Page 9 - AsianOil Week 49

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US oil exports to China hit zero in October
PERFORMANCE
CHINA’S ongoing trade war with the US has once again hit the two countries’ energy trade, with new data from the Census Bureau showing that US did not export any crude oil to China in October.
The disruption in purchases comes even as China’s upstream efforts in Iran step up a notch, with new drilling planned for one of the Middle Eastern country’s major oilfields.
In 2018, China was the third largest buyer of US oil, accounting for 11% of total exports or $5.4bn. In the year to date, China has purchased 5.2% of US oil exports. While oil trade stopped in January, it had been flowing from February through to the end of September.
The cessation of imports comes as the two sides strive to complete a partial deal ahead of a December 15 deadline set by US President Don- ald Trump, at which point the US will impose tariffs on all outstanding Chinese imports. Trump has repeatedly said he is in no rush to sign a deal with Beijing and has even suggested
that he is happy to wait until after US presidential elections in 2020.
While the two sides strive to find a mid- dle ground and reach a “phase one” trade deal, which Trump has said will address US concerns over intellectual property (IP) and financial services, China is stepping up ist development efforts in another target of US ire – Iran.
Iran’s Petroleum Engineering and Develop- ment Co. (PEDEC) recently announced that five development wells and one appraisal well would be spudded as part of a second phase of development at the China National Petroleum Corp. (CNPC) operated North Azadegan field. The field is currently producing around 80,000 bpd, but the second phase is expected to this to 100,000 bpd.
Moreover, reports have emerged that China is in the running for the contracts for the South Pars and South Azadegan after Tehran stripped the company of the fields after it delayed devel- opment efforts.™
Gazprom to study Mongolian pipeline
PIPELINES & TRANSPORT
RUSSIA’S Gazprom plans to undertake a study on the construction of a gas pipeline through Mongolia to China, it revealed ear- lier this month.
On December 2, the state gas exporter hailed the launch of the 38bn cubic metre per year Power of Siberia – the first ever gas pipe- line between Russia and China. Shipments are expected to slowly work up to full capac- ity by 2025. But in the meantime, Gazprom is devising a plan to reach Chinese consumers via Mongolia.
Gazprom head Alexei Miller signed a mem- orandum of understanding (MoU) on Decem- ber 5 with Mongolian Deputy PM Ulziisaikhan Enkhtuvshin on a joint feasibility assessment of the project. The document was signed following talks between Russian and Mongolian officials in Moscow and then Sochi.
“We are pleased that Russia supports the pro- ject to build a gas pipeline from Russia to China across Mongolia,” Mongolian PM Ukhnaagiin Khurelsukh said on December 3 in a meeting with Russian counterpart Dmitry Medvedev, according to a message on the Russian govern- ment’s website. “I believe this project has been effectively launched today.”
China and Russia have held on-and-off dis- cussions on developing a gas route through Mongolia for years, without the plan making much progress. But the project now appears to be finally gaining traction. In September,
Russian President Vladimir Putin ordered Gazprom’s Miller to evaluate options for its con- struction, noting that the plan enjoyed support from Beijing.
Russia’s original preference for a pipeline to China was via its southern Altai region, where the two countries share a border of less than 100 km in between eastern Kazakhstan and west- ern Mongolia. China instead backed an eastern route, which became Power of Siberia, agreeing a $400bn, 30-year gas supply deal with Russia in 2014 to underpin its development.
Russia likely would still favour the Altai route to a Mongolian channel, given its shorter length to the Chinese border. But Beijing is cold on the idea, given the thousands of kilo- metres of pipeline it would need to build to pump gas from its northwestern regions to demand centres in its east.
In any case, Gazprom would be able to use spare production capacity in Western Siberia to fill either the Altai or the Mongolian pipeline. This capacity is at fields which primary supply the European market. In contrast, Gazprom had to develop completely new fields in Eastern Siberia to provide the gas for Power of Siberia, driving up costs.
One of the main disadvantages of a Mongo- lian route, as far as Russia is concerned, is transit risks. Gazprom is well aware of the problems that can arise from relying on a third country to tran- sit its gas from its experience in Ukraine.™
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