[ROCKMAN]

From last post: "The products may still make it to the EU (at least initially) but not the refinery profits."

Obviously I meant "but not the oil"...not refinery products. I need to get some sleep. Maybe tomorrow. LOL

[ROCKMAN]

Probably just a coincidence that we are giving such accolades to a group that controls the transit of about 4 million bbls of crude oil and refined products per day via the Suez Canal and SUMED Pipeline.

“Egypt may have avoided a civil war this month, U.S. Secretary of State John Kerry said on Wednesday, saying this was one factor to weigh as Washington decides whether to cut off most U.S. aid to the Arab nation.”

I gather a number of Arab countries don’t disagree…at least publicly: SUMED - The pipeline is owned by the Arab Petroleum Pipeline Company, a joint venture of (50%) Egypt (50%), Saudi Arabia(15%), the United Arab Emirates(15%), three Kuwaiti companies (each of 5%), and Qatar(5%).

Since most of those hydrocarbons end up in the EU we might not expect much negative coverage coming from our European cousins either.

[ROCKMAN]

Another example of a ME country removing oil from the market by adding refining to utilize a volume that had formerly passed thru the system. And this apparently without help from China.

Turkey's oil production peaked in 1991 at 85 thousand barrels per day (bbl/d), but then declined each year and bottomed out in 2004 at 43 thousand bbl/d. Although Turkey's production of liquid fuels has increased slightly since 2004, it is far short of what the country consumes each year.

The International Finance Corporation will provide loans for Turkey to construct an oil refinery with a processing capacity of 214,000 barrels of oil per day which is 170,000 bopd more than current production. The refinery will be built in four years and after its commissioning will be able to replace imports of diesel (45 per cent of production) and aviation fuel (15 per cent). The greater part of the plant's production will be sold within the country for the retail trade.

According to the IEA energy use in Turkey is expected to double over the next decade, while electricity demand growth is expected to increase at an even faster pace. In addition to being a major market for energy supplies, Turkey's role as an energy transit hub is increasingly important. It is key to oil and natural gas supplies movement from Russia, the Caspian region, and the Middle East to Europe. Turkey has been a major transit point for seaborne-traded oil and is becoming more important for pipeline-traded oil and natural gas. Growing volumes of Russian and Caspian oil are being sent by tanker via the Turkish Straits to Western markets, while a terminal on Turkey's Mediterranean coast at Ceyhan serves as an outlet for oil exports from northern Iraq and Azerbaijan.

IOW, Turkey, as Egypt may be doing in the future, will be passing thru less oil (about 60 million bbls per year initially) to the open market place than previously. This will be a relatively small volume compared to total global production but just one of many such situations developing.

[ROCKMAN]

The IEA is apparently catching on to how China is significantly changing the global refining dynamic. And the report only focuses on China’s internal refining capacity and touches very little on Chinese refinery JV’s outside of their borders in cooperation with various oil exporters. The IEA suggests that China’s over capacity could lead to smaller refinery margins in the near future with them delivering a lot of products globally. I don’t know if this is a conscious effort on their part but being a govt controlled operation the Chinese refineries aren’t restricted to profitability parameters as other commercial refiners, especially public companies. So if the Chinese can push margins low enough a number of the world’s refineries might be forced to shut down which would give China even more leverage in the market. Locking up future oil production is one thing. In addition leveraging a larger share of the products market with oil they don’t own, such as the 400,000 bopd of KSA oil that will run thru their refinery of the Red Sea, gives them even more control over future energy resources.

From: http://www.iea.org/newsroomandevents/ne ... 57,en.html

“But assuming that the IEA is correct it …suggests that China might end up with excess refining capacity. That surplus could position it to expand its footprint as a global player in refined products. “The oil map is being redrawn and China’s emergence as a global product exporter is a big part of it,” said Antoine Halff, head of the IEA oil market unit. “There has always been a risk for refiners to overshoot or undershoot in their expansion plans. It looks like China might now be at risk of overshooting. The result could be more motorists in more parts of the world filling up with gasoline made in China.

Significant expansion could position China to become not only a regional exporter, but a global one as well. In 2011, the country averaged less than 50 000 barrels a day (50 kb/d) of net exports of gasoline and similar products, while not producing more than it needed to meet domestic demand for middle distillates like kerosene or diesel. But the country averaged net imports of 250 kb/d of fuel oil."

Which might mean a small profit margin for China in the short term but also the potential to eliminate much of their future competition. Unlike US pubcos China can afford to play the long game.

“If China imported crude oil for refining at the expense of other less competitive regions, it could in theory produce a surplus of 1.2 million bbl/d of products as of 2017. Potentially building up to that, the government recently granted the first foreign-financed project permission to buy and sell oil products for export. The planned Tianjin Refinery, a joint scheme by Rosneft of Russia and CNPC of China, is also expected to supply the domestic market. Chinese firms are already increasing their use and ownership of independent storage facilities in Europe and the Caribbean as well as elsewhere in Asia.”

This is not a new dynamic. Just the name of the Big Dog has changed. The youngsters out there probably don’t realize that the US was the world’s major producer of oil and refinery products about 60 years ago. We were the Saudi Arabia at that time and the world’s gas station. In absolute numbers not as big today but much more so percentage wise.

[ROCKMAN]

Apparently China isn’t the only country going after “our Iraq oil”. As noted above: oil production in Turkey bottomed out in 2004 at 43k bopd. This is far short of what the country consumes each year. The International Finance Corporation will provide loans for Turkey to construct an oil refinery with a processing capacity of 214,000 barrels of oil per day. The refinery will be built in four years.

So where will that oil come from? Iraq has invited international companies to build part of a new oil export pipeline linking the country's northern Kirkuk fields to Turkey. The stretch of pipeline through Iraqi territory will act as a back-up to an existing pipeline that has suffered repeated bomb attacks and technical faults

The 900km existing pipeline has been bombed by militants about 30 times since the start of the year, disrupting oil flow. It has a capacity of 1.6 million bopd but normally carries only around 500,000 bopd due to repeated attacks as well as wear and tear.

[Pops]

I came across this graphic and thought it belonged here



Bigger here:
http://chartporn.org/2012/03/19/world-gdp-1-2050/

.

[ROCKMAN]

Pops - Very interesting. But at first I misread India as Inca and I thought were the heck have those folks been hiding? Like have they been pretending to be Brazilians?

Is Russia really that small a share gdp-wise? Surprised me.

[Keith_McClary]

$this->bbcode_second_pass_quote('ROCKMAN', 'I')s Russia really that small a share gdp-wise? Surprised me.

[Keith_McClary]

Another take on KSA refineries.
Tech Talk – Oil Supply, Oil Prices and the Kingdom of Saudi Arabia
$this->bbcode_second_pass_quote('', 'B')ut these new fields, including Manifa and Safaniya produce a heavier crude that, for years, KSA struggled, usually in vain, to find a market for internationally. It is only now that it is building its own refineries to process the oil that it can find a global market for the product.

[ROCKMAN]

From Rigzone today: Brazil may eventually produce a lot of DW oil but is quickly going underwater in the process. Petrobras has plans to sell $9 billion in assets including almost $2 billion of African properties. Need to follow the story and see if China ends up the happy buyer. Brazil has gone $110 billion in short and long term debt. Even with the asset sale they may still add debt this year. China has already agreed to help Brazil expand there refining infrastructure but no details yet.

[ROCKMAN]

Not huge news. Just a few more dots to connect. The Russian company Gazprom signed a technology transfer agreement with Halliburton that will aid in developing unconventional oil/NG resources. Not a ground breaking deal. Halliburton has always been a hired gun for anyone with a fat checkbook.

But it does make me wonder where the Russians will come up with the hundreds of $billions needed to develop those resources on a major scale. China would be my first guess. My second and third guesses too. In the last few years hydrocarbon sales from Russia to China have boomed. China is building new refineries on the Russian border in Siberia near the massive Sakhalin Island oil develop project. Also serious discussions about a major NG pipeline from Russia to China. NG that has been going to the EU and other neighboring countries.

[Keith_McClary]

$this->bbcode_second_pass_quote('ROCKMAN', 'N')G that has been going to the EU and other neighboring countries.

[ROCKMAN]

Thanks Keith. Do you have a link for the maps? I haven't found a definitive one yet.

[beancounter123]

apologies if this is in the wrong thread - but I seem to remember Rockman talking about China recently making a pitstop in Mexico and the implications of a relationship between China and Mexico. Would it be safe to assume the recent Mexico Energy Reform plan was vetted then and perhaps tweaked if needed to ensure some control would pass to China with suitable monetary compensation, of course.

http://www.reuters.com/article/2013/08/ ... LS20130812

(Reuters) - President Enrique Pena Nieto on Monday proposed an overhaul of Mexico's energy industry to offer private companies profit-sharing contracts, but investors said it might be too cautious and some sold Mexican assets.

now to hustle off to new membership forum

[beancounter123]

I thought this also spoke to the change of control theme

http://www.businessinsider.com/us-energ ... f-assets-6

sorry good picture - got to learn how to show it - link above

[Keith_McClary]

$this->bbcode_second_pass_quote('ROCKMAN', 'T')hanks Keith. Do you have a link for the maps? I haven't found a definitive one yet.

[ROCKMAN]

Keith - exactly. Never seems to be enough specifics.

[ROCKMAN]

Big update on changes in Mexican energy policies on Rigzone.com today. Can't post the link but here's the big news. Both left and right parties appear to be in full agreement to strip Pemex of it's monopoly. They are crafting major changes to their constitution and will open up all aspects of the energy sector. Lots of details in the article but the biggie IMHO with respect to China and the US potentially losing some of "our Mexican oil" is the option to not just share revenue but to take one's share in kind. IOW if China helps develop oil production or does a refinery JV they can export their share of oil or products to China.

And if China negotiates their deals as I would they'll include a right of first refusal on any portion of Mexico's share. IOW with a ROFR China can have preferential rights to buy any and all oil or products as long as it's willing to pay the market price. This would also be a side benefit to México which has long complained about their huge trade deficit with China. In theory China could pay with that huge pile of pesos they receive and leave the US $ out of the process. And even if China decides to sell their share of refinery products to the US they still capture the added value and the US refiners still lose feedstock they've always assumed would be theirs.

It may take a while to settle the details but eventually I see China going big into Mexican refineries. While México has long been a crude exporter to the US they have also been a major importer of refined products and NG from the US. Much of the revenue Pemex gets from oil sales to the US they immediately send back to us for products and NG. At a minimum México would net back the refinery margin and reduce their costs.

[ROCKMAN]

Another interesting story o rigzone today. China, Venazuela and Colomibia are discussing building 300,000 bopd pipeline to haul Orinoco crude to Columbia's Pacific coast fo export to China.

Also an interesting comment from the Canadian premier. Said that the 1.1 million bopd Energy East p/l is just for exporting oil to the world markets but also supply Canadian east coast refineries. Which clearly makes the point that between the $25 billion Brit. Columbia refinery that will take oil sands production out of the US export basket and the Energy East p/l Canada does not intend the US hold it hostage any longer than it has to.

[sparky]

.
For information the Chines refineries have been squealing like stuck pigs .
the price of diesel and gasoline is controlled by the state , at a very low cost
the refineries were whining that they lost money supplying the internal market
while their oversea sales were making excellent profit .
their answer was to make as little of the stuff as they could get away with
there were severe disruption in the transport and farming sector
prior to the 2009 harvest , with trucks being rationed at the point of sale at 50 liters each ,
there were fist fight ,an talk of immobilised harvesters during the peak season .
the retail price was steeply increased and the rationing eased
the rest had to be purchased at the "free" price .