World non-renewable energy discussion

Pakistan and India are the natural clients for Iranian gas but because of US and Saudi interference in politics in Pakistan it never happened.
China getting all the Turkmen gas erases the chance the EU would get it, as they and the US originally wanted by building the Nabucco pipeline. Which they never funded. All talk as usual. Eventually TANAP happened, with mostly Azeri and Turkish funding, but all the Turkmen gas which was supposed to fill the pipeline is going into China.

I think this is kind of interesting.
big jump in crude import quotas from China this year. This is way more than what I think they actually need domestically. that means, I think they are going to export refined products big time.

Just last week, they raised the export quota of refined oil products

keep in mind China had already exported the most diesel and gasoline in November than for quite some time.

My sense is that with the oil price cap, they are getting a lot of heavily discounted Russian oil that they are able to refine at low cost and then export at a profit. All of this would also allow them to control more of the oil market, since they are now the largest oil importer in the world by a lot and they are able to use that demand to pressure exporters to pay in RMB and trade on Shanghai exchanges.

Keep in mind that Sinopec and Aramco signed agreement for another major refinery in December in the aftermath of Xi's visit.
which is after earlier agreement for such.

tphuang said:

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so if they add this, then they can get maximum 85 bcm natural gas from Turkmenistan

That's on top of the 38 (or is it 48?) bcm they get from POS1 and 50 if they build POS2.

The sino Myanmar pipeline can expand to 12 bcm IIRC.

So that would be maximum of a little less than 200 bcm they can import. To me, there is not a lot more needed from LNG market, especially unfriendly countries like Australia and US if all this is completed.

To me, Iran made a huge mistake by not working harder to get a pipeline built to China. Now, it will miss all that business.

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wow, looks like the china-central asian pipeline hit an all time high of 43 bcm in 2022.

So, it's not too far away from theoretical limit of 55 bcm.

POS supply is increasing nicely. Should be around 15 bcm in 2022 and 22 bcm in 2023
my guess is they will probably exceed that since they've completed more domestic pipeline and I'm sure they want the cheaper pipeline gas vs LNG.

China's own NG production continues to climb. Up to 220 bcm in 2022 and likely rise even more to 230 bcm this year.

China importing a lot of Iranian oil in December. Again, they are getting these huge deals for energy compared to non-US Western economies.

tphuang said:

To me, Iran made a huge mistake by not working harder to get a pipeline built to China. Now, it will miss all that business.

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Building a pipeline through Pakistan was never a good idea，there is never-ending insurgency inside the country. Terrorists attacking Chinese projects and personnel in Pakistan on a regular basis. If China actually build pipeline over there，it could be blown up any time

Following what I posted on economy thread, it will be interesting to see the effect of the EU sanction on Russian export of refined oil product starting in Feb 5. By then, Chinese new year will be over, omicron wave died down and economy is slowly getting back on feet.

As stated in this, Russia exported 5 million bpd of crude and 3 million bpd of refined product (gasoline, diesel, etc)
Here is the kicker

The third agreement stems from EU nations: Most of these 27 nations won’t be able to buy Russian crude oil delivered by sea starting on December 5, 2022. And they won’t be able to buy refined oil products coming by sea from Russia starting two months later on February 5, 2023.

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It's well known by this point that US refineries are running at almost 100% while Chinese refineries had large idle capacity for much of 2022. As such, the only country capable of replacing Russian refined product is China!

Until the Europeans are willing to get past their ESG and green commitments and add more refineries, they will continue to be at the mercy of China here.

As discussed here, China has significantly increased its refined oil quote in first batch released and followed that up by huge increase in import of crude. China is likely to enjoy low oil import price for the short to medium term and have added a lot of refinery capacity despite demand for oil likely staying flat (due to more EV usage) over the next few years. As such, it can simply enjoy capturing the large delta between the low crude price it enjoys vs the market price for refined oil at a time when refineries are getting record margins.

Chinese authorities have approved exports of gasoline, diesel, and jet fuel of 18.99 million tons—an increase of 46% over the 13 million tons of fuel export quotas China allocated in the first batch for 2022 as authorities seek to keep refining output high amid sluggish domestic demand.

At the end of last year, despite lukewarm domestic demand, Chinese refiners were boosting production and exports to profit from high diesel margins in a very tight global market. The refiners had the

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issued for 2022 by authorities. China allocated 15 million tons of new fuel export quotas to its major refiners at the end of September.

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As shown in these 2 charts, they exported about $2 billion in diesel in November (all time high) and $1.2 billion in gasoline (3rd highest on record)

Worked out to be about $130 per barrel of diesel for October based on the rough math I did.

If they can average about $4 billion of diesel/gasoline export per month in 2023, they can export about $50 billion in refined product. This is assuming their re-opening and the end of US SPR release offsets the likely lower demand from crude around the world due to recession. This probably means up to $30 billion more in export of refined oil product.

An additional likely outcome here is that some of the Russian refineries will likely close down in the future due to idle capacity whereas more Chinese refinery capacity will come online (some with Saudi help) and China will become a major refined oil exporter.

Not that great news. Refineries are heavily polluting.

Looks like China is doing more NG arbitrage here thanks to these long term LNG contracts

Pretty interesting articles to think about with Russia/oil/energy

"The oil products' embargo will have a greater impact than the restrictions on crude oil," said the senior Russian source who spoke on condition of anonymity due to the sensitivity the situation.

The source said the sanctions will lead to more crude oil supplies from Russia, which lacks storage capacity for oil products.
...
"Our assumption has been that the two embargoes combined would reduce Russian oil output and total exports by perhaps 1 million barrels per day by the end of (first quarter) 2023."
...
The Russian source said Russia hoped to recover oil products exports starting from the second half of the year by setting up new logistics chains.

According to official forecasts, Russian oil production is set to fall to 490 million tonnes (9.8 million barrels per day) in 2023 from 535 million tonnes in 2022.

Its oil products exports averaged around 1.2 million barrels per day (bpd) in 2022, according to the International Energy Agency

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So I think this is going to be an interesting thing to watch. How does Russia re-orient its entire economy to supply Asia (mostly China & India) + the global south. They can export crude to Africa, Latin America also. But unless they want to shut down all their refineries (and I'm sure they need to shut down some), they will need to export refined products to China & India for below market prices. And then China in this case could also export its own refined products to Europe. Recently, there was picture of China exporting refined oil product to Lithuania!

This just shows how much Russian oil traffic changed. I think China is trying to balance import between Russia, Iran, Venezuela and the Middle East to get the best deals for itself while managing long term relationships. Having India also buying a lot from Russia is going to provide them some geopolitical cover from the Europeans. Both China & India are likely to make it big on these oil flipping trade.

Another topic that's been discussed for a while. Horrible for the environment but it's happening. The Northern sea route will allow shipment of oil more easily to China in summer time. This is all production from Siberia.
here is explanation of Sever Bay Port

And as a result of these lower crude prices, China is able to cut gasoline & diesel prices

More on what's happening with this front.
Looks like due to the impending sanctions, European countries raised ahead and purchased a lot of Russian diesel in December (1.2 million bpd) Overall, looks like oil product shipment is down

At the same time, China also really stepped up Diesel/Gasoline export in December.
2.79 mt about 21million barrels or 700k bpd
1.91 mt about 16 million barrels or 500k bpd

Looks like they already announced 19 million t for 2023 of refined product export which is more than half what the allocated for 2022. I think this will go a lot higher. As long as exports are not causing significantly higher prices at home, I see no reason why Chinese gov’t wouldn’t continue to allocate more to export quota. Especially with them getting cheap oil imported.

Looks like the recovery in Chinese petrochemical sector is already causing inflation in Naphtha prices. Chinese refineries need to be put into action in 2023. No more 30% idle capacity.

So what happened in 2022 is as one might expect. Lower refinery activity for much of the year and then started to focus on export at the end of year to help out the refineries. They just did this, so clearly want to refined more oil going forward.

The start-up of PetroChina’s new 200,000-bpd crude unit in Guangdong and Shenghong Petrochemical’s 320,000-bpd plant in Jiangsu also helped support run levels during the last few months of 2022.

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Some thoughts on China’s oil product export quota getting raised. As you can imagine, refined vs crude spread shrunk. Other refiners don’t like it. They normally exported 1.5 million mt per months of gasoline and were exporting just 120k mt for a few month. Which allowed Indian and Korean refineries to ramp up and export more. Indian & Koreans have exported less since China increased its export quota.

Crack spread (gas/oil spread) reduced 10 to 11%. Diesel crack has reduced. Jet oil spread also decreased.

They think China will export less to keep cost down for local industry. Imo, they will just have refineries crank out more refined products. Especially with Europeans not taking in any refined product from Russia.

They estimate Russian refineries will refine less oil (as I would imagine)