I don't think it's the same as owning oil in the ground.ROCKMAN wrote:“You seem to be assuming that there is an agreement that the JV refinery will get SA oil below market prices and sell product to China below market prices.” Actually just the opposite. I expect the oil and the refined products to be priced based on some global benchmark. I assume China is making the investment for the sake of control and not to get the oil/products at a discount and may actually be paying a premium based on their capex investment.
And yes: producing more product internally will reduce demand elsewhere in the market place. But some folks keep ignoring the key issue I keep repeating: it’s a matter of controlling the oil/products. The 4+ billion bbls of oil run through that refinery for the next 30 years or so won’t be available to any other buyer. That may seem so important today. But in 15 or so years when perhaps the KSA is exporting much less than today? Same issue with the oil China owns in the ground in Angola.
I was considering a 100% Chinese owned plant. I don't see how that gives them a "lock", regardless of where it is located (unless there is some kind of deal to guarantee them supplies).ROCKMAN wrote:"I don't think it's the same as owning oil in the ground." No...it isn't. Better IMHO: they have a lock on billions of bbls of oil without having the risk of exploration drilling. The fact that the KSA owns half the plant gives them great motivation to see it's supplied over plants owned by anyone else.
I think this is just a repeat of what China & Korea have done in auto, electronics, shipbuilding and other industries. It is more about getting into the refining industry (and refinery construction) than controlling oil or products.ROCKMAN wrote:So again it isn't about production rates or who ends up with the refined products. It's all about who determines where exportable oil goes. And the increase in internal refining capacity of the oil exporters removes oil from the open market. The open market where every oil importing country competes with ever other oil importer. And will also have to compete with the refineries in the oil exporting countries. The same demand for oil imports with a decreasing volume available is not an optimistic view of the future. In the end would product consumers be better off buying from a refinery in their own country or a refinery in foreign country? Time will tell. At the very least the refineries in those importing countries could be facing extinction. Not a bad development from the view point of an oil exporter with abundant refining capacity: in general decreasing capacity for producing a commodity doesn't tend to lower prices.
Re: Refinery shortage - ICF
by seahorse » 2005-09-28, 16:57:31
In the news today was an article that Saudi Arabia plans to build 10 new refineries operational in 2011. Please note would not appear to alter the view of ICF that there will be a refinery capacity crunch at least through 2010, and possibly out to 2020. ICF says we need another 9 mbpd in refinery capacity by 2010. The problem is these projects will not be operational until 2011 and will only add another 2.4mbpd in capacity, when we need 9 mbpd more by 2011.
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