[ROCKMAN]

And one more chip in the game for China: Kenya Signs Infrastructure, Energy Deals Worth $5 billion with China

NAIROBI, Aug 19 (Reuters) - Kenya signed deals worth $5 billion with China on Monday to construct a railway line and an energy project. The cash would be spent on energy projects including a standard gauge railway linking the port of Mombasa in east Africa's biggest economy to its border town of Malaba, meant to provide faster access from Kenya's port to markets in the region. The rest would be used to improve wildlife protection, in a country where well-armed criminal gangs have killed elephants for tusks and rhinos for their horns that are often shipped mainly to China for use in ornaments and medicines.

The deals were agreed in Beijing after talks by Kenya's new President Uhuru Kenyatta and President Xi Jinping. Kenyatta is on a state visit to China scheduled from Sunday to Friday. During his first visit to Africa in March, Xi pledged to help the continent develop, responding to concerns that China is only interested in shipping out the continent's raw materials.
China is already key player in Kenya, constructing capital-intensive flagship projects, mostly roads.

Kenyatta's visit follows a promise he made during the presidential election campaigns preceding the March 4 vote. He vowed to work closely with China following comments by United States, Britain and some European officials who said they would limit contacts with Kenyatta should he win owing to his indictment for crimes against humanity at The Hague.
Kenyatta and his deputy William Ruto both face trial at the International Criminal Court for helping orchestrate the bloodshed that followed the disputed 2007 election. They both deny the accusations, and pledged to clear their names.

On Monday, Xi said China supports Kenya's quest for industrialization and plans to host a clearing house for the Chinese renminbi currency in Nairobi, as part of Kenya's plans to become an international financial hub.
Kenyatta urged China to invest in Kenya's newly discovered oil sector, power generation, a technology city near the capital city and a new port in Lamu, north of Mombasa. The $25.5 billion Lamu project would link landlocked South Sudan and Ethiopia to the Indian Ocean port of Lamu by constructing a major highway, a railway and an oil pipeline.”

So once again the Chinese have the advantage over the US including their ability to overlook “crimes against humanity”. But the US can hardly point a finger since we willingly trade with the evil Canadians.

[ROCKMAN]

It appears two companies are vying to keep the EU NG imports dominated by Russia: Rosneft to Sign Oil and Gas Deal with Azerbaijan

“MOSCOW/BAKU, Aug 13 (Reuters) - Russia's top crude producer Rosneft will sign a broad oil and gas cooperation agreement with Azerbaijan on Tuesday, the first step towards increasing its presence in a country Europe hopes will help meet its energy demand. Europe is vying for gas from Azerbaijan, a former Soviet republic seen as a safe alternative to Russia after Moscow's "gas wars" with Ukraine disrupted deliveries in 2006 and 2009.

Sources at Azeri state energy company SOCAR and in Russia's Energy Ministry said the agreement would not stipulate details of the cooperation between Rosneft and Azerbaijan, where the oil industry is dominated by Western oil majors such as BP, Statoil and Exxon Mobil. Both Rosneft and SOCAR declined to comment. The deal will be signed during a visit by Russian President Putin to meet his counterpart, Ilham Aliyev. The deal comes at a time when Rosneft is trying to end an export monopoly on Russian gas by Kremlin-controlled company, Gazprom. “

Not sure if this will be much help for the EU. It sounds more like a battle between two Russian companies deciding which will put the squeeze on European consumers. In a sense the EU countries have the same problem the US has: no govt controlled agencies, as China has, to secure long term energy resources. In the case of Rosneft and Gazprom I suppose for the EU some competition is better than none.

[pwallmann]

http://online.wsj.com/article/SB10001424127887323324904579043643918751178.html

$this->bbcode_second_pass_quote('', 'C')hina Petrochemical Corp. will pay $3.1 billion for a 33% stake in U.S.-based Apache Corp.'s APA +7.67% Egyptian oil-and-gas business

[ROCKMAN]

Here’s a hint as to how big the stakes are with respect to getting NG into the EU. And a bit of a hint maybe explaining some of the ramifications of the problems in Syria these days.

The Romanian president has reportedly appealed to the EU to reimburse his country for $30.5 million spent on the Nabucco gas pipeline project, which lost a long-running competition with the Trans-Adriatic Pipeline (TAP) to be selected as the preferred European export route for gas shipments from the Shah Deniz field offshore Azerbaijan. The Nabucco pipeline project, which was to have transported gas from the Caspian Sea to Europe in order to bypass Russia, has been cancelled. Instead, the Trans Anatolian Pipeline (TANAP), funded by Azerbaijan and Turkey, is due to come into operation in 2018.

The Shah-Deniz II consortium, which runs the largest gas field in Azerbaijan, awarded the contract for the transportation of gas to the Trans Adriatic Pipeline (TAP), which runs through Greece and Albania and under the Adriatic Sea to Southern Italy. The failure of the Nabucco project was due to a combination of geopolitical factors and business considerations.

I suppose the main take-away here is that you shouldn’t spend tens of $millions on a pipeline project until you have the contract to haul the NG. Given the many hundreds of $billions if not $trillions associated long term with such a project it’s easy to imagine a huge amount of political capital (as well as real capital) that came into play during the negotiations. And then you toss in the sidebar possibility that some of the Syrian conflict is a result of the prospect of a large amount of ME NG being, or not being, transported through Syria to the EU. And then add the huge negative impact that might have on Russian sales of NG to the EU it’s gets a tad fuzzy as to just what the various motivations are for the various actors in this dangerous play going on in Syria. We all know the stories about someone losing their life to a mugger over $50. How many lives might be lost over $500 billion?

[ROCKMAN]

I imagine it’s only natural that as more components of the POD develop more interfingered relationships are developed between all the players…both producers, importers, and even those more on the periphery. Somewhat long but worthwhile IMHO to see the wide effects of the various interactions.

“Iraq has pre-qualified 12 companies and joint ventures to build an $18-billion export pipeline to Jordan, the oil ministry said on Wednesday. The plan is to export 1 million bopd of Iraqi crude to Jordan, of which 150,000 bpd will supply Jordan's Zarqa refinery. The remainder would be exported through the Red Sea port of Aqaba, reducing Iraq's reliance on the Strait of Hormuz shipping route. After stagnating for years due to war and sanctions, Iraq's oil output began to rise significantly in 2010 and output reached 3.1 million bopd in August, according to the latest Reuters survey.”

So Jordan becomes a key player: “Jordan is among the highest in the world in dependency on foreign energy sources, 96% of the country's energy needs come from imported oil and natural gas from neighboring Arab countries. But multiple attacks on the Arab Gas Pipeline which supplies 88% of the country's electricity generation needs forced the country’s power plants onto diesel and heavy fuel oil.”

The Arab Gas Pipeline connection: “The Arab Gas Pipeline exports Egyptian natural gas to Jordan, Syria and Lebanon, with a branch underwater pipeline to Israel. As of March 2012, the gas supply to Israel and Jordan stopped due to 13 separate attacks on GASCO's feeder pipeline to El-Arish that have taken place since the beginning of the 2011 Egyptian revolution. By spring 2013 the pipeline returned to continuous operation, however, due to persistent natural gas shortages in Egypt, the gas supply to Israel was suspended indefinitely while the supply to Jordan was resumed, but at a rate substantially below the contracted amount”

And now, thanks to a very big offshore NG field Israel is cutting a deal with Egypt to reverse the flow of the line and deliver their NG to Egypt for internal consumption as well as making use of an underutilized Egyptian LNG plant to export NG to other countries. No mention of Jordan getting any of this NG.

And what does Jordan get out of the arrangement on the Iraq oil pipeline: “Jordan Petroleum Refinery Co, the country's sole refinery, is importing more fuel oil and gasoil for power generation, as continued attacks on a pipeline running through Egypt, Israel and Jordan disrupt natural gas supply. The increased demand for fuel oil that meets Jordan's power utility specifications has prompted at least one seller to pull volumes from East Asia, a rare move as fuel oil normally flows from the Middle East to the East.”

So Jordan gets a lock on 150,000 bopd of Iraq production. Not a game changer given such a small percentage of Iraq production. But one more instance amongst dozens of others where a volume of future export oil has been committed long term to either an end user or someone getting into the refined product business. Collectively it limits the amount of oil in the free market place. So even if the world is still a good way from peak oil production we may not be very far from peak export oil available on the open market. And that’s critical for those oil consumers that don’t have long term oil access committed to them.

[ROCKMAN]

IMHO the EIA is missing a very critical aspect of the increase in Chinese refining capacity. They predict an glut of refined products when in reality it will be a glut of refining capacity. No more refined products will be produced than the amount of oil sold to those refineries. Just because there might be 30% more refining capacity than we have today doesn’t mean the world will be producing 30% more refined products.

What they fail to highlight is the various JV’s China is forming with different oil exporters, such as the KSA, that effectively guarantees a certain volume of future oil production will go to those refinery JV’s. Which also effectively guarantees some of the current refineries will lose access to that oil. In addition China has been entering long term oil purchase agreements with exporters, such as Venezuela, that also eliminates access to additional oil by the other refineries. And there is the amount of foreign produced oil the China owns directly while still in the ground, such as in offshore Angola. They predict that global oil demand in 2017 will be 95.7 million bopd with a refining capacity of 100.5 million bopd. But if those refineries with that extra 4.8 million bopd excess capacity can’t acquire any oil there is no possibility of a refined product glut. In fact, if China controls enough of the refinery output via the various methods they've used to tie up future oil production there may not be as much refined product in the market place as the IEA predicts there will be demand for. Also it's good to not forget ELM: some of that future demand increase will be from some of the major oil exporters. Their increased internal consumption also reduces the amount of product in the world market. The "glut" they are predictiong (and the implied potential for lower prices) may actually be more of a shortage with some upward pressure on prices. How likely this will happen will depend largely on what China decides to do in the next several years. At the moment they seem to be telegraphing a clear intent IMHO.

http://www.energytribune.com/78815/chin ... znyKF.dpbs

“In its most recent analysis of China’s oil and gas industry, updated in April, the US Energy Information Agency (EIA) said that China’s installed crude refining capacity is over 11 million barrels per day (bbl/d), doubling since 2000, while its goal is to augment crude oil refining capacity by around 3 million bbl/d to reach 14 million bbl/d by 2015, the end of the country’s 12th Five Year Plan. China’s goal to keep increasing its refining capacity has an impact not only within China, but (as is usually the case with China’s oil and gas dynamics in the past decade) also globally. Perhaps the most conspicuous impact of Beijing’s refining goals is an impending glut of refined petroleum products worldwide. Late last year the International Energy Agency (IEA) addressed this issue, stating that global oil demand could rise to 95.7 million bbl/d by 2017, but refining sector expansion will likely take global refining capacity to 100.5 million bbl/d for the same period. The IEA said that China would account for more than 40% of global refining capacity in the next five years, a figure matching China’s recent emergence as a global energy player. “

[ROCKMAN]

US Refineries Respond to Latin American Shortfall – Or why US citizens should not expect lower fuel costs anytime soon despite increased domestic oil production. From:

http://oilprice.com/Energy/Energy-Gener ... tfall.html

"2013 has been a bumper year for United States’ refineries and it is in no small part thanks to its largest overseas market -- Latin America. Although Latin America’s oil production has grown steadily in recent years, the region’s refineries have been unable to keep pace with rising demand, particularly in the transport sector. There are several reasons for this. One is simply insufficient investment in local refining capacity. This is changing, with several projects underway. Interestingly the Chinese, who have been significant financiers of upstream oil operations across Latin America, have begun investing in the downstream sector. The China National Petroleum Corporation’s (CNPC) investment in the $12 billion Pacific Refinery in Ecuador is just one example, and we are likely to see more in coming years.

Another reason for the region’s relative decline in refining capacity is tightening regulations, meaning that existing refineries are unable to produce the quality of gasoline or diesel that meets national standards. This is complicated by the fact that the refining sector in many Latin American countries remains tightly controlled by the State, which limits opportunities for private investment. Brazil’s refining sector highlights many of these challenges. The country’s refining capacity has been outpaced by its demand for gasoline and diesel, leading the state-owned oil company Petrobras to import both fuels at great expense.

While two refineries are currently under construction, the first of these in Pernambuco state has been severely delayed and will not be finished until 2014 at the earliest. Possible joint ventures with the China Petroleum & Chemical Corporation (Sinopec) and South Korea’s GS Energy Corporation are under consideration but would not be ready till several years later.

But while countries like Brazil have clear financial incentives to boost their refining capabilities, others such as Mexico that finds itself in close proximity to cheap, abundant exports may not. Indeed, one of the most important global energy trends in the last five years has been the emergence of abundant unconventional resources across the Western Hemisphere but nowhere has this had more impact than in the United States. The success of the energy revolution in the United States means that its refineries will continue to provide stiff competition for those in the rest of the Hemisphere.

US Gulf Coast refineries have responded quickly to rising global demand, and Latin America has become their largest overseas market. US refined petroleum exports rose 260 percent from 2005 to 2012, and were at 2.8 million barrels per day (bpd) in June 2013 according to the US Energy Information Administration (EIA). Over half of these exports are destined for Latin America and the Caribbean. Over a quarter go to Mexico, Brazil and Chile alone.

These figures should not come as a surprise. Mexico, Chile, and Brazil have seen strong economic growth in recent years, bringing with it an expanded middle class and a commensurate appetite for consumer goods, including cars. Unable to meet the gasoline and diesel demand at home, Latin America’s large economies in particular have turned to the United States. US petroleum product exports to Mexico have nearly tripled since 2004 according to the EIA, reaching 440,000 bpd in June 2013. According to Mexico’s National Statistics Institute INEGI, the country’s middle class accounts for around 40 percent of the population."

[ROCKMAN]

Looks like China will have some local help in the transition of Nigeria away from being an oil exporter. I suspect part of the motivation is the loss of a large portion of Nigeria’s export market in the eastern US and Canada as a result of abundant (and cheaper) local crude.

“A company run by Africa's richest man received a loan toward a $9 billion project that will give Nigeria its largest oil refinery and petrochemical and fertilizer complex, reducing the country's reliance on international markets. Aliko Dangote, president of Dangote Group, signed a loan worth $3.3 billion from 12 Nigerian and international banks toward the project which will be built in Nigeria's southwest. "At the completion of these projects we expect Nigeria to become not only self-sufficient in fertilizer and refined petroleum products but indeed to become recognized as a leading exporter of these products." Dangote said.

Nigeria is Africa's biggest oil producer but the West African country has to import most of its fuel because of decrepit refineries unable to meet the nation's demand for gasoline due to years of mismanagement and sabotage. The 400,000 barrels-per-day oil refinery and complex will become operational by 2016, the company said. The plant will also produce 2.8 million tons of urea for fertilizing crops and to produce polypropylene, used to make plastics, a statement said. Dangote said the company is still seeking an additional $2.5 billion in development funds to augment the $3.5 billion of its own equity put into the project. The $3.3 billion loan deal was led by Standard Chartered and Nigeria's Guaranty Trust Bank.”

It will be interesting to see if China lends some help on this project. Previous reports indicate China’s involvement in 3 other Nigerian refinery projects. At the moment the US/Canadian refiners won’t miss that 400k bopd. But some day? We’ll see in the next 5+ years.

[ROCKMAN]

I’ve seen some rather odd stories about China actually taking control of a portion of another country in its efforts to secure its energy future. Here’s some details. Obviously a lot more complex than doing a refinery JV.

“In a move that could put a dent in an already fragile relationship between Pakistan and the United States, the Sharif government is likely to give a special status to its strategically important Gwadar port similar to that of Hong Kong. Pakistan has already given operational control and management of Gwadar, a deep-sea port on the Arabian Sea, to a Chinese company. But a special status to Gwadar may empower China to control the entire location. "Gwadar is strategically important and has full potential to become a free port. We can give it a special status similar to that of Hong Kong." Prime Minister Sharif said. The move has rang alarm bells in the Obama administration that sees Chinese growing influence in Pakistan as a bigger threat to its presence in South Asia.

Sources said that authorities in Pakistan were busy formulating special rules and regulations for Gwadar in consultation with their Chinese counterparts. One thing is very clear, said a source, that the Chinese will be in control of Gwadar's security. "Given the security condition in Pakistan, and engagement of Pakistan's armed forces against war on terrorism, China is likely to get full responsibility of the port's security," a source said.” Pakistani and Chinese officials said China may build a naval base in Pakistan. Chinese influence in Pakistan and the South Asian region will certainly increase if China's Overseas Port Holding Company's acquisition of management of the commercial port in Gwadar is followed by the PLA Navy's use of the facility, they said.”

So not only will the Chinese govt control the area but their military will also be at hand to protect their interests. Besides being at the footstep of the Persian Gulf why would China be interested in this little spot? More:

“Pakistan and China are set to engage in crucial talks this week on laying an oil pipeline from Gwadar Port to western China - an attempt that will allow Beijing to diversify and speed up import of crude oil. China had expressed interest in investing in Gwadar after Pakistan handed over control of the port to Beijing. Later, officials said, the oil pipeline could be extended and connected with Iran which has already offered to lay a pipeline from its territory to Gwadar for supply of crude oil. Iran had also announced its intention to set up an oil refinery with oil production capacity of 400,000 barrels of oil per day (bopd) at Gwadar Port during the tenure of previous government.”

So Iran may connect themselves at the hip with China even tighter than they are now. And this time with the Chinese military at hand to watch their backs.

“According to the officials, China meets 50 percent of its oil demand through imports from the Middle East. Oil supplies come via Dubai-Shanghai-Urumqi route covering over 6,200 miles. Crude oil processed and refined at the Gawdar oil refinery can be exported and transported to Urumqi through the shortest possible route, about 2,200 miles, by laying an oil pipeline through the envisaged energy corridor.

China will also discuss the feasibility of setting up an oil refinery at Gwadar in talks with Pakistani authorities. Islamabad has already pressed for reviving the stalled Coastal Oil Refinery project, which had been shelved by China in 2009-10 after the control of Gwadar Port was given to Singapore Port Authority. Coastal Oil Refinery, which was designed to process up to 60,000 bopd, was part of China's plan to invest $12 billion in multiple projects in Pakistan.”

So for a while that little part of Pakistan was given to Singapore but now has been given to China. I wonder what the US could get in a swap with China if we gave them San Francisco? LOL.

[beancounter123]

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

This picture really illustrates a number of your points Rockman

control
two much refining capacity = shutdown in certain areas - Europe

[ROCKMAN]

Beanie - Great maps. Thanks. It really connects with all the refinery JV's China is doing in the MENA region. We've been so focused on the oil supply issues we've just started paying attention to the swing towards control of the refined products. The EU can already easily see their future. The loss of revenue to the refineries in the industrial countries won't be insignificant but probably isn't the worse implication IMHO.

And just for those that haven't caught it such refinery JV's aren't being done in just on the other side of the world. The largest refinery expansion in US history, Motive on the Texas coast, wasn't done by a US company. It's owned by the Saudis and the Dutch. Yes...the "Shell" partner isn't Shell US but RDS...Royal Dutch Shell. US law allows any foreign sourced oil AND refined products made from said oil to be EXPORTED from the US. Neither the oil going into the plant (if sourced from the KSA) or the products will be US owned. And though technically not a JV the Bank of China is working on a loan to a Canadian company to fund a huge refinery in BC that will crack oil sands production ("our" oil) and send the products to the coast for shipment via tanker to someone's market. No details but I wouldn't be surprised if the loan agreement gives China some form of call on some or all of those products.

[ROCKMAN]

More Chinese capital to continue buying up energy around the globe. In one recent month the Chinese pulled in almost $29 billion in excess foreign currency. That's at an annual rate of almost $350 billion. This exceeds the previous record of the $295 billion per year rate last January. As mentioned before $300 billion exceeds the budget of ExxonMobil, the largest oil corporation in the world, for THE NEXT FIVE YEARS COMBINED. No one is going to outbid China for anything they really want IMHO.


From: http://www.nytimes.com/2013/09/09/busin ... .html?_r=0

[ROCKMAN]

China picks up a rather big chip in the global energy poker game. They are upping their ante to $30 billion with more on the way. This also includes direct ownership in a piece of the giant Kashagan Oil Field. It would not be a surprise if China ends up with first call on some if not all the production they don't directly own. From

http://www.rigzone.com/news/oil_gas/a/1 ... B/?all=HG2

“Sept 7 - Chinese President Xi Jinping struck a deal with Kazakhstan on Saturday giving China a stake in its giant Kashagan oil project. The agreement also blocks an attempt by India to get a stake in the oilfield, the world's largest oil discovery in five decades. Oil and gas deals, including on building an oil refinery in Kazakhstan, are among 22 agreements.

CNPC will also pay up to $3 billion to cover half of Kazakhstan's financing of the second phase of Kashagan's development. This phase is expected to start after 2020. Another draft agreement, seen by Reuters, would guarantee loans from The China Development Bank and The Export-Import Bank of China - worth respectively $3 billion and $5 billion - to Kazakhstan's state holding firm Baiterek. China is already involved in a number of oil projects in its vast resource-rich neighbor.

Kashagan and neighbouring fields in the North Caspian hold estimated reserves of 35 billion barrels of oil, with between 9 billion and 13 billion barrels recoverable. A multinational consortium developing the field has invested some $50 billion in about 13 years, making it the costliest oil project in the world. Trial runs at the giant reservoir off western Kazakhstan are set to begin on Monday, and it may take between three weeks and a month before commercial production starts, Mynbayev said.

During Kashagan's development, production will be gradually increased to 370,000 barrels per day in the second stage from 180,000 bpd in the first stage in 2013-14, according to North Caspian Operating Company (NCOC), which is developing the field.”

And since he was in the neighborhood: “This week, Xi visited Kazakhstan's neighbour Turkmenistan, which holds the world's fourth-largest natural gas reserves, and oversaw deals aiming to boost gas supplies and build a pipeline to China.”

[ROCKMAN]

More indications that the US won’t be flooded with all that DW Brazilian oil as some have assumed:

“Petrobras, said late Tuesday that it could team with China Petroleum & Chemical Corp. to build a much-needed refinery that would help reduce heavy imports of gasoline and diesel. Petrobras and Sinopec signed a letter of intent to study a possible joint venture to build the Premium 1 refinery in the northeastern Brazilian state of Maranhao. Petrobras announced a similar joint-venture study to build the Premium 2 refinery in nearby Ceara state with South Korea's GS Energy Corp.

Brazil desperately needs to increase refining capacity as growing consumption of gasoline and diesel outpaces current processing capacity of slightly more than 2 million barrels per day. Petrobras is currently building two refineries that won't be ready until November 2014 at the earliest. Despite the added refining capacity, Petrobras still estimates consumption will outpace refining capacity by nearly 1 million barrels a day in 2020 without the two so-called "premium" refineries.

Refining accounts for about 27% of Petrobras's $237 billion 2013-2017 investment plan. Premium 1 will process 300,000 barrels a day initially, but there are plans to eventually expand the refinery by another 300,000 barrels per day in 2020. Premium 2 will be able to process about 300,000 barrels a day when completed.”

[ROCKMAN]

Just discovered an interesting sidebar to the previous story about Brazilian refineries. Apparently Venezuela has been in a long protracted discussion with Petrobras about participating in a new Brazilian refinery. Sounds as though Vz has been having difficulty with the huge monetary commitment.

“Petroleos de Venezuela (PdVSA) sees its participation in the Abreu e Lima joint refinery venture in Brazil as "very expensive" but hasn't yet made a final decision whether to stay in the project. For its part, Petrobras has said that it plans to go through with the refinery with or without PdVSA. The investment cost for PdVSA is around $20 billion.

At the same time, Mr. Ramirez said PdVSA is on the lookout for buyers for some of its North American refineries which currently do not process Venezuelan crude. "That network of refineries has been problematic in how it is geographically situated. It receives little Venezuelan crude which is why we are selling refineries that don't process our oil. It doesn't interest me to become a buyer of United States nor Canadian oil, Mr. Ramirez said."

So maybe in addition to hording “our Brazilian oil” maybe Petrobras is thinking about stealing some of “our Venezuelan oil” and running it through their refineries. Cheeky bastards.

[ROCKMAN]

Seems like I can’t turn around these days without stepping on one more dot to connect. Most should know that Indonesia ceased being a member of OPEC some time ago and became a net importer. And now we see a further connection to the refining side of the business. As one of Indonesia's main oil suppliers, Azerbaijan is following through on a two-decade-long trading relationship between the two countries by planning a $4.8 billion oil refinery in Batam, a free-trade zone that is 20 kilometers off Singapore's south coast. I’ve never seen Batam mentioned before but apparently it has become a focus for some of the major ME oil exporters.

The Batam activity is part of an apparent major effort by the Indonesian government to make the country self-sufficient in its energy production. The government had plans to build two 300,000 bpd refineries in East Kalimantan and a third in South Sumatra. The East Kalimantan projects were expected to be completed by 2019, while a 300,000 bpd refinery in Palembang was expected to start construction this year. Two of those projects have been bogged down as the result of failed negotiations between the Indonesian government and two would-be investment partners, Saudi Aramco and Kuwait Petroleum. Those discussions apparently broke down because incentives requested by the foreign investors could not be met.

Both Kuwait Petroleum and Saudi Aramco have reportedly demanded a tax holiday for up to 30 years, in addition to an incentive of a price premium for the crude oil supplied to the refineries. The Saudi and Kuwaiti companies also demanded exemption of import duty. Pertamina chose Kuwait Petroleum as its partner to build a refinery with a fuel production capacity of 300,000 bopd. The crude oil would be provided by Kuwait Petroleum. In addition, Pertamina selected Saudi Aramco to construct another fuel-processing plant with a production capacity of 300,000 bpd of fuel.

And, of course, the Chinese are in the game too: Sinopec, Asia's largest oil refiner, has started building Southeast Asia's largest oil storage terminal at the Batam free trade zone in Indonesia. Liu Feng, an analyst at Zhuochung Information's energy branch, said Batam, which is situated along the Strait of Malacca near Singapore, is geographically important. The establishment of Sinopec's oil storage facility and refinery there could help the company save transport costs and allow its refined products to be sold to Southeast Asia, Northeast Asia and the Middle East, as well as other international markets. Sinopec relied on imports for 70% of its crude oil needs, while Indonesia was one of Sinopec's major crude oil importing clients. If Sinopec set up a refinery in the country, this would help save a substantial amount of transport expenses.

[ROCKMAN]

Apparently even the largest oil producer on the planet is having difficulty meeting its supply commitments to China and is offering them a piece of a 1 billion bbl oil field:

Sept 10 (Reuters) – Russia's top oil company Rosneft has offered a stake in an East Siberian oil field to China. Rosneft offered a stake of up to 30 percent in oil firm Taas-Yuryakh (TYNGD), in which it owns 35 percent and is bidding for the rest of the company. Earlier this year Rosneft agreed to more than double its oil supplies to China from the current 300,000 barrels per day it ships with the first phase of East Siberia - Pacific Ocean pipeline.

Russia has until now been reluctant to cede a significant share of its oil riches to China with Rosneft preferring to sign long-term supply deals backed by multi-billion-dollar loans. But Rosneft, which in March acquired Anglo-Russian oil firm TNK-BP for $55 billion, needs to increase its upstream base to honour its pledge to increase sales to China. Taas-Yuryakh initially plans to produce up to 20,000 bopd from its East Siberian oil field and aims to increase output 120,000 bopd by 2016. The field, with reserves of almost 1 billion barrels, is connected to the East Siberia-Pacific Ocean trunk by a 160 km pipeline.

[pwallmann]

http://ca.reuters.com/article/businessNews/idCABRE98303R20130904

An interesting report on Petro China. They have recently removed their ceo Jiang Jiemin under suspicion of graft:


$this->bbcode_second_pass_quote('', '&')quot;The new management is completely different from Jiang Jiemin, under whom PetroChina has been spending like crazy and got into a lot of deals at home and abroad with questionable economics,"

[ROCKMAN]

China now owns a bit more of future offshore Angola oil production. Interesting that Marathon sees buying its stock back as a better investment than future oil production.

Houston-based Marathon Oil in June sold its 10 percent stake in Angolan Block 31 Field to China's Sinopec Group for $1.5 billion. Marathon Oil had said it would use the proceeds from the deal to buy back its shares. The company on Tuesday said it was moving forward with its plan to buy back $1 billion of its stock.

[ROCKMAN]

Some folks still have a misconception that govts and NOC’s can act with impunity when It comes to heavy handed dealing with energy companies. Doesn’t work very well when you’re also dependent upon the energy industry to bail your economy out. Here are a couple of related stories.

“Sept 12 (Reuters) – Egypt is close to agreeing a schedule for repaying $6 billion in outstanding debt to foreign oil companies. Reaching an agreement would lead to a rise in investments from the companies to $15 billion within two years. The Egyptian state has been struggling to meet soaring energy bills caused by high subsidies on fuel products for the country's 84 million-plus population. "We are in debt to foreign oil firms for around $6 billion, which is what led them to stop investing. We are on the verge of reaching an agreement with them to schedule the debts," Beblawi said. Earlier this month, Oil Minister Sharif Ismail said Egypt was preparing a timetable for repaying arrears on debts it owes to foreign companies in order to encourage them to continue investing in exploration and development.”

And while Egypt’s problems push one oil company away a bit it opens up another opportunity for China:

“Aug 30 (Reuters) - U.S. oil and gas producer Apache Corp is selling a 33 percent stake in its Egypt oil and gas business for $3.1 billion to state-owned Chinese oil giant Sinopec Group, reducing its exposure in the country amid the recent political unrest. Apache has also formed a global strategic partnership with Sinopec to jointly pursue upstream oil and gas projects. The Egypt deal would be the first step of the joint venture with Sinopec Group. Disappointing production and investor concern over Apache's high exposure to Egypt have pressured the company's stock. Egypt is enduring the worst internal strife in its modern history, triggered by the army's July 3 overthrow of President Mohamed Mursi.

Net production from Apache's Egypt operations averaged 100,000 barrels of oil and 354 million cubic feet of natural gas per day in 2012, Apache said, adding that it employs about 9,000 people in the north African country. Sinopec and other state-owned Chinese oil firms have been investing billions of dollars in energy projects around the world as part of Beijing's drive to expand its footprint in the global oil industry and beef up energy security amid surging imports.”