nieto visited China and met with Xi in April. That resulted in an unusually quick diplomatic follow-up, just two months into Xi's presidency.

During the April talks, Xi said he is "committed to working with Mexican authorities to help Mexico export more," Carlos de Icaza, told The Associated Press. That's key for Mexico, because its trade deficit with China is exploding, far surpassing that of any other Latin American nation. While China is looking to assure supplies of raw materials, Mexico is looking to diversify its trade and investment, which have long been dominated by its superpower neighbor to the north.”

A super power to the north that Mexico has to import refined products from. Refined products made from their own oil. In theory Mexico could do the same JV that the Saudis are doing with China: China builds/finances an expanded refining infrastructure for which they have a guaranteed source of oil from the host country. The host country now has its own products that it can supplement for it’s expensive imports and, if there’s any excess, sell it at a higher value than they could selling the oil. China's benefit, in addition to its share of product, would be removing another volume of oil from the market place for their exclusive use.

[ROCKMAN]

Looks like deals are already in the works. From:

http://www.reuters.com/article/2013/04/ ... CH20130406

"Mexico's Pemex this month will begin increasing exports to China by 30,000 barrels a day. The two-year agreement between Pemex and China's Sinopec was signed in January. "This represents a landmark in the history of Pemex, since it is the first long-term contract of its kind signed with a Chinese company," Lozoya said. The level of exports to China could increase over time as part of the agreement, he added.

Pemex sends most of its oil to Mexico's largest trade partner, the United States. The oil company in 2012 exported an average of 1.256 million barrels a day, of which 85,000 barrels a day went to Asia. Pena Nieto and Pemex signed two separate agreements with Xinxing Cathay International Group and China National Petroleum Company for academic and technological cooperation. At the same event, China's government signed an agreement of understanding with Mexican steel company Altos Hornos de Mexico. The agreement between Pemex and the Chinese companies comes as Pena Nieto prepares to launch a major overhaul of the Mexican energy sector this year, aimed at making Pemex more efficient."

Not a lot of oil compared to what they export to the US. At least not yet. Only about $2 billion worth. OTOH that is "our" oil...so to speak. Next thing you know they'll be stealing some of our Canadian oil.

[ROCKMAN]

I’ve finally found someone who has estimated what China has accomplished in recent years. From: http://chinabystander.wordpress.com/201 ... d-mexicos/

China’s Oil Production Outside China To Rival Kuwait and Mexico’s

"While it is no secret that China’s state-owned oil giants have been on a buying spree of overseas assets over the past three or four years, not much consideration has been given outside the industry to what that means in production terms. Now the International Energy Agency (IES) has done just that. And it is eye opening. The IEA estimates that by 2015 China will be producing 3 million barrels of oil a day outside its borders, twice what it produces today. What that means is well illustrated by some comparisons. Three million barrels per day is roughly what the United Arab Emirates, Mexico and Kuwait each now produce. They are currently the world’s eighth, ninth and tenth largest producers. It would be comfortably more than Brazil, Nigeria and Venezuela’s output. They are the eleventh, twelfth and thirteenth largest producers. It would also be three quarters of the way to what China already produces; China is the world’s fifth biggest oil producing nation.

This ranking hasn’t come cheap. The M&A consultancy Dealogic says that China’s state oil companies have spent $92 billion since the start of 2009 on oil and gas assets in countries from Angola to the U.S. There is little to suggest that number won’t pass the $100 billion mark sometime later this year as they continue to buy oil and gas in the ground, be it under water or shale, and the expertise to get it out."

And remember this is the oil China owns. It doesn’t include the oil they are locking up via those refinery JV’s and loan deals. Those projects appear to be adding up to another $100 billion.


And then there’s this rather odd aspect of this story: it comes from a site from the Yucatan, Mexico
http://yucalandia.com/pesos-politics-ma ... -policies/

US – Mexico – China Oil Policies and the Peso

And a small blurb emanated from Abu Dhabi: China passes US as top Saudi oil importer: energy secretary by Staff Writers Abu Dhabi (AFP) Feb 24, 2010. Should we care?

Since Saudi Arabia and China established diplomatic ties, two-way trade has grown from $290 million in 1990 to more than $40 billion in 2008. The Chinese have aggressively and consistently been inking long term oil supply deals from Darfur to Lima, guaranteeing Chinese oil supplies for the next decade – and news reports consistently say that the Chinese are not using the political strong-arm techniques of the British and Americans, making the deals about oil and Yuan vs. Western efforts at trade agreements that simultaneously attempt to muscle various regimes to fall-in-line behind US or British foreign policy.

Can we really count-on the Saudis to help us in the future? The US Govt. seems to have no consistent energy program for the future and is being rapidly displaced by China’s focused and effective efforts. As the world economies recover from the 2008 financial crisis and oil consumption surpasses oil production capacity, and as China’s and India’s oil consumption jump by 7% – 10%, demand for oil will soon exceed supply, and we predict oil that prices will likely rise this coming year to $120 – $150 per barrel.









[ROCKMAN]

Usually I try not to add to much editorial color to my posts but this time I have to wonder who the WSJ is putting lipstick on this pig for: the White House, Wall Street or maybe both. I’ll let y’all judge for yourself given my recent posts about China’s currently strategies regarding energy. From:

http://online.wsj.com/article/SB1000142 ... 55772.html


“Friday's summit between the leaders of China and the U.S. marks a turning point in economic relations between the world's two largest economies: China growth is slowing sharply after a long boom while the U.S. economy is slowly regaining its vigor after a long slump.”

Yep…slowing down…only growing at almost 3X as fast as the US.

"There has been an air of triumphalism on the part of China in recent meetings of Chinese and U.S. leaders. That has faded as China's recognition of the medium-term challenges it faces has increased."

Yep…I’m sure based on those recent disastrous production acquisitions, refining JV’s and finance deals China has done they must be terribly depressed.

“There have been other shifts in the two nations' economic relations: the recent offer by a Chinese company for the maker of Smithfield ham illustrates the larger role that cross-investment now plays in ties.”

Yep…China buying on of the US larger food companies…now we have them where we want them.

“The meeting could help set a new tone for economic relations that could let both countries expand investment and liberalize trade.”

Yep…liberalize trade. Like liberating those refined products made from Canadian oil that will be shipped from Texas Gulf Coast facilities including those two new ones to be built.

“President Obama wants to encourage Beijing to follow through on years of pledges by Chinese officials that the country will revamp its economy so it relies more on domestic spending than exports and investment, which would provide trade and investment opportunities for U.S. firms.”

Yep…that’s plan seems to be working. Instead of exporting a lot of cheap crap from China no one really needs they can start exporting oil and refined products from other countries to an increasingly hungry market.

"We see this [meeting] as an opportunity to get a better understanding of the kind of domestic policies and reforms" that Mr. Xi and other senior Chinese leaders are discussing at home, said a White House official.”

I think just keeping up on their reading of the Rig Zone should provide a clear understanding of China’s policies. Might even want to scan po.com from time to time.



“The most-recent time a Chinese president came to the U.S. for a summit, Hu Jintao's visit in January 2011, China's economy was humming: It grew at a 9.3% annual clip in the first quarter of that year on the strength of a powerful stimulus plan that helped the country continue to grow rapidly despite the global financial meltdown. China's prestige in Latin America and Africa was soaring on the strength of Chinese investment there. Now, the situation has shifted. The U.S. grew 2.4% in the first quarter of 2013 as the economy has regained its footing. U.S. technological prowess is helping to revive manufacturing and make the country a powerful energy supplier through its exploitation of shale gas, two sectors that seemed down for the count not long ago.”

Yep…did you feel that big shift? That must be our unemployment rate dropping back under 5%

“China's GDP slipped to 6.4% in the first quarter, when measured on an annualized basis—the gauge used by the U.S. and other wealthy nations—which would make it China's weakest quarter since the financial crisis.”

Hmm...if 6.4% is “weak” I wonder how they would characterize 2.4%

"No one can forecast with confidence the future of the Chinese economy," said Harvard economist Lawrence Summers, a former White House economic adviser and Treasury secretary. "In retrospect, U.S. alarmism about Japanese growth peaked at about the same point that the Japanese competitive threat to the American economy peaked."

Right…Japan & China…like two peas in a pod. You can tell they’re very much alike. Just look at their eyes.

“Moreover, China could settle on strategies that put U.S. companies at a disadvantage, for example by creating government-backed monopolies to reduce excess capacity in the steel, aluminum and other industries rather than by boosting private-sector competition in those areas. "Reforms should be thoughtfully assessed in relation to U.S. interests," said former U.S. Trade Representative Charlene Barshefsky.”

Hmm…someone appears to have slipped on their thinking cap.

"China's now having a deep restructuring of its economy," Mr. Hong said. "The purpose is to promote efficient and fast growth of the economy."

Have to agree with that. From an economy heavily dependent upon exporting low value items they are concentrating on a combination of owning and control a rather large portion of the oil produced in the world.

[ROCKMAN]

A few more details. I also caught an interesting tidbit: that Mexican oil being shipped to China won’t be traded in US $’s It didn’t offer more details but given the big trade imbalance that Mexico has with China I would guess the Chinese will be paying for that oil in pesos.

“Mexico City, June 6 (IANS/EFE) State-owned Pemex, signed two agreements with Chinese firms covering ships, equipment and technology for Mexico's oil industry. Under the terms of the first agreement, state-owned Export-Import Bank of China will provide a $1 billion line of credit for the acquisition of ships and equipment for offshore maritime activities. The line of credit includes an option for financing the overhaul of the Pemex fleet, as well as the modernization of maritime equipment.”

I would assume part of the deal requires Mexico to buy much if not all of that infrastructure from Chinese companies.

“The second agreement will be governed by a memorandum of and aims to "identify options for joint work in the area of pipelines", Pemex said.

Hmm…offshore tankers and pipelines. Seems like the next logical step would be refineries which Mexico desperately needs.

[ROCKMAN]

Hmm…more dots to connect. Focused on China’s potential to try a refining JV with Mexico I wasn’t paying attention to its neighbor to the south…Costa Rica. While reading this story keep in mind how much oil CR produced in 2012: 0.000 bopd.

“On Monday Xi and Costa Rican President Laura Chinchilla signed agreements on projects worth nearly $2bn, including upgrades of an oil refinery, a key highway and public transport. “Relations between China and Costa Rica could well become a model of co-operation between countries of different sizes and national conditions,” Xi said after meeting privately with Chinchilla.

The biggest project will be the modernization of an obsolete oil refinery in the Caribbean port El Limon, which will be replaced with a new refinery capable of processing 65,000 barrels of oil a day. The $1.5bn venture will be financed with a $900mn credit from the China Development Bank, and the remaining $600mn will be put up by the China National Petroleum Corporation and the Refinadora Costaricense de Petroleo (RECOPE).”

Now why would anyone spend such capex for a refinery in a country with no oil production? Guess they would import it into that coastal town which is just a short sail from Mexico including its big offshore Cantrell Field which has to have its production loaded into tankers anyway. Given the Mexican govt prohibition (at least for now) of anyone other than PEMEX refining in the country. There is no restriction to exporting their oil to foreign refineries from which they then have to buy the products back. As they’ve been doing with Texas refineries for many years. Of course, there’s also all that Venezuelan oil China has tied up on long term contracts that's also a short sail away. Well, just one relatively small dot. What’s the potential harm?

Dot…dot…dot…