Russia, N.America invest billions to feed Asian oil, gas demand

* Mideast producers to free up more oil for exports

* Russia ties up long term supply contracts with China, to start gas exports

* Asia invests in U.S., Canada LNG; Canada to send more oil to Asia

Fast-growing oil and gas producers Russia and North America are spending billions of dollars on pipelines and port facilities to supply energy to Asia, intent on grabbing a bigger share of the world’s fastest growing fuel market from Middle East suppliers.

China has driven global oil demand growth for a good part of the past decade, galloping ahead of the United States as the world’s top net oil importer last month. The Asian superpower’s surge in consumption has kept prices supported despite a rise in North American shale output and a weak economy in the West.

That pivot in growth away from the West has meant producers such as Canada have had to look further from home to find a market. At the same time, Russia, its Central Asian neighbours and other exporters are also queuing up at Beijing’s door to sell their oil and gas.

“The centre of gravity shifting east is becoming a reality,” Maria van der Hoeven, executive director of the International Energy Agency told Reuters on the sidelines of the World Energy Congress in South Korea.

“They (China) would like to get oil from everywhere. Whether it’s by ship or, let’s not forget about Russia, by pipeline.”

Net oil imports in the Asia-Pacific will rise to more than 25 million barrels per day (bpd) in 2035, close to current crude output in the Middle East, the Asian Development Bank said, giving a sense of the region’s rising demand.

ASIAN DEMAND

While Asia’s market grows, the United States, which has been for decades the world’s biggest market for oil and gas, could slash its oil imports by half by the end of 2020 from levels seen two years ago due to the shale oil and gas boom and improving energy efficiency, the IEA said.

Gas producers in North America and Asian buyers are working on multi-billion dollar projects to liquefy the region’s abundant gas supply and ship the super-chilled fuel to the East.

North America has already pushed Australia out of the top spot for new Asian investment in gas development, while several pipeline projects are being planned in Canada to send landlocked crude to Asia.

Pipeline operator TransCanada Corp is participating in projects worth nearly C$14 billion ($13.5 billion) that aim to fill Asia’s fast-growing demand for Canadian oil and gas and could build more, Chief Executive Russ Girling said.

“I would have never predicted that 24-36 months ago,” Girling said in an interview earlier this week.

Russia, the world’s largest gas producer, also plans to open up liquefied natural gas (LNG) exports next year to meet growing demand from Asia-Pacific markets. The government plans to submit a bill in parliament on it soon.

That comes after Russian producer Rosneft signed one of the biggest deals in the history of the global oil industry in June – a $270 billion pact to supply 365 million tonnes, or 300,000 bpd, of oil for 25 years.

That would come on top of the 300,000 bpd Rosneft is already sending to China.

MIDDLE EAST

Middle East producers are competing hard among themselves and with other suppliers for the Asian market.

Fast emerging as a key competitor to Saudi Arabia, Iraq said China is seeking to increase purchases of its crude by more than two-thirds next year, to 850,000 bpd. More requests for 2014 supply from China may come in, deputy prime minister for energy Hussain Al-Shahristani said.

Top oil exporter Saudi Arabia, which increased its annual capital budget ten-fold to $40 billion in the last 10 years, will export more of better quality light crude by 2017 from two fields – Shaybah and Khurais – while its giant Manifa field will provide heavy crude supply.

The race is on for producers who can provide steady, large volumes of oil to China as it may overtake the United States as the world’s largest crude importer by 2017, according to Wood Mackenzie.

“OPEC’s orientation is no longer a global diversified market, it will continue to sell oil globally but it will predominantly be selling oil to China,” said William Durbin, head of global markets research at Wood Mackenzie.

Reuters