Russian crude oil exports to the Far East ESPO starts flowing

Transcription

1 S P E C I A L R E P O R T OIL Russian crude oil exports to the Far East ESPO starts flowing February 2010

2 Platts, the energy information division of The McGraw- Hill Companies, launched crude oil price assessments for Russia s ESPO starting with a Singapore close followed by a London close assessment. ESPO, the new Russian crude oil which has recently started to flow out of the Russian port of Kozmino, near Validivostok in the Far East, has been delivered into Asian and US markets. Platts new price assessment provides transparent prices for this new oil stream, exports of which are running at a rate of 268,000 b/d. The export rate during 2010 is expected to average 300,000 b/d. Platts, a leading global oil information provider with a 100-year history of assessing physical energy, has been working closely with Russian energy ministry officials and producers, as well as Asian consumers and others, in the planning of this new crude assessment. ESPO barrels are currently priced as a differential to a commonly used benchmark - Platts Dubai, but due to its location, ample production levels and wide equity ownership, it has then elements that could, over time, help it become a major price indicator of spot oil volumes in Asia. The Asian markets are heavily dependent on imported oil and the role of Russian oil has been growing in recent years. The Eastern Siberian Pacific Ocean pipeline will enable supplies from the Eastern Siberian fields to supply some of the rapidly growing energy needs in Asia. Russia s crude oil production rose to million barrels/day in November, gaining 2.6% year on year and, according to the president of Russia s national oil pipeline operator Transneft, Nikolai Tokarev, is expected to grow to 11 million b/d after The start of the ESPO crude exports will be a major step for Russia s oil export infrastructure, which is currently heavily focused on moving oil west toward Europe. The initial stage of the ESPO pipeline, which runs for 2,757 km from Taishet in East Siberia to Skovorodino in the Amur region Russia s Far East, near the border with China, has a capacity of 600,000 b/d. Capacity is slated to grow to 1 million b/d by 2012 in the second stage of the project, and potentially to as much as 1.6 million b/d at a later date. Eastern Siberian Pacific Ocean Pipeline West Siberian oil & gas fields RUSSIA East Siberian oil and gas fields ESPO Phase 1 Taishet-Skovorodino Sea of Okhotsk Omsk Pavlodar KAZAKHSTAN Tomsk Taishet Angarsk Lake Baikal Tynda Skovorodino ESPO Phase 2 Skovorodino-Kozmino Vanino Khabarovsk Lake Balkhash Oil pipeline Oil pipeline under construction Tanker terminal MONGOLIA Daqing Nakhodka Kozmino CHINA NORTH KOREA Sea of Japan JAPAN Source: Platts, ERINA 2

3 From Skovorodino, 300,000 b/d will be transported by rail to a new export terminal at Kozmino on the Pacific coast, and eventually another 300,000 b/d will be delivered to China, after an offshoot from Skovorodino to the Asian country is completed at the end of The offshoot from Skovorodino to Daqing will be built by CNPC, with only 64 km to the border to be constructed by Transneft. Rosneft has signed a 20-year contract with CNPC for the delivery of 300,000 b/d from Skovorodino, and supplies to China through the pipeline could increase beyond this in the future, according to Rosneft. The price at Skovorodino for deliveries into China will be equal to the FOB Kozmino price, with no premiums or discounts being applied, sources involved in negotiations told Platts. Russia s deputy prime minister Igor Sechin estimated the contract signed between Rosneft and CNPC to be worth at least $100 billion. The contract envisages total oil deliveries of 300 million mt (close to 2.26 billion barrels) over 20 years. The terminal at Kozmino currently has a tank farm with capacity of 350,000 cubic meters (close to 2.6 million barrels) and a loading capacity of 300,000 b/d. Vostoknefteprovod, a company affiliated with Transneft, was created to operate the new Eastern Siberia Pacific Ocean oil pipeline. The Skovorodino delivery station has a storage capacity of 80,000 mt and a loading installation for 82 rail tanks, with a current loading capacity of 35,000 mt/ day, which is expected to increase to 43,000 mt/day Russian crude oil production Million b/d Quality specifications ESPO and other key crudes API Sulphur ESPO % Brent % Forties % Dubai % Oman % Urals % Sokol % Vityaz % (close to 323,000 barrels/day) in the near future. Physical exports along the ESPO route started in late December. Russia s Rosneft sold on November 23 the first ESPO cargo through a tender auction, with the buyer emerging as International Petroleum Products OY at a 50 cents premium to average Platts Dubai prices published for December. Rosneft awarded the tender to IPP OY for 100,000 mt of ESPO crude for December loading FOB Kozmino basis. A total of 15 companies participated in the tender, with two companies bidding at positive differentials, according to industry sources. Transneft estimates the cost for the first stage of the ESPO pipeline at Rb420 billion, or $14.4 billion. The company expects the second stage of the pipeline, which would expand capacity from the initial 600,000 b/d to 1 million b/d, to cost around Rb350 billion, or $11.97 billion. Beyond the second stage, capacity could be extended further to 1.6 million b/d. When the route is expanded to the planned maximum capacity, 300,000 b/d will go to China, 400,000 b/d will be sent to a new refinery Rosneft plans to build near Kozmino, and around 200, ,000 b/d will be sent through the route to existing Far Eastern refineries in Komsomolsk-on-Amur and Khabarovsk, according to Transneft. This implies that the remaining 600, ,000 b/d will be exported from the terminal at the Pacific Coast, although it is not currently clear when the route might be expanded to this maximum capacity. 9.5 Jan-08 May-08 Sep-08 Source: Russia s Ministry of Energy Jan-09 May-09 Sep-09 Jan-10 For 2010, Transneft s transportation schedule projects deliveries of 15 million mt or 300,000 b/d via the route. However, Transneft has not ruled out some changes at 3

4 the initial stage when the new transportation system is tested. Rosneft has said it expects to export some 4-6 million mt of oil from Kozmino in 2010, while TNK-BP expects to export a total of million mt. Russia has also not ruled out sending additional volumes of West Siberian crude to the ESPO pipeline if there is not enough crude produced in East Siberia to fill the line. Russia s energy minister Sergei Shmatko, however, said that he believes that 100% of East Siberian crude would be exported. The Russian government announced late November an exemption from crude export duty for East Siberian crude, to be implemented from December 1. The exemption is designed to stimulate development in the remote oil province. The long-awaited zero rate will be applied to crude with a density of between kg/ ESPO crude quality specifications Test Units Method Result Density at 15 C kg/m3 ASTM D API gravity ASTM D Kinematic viscosity at 20 C mm2/s ASTM D Total acid Number mg KOH/g ASTM D Pour C ASTM D 5853 minus 30 Point Water by distillation mass% ASTM D Sediment by extraction mass % ASTM D Chloride salt content mg/dm3 GOST (A) 17 Organic chlorine content mg/kg ASTM D 4929(B) *1 Sulphur content mass% ASTM D Hydrogen Sulphide ppm UOP 163 less 1 Mercaptan Sulphur ppm UOP Ash content mass % ASTM D Nickel ppm IP Sodium ppm IP Iron ppm IP Copper ppm AAS less 1 Vanadium ppm IP Calcium ppm IP Paraffin Wax content mass % UOP RVPE kpa ASTM D Asphaltenes (heptane insolubles) content mass% IP Distillation at 760 mmhg GOST (B) IBP C 38 recovered at 100 C % vol. 7.5 recovered at 120 C % vol recovered at 150 C % vol. 15 recovered at 160 C % vol recovered at 180 C % vol recovered at 200 C % vol. 24 recovered at 220 C % vol. 27 recovered at 240 C % vol. 30 recovered at 260 C % vol. 34 recovered at 280 C % vol. 38 recovered at 300 C % vol

5 cubic meters at 20 degree Celsius (equivalent approximately to API gravity of at 15.5 degrees Celsius) and with a sulfur content of between 0.1% and 1%, according to the document signed by prime minister Vladimir Putin. A total of 13 separate fields in East Siberia are currently eligible for the zero rate. They are Vankor, Yurubcheno- Tokhomskoye, Talakan including the East Block, Alinskoye, Srednebotuobinskoye, Dulisminskoye, Verkhnechonskoye, Kuyumbinskoye, North Talakan, East Alinskoye, Verkhnepeleduyskoye, Pilyudinskoye, and Stanakhskoye. The fields are owned by several entities including Rosneft, Surgutneftegaz, TNK-BP and Gazprom Neft. Russia is said to be considering expanding the number of East Siberian fields eligible for the zero rate to eighteen. In late October, energy minister Shmatko said the zero rate was likely to last a minimum of five to seven years, but the government has yet to make a firm decision on this. Russia s Rosneft has recently discovered a major oil field in East Siberia s Irkutsk region, with reserves estimated at 1.17 billion barrels of crude oil. This field s production is also expected to feed into the Eastern Siberian Pacific Ocean Pipeline. Russia s Federal Tariffs Service has approved a through transportation fee for crude deliveries via the new export oil pipeline across East Siberia towards the Pacific Ocean at Rb 1,598/mt ($52.68/mt or $7.21/ barrel). The fee includes services for crude deliveries via the pipeline, by railroad, and for crude re-loading at terminals including at the Kozmino sea port for onward exports. An ESPO crude assay became available in early February. The assay came from a sampling of the first cargo that loaded from Kozmino over December The test, conducted by SGS, is based on a composite sample taken from the ship s tanks after the cargo loaded. The assay puts the sulfur content of the crude at 0.535% and its gravity at 34.7 API. The assay also shows the crude having a total acid number of 0.05 mg KOH/g, water content of 0.35% and a pour point of minus 30 degrees Celsius. Using a cut point of for naphtha, for kerosene, for gasoil and 343 and above for residue, the crude is able to yield slightly over 15% of naphtha, 13-14% of kerosene, slightly above 20% of gasoil and 51-52% of residue. The diesel-rich crude appeals to most Asian refiners. American refiners also have produced an assay for the crude showing a sulfur content of close to 0.5%. But some market participants expect the crude to become slightly more sulfurous and heavier in the coming months. As with all new crudes the quality of ESPO is still unstable, with some cargoes showing different properties from others. End-users that have bought ESPO crude include South Korea s GS Caltex and SK Energy, US refiner Tesoro and ExxonMobil, which is taking it to its joint venture refinery with Japan s TonenGeneral. The table overleaf displays the ESPO loading program from Kozmino and tracks the buyers, loading vessels, and prices where applicable. Platts has also published data in its publications regarding the destination of the shipments which have included China, South Korea, Japan and the US. 5

6 ESPO loading program from Kozmino* Date Size Supplier Buyer Vessel Price Dec k Rosneft IPP OY Moscow University Dec Dubai + $0.5 Jan k TNK-BP Trafigura Libya Jan Dubai - $0.55 Jan k Surgutneftegaz Gunvor Ashahda Jan k Surgutneftegaz Gunvor Pacific Energy Jan k Rosneft IPP OY Moscow University Jan Dubai - $2 Jan k Rosneft IPP OY Ashahda Jan Dubai - $2.1 Jan k Rosneft IPP OY Atlantic Explorer Jan Dubai - $2 Jan k Rosneft IPP OY Sky Lady Jan Dubai - $1.16 Jan k Rosneft IPP OY Bunga Kelana 7 Jan Dubai - $0.95 Jan k Gazprom Neft Mitsubishi KWK Esteem Jan Dubai - $0.75 (CIF North Asia basis) Feb k Surgutneftegaz Gunvor Feb k TNK-BP BP British TBN Feb Dubai - $2 Feb k Rosneft Mitsubishi Torm Gudrun Feb Dubai - $1.3 Feb k Surgutneftegaz Gunvor Bunga Kelana 4 Feb k Rosneft Crudex Atlas Explorer Feb Dubai - $1.25 Feb k Rosneft Vitol Bunga Kelana 4 Feb Dubai + $0.02 Feb k Rosneft Petronas Oasis River Feb Dubai + $0.2 Feb k Rosneft Crudex Feb Dubai + $0.25 Feb k TNK-BP BP Castor Voyager Feb Dubai + $0.80 Feb k Gazprom Neft Mitsubishi Maersk Phoenix Feb Dubai + $1.10 (CIF North Asia basis) Mar k Rosneft Crudex Ruby Mar Dubai + $0.29 * Some trade details are not official, and are listed as reported by market sources For further details, please contact Jorge_Montepeque@platts.com, Corneliu_Tataru@platts.com with a CC to PriceGroup@platts.com About Platts Platts, a division of The McGraw-Hill Companies (NYSE: MHP), is the market leader for independent real-time news, pricing, and data for the energy and metals markets. From our 17 worldwide offices, we create market transparency and drive better decision-making for traders and investors in more than 150 countries. More information is available at For information on Platts publications, please contact the Platts sales office nearest to you: North America EMEA Latin America Asia-Pacific Russia PLATTS8 (toll-free) +44-(0) support@platts.com (direct) 2010 Platts, a Division of The McGraw-Hill Companies, Inc. Reproduction of this publication in any form is prohibited except with the written permission of Platts. Because of the possibility of human or mechanical error by Platts sources, Platts does not guarantee the accuracy, adequacy, completeness, or availability of any Platts information and is not responsible for any errors or omissions or for the use of such Platts information. Platts gives no express or implied warranties, including, but not limited to, any implied warranties of merchantability or fitness for a particular purpose or use. In no event shall Platts be liable for any direct, indirect, special, or consequential damages in connection with subscribers or others use of this publication. 6