Europe Becomes Victim Of Russia's Newest Oil Strategy

Authored by Irina Slav via OilPrice.com,

Higher shipments of Russian crude oil to China may saddle European importers with a fatter bill, an industry consultancy warned at the end of last year, noting the latest stage of Russia’s Eastern pivot: the launch of the expanded East Siberia-Pacific Ocean pipeline that would lift Urals crude supply to China twofold, to 30 million tons annually. 

 

https://www.zerohedge.com/sites/default/files/inline-images/20180107_russ.png

FGE said in a note quoted by Bloomberg that Russia will start moving more Urals eastward right after the launch of the pipeline extension, at a rate of 160,000 bpd. The overall increase of Russian crude shipments to China, according to the consultancy, could be around 200,000 bpd. 

This means less oil for Europe, which is Russia’s number-one oil client. This only highlights the significance of Moscow’s Asian pivot amid lingering European sanctions following the 2014 annexation of Crimea and Russia’s involvement in separatist conflicts in the Ukraine. 

In 2016, Russia exported an average 3.7 million barrels daily to European countries, compared with less than a million bpd to China, according to figures from the Energy Information Administration (EIA). In percentage figures, Europe accounted for 70 percent of Russia’s 2016 crude oil exports, while the share of China was just 18 percent. Yet this is changing fast, as this chart from the EIA shows:

(Click to enlarge)

The rise in Chinese exports has been quite steep since 2014: as of November last year, Russia shipped 1.3 million barrels of oil daily to China. All the latest signs point to further growth. However, exactly how much this would hurt European buyers is unclear.

The Urals is currently trading at a discount of about $4 to Brent crude but WTI’s discount to the international benchmark is $6 a barrel. In other words, Russia’s diverting of crude oil from Europe to China could be an opportunity for U.S. exporters as long as they can keep their transport costs low enough. Europe will probably be grateful for the diversification. 

Over the long term, things are even more uncertain. Clearly, Russia has prioritized its relationship with China: In addition to the ESPO expansion, Gazprom is on track to complete the Power of Siberia gas pipeline by 2019. The 2,500-km mammoth of a pipeline will pump 1.3 trillion cu ft of gas to China annually. 

The country is already the third-largest consumer of natural gas in the world, behind the U.S. and Russia, and is expected to show the strongest demand growth over the coming decades—propelling it to second place by 2040 as the economy shifts away from coal. 

This soaring demand has already created shortages in parts of the country. A recent report by Eurasia Daily suggested the Power of Siberia will be essential in avoiding future gas shortages. Would that take gas away from Europe? It’s unlikely given Gazprom’s 30+-percent market share in Europe, and besides, there’s enough gas for everyone. What might happen is China overtaking Europe as Russia’s biggest gas export market at some point in the future, especially if Russia–EU relations continue to be strained.

Comments

onmail1 Jan 8, 2018 10:54 PM Permalink

euroPeons are only printing money

paper which may soon become worthless

so if they still hold gold & other riches

Russia should sell oil & gas & get all their wealth

which they had looted from other nations

and when they have no real wealth left

stop selling them & let EU become desert

(now they eat desserts while the rest of world starves)

Koba the Dread Jan 8, 2018 3:49 PM Permalink

"Europe Becomes Victim Of Russia's Newest Oil Strategy" Victim? The Euroclowns are victims of their whoring to US sanction policy.

Victims indeed!

And ZH readers are victims of headlines written by propagandists.

numapepi Jan 8, 2018 12:30 PM Permalink

Europe is setting on tons of nat gas that could be effectively recovered with fracking... but the elite there so hate capitalism... and fracking is synonymous in their minds with capitalism.

William Dorritt Jan 8, 2018 8:58 AM Permalink

HAIL HYDRA

The Globalist (hydra) strategy of forcing Russia into the arms of the Chinese Generals, also hydra members, is working.

The overthrow of the Ukraine Govt and sanctions forced Russia to end hard ball negotiations with the ChiComs and give them a better deal for the oil and gas.

 

 

Joiningupthedots Jan 8, 2018 8:47 AM Permalink

Russia is budgeting for 40 USD oil.

Everything on top is just more gravy.

Sanctions aren't working, the relationship with China is becoming deeper and stronger, the future of the world for next 100 years (at least) is China powered by Russian energy.

America/NATO/ can do nothing to stop it either.

east of eden Jan 8, 2018 7:22 AM Permalink

As Spock would say, 'fascinating'. When anyone brings up the subject of renewable energy to the fanatics on the alt-right we get barraged with everything from being nuts and crazy to being  traitors. But when there is a geo-political issue, well, then the idea of Europe having lots (and lots more) renewable suddenly becomes 'acceptable'.

So, what the fuck is it you turds? Either renewables work and are affordable or they don't, and aren't. You can't have it both ways.

east of eden Neochrome Jan 8, 2018 7:49 AM Permalink

Well, I know, but Denmark, the Netherlands, Germany, Sweden and a lot of other countries have already 'proven' a couple of keys points about renewables. One, they can be built out to handle baseload, and net/net, if implemented on a widely distributed basis such as they are in Germany, people's energy costs actually go down, not up, and down by quite a bit. So, the two main planks in the arguments against renewable have already been shot to hell.

In reply to by Neochrome

Neochrome east of eden Jan 8, 2018 8:09 AM Permalink

Solar and wind are my choice definitely, if nothing else because of it's scalability and a low labor intensity. You can install 100W solar panel, 10kW, or if you feel like it 10MW as you see it fit, and those "bits" do add up. No need to lay down pipes, mine coal, build dams, worry about nuclear waste and so on. You can go into a middle of the desert, without any infrastructure at all, lay down some solar panels and you are in business. If PR had decentralized power production people wouldn't be without power months after the storm. 

In reply to by east of eden

east of eden Jan 8, 2018 7:05 AM Permalink

The whole issue of the US 'picking up the slack' in terms of reduced oil and gas imports into Europe is a canard. Even the largest fracking areas in the US (i.e. Eagle Ford) are being depleted at a fantastic rate, and every single one of those fracking wells is ultimately not profitable - they are being drilled and brought into production, at a loss, so I fail to see how the US could possibly try to portray itself as some kind of net energy exporter when it still imports 10 million barrels a day, itself. The one thing there is a lot of is natural gas, both in Canada and the US, but building infrastructure to liquify, ship, then de liquify the gas is very expensive, matter of fact, the gas rate to Europe from US shippers is nearly double the rate they pay from the Russians. Don't really think you are going to find a lot of customers, not even England.

Brazen Heist Jan 8, 2018 6:42 AM Permalink

Enter the Neocons, who will be pushing their fracked-up low-quality and over-priced crude onto their European colonial playground. 

They're already arm-twisting Poland, Romania, Bulgaria, Ukraine and Germany to start buying US shale or reneging on pipeline deals with Russia.

Russia has still plenty of capacity for European demand. But the USSA empire cannot operate on a level playing field with Russia., that's why they bully and cheat the competition and end-users. And that will backfire as usual.

OverTheHedge east of eden Jan 8, 2018 7:24 AM Permalink

I assume that, as a balanced equation, China is no longer buying as much oil from other nations, because of the new pipeline from Russia, so this will impact the Middle East first?  The internet is being coy about the breakdown of who exports how much to China, but I found this on the nasty Yahoo site:https://au.finance.yahoo.com/news/saudi-oil-exports-china-hit-180000189…

How will the House of Saud do, if no one buys their oil? Anyone?

In reply to by east of eden

Greed is King Jan 8, 2018 6:42 AM Permalink

Prod and poke Russia constantly, impose sanctions on Russia, the only purpose of which are to starve the Russian people into revolution and civil war, hold military exercises on Russian borders, try to create insurgencies and civil war in Russia`s M.Eastern allies in order to obtain an excuse to invade and occupy; and Russia is expected to keep taking the punches without retaliation.

The Western bully has more than one screw loose if he thinks he can treat Russia like that. Time to make friends and partnerships, not enemies and war.

Islamaphobe Jan 8, 2018 6:30 AM Permalink

It looks like the German industrialists are going to ignore the EU's attempts to limit Russian oil and gas supplies and will go ahead - against Brussel's "advice" - with Nord Stream II. No way are they going to pay twice the price for LNG from the US. Even the US' most obedient poodles will only go so far to promote US hegemony.   

zeroboris Jan 8, 2018 6:06 AM Permalink

Europe Becomes Victim Of Russia's Newest Oil Strategy

Russia just doesn't want to be blackmailed by European political prostitutes, so nothing personal.

AgLand Jan 8, 2018 6:03 AM Permalink

The enemy is not Russia, it’s China.  Instead of ‘friending’ the white boys with the nukes on the Chinese border we’ve created a shotgun marriage between the two that impacts the whole global petro neighborhood, including the future of the petrodollar.

this new and latest “Red Scare” is going to pay us back in spades one day.

 

all those who believe renewables will be powering the planet before the ‘shale revolution’ is done have their heads up their asses.  In 20 years that will mostly have all played out.

beijing expat Jan 8, 2018 5:25 AM Permalink

Europe are the authors of their own misfortunes. If they had called Obama out on his Ukrainian coup they wouldn't be seeing Russia in bed with China instead of them. 

Davidduke2000 Jan 8, 2018 5:23 AM Permalink

It is russia's oil and it can sell it to the highest bidder, the EU  put so many roadblocks in the construction of Russian pipelines going through some European countries and will pay the price for it. Obama had promised the EU oil and natural  gas & propane shipments that never materialized because the us has none, it was only an illusion.

Now they would have to buy through Turkey.

Maybe this time they won't delay new pipelines because Putin is selling his oil and gas elsewhere and running pipelines including through NK.

squid Jan 8, 2018 4:48 AM Permalink

"And again, the paste function is not working Tyler. Any estimate on when the current Web site downgrade will be complete?"

 

Squid

OverTheHedge squid Jan 8, 2018 7:13 AM Permalink

Click on the little button on the right of the comments header, labelled "Source". Then paste to your heart's content, and when you are done, click on "Source" again.

I think it is more of a "workaround" than a design feature, but Tyler is probably working on it.

Well, Paramjeet is working on it - Tyler is just paying the bill. If Tyler actually IS working on it, perhaps we need to send him a Paramjeet?

In reply to by squid

Joe A Jan 8, 2018 4:16 AM Permalink

Even during the hardest times of the Cold War, Russia supplied Europe with gas. But Europe falls victim of it own energy insecurity and of it dependence of the US for its protection. It is time for Europe to deal with both issues.

Lore Jan 8, 2018 4:10 AM Permalink

European nations really ought to re-think participation in those sanctions. They hurt their own people and undermine their own sovereignty.

css1971 Jan 8, 2018 4:06 AM Permalink

European sanctions against Russia....... Oops...

I swear to god that we have the dumbest representatives on the planet.

Europe has turned into Moron Central.

Fireman Jan 8, 2018 4:00 AM Permalink

So Brussels Natostan's Pedophile Politburo is content being USSA's bitch...then Russia has other options. The EUSSR will go down the toilet with the Saudi Mercan IOU petrodollah and the sooner the better for the once sovereign nations of Urupp.