We’re a lot less together in the oil world than we
used to be, according to the IEA outlook
By Margaret McQuaile | October 12, 2012
Interdependence has been a consistent theme in the world of oil for
many years, the idea that even a small supply disruption in one part of
the globe can have an impact thousands of miles away.
Well, say goodbye to that notion, or at least part of it. The
International Energy Agency has looked into the not-too-distant future
and it sees a world divided between an increasingly self-contained
western hemisphere and pretty much everywhere else.
The IEA, in its latest medium-term outlook, believes the world oil map
will be deeply transformed over the next five years as regional shifts
in demand and new sources of supply growth continue to reshape the
global refining industry and as crude trade becomes increasingly split
between the western hemisphere and the rest of the world.
Thanks to surging production of non-conventional oil in Canada and the
US, North America will move closer to balance after having been a large
importer, the IEA says. And the changing quality of US domestic crude
production means that most of the light, sweet grades previously
imported from West Africa and elsewhere will no longer be needed.
At the same time, the combination of robust demand growth in the
Middle East and parts of the former Soviet Union and extensive refinery
investment is set to reduce the amount of crude available for export.
Although the Middle East is expected to retain its role as the world’s
key producing area, the IEA reckons that rising regional demand and
refining capacity will keep more crude in the region, slashing the
volume available to export markets by an aggregate 1.9 million b/d over
the next five years.
On the downstream side, OECD Europe, amid diminishing demand,
challenging environmental standards, constraints in access to feedstocks
and ageing plant, faces further capacity attrition, while North America
is set to benefit from new, discounted feedstock supply, cheap natural
gas and some of the lowest energy costs on the planet in the form of
cheap natural gas.
Within the United States, demand is eroding and, as a glut of
unconventional supply comes on stream, exports of refined products are
growing fast. Asia and the Middle East are also increasing their exports
of refined products, but these are the result of expanded refining
capacity rather than falling demand. Even energy-hungry China could
emerge as a new “powerhouse” in product exports if all planned projects
go ahead and demand growth slows as forecast, the agency says.
So, the refined product trade map is set to become more and more
integrated and interdependent, with long-haul product trade volumes
increasing and providing the market with a greater degree of
flexibility.
There’s an interesting graphic in the IEA medium-term report which
forecasts a shift in export patterns for crude oil from eastern Russia.
At the moment, China receives around 300,000 b/d of crude from Russia
through a branch of the East Siberia-Pacific Ocean pipeline, which has
been in operation since early 2011. But a similar volume goes through
the main ESPO line to Kozmino, a Pacific Coast port. Much of this
currently goes by tanker to China, but the IEA expects the ex-Kozmino
exports to be directed increasingly to the wider Asia area in the
future.
China wants to increase its imports of pipeline oil from Russia and the
head of Russian pipeline operator Transneft said in June that Beijing
wanted to triple its volumes to around 900,000 b/d. This would be
achieved by the building of a parallel line to the ESPO spur to China
and a new link from the Pacific Coast southward.
The IEA, in a map in its report, seems to suggest that with these
shifts, 1.1 million b/d of Russian crude could be headed to China by
pipeline by 2017, with only 100,000 b/d leaving for other markets in
Asia via the port of Kozmino, compared with 300,000 b/d at present.
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