Sinopec buys from Africa to cut Middle East imports
Monday, September 4, 2006, 09:36
China Petroleum & Chemical Corp., the nation's biggest refiner, and Japan's Nippon Oil Corp. are importing more oil from Africa and Russia as Asian nations try to reduce their dependence on Middle East crude. „Winston Churchill said energy security lies in diversity, and that very much applies today,” said Anthony Nunan, an oil trader in Tokyo at Mitsubishi Corp., Japan's largest trading company. „Refiners want to diversify as much as they can, and they are doing it very seriously now.” Angola has overtaken Saudi Arabia as China's largest supplier this year, and Japanese refiners have started buying crude from Russia's Far East. Refined oil from Africa and Russia typically yields more gasoline and diesel than Middle East supplies, making them more attractive in Asia, the world's fastest-growing automobile market. The trend will benefit companies drilling in Africa and the former Soviet Union, including Exxon Mobil Corp., BP Plc, Total SA and OAO Lukoil. They've largely been excluded from production in Saudi Arabia and other countries in the Middle East, source of one-third of the world's oil, where state-owned monopolies control the industry. The topic of diverse oil supplies will be discussed at the annual Asia-Pacific Petroleum Conference in Singapore this week.
About a fifth of the world's oil consumption, or about 17 million barrels a day, flows through the Strait of Hormuz, the 21-mile wide waterway between Iran and Oman, which separates the Persian Gulf from the rest of the world. Iran's refusal last week to accept a United Nations demand to stop nuclear research has raised concern that supply may be disrupted from the region. The United Nations may decide to impose economic sanctions against Iran. China Petroleum, or Sinopec, Indian Oil Corp., South Korea's SK Corp. and Nippon Oil are among Asian refiners that have bought new grades of crude oil for the first time this year. Most spare oil production in the Middle East is so-called sour crude, which has a high sulfur content and produces less gasoline. „Refiners in Asia are trying to produce more transportation fuels because of rising demand and they want to get their hands on the best quality crude,” said Sean Yun, an oil trader at Ssangyong Pte in Singapore. „In the Middle East, geopolitics and the current nuclear issue concerning Iran will linger on for a long time despite the pressure from the UN.”
China's imports from Africa, Kazakhstan, Russia and Venezuela this year have lowered the market share of Persian Gulf producers such as Saudi Arabia, Oman and Yemen in the world's second-largest energy market. Shipments from the Persian Gulf to China rose 5.8% to 33.1 million metric tons in the H1 of this year. In the same period, imports from Africa rose 22% to 23.4 million tons, according to customs data. Angola, sub-Saharan Africa's second-largest oil producer, shipped 15 million tons of crude oil to China in the first seven months of the year, 13% more than Saudi Arabia. „More and more people are coming to talk to us,” said Oscar Brito, a senior trader at the Singapore office of Angola's state oil and gas company, Sonangol SA. Angola exported 52% of its oil production to Asian countries including China, Taiwan and South Korea in the Q2 of the year, up from 46% in the same period of 2005, according to Sonangol. This year, Sinopec imported its first cargo of Mauritania's Chinguetti crude, which started output in February. The refiner also bought its first cargo of Azerbaijan's Azeri Light and Venezuela's Hamaca Blend.
Chinguetti is produced by a group led by Australia's Woodside Petroleum Ltd., while Azeri Light is pumped by a venture headed by London-based BP, Europe's second-largest oil company. BP's predecessor, British Petroleum, was born before World War I as a state company called Anglo-Persian Oil, which held a monopoly on exploration in what is now Iran. Churchill, serving as First Lord of the Admiralty, oversaw the Royal Navy's switch to oil-fired vessels and sought increased energy supplies. Japan, Asia's biggest crude oil buyer, which relies on the Middle East for 90 percent of its oil needs, has started to take crude from Russia's Sakhalin island. Last month, Nippon Oil, Japan's biggest refiner, bought crude oil from the $13 billion Sakhalin-1 oil and natural gas project led by Exxon Mobil for the first time. The refiner bought 700,000 barrels of light, low-sulfur Sokol grade oil, the company said in a statement on Aug. 23. The cargo is scheduled to arrive at Kagoshima, in southern Japan, in October.
Indian Oil, the country's biggest oil-refiner, bought Angola's Girassol crude from Sonangol SA for the first time, according to Bloomberg data. The grade is produced at a field operated by Paris-based Total. Indian Oil has also bought Nigeria's Erha crude this year. Hindustan Petroleum Corp. and Bharat Petroleum Corp. have purchased Azeri Light and Erha. „In the long run, you don't want to put your eggs in one basket,” said Sumita Roy, general manager for international trading at Bharat in Mumbai. „There's a need to diversify to avoid” supply disruptions. (Bloomberg)