Europe squeeze as Russia lifts oil exports to Asia

RUSSIA, making a strategic shift towards fast-growing Asian markets, said yesterday it plans to ramp up eastbound oil exports next year, squeezing supplies to Europe as production is expected to plateau in the years ahead.

In so doing, the Kremlin is staking a claim to the dynamic Asia-Pacific region while also boosting the price it can command in Europe for its Urals Export Blend crude, which now often trades at a premium to North Sea benchmark Brent.

Deputy energy minister Kirill Molodtsov said that Russia, the world’s top oil producer, planned to increase oil exports via the Pacific port of Kozmino to 30m tonnes (600,000 barrels per day) next year from the 21m tonnes expected to be shipped this year.

“The balance between West and East will change,” Molodtsov told reporters, without specifying the expected impact on exports to Europe.

Russia, the world’s second-largest oil exporter after Saudi Arabia, ships around 3.5m barrels per day (bpd) to Europe, about a third of its total crude output.

Together with its export pipeline to China and East Siberia-Pacific Ocean route to Kozmino, Russia will export around 750,000 barrels per day to Asia in July to September, or 17 per cent of its overall exports of 4.4m bpd.

That shift reflects a long-term bet in particular on growing demand in China, the world’s second-largest oil consumer after the United States. Chinese oil demand is forecast to grow by 3.9 per cent to around 10.3m bpd in 2014, the International Energy Agency said yesterday.

Last month, Russia’s top oil producer Rosneft agreed to more than double oil shipments to China and has already increased plans for crude supply in the third quarter at the expense of Europe.

Molodtsov forecast Russian oil production at 518-520m tonnes (10.40-10.44m bpd) over the next three years. That is a touch below June oil output of 10.53m bpd – a post-Soviet high.