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Page added on February 29, 2016

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Peak oil in the South China Sea

Peak oil in the South China Sea thumbnail

The recent deployment of missile launchers and jet fighters on Woody Island of the Paracel islands have put the spotlight on the South China Sea (SCS).

Fig 1: The 200 mile Economic Exclusion Zone claimed by China around Woody Island and the overlapping 108 nm range of the HQ-9 SAM system. Image via ISI. [Image Sat International]   http://defense-update.com/20160218_woody_island_hq9.html

In this post, we focus on oil production around the SCS.

 Oil production (crude and NGLs)

Fig 2: Black triangles denote country peaks, the red triangle shows the SCS peak

Oil production in 2015 was down around 14% from the peak in 2001.

Fig 3: China dominates all of South China Sea’s adjoining countries

Fig 4: China’s monthly production 2013-2015

Although production in 2015 was higher than in 2013 and 2014 it seems that production in the 4th quarter will not be much different from the previous years. A 100 kb/d difference is just 1% of China’s 2015 demand of 11.2 mb/d (IEA January Oil Market Report, p 57)

Chart of the Day: No turning back for China’s oil production

21/11/2015
China’s domestic oil production likely peaked this year and is about to enter a long-term structural decline, according to Nomura.
http://www.scmp.com/business/commodities/article/1881188/chart-day-no-turning-back-chinas-oil-production

Fig 5: Production of 3 oil majors in China

Oil imports

Fig 6: Thailand was always a net oil importer

Fig 7: Indonesia became a net importer of oil in 2003

Fig 8: Vietnam is a net oil importer since 2010

Fig 9: Malaysia turned into a net oil importer in 2011

Fig 10: China’s net oil imports have been growing at appr. 360 kb/d pa (last 10 years)

All together now

Brunei, China, Indonesia, Malaysia, Phillipines, Thailand, Vietnam

Fig 11: Homework for governments dreaming of Asian Century

 Future oil production and demand

Fig 12: Oil production decline predicted in the World Energy Outlook 2015 (IEA)

Fig 13: Oil demand is expected to grow by 1.5% pa

https://www.iea.org/publications/freepublications/publication/world-energy-outlook-special-report-2015-southeast-asia-energy-outlook-2015-.html

2 years earlier, in the WEO 2013, the IEA warned of growing net oil imports in ASEAN countries.

Fig 14: ASEAN imports 75% of its oil in 2035

 http://www.worldenergyoutlook.org/southeastasiaenergyoutlook/aseanreport_presentationtopress.pdf

The IEA’s production outlooks assume of course that sufficient investments are done in the oil and gas sector to moderate natural decline in existing fields. However:

Fig 15: Asia-Pacific CAPEX decreased by 14% between Q3 2015 and Q4 2014

http://www.drillingcontractor.org/pressures-mount-as-industry-goes-deep-into-survival-mode-37357

Forecast Shows More E&P Spending Cuts Worldwide

January 2016

Fig 16: Asia-Pacific exploration & production spending is expected to drop by 21% in 2016

“Cowen & Co noted that companies used an average WTI oil price of $48.50/barrel for the survey. The annual forecast comes as the industry continues to endure the brutal consequences of an oversupplied market with oil prices now below $37/barrel.

Farther east, less spending from Petro China, Petronas and Sinopec are expected to contribute to the forecasted 21% spending drop in the Asia-Pacific region.”
http://www.epmag.com/forecast-shows-more-ep-spending-cuts-worldwide-833871

Conclusion

While the mainstream media are regularly reporting about artificial islands and militarization in the South China Sea, peaking oil production in this important region of the world and its economic impact is totally ignored. Not even the recent Australian Defence White Paper mentions, let alone deals with it. No wonder, therefore, that Australia makes itself even more vulnerable to oil supply disruptions by building yet more oil dependent infrastructure like the NorthConnex and WestConnex road tunnels in Sydney.

crudeoilpeak.info



12 Comments on "Peak oil in the South China Sea"

  1. twocats on Mon, 29th Feb 2016 11:01 pm 

    Anyone whose been following Peak Oil since people began to wonder, “Iraq? Why are we invading Iraq? They didn’t have anything to do with 9/11.” should know that it was Dick Cheney, from his time as CEO at Halliburton 1995 to 2000, who really understood, probably by 1997, that the South China Sea was a huge gigantic megalithic dud.

    This was the revelation that turned his eyes towards Iraq (which was perhaps the last great Prize left on the planet).

    So yeah, we know the South China Sea is not a huge energy play. They should probably consider themselves lucky.

  2. Nony on Tue, 1st Mar 2016 1:20 am 

    The Army calls it ‘Asia’ but I call it ‘freaky-dreaky sex land’.

  3. makati1 on Tue, 1st Mar 2016 2:51 am 

    Lots of pretty graphs signifying … nothing.

  4. makati1 on Tue, 1st Mar 2016 2:52 am 

    Nony, you would fit right in. LOL

  5. Davy on Tue, 1st Mar 2016 4:21 am 

    Asia is crashing from peak everything combined with peak population. China is the canary in the coal mine for Asia. Tell me how 4.4BIL people are going to make other arrangements once decay and decline pick up the pace? They are going to see the worst primarily from overpopulation. Everywhere is going to be bad for reasons of overconsumption and overpopulation but Asia has both with extremes of both.

  6. Davy on Tue, 1st Mar 2016 4:33 am 

    “China Faces 15 Trillion Bombshell As Shadow Banking Sector Collapses”
    http://www.zerohedge.com/news/2016-02-29/china-faces-15-trillion-bombshell-shadow-banking-sector-collapses

    “We’ve spent more time than most documenting China’s wealth management product problem. WMPs are part and parcel of Beijing’s sprawling shadow banking complex which, until 2014 that is, helped pump trillions of yuan into China’s economy and shouldered the burden when it came to propping up the most important economy on the planet.”

    “This is space that’s running what amounts to an enormous maturity mismatched fraud. Of course the describes the entire fractional reserve banking system, but in the case of China’s WMPs, it’s all on the verge of implosion.”

    “The multifarious nature of the space’s liabilities makes it virtually impossible for anyone to assess what the embedded risks are. As we first documented last summer, some 40% of credit risk is carried off balance sheet and that figure might well have grown recently, especially considering mid-tier bank’s propensity to extend new credit through new cateogries of channel loans that are classified as “investments” and “receivables”

    “The bottom line is this: if this implodes, it will not only tank the entire Chinese banking system but the global economy as well, as the amount of liabilities here is quite frankly enormous.”

  7. onlooker on Tue, 1st Mar 2016 4:34 am 

    Yes this is absolutely true. The Western Hemisphere can hang on a bit longer albeit with some die-off and massive dislocation and disruption. But Asia is looking at a full blown Malthusian die-off. It is either that or conquer Western areas. In the end economy is but a proxy for the environment.

  8. Nony on Tue, 1st Mar 2016 11:36 am 

    I didn’t post the comment, Maki. That was my login stealer.

  9. makati1 on Tue, 1st Mar 2016 7:30 pm 

    onlooker, You are not seeing the real Asia. Yes, the big cities will die back and there will be a drop in incomes, but they are more able to adjust to the new/old lifestyle than the West. Hardship is nothing new here. It would be catastrophic in America.

    In the West, especially America, hardship is not having a car and the latest I-gadget. Americans are so drugged up that a collapse reality will kill off a high percentage of them, or turn them into killers in the first months. They have never had to truly ‘do without’. I predict 50% of Americans will be dead in the first year, if the system that provides their meds and support goes down.

    If Americans are lucky, the collapse will take a few years and some will have time to adjust, but the suicide rate will go up and the shooting and riot chaos will become the norm, not the exception. It is fast becoming obvious even now when the pain is just annoying, not fatal.

  10. makati1 on Tue, 1st Mar 2016 7:41 pm 

    It is obvious that some here only read the Imperial Propaganda outlets. Your “opinions” come from the New York Times, Washington Post, CNN, Fox, etc, not real news sources. For every negative article you post about Asia, I can find at least five about the US from sources outside the 50 states.

    I really feel sorry for most Americans. They have been turned into gullible, uneducated, unthinking, sheep, constantly being sheared and waiting to be butchered to feed the greedy elite. Reality is really going to be a bitch when they wake up. IF they ever do. I doubt it.

  11. Nony on Wed, 2nd Mar 2016 9:58 am 

    My favourite trip to Asia was up the Yellow River, if you know what I mean.

  12. Nony on Wed, 2nd Mar 2016 11:00 am 

    Is this what you mean, imitator?

    https://www.youtube.com/watch?v=zGoHQ7c5I2I

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