[ROCKMAN]

As pointed out above there are good reasons for a major consumer of refinery products to export the same. First is the obvious profit motive: if one has excess refining capacity, as does the US, it strengthens a country's critical industry. Second, more important IMHO, it allows a country to tie up future resources. Today it makes sense for China to sell products to other countries for the sake of revenue. But the day will eventually come when the demand for the products refined in the KSA (a guaranteed source for that refinery) will be shipped to China when it exercises its right of first refusal.

Reuters - Chinese oil giant Sinopec will target Europe and East Africa for diesel shipments from its new joint venture refinery in Saudi Arabia, in a major expansion of its trading presence beyond Asia. The 400,000 barrels-per-day (bpd) refinery in Yanbu that Sinopec jointly owns with Saudi Aramco started trial runs this month, with the first clean diesel cargo due in the first quarter of next year, three people with knowledge of the matter told Reuters. The state-owned refinery hasn't previously detailed its plans for its 37.5 percent share of output from the mega refinery, the second to start up in Saudi Arabia in the past two years, which will make it a significant exporter of diesel. Sinopec has already been tapping markets within Asia to sell excess diesel following growth in Chinese refining capacity and slowing domestic demand for the industrial and transport fuel due to a weaker economy. The Yanbu Aramco Sinopec Refining Co refinery is also starting operations at a time when a global oil supply glut has depressed margins at refiners in Europe and Asia, with Asian diesel margins slipping to a three-and-a-half year low in June.

[ROCKMAN]

Apparently having control of huge oil reserves doesn't guarantee increased production if that control isn't balanced with the interest of investors needed to develop those resources. The Brazilian govt is now learning what the Venezuelan govt learned long ago:

Reuters - Investors are losing interest in Brazil's oil industry as the country's energy policies raise costs, reduce efficiency and increase risk, Brazil's oil industry association, the IBP, said on Monday. Without changes Brazil will likely lose out to places such as Mexico, Iran, Iraq and Algeria where policies are becoming more open to private sector investment.

"I went to the three largest oil conventions in the world this year and you hardly heard Brazil's name mentioned," Milton Costa Filho, Executive Secretary of the IBP told reporters at an industry event in Rio de Janeiro. "Brazil is falling off the world oil map." "That wasn't the case a few years ago," he said. "But investors have other options now" including rising shale oil output in the United States and Arctic oil prospects in Russia and Norway.

The IBP announced its agenda of priorities for 2014-2015, asking the government to review policies that have strengthened state-control over the oil industry, policies it believes are hurting a sector that accounts for 12 percent of the gross domestic product of Brazil, the world's seventh largest economy. Since those policies were adopted in 2008 in the wake of offshore oil strikes, Brazilian oil and natural gas output has stagnated, despite more than $200 billion of investment.

IBP President Joao de Luca asked the government to allow state-run oil company Petroleo Brasileiro SA to charge world prices for gasoline and diesel fuel in Brazil to stem losses on fuel imports of as much as $34 billion in recent years.

[ROCKMAN]

This seemed rather inevitable from the start IMHO. Of course Baghdad could sue China. That should only take several decades to work out. And then there are the oil field contracts China has with Baghdad. There question there is who needs who the most:

Reuters - At least 3 million barrels of Iraqi Kurdish oil are on ships heading to Asia, with trade sources naming China as a possible destination as the autonomous region expands efforts to establish independent oil sales in defiance of Baghdad. Two sources with knowledge of the matter said Iraqi Kurdistan was in talks to potentially supply China with 4 million barrels of oil.

A deal could place Beijing on a collision course with Baghdad, one of its major crude oil suppliers, which has tried to block the Kurdish sales that it says are illegal. The Kurdistan Regional Government (KRG) argues they are allowed under the Iraqi constitution. "The Kurds are in the process of negotiations with the Chinese," said one of the sources, who asked not to be identified due to the sensitivity of the matter. "China is buying up multiple origins of oil. So, there is not an issue from that side," the source added. "It will come down to price."

Since May, Iraqi Kurdistan has shipped over 11 million barrels of crude from the Turkish port of Ceyhan. The Kurdish sales have been shrouded in mystery, and the KRG has declined to say who is helping it arrange the deals. Trading sources said they may have to discount the oil to attract buyers in a well-supplied market.

[ROCKMAN]

And notice the carefully chosen wording from RigZone: “Energy”…not “Oil”:

Unconventional Oil, Gas to Lift US Energy Exports: The rapid rise in U.S. unconventional oil and natural gas production will help boost U.S. energy exports by around 5 percent per year through 2030, according to the September 2014 U.S. HSBC Global Connections Trade Forecast. Emerging markets that don’t have refining capabilities or don’t dispose of energy reserves could represent a major opportunity for U.S. energy exporters.

Chemical plant expansions and LNG terminal upgrades, coupled with the opening of Mexico’s energy industry to foreign investment, are expected to result in a new export boom for Houston and to create over 55,000 new jobs. The massive investment in chemical plants and LNG export terminals has fed a second boom as Houston’s engineering, construction and fabrication firms design and construct these plants.

{The Rockman lives right across the highway from the big ExxonMobil refinery which is gearing up to add 5,000 new construction jobs. Been watching them do site prep for a few months now}

[Graeme]

Study finds US refining sector could produce higher octane E20 and E30 at modest additional cost; enabling more efficient engines

A number of studies recently have pointed out that increasing the octane rating of the US gasoline pool (currently ∼93 Research Octane Number (RON)) would enable higher engine efficiency for light-duty vehicles through reducing engine knock constraints, thereby enabling the design of new spark-ignition engines with higher compression ratios and boost levels. (Earlier post.) Such a move would also have significant implications for refineries in the US refining sector, whether the higher octane was achieved via more severe refining operations, increased use of ethanol, or both.

A linear programming analysis of US refining sector by a team from MathPro Inc., Ford, GM and Chrysler has found that, by increasing the volume of ethanol, the refining sector could produce hydrocarbon blendstocks for oxygenate blending (BOBs) yielding finished E20 and E30 gasolines with higher octane ratings at modest additional refining cost (ARC): e.g., ∼1¢/gal for 95-RON E20 or 97-RON E30; 3–5¢/gal for 95-RON E10, 98-RON E20, or 100-RON E30; and 96-RON E10, 99-RON E20, or 101-RON E30 gasoline pools at approximately 10¢/gal.

Achieving higher octane ratings for finished gasoline incurs progressively higher investment and ARC. The price of ethanol relative to gasoline and crude oil were key determinants of the relative costs of the various finished fuels.

The study also found that reduced BOB volume (from displacement by ethanol) and lower BOB octane could (i) lower refinery CO2 emissions (e.g., ∼ 3% for 98-RON E20, ∼ 10% for 100-RON E30) and (ii) reduce crude oil use (e.g., ∼ 3% for 98-RON E20, ∼ 8% for 100-RON E30).

greencarcongress

[JimBof]

A number of cars in Australia now require 95 or 98 octane fuel as against the base of 91. More manufacturers are mandating this for their engines each year.

[ROCKMAN]

This story does a good job of explaining why I created the thread. The current dynamic goes far beyond who is producing how much hydrocarbon. We have a very broad system with a complex connectivity.

Reuters - To capitalize on a flood of domestic and Canadian crude into the U.S. Gulf Coast, logistics giant Kinder Morgan Energy Partners is spending more than $1.5 billion in Houston to build the most flexible oil and fuel transport hub in the country. The company's expanding infrastructure smorgasbord includes a bit of almost everything at the increasingly crowded Houston Ship Channel - all next door to the biggest concentration of refiners in the country. The buildout, executives say, responds to the increasingly dynamic world of physical crude trading in North America, where the variety of available crudes is growing, and is aimed at securing their central position in moving oil from the U.S. shale boom to market. Customers want multiple options to switch delivery modes on a dime and snag the best price for refinery feedstocks. They need more dock and storage space to handle surging volumes of fuel being shipped overseas. "More of them are producing more than they can consume in the United States. So they want to take it to water, either for movement up and down the coast ... or to export because you see a tremendous amount of growth," John Schlosser, president of Kinder Morgan's terminal division, said of refiners.

Kinder's latest push is to add storage and pipeline connections to final domestic destinations, a huge oil-by-rail offloading operation, and a wider export platform. The company recently acquired U.S.-flagged tankers that can move crude and products between domestic ports as required under the Jones Act. Docking space it added opens customer opportunities to export refined products and coal internationally. Kinder's spending in Houston is a piece of hundreds of millions of dollars in pipeline, storage, distribution and ship berthing investments being made across the Gulf Coast in the oil and chemicals industries. Those include Enterprise Products Partners' and Enbridge Inc's $2 billion expansion of the Seaway Oklahoma-to-Texas crude oil pipeline, Oiltanking Partners LP's $340 million oil storage expansion in Beaumont and Magellan Midstream Partners' $1 billion BridgeTex pipeline joint venture with Occidental Petroleum Corp.

"It's about creating a nimble and adaptable infrastructure. When everything is in flux and in constant change you have to have the ability to be flexible, to adapt to new streams and to new requirements," Javier del Olmo, Oiltanking's vice president of engineering, recently told analysts. Enterprise also is expanding its Enterprise Crude Oil Houston (ECHO) storage and distribution complex in south Houston with connections to southeast Texas refineries that provide a fifth of U.S. refining capacity. "Ultimately the barrels are going to have to clear the market, and (Enterprise's) vision is to build the most comprehensive distribution system on the Gulf Coast," he said.

U.S. crude production averaged 8.6 million bopd in August, up 72 percent from 2008. "The impetus is on us to find places to put it," Enterprise's Secrest said. Kinder is widening its crude handling, with a major 300,000- bpd crude and condensate pipeline stretching from the Eagle Ford shale to Houston, as well as a 210,000-bpd oil-by-rail joint venture with privately held short-line railroad operator Watco Companies that started up this summer. Some of that condensate, a very light form of crude oil that makes up about half of the Eagle Ford's output, will feed a 50,000-bpd condensate splitter Kinder aims to start up in November and a second one next year to double that output. Splitters perform more complicated processes than oilfield condensate stabilizers that remove natural gas liquids from crude, but are more simple than a refinery. It "splits" condensate into naphtha, a element of gasoline, diesel, jet fuels and other petroleum components that BP Plc will buy and then sell.

Kinder is also adding docks and pipelines to its two major complexes in Galena Park and Pasadena along the ship channel, including a coal and petroleum coke export facility. And this year's $962 million acquisition of American Petroleum Tankers and State Class Tankers brought U.S.-flagged oil shipping in house, another option requested by customers. "The reality is, (customers) don't know where their markets are going to be tomorrow, or 10 years from now, or even two years from now," Schlosser said. "They want to know that they can go to A, B, C, D or E, depending on what makes the most sense."

[ROCKMAN]

Thank Dog: it's about time the oil producer lobbyists are finally able to outbid the refinery lobbyists for our local politicians. The refiners having grabbing a lot of the producers' profit by low balling oil prices while shipping about a billion bbls of refined products over seas yearly. Either way the US consumer gets screwed but that ain't the Rockman's problem: getting a higher price for his oil is the goal.

Reuters - In the oil drilling and refining heartland of Texas, the debate over U.S. crude exports is no longer a fight over whether a 40-year ban should be lifted. The question now is how soon it will end. As Washington mulls reversing the ban amid a drilling boom that has swamped the U.S. Gulf Coast in oil, Texan lawmakers are already preparing for the prospect of crude oil exports from the state's major ports, and assessing what it means for constituents. Even representatives of districts that include large oil refineries, the owners of which have expressed strong opposition to exports for fear it would increase the price of crude, told Reuters that they would support the shipment of oil overseas. Their views represent a shift in the national discussion over crude exports in which elected officials increasingly acknowledge the likelihood that some of the United States' abundant reserves of oil will eventually find its way overseas for the first time since the 1970s. Already this year, the U.S. government has issued licenses to allow two companies to export ultra light crude oil known as condensate.

At stake is not just the state of the U.S. market where growing volumes of oil are logjammed without an outlet. Supporters of exports also see it as a powerful political tool abroad as Europe seeks greater independence from Russian energy and violence spreads across the Middle East. "The decades old ban on crude oil exports is no longer justified given the current market conditions," said Representative Michael McCaul, the Republican who in April introduced the Crude Oil Export Act which proposes an end to oil export limits. "Lifting the ban will also give America a new foreign policy tool to provide greater stability in the world oil market." Alongside McCaul, a growing chorus of Texas representatives say that a middle ground can be met between refiners who wish to maintain profits by limiting exports, and producers who favor unlimited markets for their crude

[ROCKMAN]

Again, one more crack in the myth that the US has a "ban on oil exports":

Reuters - The Suezmax Polar Discovery loaded at the Valdez terminal in Alaska late last week and was due to arrive next week in Yeosu, South Korea, according to shipping data available on Thomson Reuters Eikon. South Korea's second-biggest refiner GS Caltex Corp will receive 800,000 barrels of Alaskan crude on October 10 after purchasing the oil on the spot market, a company source told Reuters. It was the first exported cargo of Alaska North Slope (ANS) crude, which is largely excluded from a 40-year U.S. ban on oil exports, since 2004. A spokesman for ConocoPhillips, one of the major producers of Alaskan crude, said the company had sold a cargo of ANS to Asia, but did not reveal terms of the deal or confirm if it was the Polar Discovery. The sale would "enable the state of Alaska and ConocoPhillips to potentially realize a higher value" for the oil, spokesman Daren Beaudo said.

"I am encouraged to see Alaska increasing its participation in global oil markets," said Republican Senator Lisa Murkowski of Alaska, The source at GS Caltex, a joint venture between GS Holdings and Chevron Corp, said the refiner bought the crude at competitive prices but did not elaborate. Bids for the crude from Asian customers were higher than those from U.S. West Coast customers, Genscape, an industry group that first reported the shipment, quoted an unnamed Conoco official as saying."

{Makes me wonder where the refiners in Washington state (which produces no oil itself) will find an alternative source. Maybe a few more trains from Alberta can fill the gap.}

[Synapsid]

ROCKMAN,

You're doing it again.

Washington refineries have been happily taking more of the Alberta crude from TransMountain's pipeline as well as Bakken crude by rail. I seem to recall that the Alaska stuff has been less of a priority than it used to be. No moss growing on those refineries, no sir.

By the way, gasoline has mostly been above $4/gal here for months. The past couple of weeks I have seen some prices in the $3.80s. I rarely buy the stuff, myself. Three gallons every month and a half, maybe.

There.

[ROCKMAN]

"No moss growing on those refineries, no sir." I know...I just wanted you to tell the world how you state is refining the "dirtiest oil on the planet". LOL. I'm sure your governor's crotch must be getting a tad raw by straddling that environmental fence.

[Synapsid]

ROCKMAN,

Oh, I'm sure everyone who reads the site knows about the refinery complex up near the Canadian border. You're the most assiduous advertising campaign for it, you know, and widely read here and I expect up there at Anacortes and Cherry Point and Ferndale, too.

Pretty country, by the way.

[ROCKMAN]

Syn - You're welcome. I figure folks deserve to get the credit for their efforts to maintain BAU with regards to energy consumption. Both Texas and Washington state are linked arm in arm going down the PO path. LOL.

[ROCKMAN]

Just a note for those folks who think "nationalizing" (i.e. stealing) a foreign company's assets is a big win. Besides Venezuela now agreeing to pay ExxonMobil $900 million in addition to the $908 million already paid. Also the project wasn't completed and Vz missed out on increased exports coincident with record high oil prices. Vz was also getting a 17 month low oil price last August at $90/bbl. And now prices has slipped further: for every $1/bbl decrease the Vz gov't loses $1 billion per year. One of the govt's response: printing money. Which has led to 50%+ inflation and the subsequent decrease in the exchange rate which increased the price of imports. Despite the huge oil export income Vz has a significant and growing trade imbalance.

Reuters - Venezuela will end up paying almost $1 billion to Exxon Mobil Corp for oil assets nationalized in 2007, after this week's World Bank tribunal award, the Venezuelan government said on Friday. Venezuela will deduct a previous award made against it by another international tribunal, the Paris-based International Chamber of Commerce (ICC), from Thursday's $1.6 billion ruling by the World Bank's ICSID body said Ramirez, who until a cabinet reshuffle several weeks ago, was head of the oil ministry and state oil company PDVSA. A senior PDVSA source told Reuters on Thursday that the company would pay the compensation ordered. Exxon received $908 million from PDVSA in 2012 after a separate decision by the ICC over the same claim. "We're ready. We have no problem finishing up this determination and closing this chapter that became a menace to the economy of our nation," Ramirez added at a news conference. The case relates to the 2007 takeover of a large heavy crude project in the Orinoco region by then president Hugo Chavez's socialist government.

[ROCKMAN]

So the west imposes sanctions on Russia but the Russians are dependent upon oil/NG exports to run their economy. What are they to do? Hmm…seems they have figured out what to do. And began doing it about the same time they began their move on Crimea. It’s almost as if they knew how the west would react:

Reuters – Russia is diverting more of its crude oil east with deliveries to China hitting a new record last month at the expense of Europe as geopolitical tensions between Moscow and the West dictate the latest shift in flows. As Russia's relations with the West deteriorated over the Ukraine crisis, the European Union and United States imposed wide-ranging sanctions on Russian firms, including oil and gas producers, leaving Moscow trying to forge closer ties with energy-hungry China. Russia's energy ministry says crude oil supplies to China surged in January-September by almost 45 percent year-on-year, to 450,000 bopd, while shipments from the Baltic Sea port of Primorsk plunged almost 20%. Oil product exports to Europe have been rising and plans for state-owned monopoly Transneft to use crude oil pipelines for exports of diesel show the trend will likely continue. The decline in Russian crude oil exports comes as increasing volumes of crude oil are being processed at domestic refineries, reaching a post-Soviet high of almost 6 million tonnes in August as plants undergo a huge $55 billion modernization programme.

Analysts say it is more profitable for Russian companies to export processed oil products, such as diesel and fuel oil rather than crude oil. The modernization of Russian refineries has already eaten into the margins of European plants, as oil product exports from Russia to Europe have surged. After Russian President Vladimir Putin inaugurated Russia's first oil terminal in Primorsk in 2001, Russia steadily increased crude oil exports, the windfall from which has shaped Russia's economy. However, the trend reversed in 2011 due to shortages of fuel on the domestic market, when authorities encouraged companies to process crude oil. Exports of oil products doubled in 2003-2011. Oil products are more profitable to export from Russia than crude oil.

Russia supplies around 16 percent of its crude exports to Asia, and by 2035 aims to double that share to a third, despite the fact that it faces a lack of pipeline capacity. "By diverting crude to Asia and cutting exports of straight-run fuel oil and vacuum gasoil, Russia will deprive European refiners of feedstock. By exporting growing amounts of ultra low-sulphur diesel, Russia will hammer refining margins (in Europe). To boost flows to Asia, Russia has sped up plans to expand East Siberia-Pacific Ocean annual capacity to 1.6 million bopd by 2020, 10 years earlier than initially envisioned.

[ROCKMAN]

The complexity of the dynamics just can't be honed down to fit a bumper sticker. Volumetrically not a huge deal but does jump up and slaps your face when first reading the headline: VENEZUELA TO IMPORT RUSSIAN OIL

Reuters - Venezuela's state oil company PDVSA bought two cargoes of Russian Urals light crude from a unit of Petrochina to be delivered starting in early November to the Isla refinery in Curacao, traders told Reuters on Friday. The 1-million-barrel cargoes will be the second crude import made by the OPEC member since signing a supply contract with Algeria's state-run Sonatrach to buy Saharan blend light crude that will start this month to be used as a diluent for Venezuela's extra heavy crude production. "The Russian crude will be refined at Isla, mainly to produce lubricants, but there is not a signed supply contract, so PDVSA could buy other grades in the future," one of the sources said. Amidst declining oil production and exports, PDVSA is running out of light crudes to use as diluents for its extra heavy output from the Orinoco belt, its main producing region

With the world's largest crude reserves, Venezuelan's imports of oil are highly controversial. PDVSA is trying to cut costs by replacing naphtha purchases made on the open market with light crudes, while formulating better quality blends that could be sold at higher prices. The 335,000 barrel per day Isla refinery on the Caribbean island of Curacao is a facility rented and operated by PDVSA that has been working well below its capacity in recent years because of a lack of power and other services. Those problems are being addressed this year.

The price of Venezuela's oil basket fell $5.07 per barrel this week to $77.65, causing concern in the country where 96 percent of its revenue comes from petroleum exports. But PDVSA's president said this week its production costs are still "competitive.". Venezuela's first ever import of crude is scheduled to arrive Oct. 26 to the Jose terminal, coming from the Algerian port of Bejaia. The crude will be mixed with extra heavy oil in Venezuela, but a PDVSA source told Reuters that is possible that the company will later decide to start producing blends in the Caribbean, mainly in the Saint Eustatius terminal.

[radon1]

Just a note for those folks who think "nationalizing" (i.e. stealing) a foreign company's assets is a big win.

How about the front page story of BP effectively taking over the Iranian assets at the North Sea?

http://peakoil.com/production/bp-to-res ... ed-by-iran

[ROCKMAN]

Yep... saw that story. As I said there sanctions are one thing. But selling their asset and holding the revenue is another. Especially when you start thinking about the sales price and who gets to buy it. We'll see if the Word Court takes a difference stance given who is doing it: one thing to slap around El President on some S American country.

There is actually a system that handles situations such as this called "gas balancing": I want to sell my half of the NG and you don't. So I sell all the NG and keep 100% of the revenue. But as I produce your ownership of the remaining reserves increases. So eventually when you come into the revenue stream you might get 75% of the revenue. And if their isn't enough reserves left for the split to balance out? I pay you on some predetermined price schedule.

[Keith_McClary]

Harper’s response to the Russia-Ukraine conflict has been similar: a maximum of infantile, simplistic sabre rattling rhetoric with an absolute minimum of reflection on the historical context or even the immediate facts of the situation. This is foreign policy for the willingly – if not willfully – ignorant. We are encouraged – or perhaps enlisted is a better word – to treat facts and history with a disdain bordering on contempt. Facts, context, history and thoughtful anticipation of the consequences of our actions – all of this is for sissies and Putin apologists. The nay-sayers are all Neville Chamberlain clones.
...
And the consequences? Just how is driving Russia away from integration with Europe (which it had been seeking throughout Putin’s rein) and into the arms of the imperial Chinese in Canada’s interests? The $400 billion natural gas deal Putin signed with China – accelerated and made a certainty by NATO’s aggression – will likely kill BC’s dream of billions in LNG investment (a silver lining in my view but hardly a smart move for an “energy super-power”).
http://www.counterpunch.org/2014/10/21/ ... l-to-isis/

[ROCKMAN]

Oil prices rise...drilling increases...consumers begin consuming less...prices decline...drilling falls off...production declines...consumption increases...prices increase...drilling increases...etc. etc.

The well-known cycle. But there seems to be a new critical component to this dynamic: China. Not so much new in that China buys more oil when prices fall but their swiftness. I vividly recall the feeding frenzy that China went into back after the ’08 prices decline. Of course all buyers saw the same opportunities but being corporations (especially the pubcos) it takes time to transition. But Chinese companies (more or less controlled by the govt) aren’t so restricted. In fact it isn’t difficult to imagine the threat some Chinese managers assume if they don’t respond quickly. And then add the political dynamics of many energy exporters (especially Russia) looking more towards Asia these days.

So what got me remembering the ’08 days? - “Oil Ends Up After China Demand News”

Reuters - Brent crude oil ended up almost 1 percent on Tuesday, helped by data showing stronger-than-expected China demand and some technical price recovery after weeks of almost uninterrupted selling.
Analysts and traders cautioned, however, that global economic data, especially out of Europe, were still weak amid strong fears of oversupply in crude markets.

"Because of their deep slide over the past couple of weeks, oil prices are kind of overdone on the downside and vulnerable to turnarounds now," said Gene McGillian of Tradition Energy, an oil services advisory firm in Stamford, Connecticut. "But whether we have hit bottom or not remains a question. I would think not given the market's recent performance, the continued swoon of the European economies and the idea that we have more than ample supplies of oil sloshing around the world finding for a home."

See more at: http://www.rigzone.com/news/oil_gas/a/1 ... 8u616.dpuf