Introduction to asian oil geography.
Russia holds first oil reserves in the Asian Continent: 88.2 billion oil proved barrels in 2010.
Oil was discovered very early in Russia, far earlier than elsewhere, contrary to the gossip peddled by Drake. Indeed, crude was operated for the first time early XIX Century, in the present Azerbaijan (literally “fire country”, called before Russian Empire province). In 1830, Bakou counted 116 drillings which produced 720 barrels a day. However, due to the western oil companies, crude took its real market value and was carried by a network financed by these towards the western countries.
Later on, the Russian production dropped a lot early XX Century during the revolution which took place in 1905.
At USSR drop off, production only reached 6 million barrels a day from 1994 till 1999, date on which a spectacular kick back started, and finally reaches 10 million barrels a day today.
This production increase is based on the modernization of mining techniques, as there are few new discoveries of oil deposits.
The Russian Oil production is concentrated in the oblast of Western Siberia (69 %) and Volga-Ural (26 %), the reserves of which have already been greatly cut into. The main not operated deposits are located in East Siberia, in Far East and in the oblast of Timan-Pechora but the production conditions are more difficult and more onerous over there.
Although Russia is the first world oil producer before Saudi Arabia with 10.34 million barrels a day (i.e. 511 million tons) in 2011, i.e. 12.6 % the world production (82 Mbd), production is still far under 1988 levels (12.5 Mbd). It is the highest level of the post-soviet period. However, production has been increasing since 1998 (6.16 Mbd). Its production should stay stable up to 2030. Let us note that, in the present condition of its infrastructures, Russia holds a very limited increase capacity of its production, contrarily to Saudi Arabia.
Russia is also the second world oil exporter behind Saudi Arabia with 5.2 Mbd in 2011 (total of crude and refined products). Exports have been increasing a lot since 1999 (3.8 Mbd), re-startup year of the Russian economy, further to the crisis of the years 1990, the head of which had been reached in 1998. Russia sells over 85 % its oil products outside CIS. EU absorbs 53 % Russian oil plants, representing 16 % its consumption. These ratios have mechanically increased due to the extension of EU to the Central and Eastern Europe in 2004, as oil supply of these latter originates approx 90 % from Russia.
In almost two decades (1992-2011), oil consumption in Russia decreased by almost 60 %, from 4.5 to 2.7 Mbd in 2011, i.e. 3.1 % world consumption (87.4 Mbd in 2011), compared to 21.4 % (18.7 Mbd) for the United States.
Russian oil companies:
Formerly under State control, the oil sector has been greatly privatized since 1992, remaining, preferably, between Russian hands. At present, we count approx ten companies, the main three companies ( Rosneft, Lukoil and TNK-BP) of which hold respectively 18.11, 13.7 and 13 billion barrels of proved reserves and cover themselves over 50 % the Russian production. Vertically integrated, they control all professions, as well up as down : prospection, production, refining, dispatching.
The configuration of the Russian oil sector is different from that of the main other OPEC producing countries (Saudi Arabia, Gulf Emirates, Venezuela…) where, generally, there exists only one big domestic company controlled by State. This multitude of operators is a handicap for Russia. Decisions concerning crude production and export do not only concern State, so reducing its investment capacities (whilst requirements on this subject are considerable). The Russian oil companies have then to open up its doors to foreign investments, to the image of TNK-BP.
On this latter decade, foreign investments have been indispensable for the modernization of the Russian oil transport network, weak point of its oil industry. Indeed, to be able to develop itself, the Russian companies need to export their production. However, they meet two major obstacles : from one hand the oil pipelines network remains under the unique control of the public company Transneft which may impose its conditions, and on the other hand it is already at the maximum of its capacities.
Moreover, Russia does not have enough sea outlets accessible and usable all year long. Projects of oil pipelines, oil terminals and Port facility have multiplied. It allowed increasing substantially the export capacity of Russian crude to Europe, the United States and Asia.
Major oil pipelines in 2011 are:
- Baltic Pipeline System (BPS): controlled by Transneft, it carries oil from Western Siberia and from Timan-Pechora region, to Baltic harbors, to serve Western Europe. BPS will reach over one million barrels a day in 2020 (i.e. 55 Mt/year), when all works are achieved (namely the construction of a second terminal on Vytosk Island in Finland Gulf).
- Caspian Pipeline Consortium (CPC): it connects Tenguiz fields (Kazakhstan) to Novorossisk harbor on the Black Sea. Operated in 2001, this way may discharge approx 1 million barrels a day. It offers a Russian alternative to the following oil pipelines Bakou-Soupsa and Bakou-Tbilissi-Ceyhan (BTC), which may export crude from Caspian Sea to the western markets without crossing Russia.
- Droujba-Adria: it dispatches the Russian crude to the central and eastern Europe, either by the North (Russia-Belarus Republic-Poland-Germany), or by the South (Russia-Ukrain-Hungary-Slovakia-Czech Republic) to those belonging to Adria system connecting Omisalj Croatian harbor to Hungary. For the moment, it allows to dispatch 300 000 barrels a day.
- Eastern Siberia-Pacific Ocean (ESPO): operated by Transneft, located in the Southeast Siberia, its first phase (built from 2006 till 2009) spreads over 2 757 kilometers, connecting Eastern Siberia deposits since Taïchet in Irkutsk region to the Chinese border at Skovorodino. This project cost 12.27 billion dollars (without counting Skovordino terminal cost which reached 1.74 billion dollars).
Its second phase will extend it to the Pacific Ocean, at Kozmino harbor in the Japan Sea, namely a complementary distance of 2100 kilometers so serving Japan, South Korea and the other Southeastern countries. Its realization is foreseen for 2014. Its final length will be 4 857 kilometers and its cost will be approach 20 billion dollars. Its transport capacity in 2012 reaches 600 000 barrels a day. It intends to increase to 1 million barrels a day in 2016 and to 1.6 million barrels a day up to 2025. Awaiting the realization of the second phase, transport from Skovordino to Kozmino is ensured by railway.
Fields located west Ural are very mature. Most of them entered production in the years 1980, i.e. over 30 years being mined. To the contrary, fields located east Ural (Eastern Siberia) are far more recent : some have not been operated yet. The future Russian crude is then in East Siberia as well as in Arctic.
West Ural was named “the second Bakou”. Indeed, 40 billion crude oil barrels issued from rocks dating from Devonian were discovered.
It holds approx 27 billion barrels. The greatest field is that of Romachkino, located in Tatarstan, west Ural. This field was discovered in 1942 and holds 17.2 billion barrels crude oil. It is strongly depleted. 15 billion barrels have already been extracted.
Western Siberia was in turn qualified of “third Bakou”. Indeed, this zone of Russia holds approx 80 billion barrels and produces today over 5 million barrels a day. Source rocks date from Jurassic.
The first deposit was discovered in 1953. The region started to develop in the years 1960. Samotlor deposit (the biggest Russian deposit) was discovered in 1967. It contains 44.6 billion barrels. Only 20-23 are recoverable. This deposit is strongly depleted. 16 billion barrels have already been extracted. Its production peak dates from 1980 (3.5 million barrels a day : second highest level of production in the world behind Ghawar deposit – 5 million barrels a day in 2005, i.e. 6.25 % world production).
Crude was discovered in the years 1970. Reserves are located on Sakhaline Island as well as offshore not very far from this latter, in Pacific Ocean (namely the northeastern coast of the island). The mining of this crude started in the years 1990. Reserves are estimated at 14 billion oil barrels. Let us note that in 2007, as per Rosneft and Korea National Oil Company (KNOC), Kamtchatka peninsula might hold equivalent reserves.
Vankor, located in the great North, holds 3.8 billion barrels. It is held by Rosneft. Yurubcheno-Tokhomsk will enter production in 2013. It is also held by Rosneft. Verkhnetchonsk (TNK-BP/Rosneft). Let us add to the list those of Kouïoumbinsk (Slavneft), Doulisminsk (Sberbank), Sredne-Botouobinsk (Taas-Yuriakh) and a lot more.
It is located in the Great North, and partly in Pechora Sea (located between Barents Sea and Kara Sea, in Arctic Ocean). It holds approx 11 billion barrels. It is presently in development phase, namely by Lukoil and ConocoPhillips.
Dependence on markets:
If the Eastern Europe, and in a minor extent, the Western Europe, is dependent on Russia energy resources, Russia is subject to the demand of these countries and to fluctuations of hydrocarbon quotes. Let us remember that the energy sector represents in 2010 approx 40 % Russian GDP. Furthermore, oil deposits of the country are strongly depleted and no great discovery appeared since decades.
Kazakhstan holds 10th world oil resources with 47.34 billion proved barrels in 2012, figure increasing constantly further to discoveries. It might hold 75 billion barrels. It is the 2nd potential not operated in the world behind Iraq. Indeed, the major part of the country has not been explored yet.
The country holds 75 % Caspian Sea oil reserves (i.e. 3 % world reserves) and hopes to belong to the first five exporting countries up to 2020 (in 2011, it is 16th).
KazMunaiGas is the domestic Kazakh Company issued from merging between KazakhOil and Oil and Gas Transportation in 2002. It manages the sector within the country, however in partnership with numerous international companies.
The major part of oil basins is concentrated west country, north Caspian Sea and slightly east of this latter, along a vast continental margin having Silurian source rocks presenting three super giant deposits. Two small oil basins are located in the center of the country. The republic counts totally over 200 minor fields in 2011.
Discovered in 2000, it is located offshore north east Caspian Sea, offshore Atyrau city.
Its reserves are estimated between 30 and 50 billion barrels (38 billion would be the best estimation), the biggest discovery in the world since over 30 years. At present, it is the greatest industrial project in the world with a budget estimated at 160 billion dollars. The Consortium North Caspian Operating Company (NCOC) manages this project, its participants are : ENI (18.52 %), Shell (18.52 %), ExxonMobil (18.52 %), Total (18.52 %), ConocoPhilips (9.26 %), Inpex (8.33 %) and KazMunaiGas (8.33 %).
It has not entered production yet due to two main factors:
- Ultra deep drilling (5000 meters under the sea level, then 1000 meters rock)
- Variations of Caspian Sea level
- Segmented reservoir
- Extreme climatic conditions
- Complex geological structure
- Disease in local populations
- Important mortality of surrounding fauna
- High sea and ground pollution
- Presence of toxic metals in the reservoir
- High sulfur acid content (risk of acid rains)
- Lack of transparency (disclosure refusal of ecological report infringing Aaharus Convention)
- High accident risks
- Seismic risk of concern
Furthermore, its sulfur content is high (45°C API).
However, Kazakh government intends to extract over 1.5 million barrels a day in 2015, what should place it to the third place of world oil deposits in terms of production behind Ghawar and Burgan. Production will start end 2012.
Located between Atyrau and Aktau cities, northeast Caspian Sea, it has been discovered in 1979.
The upper part of its reservoir is located at 3657 meters from the surface of the earth, making it the onshore deposit which is the deepest most operated in the world. It is the greatest Kazakh deposit already operated. It holds 25 billion oil barrels, 6 to 9 of which are recoverable with present technology.
The development of the field was carried out early 1990 by a consortium led by Chevron. At present, it is operated by TCO Consortium (Chevron, ExxonMobil and KazMunaiGas).
The sulfur content of its oil is very high (16 %). A “demercaptanization” process (process of thiol extraction enclosing the major part of sulfur in the crude) was set into place in order to de-sulfur the crude. Due to this technique, crude is marketable, as it only contains now 0.55 % sulfur, what is a normal content. The deposit produced 206.2 million barrels in 2011, i.e. an average of 565 000 barrels a day.
Located in Caspian Sea, on the Russian-Kazakh sea border, 120 kilometers away west Buzachi peninsula. It had been identified by seismic statements in the years 1980. An agreement dated from 2002 intends to share 50/50 the future profits of its mining between both governments. Its reserves are estimated between 7 and 10 billion barrels. It will be operated by KasMunaiGas and Rosneft.
In more modest fields, Lukoil has a high presence in Kazakhstan.
Indeed, it was the first company to operate in Kazakh fields.
Kazakhstan produced few up to 1998. On that year, production growth became significant. This latter, since that time, is geometric. In fact, in 1998, it reached approx 500 000 barrels a day. It reaches 1.3 million in 2005 and 1.75 million in 2011.
The country intends to produce 3.5 million barrels a day in 2015.
Major part of exports is the surrounding countries due to the Russian oil pipelines network. Connections to Black Sea and Persian Gulf harbors allow Kazakhstan exporting its crude to more distant countries through waterways.
China will absorb 65 % Kazakh total production in 2020.
Transport: exports of an enclosed country:
For long, Kazakhstan suffered from its geographical location. It had to expect for foreign high investments to settle its transport network and to make so the country autonomous. Although the State still benefits from the Russian pipeline network, it is now well covered. So well covered that it has even become an important transit crossroads for the surrounding countries.
Its major pipelines are:
- Kazakhstan-China : the oil pipeline connects Atyrau, Kazakh city located on the Caspian Sea bank , to Alashankou located in Dushanzi district in Xinjiang Chinese region.
It is held by China National Petroleum Corporation (CNPC) and the domestic Kazakh Company KazMunaiGas. Its construction was carried out from 1997 to 2009. It measures 2 228 kilometers long. It has a transport capacity of 10 million tons crude oil a year (this capacity will be reached in 2015). Its cost amounted to 3 billion dollars. This pipeline is connected to Atasu terminal, connecting to the pipeline Omsk (Russia)-Pavlodar (Kasakhstan)-Shymkent (Kasakhstan) – Türkmenbasy (Turkmenistan), managed by the Joint-venture Gasprom Neft and TNK-BP, crossing vertically Central Asia, russian oblast of Samara, where it joins Transneft oil pipelines system. It allows Kazakh crude benefiting from Transneft network to supply with eastern Asia countries.
- Caspian Pipeline Consortium (CPC) : it connects Tengiz to Novorossiysk, Russian oil terminal located on Black Sea coast. It spreads over 1 510 kilometers. Production started in April 2003. Its transport capacity reaches 1.3 million barrels a day in 2012. It is held by a consortium of 10 companies : Transneft (31 %), KazMunaiGas (19 %), Chevron (15 %), LukArco (12,5 %), ExxonMobil (7.5 %), Rosneft (7.5 %), ENI (2 %), BG (2 %), Oryx (1.75 %), KazMunaiGas-BP (1.75 %).
The country holds three major refineries located at Pavlodar, Atyrau and Shymkent, with a total capacity of 21 million tons of refining per year (i.e. 427 000 barrels a day).
Kazakhstan economy is essentially built on crude exports, representing 56 % export value and 55 % State budget.
China is the fifth world oil producer with approx 4 billion barrels in 2010. It holds 20.4 billion proved reserves.
Oil resources are mainly concentrated in three sedimentary basins, two northeast country and one west country.
Tarim basin : located west country, in Xinjiang, in Taklamakan desert, it holds 10 billion tons of crude oil. It will be, in the future, the greatest oil producer in the country. However, this basin located in uighur autonomous Region of Xinjiang is subject to tensions relative to the sovereign contestation of the Chinese Authority by East Turkestan and Tibet. This has the effect of slowing down prospection. Indeed, some projections believe that Tarim basin reserves amount to 30 billion tons.
Songliao basin : located north Pekin, it holds namely Daqing deposit, main field in the country since decades. Source rocks are lake deposits from the Mesozoic era.
Bohai basin : located a little more south, it also offers important resources. It extends itself offshore in Bohai sea. These regions have been mined for decades and rather mature. There are less discoveries and production is stagnating or declining, but still covers domestic production. South China sea (even east) is subject to territorial conflicts between coastal States and slows down mining.
In a minor extent, there are Ordos and Sichuan basins located in the center of the country. In major part, they are constituted with natural gas. In the southeast, the estuary of Pearl River also offers not negligible reserves and small deposits were discovered recently in its extension deep offshore.
Major oil deposits:
Daqing: Daqing region holds the greatest eponymous oil deposit in China. Located between Songhua stream and Nunjiang stream in Heilongjiang province, it was discovered in 1959. Its initial reserves amounted to 6.36 billion tons : two-thirds have already been extracted, meaning that it is strongly declining. It produces 1 million barrels a day from 1975 to 2003, then declined from 2004. In 2011, it produces 650 000 barrels a day. It is mined by Daqing Oilfield Company Limited.
Shengli: second greatest oil field in China, it was discovered in 1961 and entered production in 1964. It is located in Yellow River delta, north Shandong province, on the border of Bohai sea, east Beijing, it produces 471 000 barrels a day in 2011 and holds 5.31 billion tons of oil. It is mined by Sinopec. It produces itself one fifth the Chinese production.
Jidong Nanpu: located east Hebei province, this field holds 2.8 to 4 billion oil barrels. It is mined by PetroChina.
Henan: located in Henan province, east republic, it holds 2.7 billion oil barrels. It is mined by Sinopec.
Jilin: located in Songyuan region, west Jilin province, it entered production in 1955. It produces 121 000 oil barrels a day in 2011.
Other oil regions such as Qaidam basin (225 million tons) or also in Qinghai province hold oil in a minor extent. Offshore, the greatest field is that of Kiuhua, located 300 meters deep in the south of China sea. It represents 1 billion oil barrels and is mined by FPSO platform from CNOOC.
PetroChina Company Limited is a subsidiary of China National Petroleum Corporation (CNPC), created on 5th November 1999. CNPC, domestic company, injected 90 % its assets and its liabilities into it as well as its activities (prospection, production, refining, sales, and so on). It is the second Chinese company and the twelfth company in the world with a turnover amounting to 221,57 billion in 2011. PetroChina entered Shanghai Stock Exchange in November 2007 (it is also now present at Hong Kong New York Stock Exchanges.
Petrochina differed in purchasing shares in oil deposits abroad (Talara (Peru), Muglad (Sudan) and so on) or also in purchasing shares of foreign oil companies (Aktobe Oil Company of Kazakhtstan – 60.3 %) and acquisitions (PetroKazakhstan, and so on) but also mining contracts (Intercampo, East Caracoles (Venezuela) and so on). Its operations are diversified on each continent (Azerbaidjan, Canada, Iran, Uzbekistan, Afghanistan and so on).
In 2011, it holds 11.1 billion barrels of proved reserves and has produced 886 million oil barrels.
Sinopec is a subsidiary of China Petroleum & Chemical Corporation Limited, Chinese State Company created in February 2000. It is quoted at Hong Kong, New York and London Stock Exchanges. It is the first Chinese company and the sixth company in the world with a turnover of 273 billion dollars in 2011.
Sinopec is as well specialized upstream as downstream. Indeed, its activity sectors are : prospection, production, refining, storage, transport, trading and so on. The turnover of the company greatly depends on its downstream activities (petrochemicals, trading, and so on). Indeed, Sinopec only produces a little more than one third of what Petrochina produces, but produces 60 % refined products more every year.
The company is aggressive on acquisition market. It repurchases competitors or stakes on each continent (Addax Petroleum (Switzerland), Daylight Energy (Canada), Galp Energia (Brazil) and so on) and also holds shares in international projects, any activity sector included. It is namely present in Gabon, Sudan, Ethiopia and so on. It collaborates with the greatest major companies in the sector such as Saudi Aramco, Exxon-Mobil, Total, ConocoPhillips, and so on.
In 2011, Sinopec holds 3.97 billion crude oil equivalent, 2.85 billion of which are proved reserves oil. It produced 321.73 million barrels of crude oil on that operating year.
China National Offshore Oil Corporation (CNOOC):
China National Offshore Oil Corporation (CNOOC) is the third greatest state oil company in China. CNOOC is specialized in oil exploration and mining offshore. Its subsidiary, CNOOC Limited, is quoted at Hong Kong Stock Exchange as well at New York Stock Exchange. Its market capitalization reaches 60.48 billion dollars in 2011.
CNOOC in major part operates in China (China Sea and Bohai Sea). It also operates abroad, on each continent (except Europe). It is also procreative concerning stakes from its competitors and acquisitions abroad, namely in Canada (MEG Energy, Opti Canada, Nexen, and so on).
In 2011, the group holds 3.19 billion barrels of proved oil and produces 258.5 million barrels.
China is largely supplied by waterways transport. Supertankers leaving the Middle East (passing through Ormuz Strait) or from Africa (Angola, Sudan, Nigeria and so on) pass through Malacca Strait before reaching Guangzhou, Beihai, Jinxi and Shanghai harbors.
However, the country is also supplied by road transport, coming in major part from Kazakhstan-China oil pipeline achieved in 2009 by the joint-venture KazMunaiGas-CNPC. It joins Atyrau (Kazakhstan) to Alashankou (West China). This pipeline is also used to send Russian oil from West Siberia to China, as well as that of Turkmenistan and Iran. Its capacity is 400 000 barrels a day in 2011.
China also holds a domestic oil pipeline network reaching 22 430 kilometers (operated at 70 % by CNPC).
The country holds a high refining capacity : 10 million barrels a day. It intends to increase it up to 15 million barrels up to 2016. Major refineries are held by Petrochina (50 %) and Sinopec (35 %).
High demand related to growth:
As Chinese demography reaches 1.35 billion inhabitants, an average age of 32 years old, and mainly as the economic growth increases meanly by 10 % a year since 1990 with a GNP reaching approx 7 000 billion dollars in 2011, China commodities requirements are considerable. China consumed 545.5 million tons (i.e. approx 13 % world demand) hydrocarbons in 2011, half of it was imported. Its imports grow by 6 % a year. Without a new important discovery, China is strongly exposed to a growing foreign demand in oil, which might reach 70 % of its domestic demand up to 2020.
The main oil suppliers of China are Saudi Arabia, Angola, Iran and Russia representing altogether approx 50 % demand. But the country diversified its suppliers in a good manner because it also has suppliers in South America (Venezuela, Argentina, Colombia and Equator) and North America (Canada, United States and Mexico). However, the major part of its oil is supplied by countries from the Middle East (mainly Saudi Arabia, Iran and Iraq, up to 45 %) and Africa (mainly Nigeria, Angola and Sudan, up to 29 %). It also has other smaller suppliers in Asia and in Oceania (Indonesia, Malaysia, Bangladesh and so on).
China multiplies its strategic partnerships throughout the world to guarantee its supply security by means of fixed contracts at market price on durations going from 20 to 30 years with countries such as Iran, Venezuela, Brazil, Angola and so on). Indeed, Chinese oil imports should increase exponentially up to 2030. In 2020, China should represent 23 % the totality of the world demand with 10.5 million barrels a day, 8 of which imported, and should increase to 17 million barrels a day in 2035.
However, the invoice might be lower with a better Tarim basin mining. Furthermore, 85 % its reserves are onshore. CNOOC is far from ending its offshore prospection in China Sea.
Western countries stopped mining Bakou deposits in 1918 due to discoveries of huge reserves in the Middle East.
Geologically, Central Asia, from Bakou to Samarcande, is promising, as shown as well by phenomena as Darvaza, as in process operations. 70 years later, the Caspian potential is hardly exploited.
Contrarily to the Middle East, where crude is frequently close from a harbor, Caspian Sea is very far from both harbors and consumption centers. The only means to market great quantities of crude is to evacuate it through oil pipelines.
Already in 1906, the first pipeline Bakou-Batoumi, 800 km long, transported kerosene to the Black Sea and the west markets. In 1991, the sea traffic through Bosphore is already saturated and other routes are researched. The United States hurry up making proposals to evacuate this crude to the Western countries, in order to decouple Central Asia producing countries from a new liability to Russia. Bill Clinton himself took care of the promotion of Bakou-Tbilissi-Ceyhan (BTC) project.
BTC will be operated 6 years later. The Silk Road Strategy Act, which authorizes the American government to support “east-west corridor” countries which are favorable to them, quoting pipelines explicitly, is adopted in 1999.
In North Caspian, in 2001, CPC is a Texaco success in spite of huge initial difficulties. It carries Turkmen crude from Tengiz to the Black Sea. Traded during the peak of the Russian crisis, it is the object of pressures from a partner which has become powerful again. This pressure resulted in BP eviction in December 2009, obliged to yield its share into CPC to Lukoil.
In 2006, China installed an oil pipeline between Kazakhstan (Atashu) and Karamay (Dushanzi) with low capacity for the moment. However, the Chinese consumption figures for 2009 (9 Mbbl/d) let suppose that a flow-rate increase should be welcome from both hands.
It is also question of “pipeline diplomacy”. Any stable link structures the environment, implies economical consequences and expresses political wills. A pipeline requires furthermore a customer and a supplier which commit themselves on a very long term in a reliable way on volumes and quotes. The first kerosene pipeline Bakou-Batoumi allowed reaching Western Europe markets, and Bakou conserved the added value of kerosene extraction by crude distillation. Today, there are thousands kilometers pipelines being operated. The route of recent big size pipelines reveals a lot of.
Evocated early years 1990, BTC is designed to feed Western Europe from Bakou, avoiding the Russian territory, bypassing Armenia (which had bad relations with Turkey at that time) and favoring Turkey by the complementary traffic in Ceyhan Harbor. Then, it competes with the Russian influence in this region to the profit of partners favorable to NATO. But BTC transports 1 Mbb/d, whilst it is expected that the Caspian Sea produces 5 Mbb/d in 2015. So, complementary routes have to be found. To the south, it seems difficult to cross Iran. Iran has no interest to open up crude which will compete with its own crude. To the north, we find Russia again. So, only Afghanistan is left. This is the TAP project (Turkestan, Afghanistan, Pakistan), become TAPI (with India). In 2009, we do not know the issue of this project.
Azerbaidjan economy is strongly dependent on crude mining in the Caspian Sea which represents 70 % its exports and 50 % State budget.
India holds 5.62 billion barrels oil in 2011. It takes the 2nd position in Asia-Pacific region, behind China. The major part is located in offshore Mumbai High (West) deposit as well as northeast onshore in Assam State. More recently, reserves have been discovered in Rajasthan desert, west, reaching 500 million barrels. Huge reserves located offshore in Bengal Bay are unexploited at the moment.
Indian oil sector is dominated by domestic companies. Oil and Natural Gas Corporation (ONGC) is the greatest one. Namely, it represents 75 % upstream. Then you have Indian Oil Corporation (IOC) which holds almost half downstream (crude oil products, 40 % refining capacities, 67 % transport capacities) . You also have Bharat Petroleum and Hindustan Petroleum. The proportion of private companies is growing. The most important one is Reliance Industries. Few foreign companies hold shares in Indian oil concessions.
Recently, Indian domestic companies started to acquire stakes in foreign projects. The most active one is ONGC Videsh Ltd(OVL). This one operates namely in Russia (Sakhaline Island), Sudan, Vietnam, Colombia, Syria. OVL intends to grow its production from 150 000 barrels a day in 2011 to 560 000 in March 2014.
Mumbai High : it is the main Indian deposit. It is located 160 kilometers west Mumbai coasts, offshore, in Khambhat Gulf. It is mined by the Indian company Oil and Natural Gas Corporation (ONGC). This oil field was discovered in 1964 by a Russian and Indian joint-venture. The first well was drilled in 1974. The seal rock is mainly composed of salt domes and coral reefs forming an anticline. That is the reason why it is called “High”. Its oil has a good quality (60 % of paraffinic content versus only 25 % for Arabian crude). Since 2004, it produces approx 400 000 barrels a day, i.e. 14 % domestic demand and almost half country production.
Assam-Arakan Basin : the first oil field discovered in Assam region was that of Digboi in 1889. The oil is loaded in paraffinic content. Its rocks originate from High Mesozoic to Cenozoic. Geologically, it is not stable due to a tectonic activity : the propulsion of Naga belt against that of Nassam, making extraction delicate. Assam-Arakan basin covers 116 000 square kilometers. It is composed of very numerous oil fields such as Nahorkatiya (1953), Moran (1956), Rudrasagar (1960), Jorajan, Kumchai, Hapjan, Shalmari, Lakwa, Lakhmani, Geleki, Amguri, Charali, Borholla, Dikom, Kathaloni, Khoraghat, Baghjan, Dirok, and so on. Totally, a hundred fields are recorded.
Mangala : located in Rajasthan (northwest India) in Barmer basin, it was discovered in 1999. It is mined and held at 70 % by Cairn India Limited (subsidiary of Cairn Energy – Scotland). In January 2004, a study estimated its reserves at 3.6 billion barrels, 1 billion of which is recoverable, that was the greatest discovery onshore of the year in the world. The crude has a medium quality (25-30° API, versus 38 for Brent). It is waxy : its pour point is at 42° C (versus 3° C for Brent). Two types of Enhanced Oil Recovery (EOR) will succeed in growing the recovery by 25 %. In 2005, Oil and Natural Gas Company acquired 30 % shares. The field entered into production in August 2009. Its production reaches 125 000 barrels a day in 2012 and will reach 150 000 in 2013. A production plateau is estimated at 240 000 barrels a day. Mangala field should supply 6 % of the domestic demand and 20 % of the global production of the country up to 2016.
In 2011, India holds a refining capacity of 4 million barrels a day, via 21 refineries. India is the 5th crude refining country in the world. Its greatest refinery is that of Jamnagar complex (operated by Reliance Industries) located west country. It has a refining capacity of 1.24 million barrels a day.
Due to the growing demand in oil products in the region, the government tries to make India become a refining country for its neighbors and hopes so to become a net exporter of refined products intended for the Asiatic market in a next future.
The Indian population presently amounts to 1.21 billion inhabitants. It increases by 19 million a year. India is the 6th energy consumer in the world and the 4th oil consuming country behind the United States, China and Japan. In 2009, oil represented 24 % of its energetic mix.
Its energy demand should be multiplied by 2.5 up to 2020 (16 % a year) due to its demographic growth, its urbanization, the development of its transports, and so on. The volume of the domestic demand of the fiscal year 2012 rose to 3.45 million barrels a day (i.e. 172.11 million cubic meters) versus 3.29 million barrels a day (i.e. 163.59 million cubic meters) the previous year. The import has increased by 41 % up to 141 billion dollars. The country produces less than one third of its crude oil requirements.
Its suppliers are mainly located in the Middle East, namely Saudi Arabia (18 %) and Iran (11 %).
Indonesia holds 3.99 billion barrels proved reserves in 2011. Its production amounts to 994 690 barrels. Its consumption is 1.43 million barrels. The country has become a net importer since the end of 2004. OPEC member since 1962, it quitted the organization in 2008. Its deposits are depleting. Its demand is growing. The objective is to maintain production.
Most of Its deposits date from the tertiary era. The first one was discovered north Sumatra, in Telaga Tunggal by 121 meters deep in 1885. Then, new discoveries resulted, such as Kruka (east Java, 1887), Kampong Minyak (south Sumatra, 1896), Sumpal (south Sumatra, 1897), Sanga-sanga –east Kalimantan, 1897), Perlak (north Sumatra, 1900) and Ledok (east Java, 1901). Some crude oil was also discovered east Borneo. At the beginning of the century, the production amounts to 65 000 barrels a day (at 95 % by Royal Dutch Shell). In 1939, the production amounted to 170 000 barrels a day and the refining capacity amounted to 180 000 barrels a day. At that time, 75 % oil in the Far East came from Indonesia. In January 1942, during the First World War, Japan invaded the Dutch colony and in March it took full possession of the country deposits. They also drilled Minas giant oil field. After the war, Indonesian leaders decided to free their country from the Dutch colonial yoke. Their independence being acquired in 1949, production rose progressively to reach 400 000 barrels a day in 1960. A consortium of domestic companies intensified the exploration offshore in Java Sea. Arjuna complex, located by 1400 meters deep, was the first oil deposit offshore discovered in Indonesia in 1968.
From 1975 till 2001, production amounted between 1.4 and 1.7 million barrels a day. In 2008, the country quits OPEC. In 2011, its production amounts to 1 million barrels a day approximately.
At present, 53 oil companies operate in Indonesia. The country production is operated in major part by Chevron, via its subsidiary Caltex (47 %). Pertamina, created in 1968, is the greatest State Indonesian Company. It represents 16 % the domestic production. The rest of the production is operated by Total (France 9 %), ConocoPhillips (USA 8 %), Petrochina (China 7 %), CNOOC (China 5 %), Medco (Indonesia 4 %), Kodeco (Indonesia 2 %) and BP (United Kingdom 2 %).
The refining capacity of the country amounts to 1.14 million barrels a day.
BPMigas is in charge, by State, of regulating upstream sector.
Located between Indonesia and Malaysia, it is the main passage track between Indian Ocean and Pacific Ocean, Malacca Strait is one of the main oil supply routes of two of the main world consumers, China and Japan. It has a traffic equivalent to that of Suez Canal (Egypt). Over 80 000 ships transited in 2011, i.e. 30 % world see transport. Half oil sea commerce is carried out through Malaca Strait and this figure is constantly growing, due to the growing demand in China. Let us note that 60 % oil imported by China transits through this strait, as well as 80 % Japanese oil. Asia absorbs 60 % Middle East production and the major part transits through Malacca strait. So, it is a highly strategic sea transit place. Piracy took place, but means were taken by Indonesian and Malaysian authorities to slow down this piracy. In 2008, 135 ships had been attacked, 44 ships seized and 600 seamen taken as hostages and exchanged for money.
The Indonesian economy is less and less exposed to incomes due to oil.
Malaysia holds 5.8 billion barrels of proved reserves in 2011. Royal Dutch Shell started first the exploration in Malaysia. The first well was drilled in 1910 at Miri in Sarawak State. The first offshore deposit was also discovered by Royal Dutch Shell in 1968. In 1974, the Malaysian production amounted to 81 000 barrels a day. Today it amounts to 523 000 barrels a day, in decline since 2004.
Peninsula Malaysian is bordered by Malacca Strait, unconditional sea road of the world oil traffic. Eastern Malaysia (north Borneo Island) is booming in deep offshore.
Major oil fields:
Tapis: located in South China Sea, 209 kilometers away from the coasts of Terengganu State in Peninsula Malaysia, by 64 meters deep, it was discovered in 1969 by ExxonMobil. It is operated by ExxonMobil and Petronas, the Malaysian State Company. The reservoir dates from the Miocen period. The deposit produces 200 000 barrels a day in 2011. The quality of its oil amounts to 45.6° API and contains 0.0324 % sulphur.
Kikeh: located northwest Labuan Island, southwest Sarawak State coasts in Eastern Malaysia, nearby Brunei, 1300 meters deep, it was discovered by Murphy (USA) in 2002. Its production started in 2007. The field holds between 400 and 700 million oil barrels. It produces 52 000 barrels a day in 2011. Thanks to an investment, its production capacity will amount to 120 000 barrels a day in 2014 and should remain stable up to 2020. The field is operated by Murphy (USA) and Petronas. It is the only field in the country located deep onshore producing in 2012.
Exploration and production:
Production amounted to 862 000 barrels a day in 2004 and declines since that time due to mature reservoirs of the fields being exploited. The production of the country amounted to 523 000 crude oil barrels a day in 2011, down by 4 % compared with 2010. Its deposits are essentially offshore. The greatest field is Tapis, the crude of which, having a high quality, is used as a reference on the regional market at Singapore Stock Exchange. This field produces over one third the Malaysian production.
The population consumes almost the totality of the domestic production and its demand is growing. Malaysia exported 234 000 barrels of crude oil a day in 2010 and imported 205 000 of it.
The government took then measures to increase its production, essentially deep offshore close to Sarawak and Sabah States. In 2010, a massive investment by ExxonMobil in Tapis field (as well as in fields around Seligi, Guntong, Tapis, Semangkok, Irong Barat, Tebu and Palas) aiming at increasing its production. The result is foreseen in 2013.
Some oil deposits in the Malaysian basin are the object of a contract (Comercial Arrangement Area –CAA) between Kuala Lumpur and Hanoi. The operators of the Malaysian basin fields are Petronas (46 %), Talisman Energy (41.4 %, Canada) and PetroVietnam (12.5 %). The fields in north basin entered into production in 2009 and supplied with 25 000 barrels a day in 2009. This figure doubled in 2010. The fields south basin are still prospected.
Some offshore zones are subject to interstate conflicts with Brunei, Thailand, Indonesia, Philippines and Vietnam. One of those conflicts, 20 years duration, has been settled between Kuala Lumpur and Bandar Seri Begawan resulting in a common development of a field next to Borneo. This started in 2011.
All deep offshore projects are located close by Sabah. Outside Kikeh, which is already producing, the main fields in the region are the following:
Gumusut-Kakap: located by 3900 meters, it should enter into activity end 2012 and produce 135 000 barrels a day. The shareholders are Royal Dutch Shell (33 %, it is the operator of the field), ConocoPhillips (33 %), Petronas (20 %) and Murphy Oil (14 %). FPSO will be connected to Sabah terminal located at Kimanis.
Kebabangan (KBB): located next to Gumusut-Kakap, it will enter into production between 2012 and 2014. It lies by 140 meters deep under the sea level. Its production capacity is estimated at 22 000 barrels a day. It is held by Kebabangan Petroleum Operating Company (KPOC), consortium including Petronas (40 %), Royal Dutch Shell (30 %, operator) and ConocoPhillips (20 %).
Malikai: located at 140 kilometers northeast KBB, it has been discovered in 2004 by 565 meters deep. The development started in 2009. It should enter into production in 2014 with a capacity amounting to 60 000 barrels a day. The field is connected to Kimanis terminal. The shareholders are Royal Dutch Shell (35 %, also operator), ConocoPhillips (35 %) and Petronas (30 %).
Refining capacity : 538 580 barrels a day in 2011. Petronas operates three refineries : Kertih, Melaka I and Melaka II, with a combined capacity of 259 000 barrels a day, Royal Dutch Shell holds Lutong refinery which has a capacity of 170 000 barrels a day, ExxonMobil and Kemanan Bitumen operate two others, having a lower capacity equal to 86 000 and 23 750 barrels a day.
Other refineries are in project, essentially on Petronas demand, namely that of Pengerang Johor.
Kimanis terminal, located in Sabah State, will be achieved end 2013. It is built by Samsung. It will have a handling capacity of 300 000 barrels crude a day.
Malaysian State Company, Petroliam Nasional Berhad (Petronas) was created in 1974. It is in charge of all energetic resources of the country.
Quoted at Kuala Lumpur Stock Exchange via three of its numerous subsidiaries, the main subsidiary being Petronas Dagangan Berhad, it invests into thirty countries. Its activities are as well upstream as downstream.
Petronas holds 27.12 billion barrels petrol equivalent throughout the world, including 20.56 billion in Malaysia with a mean production of 1.63 million barrels a day.
Outside Malaysia, Petronas is present in Sudan, Egypt, Turkmenistan and Chad, or also in Iran, Mauritania, Gabon, Cameroun, Niger, Yemen, and of course in Indonesia and Vietnam.
In addition to its three malaysian refineries Petronas also has a refinery in Durban (South Africa) with a capacity of 125,000 barrels per day.
45 % incomes from the Malaysian State come from Petronas.