ASIAN OIL UPHEAVAL
Asia's oil markets are being upended as India's and China's refiners overtake once-dominant buyers like Japan and challenge the United States as the world's biggest consumer.
The shifts are not only establishing new trade routes but are also challenging the way oil is priced in the region as the new players push for more cash cargoes and fewer long-term deals.
China and India's combined share of world oil consumption has tripled since 1990 to over 16 percent, nearing the U.S. share of roughly 20 percent, cementing their status as the main center of global demand growth.
"Asian oil markets are in a tremendous period of flux," said Owain Johnson, managing director of Dubai Mercantile Exchange (DME).
By 2040, China and India could double their share again to a third, analysts say.
One of Asia's rising traders is Indian Oil Corp, which operates 11 refineries with a combined capacity of 80.7 million tonnes a year (1.9 million barrels per day), a third of India's capacity and roughly the same size as Exxon's U.S. refining base.
"Spot crude (trading) gives more flexibility and more variety is available. Last year we raised spot purchases and for this year we are working out a strategy," said its head of finance A. K. Sharma.
The changes come at the expense of western majors, with Shell complaining in December that aggressive trading, conducted by Chinese companies, meant Asian crude prices didn't properly reflect the market.
"Chinese oil companies have become the new power houses in oil trading," said Oystein Berentsen, managing director of crude at Strong Petroleum in Singapore.
Previously, Asia's largest oil buyers from Japan - which once accounted for about 10 percent of global demand - stuck with long-term contracts.
Now, as China and India take the lead, a growing share of trading is done on a spot basis as buyers prioritize cost and delivery flexibility over fixed shipment schedules.
Moreover, thanks to the hefty volumes, the new buyers are able to extract favourable prices. China and India's combined daily net crude imports exceed 10 million barrels, or some 3 million bpd more than top importer the United States.
The new buyers are also bringing new characteristics to the marketplace.
"Indians are more flexible than many of their Asian peers, buying up distressed or stranded cargoes when there's a profitable opportunity," said Ivan Szpakowski, head of Asia commodity research at Citigroup.
"India will become the biggest source of oil consumption growth. Its geography also changes trade flows. If you look at a map, the Middle East is much closer to India than to Japan or China and such shipments are effectively short-haul."
In China, state-owned oil giants have been joined by nearly 20 independent refiners which have been granted import licenses and exclusively buy spot supplies.
Their arrival is changing trade flows through their preference for cheaply-delivered Russian crudes which has helped Russia challenge the Middle East as China's biggest supplier.
NEW OIL PRICING?
Not all is smooth sailing. Richard Gorry, director of JBC Energy Asia, said the rise of these traders is causing "teething problems" as they make their first deals with highly regulated international companies.
In January, a crude cargo sold to an independent Chinese refiner by western merchants Vitol and Mercuria had to be resold after the firm failed to secure financing, while this month another private Chinese company walked away from a deal to buy $680 million of Russian oil, citing "changes in the market" as a reason.
China's national oil firms are also challenging Asia's leading price benchmark, the Dubai Market-on-Close (MoC) by Platts, used to price more than 12 million bpd of crude to Asia, by frequently sweeping up almost all available cargoes, preventing other traders from participating in the pricing process.
To avoid further squeezes, Platts made more crude available in its MoC, and Dave Ernsberger, head of global oil content at Platts, a subsidiary of McGraw Hill Financial, said it "absolutely makes sense" for China to take "a much more pre-eminent role in price discovery."
Still, challengers are circling.
"The old system is no more and the creation of new systems and patterns of behaviours has begun," said Jorge Montepeque, who set up the MoC system for Platts in the 1990s and is now an independent consultant.
Keen to play a bigger part in price creation, China plans to launch Shanghai crude futures.
Other exchanges are also looking to capitalize on the change.
"China is obviously keen to have an ever greater say in pricing. At the same time, Iran is returning to the market. Firms across Asia are looking at new ways of doing business and legacy arrangements are all under review," DME's Johnson said.
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International benchmark Brent crude futures were at $56.51 a barrel at 0644 GMT, up 8 cents, or 0.14 percent, from their last close. U.S. West Texas Intermediate (WTI) crude futures were up 12 cents, or 0.24 percent, at $50.67 per barrel.
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Александр Новак отметил, что Россия занимает лидирующие позиции в мире в области топливно-энергетического комплекса, в частности, первое место по добыче нефти, второе место по добыче газа. «При этом Россия - номер один по экспорту газа. Мы добываем 670 млрд кубических метров газа, из них 220 млрд поставляем в другие страны различными способами – трубопроводным и сжиженным», - подчеркнул Министр.
Кирилл Молодцов также сообщил о применении новых технологий в сфере нефтегазодобычи. «Из общего количества технологий, а их насчитывается примерно 600, более 300 производятся в России. Более двухсот имеют российские наработки и аналоги, то есть практически имеют стадию разработки проекта. Есть технологии, которые нас сильно волнуют, и мы будем развивать их дальше. Это абсолютно автономные системы добычи, окончание морских месторождений, забуривание, возможности создания и развития проектов в Арктике», - заключил Кирилл Молодцов.