by ROCKMAN » Thu 15 Aug 2013, 07:50:55
Dude - Each JV will have it's own terms. Haven't seen such details on any one of them...and may never. But take the China/KSA 400k Red Sea refinery. I think the cost will be split 50/50. But details? How will the price of the KSA crude be benchmarked? How will out put be split...the KSA has a big product import bill. Will the KSA get their product at cost or benchmarked? Will China have control over exported products? Will China have a right of first refusal on exported products? Products exported and sold: how is the profit split? Is China loaning the KSA their share of the construction costs or vice versa? Will the plant be manned with Saudi or Chinese workers? In the JV with Iraq the Chinese built their own airport to shuttle their workers back and forth.
As far as import volumes it's easy: oil is oil, diesel is diesel, etc. Count each separately. But the real issue is whose refineries will be supplied and thus book the profits. For instance China plans to build the largest refinery ever constructed in Egypt... a country with little relative oil production. But there are 2 to 4 million bbls of Persian Gulf oil per day that transits Egypt via the S. Canal and the SUMED pipeline. It's shipped out of the Med port to EU refineries. Seems obvious this crude will be sourced from the Persian Gulf exporters. They may still sell every bit of product to the EU but now it would be the Chinese and oil exporters capturing that segment of the value stream. And then there's the big potential stick for China: the option to ship some or all of the product to their homeland. Same potential with the big Brit. Columbia refinery the Chinese will finance. Initially they may sell all those products cracked from the oil sands fields to CA because that's where the best profit could be had. OTOH I would be shocked if part of the loan terms didn't give China the right of first refusal and could allow them the option to ship all the product to China. A ROF is easy to negotiate: the seller, in this case the Canadians, get the same price either way and thus costs them nothing. But now the Bank of China controls who gets to buy the product...mucho leverage.
The next big deal that might significantly impact the US would be refinery JV's between China and México. Now México has to sell crude to US refineries but buy back as much as 1/3 of the products. Pemex doesn't have the refining capacity. Just a matter of México getting the constitution adjusted to allow such deals. México also has a huge trade imbalance with China. Selling China oil would help that. They've already begun that on a small scale...50k bopd I think.