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New Pipeline Doubles Russian Oil Supply To China

Pipeline

An extension of the East Siberia-Pacific Ocean oil pipeline between Russia and China started operating on January 1, doubling the export volumes from 15 to 30 million tons annually, or almost 220 million barrels, Xinhua reports. The agency noted that the extension, agreed in 2013, would serve China’s Belt and Road initiative for expanding China’s regional influence in Asia.

At the same time, it will increase Russia’s market share in the world’s top consumer as China last year gobbled up more crude than the United States for the first time, posting record import figures as well, despite a much-publicized drive away from fossil fuels. The pipeline, which initially ran from the East Siberian town of Skovorodino to Mohe, a town on the Russian-Chinese border, was extended into China, to the city of Daqing in northeastern China.

Rosneft is the supplier of the crude via the ESPO pipeline, and PetroChina is the buyer. The oil will be processed at three refineries in the Northeast of China. Back in September, Reuters reported, citing refinery sources, that one of these was undergoing a capacity expansion upgrade that cost US$880 million. The upgrade should increase its capacity to 400,000 bpd by the end of this year.

Russia last year became China’s biggest oil supplier, holding the crown for nine consecutive months based on the latest data, released in the last week of December. In November, Russian crude exports to China totaled 5.12 million tons, or about 1.25 million barrels daily. That was 11 percent more than in November 2016. At the same time, Saudi imports fell by 7.8 percent in November, to 1.056 million bpd.

Higher imports have been necessitated not just by growing energy demand in China but also by falling production from mature field, many of them in northeastern China. But Russia is not the only one eating Saudi Arabia’s market share in the world’s top importer: the U.S. has been exporting crude at unprecedented rates. Last year, the average U.S. oil shipments to China stood at 180,000 bpd for January to September alone.

By Irina Slav for Oilprice.com

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  • petergrt on January 02 2018 said:
    How long will the Saudis tolerate seeing their lunch being eaten by others . . . . .?

    They will soon find out that recouping the market share ain't going to be that easy - without a price war.

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