[ROCKMAN]

Another oil exporter hooking itself financially to a country dependent upon refined product imports and thus removing another portion of oil from the global market place. Latest numbers show Azerbaijan’s reserves at 7 billion bbls. Another transitional move from oil exporter to product exporter:

Reuters - Azerbaijan's state oil fund said it had invested $475 million to help fund construction of the new Star oil refinery in the west of Turkey. The fund said on Monday it would provide another $300 million next year for the $5 billion refinery project, which aims to start production in mid-2017 with an annual crude processing capacity of 10 million tonnes. Azeri state energy company SOCAR is building the Star refinery in partnership with Turcas Petrol to supply Turkish petrochemical company Petkim and reduce Turkey's dependence on imported refined products.

The $34 billion Azeri state oil fund invests the revenue from its oil contracts, oil and gas sales, transit fees and other revenues and uses the proceeds to help finance social spending and infrastructure projects. SOCAR said earlier this year it would also borrow about $3 billion on the international markets to finance the project. SOCAR signed a $3.46 billion engineering procurement and construction contract with a consortium.

[ROCKMAN]

With 2 to 4 million bbls of Persian Gulf oil transiting Egypt daily on its way to the EU it looks like their govt is garnering more support than one would imagine for a net oil importer currently being controlled by a military dictatorship: From RigZone:

Reuters - Egypt promised on Wednesday to pay $1.5 billion of the $6 billion it says it owes foreign oil companies, aiming to restore investor confidence in an economy damaged by nearly three years of political turmoil. The arrears had discouraged investment in the critical energy sector. Gulf oil-producers rallied behind Egypt after the army ousted Islamist President Morsi, pledging billions of dollar in financial support. Saudi Arabia and most other Gulf states deeply distrust Morsi’s Muslim Brotherhood. The central bank would supply the dollars to reimburse the oil companies. Financial disclosures by firms including BP, BG Group , Edison SpA and TransGlobe Energy show Egypt owed them more than $5.2 billion at the end of 2012.

In the week after the army removed Morsi, Saudi Arabia, Kuwait and the United Arab Emirates promised Egypt a total of $12 billion in grants, interest-free loans and oil products. Egypt hopes Gulf investors will also inject cash. The government calls the Brotherhood a terrorist group that imperils national security. Gulf support has helped Egypt withstand Western criticism of its democratic credentials since the army takeover. Egypt badly needs private capital. Foreign direct investment fell to $3 billion in the 2012/13 financial year, which ended in June, compared with more than $10 billion a few years ago. Qatar, which backed Morsi and the Muslim Brotherhood, is reluctant to invest in Egypt, but the United Arab Emirates seems keen for its companies to launch or resume projects there.

The government is preparing a law to reinforce the legal standing of past contracts with the state. Egypt's business climate has been clouded by court cases that have challenged past state contracts, including rulings ordering the re-nationalising of state businesses sold when ousted autocrat Hosni Mubarak was in power. The army-installed government, under pressure to produce a long-term plan to revive the economy, launched a $4.3 billion stimulus package this year after Morsi’s overthrow brought aid pledges from Gulf countries.

[ROCKMAN]

The Hufco piece doesn’t mention energy exports but I would think any agreements to limit sovereign power in all international trade deals would be significant in this area. As we go down the PO path such issues should loom even larger than they do today IMHO.

WASHINGTON -- "The Obama administration appears to have almost no international support for controversial new trade standards that would grant radical new political powers to corporations, increase the cost of prescription medications and restrict bank regulation, according to two internal memos obtained by The Huffington Post. The memos, which come from a government involved in the 12-nation Trans-Pacific Partnership free trade negotiations, detail continued disputes in the talks over the deal. The Obama administration has urged countries to reach a deal by New Year's Day, though there is no technical deadline. The Obama administration has been leading negotiations on the international trade accord since 2010. One of the most controversial provisions in the talks includes new corporate empowerment language insisted upon by the U.S. government, which would allow foreign companies to challenge laws or regulations in a privately run international court. Under World Trade Organization treaties, this political power to contest government law is reserved for sovereign nations. The U.S. has endorsed some corporate political powers in prior trade agreements, including the North American Free Trade Agreement, but the scope of what laws can be challenged appears to be much broader in TPP negotiations.

"The United States, as in previous rounds, has shown no flexibility on its proposal, being one of the most significant barriers to closing the chapter, since under the concept of Investment Agreement nearly all significant contracts that can be made between a state and a foreign investor are included," the memo reads. "Only the U.S. and Japan support the proposal." Under NAFTA, companies including Exxon Mobil, Dow Chemical and Eli Lilly have attempted to overrule Canadian regulations on offshore oil drilling, fracking, pesticides, drug patents and other issues. Companies could challenge an even broader array of rules under the TPP language.

The Obama administration is insisting on mandating new intellectual property rules in the treaty that would grant pharmaceutical companies long-term monopolies on new medications. Nearly every intellectual property issue in the November chart is opposed by a broad majority of the 12 nations. The deal would obligate nations to develop many standards similar to those in the United States, where domestic prescription drug prices are much higher than costs in other nations. The U.S. has reintroduced a proposal that would hamper government health services from negotiating lower drug prices with pharmaceutical companies. The Obama administration has been pushing to ban activities which would prevent locking in big profits for U.S. drug companies.

The U.S. is also facing major resistance on bank regulation standards. The Obama administration is seeking to curtail the use of "capital controls" by foreign governments. These can include an extremely broad variety of financial tools, from restricting lending in overheated markets to denying mass international outflows of currency during a financial panic. The loss of these tools would dramatically limit the ability of governments to prevent and stem banking crises. Previously leaked TPP documents have sparked alarm among global health experts, Internet freedom activists, environmentalists and organized labor, but are adamantly supported by American corporations and the U.S. Chamber of Commerce. The Obama administration has deemed negotiations to be classified information -- banning members of Congress from discussing the American negotiating position with the press or the public. Congressional staffers have been restricted from viewing the documents."

Yep...that must be that new "transparency" thingy the administration keeps mentioning. Sounds like at least one country is tired of being pushed and is willing to flip the lights on and watch the roaches scramble.

[ROCKMAN]

One more round of Chinese refinery JV’s that will remove a volume of future oil production from the market place. It appears another incentive besides access to China’s huge foreign currency reserve is access to their booming market for refined products. From the China International Petroleum Technology Conference and Exhibition 2013:

China’s top energy group and its partners Qatar Petroleum and Royal Dutch Shell agreed to push ahead with plans for a $12.6 billion refinery and petrochemical complex in east China which is likely to start before similar rival facilities. The investment is a major development that will deepen CNPC’s cooperation with a major Middle East resource nation and an international oil company. The project, which includes a 400,000 bopd refinery and a 1.2-million-tonne-per-year ethylene complex.

The other projects include ventures between Chinese energy firms and Venezuela’s PDVSA, Kuwait Petroleum International and Russia’s Rosneft. China’s total refining capacity stood at around 10 million barrels per day at the end of 2010. It is likely to add another 3.7 million bpd between 2011 and 2015. China is hungry for fuel, but the refining business has long been dominated by state giants Sinopec and PetroChina and the government still sets fuel prices at the pump. Without full access to wholesale operations and what happens at fuel stations, refiners often bear the brunt of thin or negative margins.

CNPC has also partnered Venezuela’s state-run PDVSA for a refinery and petrochemical complex in Guangdong province, under which PDVSA will supply the crude and provide oilfield concessions to CNPC in Venezuela in return for a foothold in China’s vast fuel market. Sinopec has partnered with Kuwait’s national oil company to set up a similar venture in Zhanjiang city.

[ROCKMAN]

Perhaps this is a prelude of future energy rules where one party tries to impose regs on second party. And the second party tells the first to shut up or I’ll starve you of energy. What’s interesting the “EU” authorities are telling the Russians they can’t do it this way but member countries of the EU are signing on with the Russians. As we stumble down the PO path perhaps we’ll see even more disunity between “friendly” neighbors.

Reuters – Deals between Russia and the countries through which the Gazprom-led South Stream gas link is to be built trump European Union rules, Russian Prime Minister, raising the stakes in a row over the project. The European Commission has said South Stream cannot operate on EU territory unless it complies with the bloc's energy law, and it could take years to do so. According to the law, an owner of resources cannot also own the infrastructure through which they are shipped. South Stream as well as Nord Stream, which already carries Russian gas to Europe via the Baltic Sea, are designed to bypass transit countries, including Ukraine, which stand in the way of Russian energy supplies to European markets. Russia has signed intergovernmental agreements with a number of countries, including Austria, Bulgaria, Hungary and Italy, on the South Stream pipeline, which from 2018 is projected to carry 63 billion cubic metres of gas a year from Russia via the bed of the Black Sea. Moscow has pushed forward with the project despite protests from EU authorities. "Legal acts of the EU are considered to be national laws for the countries of the EU ... (while) intergovernmental agreements, signed by Russia and the above-named countries of the EU are acts of international law," Medvedev told a news briefing

[ROCKMAN]

This time a closer to home: Ohio production going to Canada. "UTOPIA"...rather ironic IMHO.

Kinder Morgan Cochin LLC has signed a letter of intent to develop a new products pipeline from the Utica Shale. Kinder Morgan Cochin will develop, construct, own and operate a 210-mile, 10-inch diameter pipeline from multiple fractionation facilities in Harrison County, Ohio, to Kinder Morgan’s Cochin Pipeline near Riga, Mich., where the company will then move product via Cochin east to Windsor, Ontario, Canada.

The proposed approximately $300 million Kinder Morgan Utica To Ontario Pipeline Access (UTOPIA) would transport previously refined or fractionated natural gas liquids (NGLs), including ethane and propane. The pipeline is expected to have an initial 50,000 barrels per day of capacity, which is expandable to more than 75,000 bpd. A mid-year 2017 in-service date is anticipated.

[ROCKMAN]

And the transition continues:

Reuters - Russia will cut oil exports to Europe as it ramps up oil supplies to China, the country's final exporting schedule showed on Tuesday. The schedule showed that Russian crude exports on a daily basis will increase in January - March 2014 by 1 percent to 53.5 million tonnes. This is compared to 54.1 million tonnes in the fourth quarter of 2013, which is longer. The plan also showed that Russia will start oil flows to China via Kazakhstan in the first quarter, at 1.7 million tonnes.

Not a big deal volumetrically at the moment since Russia still has a lot of oil to export. But as Russian production declines in the future? In this game of musical chairs I think it's easy to predict who will be standing alone in the future. The Golden Rule of oil acquisition: he with the gold gets the oil. Especially if he has spent $billions laying those new pipelines.

[ROCKMAN]

Volumetrically not a big deal. But philosophically you have an OPEC member using their revenue stream to gain control of petroleum resources in other countries. PETRONAS, the Malaysian state oil company, has moving in this direction for many years. And they are not a small time player despite the fact they are under the radar of many in the US: Fortune ranks PETRONAS as the 68th largest company in the world in 2012. It also ranks PETRONAS as the 12th most profitable company in the world and the most profitable in Asia. From Rig Zone:

Total S.A. announced that Qatar Petroleum International (QPI) is now a shareholder of Total E&P Congo, holding 15 percent of its capital. “The conclusion of this agreement, which is an important milestone, builds on Total’s already well-established partnership with Qatar.” The $1.6 billion increase of Total E&P Congo’s capital will consolidate its financial capacity at a time when it is progressing the development of the Moho Nord deep offshore project in Congo.

[ROCKMAN]

Just one more small move in the global energy chess match:

Syria's state news agency says the oil ministry has signed a deal with Russian oil and gas company Soyuzneftegaz to explore in the Mediterranean Sea. SANA's report said the exploration will take place off the Syrian coast. Earlier this year, Syrian Oil Minister Suleiman Abbas discussed with the ambassadors of China and Russia the possibility of exploring for oil and gas off Syria's Mediterranean coast.

Most of Syria's oil and gas fields in the country's east are under opposition control and the country's oil exports almost have stopped. Israel is already developing recent discoveries of massive offshore deposits and Lebanon has also spoken of trying to develop offshore fields.

[ROCKMAN]

Interesting that a country with one of the largest oil reserves is developing production outside their border:

Russian explorer Lukoil reported Tuesday that its first appraisal well on the Independence field, offshore Cote d'Ivoire has proven oil in Turonian sands. The Independence field, discovered in December 2011, is located on block CI-401 in the Gulf of Guinea. The well was drilled to a depth of more than 14,760 feet by the Eirik Raude (DW semisub) rig. Lukoil said that data provided by the well is currently being processed in order to evaluate the potential resources within the field and this work will be used to make a final decision on further field appraisal. The next phase of the drilling program off Cote d'Ivoire will be the spud of an exploration well in block CI-101.

[sparky]

.
On Russian presence in the Eastern Mediterranean , it is reported that Russia might act as a project coordinator
for several ventures , the articles mention their good relation with Turkey , Israel , Cyprus and Syria
and their experience in multinational project

[ROCKMAN]

Looks like not only China has designs on Mexican oil production but so does the EU. Maybe motivated in part by the ongoing changes in Mexican regs. Perhaps the instability in the ME is pushing them to look for more secure oil sources. Next thing you know they’ll be going after our Canadian oil. Actually that process has already begun as the expansion of Canadian east coast export terminals has already begun. Once the new pipeline systems from Alberta begin delivering oil sands productions to those terminals we could see a lot more of “our” oil going to foreigners: Reuters - Mexico will begin shipping extra light Olmeca crude oil to customers in Europe this month, diversifying the country's export markets, national oil company Pemex said on Monday. A company spokesperson declined to provide details, including expected shipment volumes.

Mexico exported an average of 1.18 million barrels per day (bpd) of mostly heavy crude oil last year through November, while it produced 2.52 million bpd over the same period. In August, the company said it was planning to increase crude exports to growing Asian markets, especially China and India. Over 80 percent of Mexico's crude exports are comprised of heavy Maya crude, which mostly go to customers in the United States.

[Tanada]

Probably a dumb question but does plentiful Athabaska oil in Cushing suppress the sale price of Maya from Mexico? Mexico might be getting better offers from China and the EU ?

[ROCKMAN]

T - I don't know the details but it may be a similar situation as to why we are shipping 50,000+ bopd from the Eagle Ford to eastern Canadian refineries: they can crack that oil more profitably then our Gulf coast refineries to the point that the addition transport cost is worth it. There may also be an additional benefit of products demanding a better price in that market.

The big question I'm waiting to see is when that 600,000 bopd of Alberta production makes it straight from the oil sands fields to the Texas coast in a couple of weeks how much will be cracked here and how much might be shipped to overseas refineries. That oil won't be subject to the US ban on exporting oil. That ban only applies to oil produced in the US...not oil that transit the country. If a foreign refiner can make just $2 more per bbl net transport costs that's an extra 1/3 of a $TRILLION per year profit. That would seem to be a viable motive.

[ROCKMAN]

Just for those folks here who still think of the oil patch as one monolithic creature with a single goal:

Reuters: "Independent U.S. refiner PBF Energy has begun talks with a half-dozen of its rivals to consider jointly lobbying Washington against lifting a decades-old ban on U.S. crude oil exports. New Jersey-based PBF, run by veteran refinery investor Thomas O'Malley, organized a telephone call earlier on Wednesday to discuss creating a lobby group that would seek to maintain existing restrictions on crude exports, according to two people with knowledge of the call. HollyFrontier Corp., Delta Air Lines' Monroe Energy, Philadelphia Energy Solutions and Alon USA Energy joined the call, as did larger rivals Valero Energy Corp. and Marathon Petroleum Corp., one of the sources said. Valero spokesman Bill Day confirmed the call. The discussion, which one source said was likely to be continued next week with many of the same participants, is the first evidence of a more focused lobbying effort that may counter rising calls to ease the ban, which was imposed in 1975 after the Arab oil embargo."

And US oil producers are all for exporting our oil since it could create better profit margins so LET'S EXPORT OIL!!!. But wait...not Canadian oil. About 99% of the US oil producers would love to see those exports banned. OTOH about 99% of US refiners would love to see as much Canadian oil exported just as much as they would love to see no US oil exported but also want to be able to export as much refined product as possible.

Oh for sure: All for one and one for all. As long as it doesn't hurt my profit margin. It's really not that complicated: just follow the money.

[ROCKMAN]

Again the impact of oil exporters slowly converting to refined product exporters with the aid of third party investors. In particular China. Not only do the product exports compete with the other refineries but it also lessens the amount of oil reaching the open market and thus helps maintain upward pressure on oil prices. And looking down the road 5 to 10 years it isn’t difficult to imagine much of the EU market being held captive by refineries in the oil exporting countries.

Reuters - Diesel from the new Jubail refinery in Saudi Arabia will head to Europe for the first time this month, piling pressure on refineries already battered by huge imports and poor margins. Saudi Aramco is set to ship the first cargo of diesel out of the 400,000 barrel-per-day refinery, a joint venture with France's Total. European refineries have come under massive pressure in recent months amid weak domestic demand, while imports of cheaper diesel from the United States, Russia and Asia reached record levels since September. Low, and sometimes negative, refining profit margins in northwest Europe and the Mediterranean, which rely heavily on diesel for both motoring and heating, have forced many plants to reduce output dramatically.

"European refiners appear to have ceded market share at home to their international competitors and will surely have difficulties regaining it over this year, especially given the fact that diesel streams from new Middle Eastern refineries have not hit the market yet," analysts at Vienna-based JBC Energy said in a note to clients.

[ROCKMAN]

Some more dot connecting: the Ukraine has to import oil from Russia and Kazakhstan and still doesn't have enough feedstock to keep it's refineries running anywhere close to capacity. In the meantime China is growing it's oil supplies from...wait for it...Russia and Kazakhstan. And now China is thinking about building a new refinery in a country with a huge excess refining capacity. In the meantime EU refineries are quickly going down the toilet. I can't imagine what China is thinking. LOL.

Reuters - China is considering investing in a project to build a new oil refinery on Ukraine's Black Sea coast, the Interfax news agency reported on Wednesday. Ukraine's Energy Minister Eduard Stavytsky was quoted as saying that the new refinery could cost up to $2 billion and would probably be built in Odessa or the Kherson region in southern Ukraine. Ukraine has six large oil refineries but only two regularly process oil. Producers have said that the current tax regime makes oil processing unprofitable. Stavytsky said last year that PetroChina was considering investing in construction of an oil refinery in Ukraine.

Ukraine reduced oil processing by about 26 percent between January and November last year and cut petrol output by 41 percent. Ukraine has insufficient oil to provide refineries with raw material for processing and relies heavily on crude imports from Russia and Kazakhstan. President Yanukovich visited China last month and said the country could bring Ukraine about $8 billion in investments in the near future.

Might make more sense for Total to buy its fuels from someone else's refinery. Maybe like one in the Ukraine: Total lost $684 million last year at its strike-hit refining business in France, Chief Executive Christophe de Margerie told a hearing of the French parliamentary economic affairs committee on Wednesday.

Dot...dot...dot...

[Tanada]

Some more dot connecting: the Ukraine has to import oil from Russia and Kazakhstan and still doesn't have enough feedstock to keep it's refineries running anywhere close to capacity. In the meantime China is growing it's oil supplies from...wait for it...Russia and Kazakhstan. And now China is thinking about building a new refinery in a country with a huge excess refining capacity. In the meantime EU refineries are quickly going down the toilet. I can't imagine what China is thinking. LOL.

Reuters - China is considering investing in a project to build a new oil refinery on Ukraine's Black Sea coast, the Interfax news agency reported on Wednesday. Ukraine's Energy Minister Eduard Stavytsky was quoted as saying that the new refinery could cost up to $2 billion and would probably be built in Odessa or the Kherson region in southern Ukraine. Ukraine has six large oil refineries but only two regularly process oil. Producers have said that the current tax regime makes oil processing unprofitable. Stavytsky said last year that PetroChina was considering investing in construction of an oil refinery in Ukraine.

Ukraine reduced oil processing by about 26 percent between January and November last year and cut petrol output by 41 percent. Ukraine has insufficient oil to provide refineries with raw material for processing and relies heavily on crude imports from Russia and Kazakhstan. President Yanukovich visited China last month and said the country could bring Ukraine about $8 billion in investments in the near future.

Might make more sense for Total to buy its fuels from someone else's refinery. Maybe like one in the Ukraine: Total lost $684 million last year at its strike-hit refining business in France, Chief Executive Christophe de Margerie told a hearing of the French parliamentary economic affairs committee on Wednesday.

Dot...dot...dot...

Any idea if the Trans-Siberian Railroad could be used to ship crude in tanker cars to China? I am sure it could be expanded to do so at some point, what I mean is dose it have that capability today and through 2014?

[ROCKMAN]

More importantly: "Many Peak Oil doomers (like environmentalists) purchase dogs, cats and other assorted animals as a substitute for their feelings of inadequacy at having never passed on their genetic material." I bought my wife those two miniature schnauzers so she could focus her affections on them and leave me the hell alone.

As far as feeling of inadequacy Mother Earth does a damn good job of reminding me of my shortcoming on a regular basis. And as far as my genetic material goes it weren’t much to brag about. So no big loss there by adopting my daughter in China a decade ago.

[Keith_McClary]

Canada should refine own resources rather than exporting: Mulcair

NDP Leader Thomas Mulcair spelled out his party’s energy policy Wednesday, promising to put environmental protection at the forefront of a new national strategy and to encourage the processing of resources at home rather than the export of raw materials.

In a luncheon speech in Ottawa, the opposition leader contrasted his party with both the Stephen Harper’s Conservatives and Justin Trudeau’s Liberals, both of whom have supported the controversial Keystone XL pipeline. Mulcair opposes TransCanada Corp.’s proposed project to ship oil sands bitumen to U.S. Gulf Coast refineries, saying the heavy crude should be upgraded and refined in Canada.
...
The plan would “leverage[s] our natural resource wealth to invest in modern, clean energy technology that will keep Canada on the cutting edge of energy development and ensure affordable energy rates into the future,” he said.