Saudi Arabia stepping up exports to Asia, analyst says

Saudi Arabia said it will increase oil exports to Indonesia to 325,000 b/d from 200,000 b/d in 2010, underling a rising trend in exports that analyst BMI sees taking place elsewhere in Asia.

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Apr. 21 -- Saudi Arabia said it will increase oil exports to Indonesia to 325,000 b/d from 200,000 b/d in 2010, underling a rising trend in exports that analyst BMI sees taking place elsewhere in Asia.

“The move highlights the growing energy relationship between energy-rich Saudi Arabia and fast-growing Asian economies, as the Saudis offer supply security in return for Asian demand security,” BMI said.

In a word, the analyst claims that, “from the points of view of both geopolitics and economics, Saudi Arabia is betting its metaphorical chips on the East.”

The trend in Saudi Arabia’s exports of oil also applies to refined products.

According to data provided by the US Energy Information Administration, Saudi Arabia exported 54% of its refined products output to the Far East in 2008, vs. just 9% to the US and European markets.

Saudi Arabia has been developing a vast petrochemicals production and export capacity and sees Asia as a large market for these higher-value products.

Therefore, BMI said it expects petrochemicals and refined products “to form a larger share of the economic trade between Saudi Arabia and Asia in the medium and long term.”

Generally, according to BMI, Saudi Arabia has been keen to expand energy relations with Asia’s economic powerhouses, with China and India pegged to lead growth in the region.

At the end of February, Saudi Aramco announced plans to boost crude exports to India to 803,000 b/d from 512,000 b/d, while China’s oil imports from Saudi Arabia increased 5.2% year-on-year to 841,000 b/d.

In both cases, Saudi imports represent 20% of each country’s imports. But BMI data indicate that, between 2010 and 2020, India's oil imports are expected to rise from 2.3 million b/d to 3.8 million b/d, while China's oil imports will increase from 5.1 million b/d to 9.4 million b/d.

“Robust economic growth in these two promising emerging markets portends a long-term stable crude oil export opportunity for Saudi Arabia, which is keen to be a part of the economic futures of India and China,” the analyst reported.

But it noted that other Asian economies, such as South Korea and Japan, “are even more dependent on Saudi crude imports.”

BMI cited data from Japan's Natural Resources and Energy Agency indicating that Japan imported 26.92 million bbl of crude oil from Saudi Arabia in February 2010, representing 26% of Japanese imports.

BMI also cited EIA data indicating that South Korea imported 875,000 b/d of crude oil from Saudi Arabia in 2008, representing 38% of its imports.

“Both countries have attempted to diversify their import base beyond the Persian Gulf states, although their vulnerability to a supply disruption from these countries remains obvious,” the analyst said.

In particular, geopolitical tussles over Iran have led Saudi Arabia to assure China and other Asian countries that it can supply them with extra amounts of oil to meet any potential shortfall from sanctions or military action on Tehran.

“The Iranian issue, therefore, has the potential to bring Saudi Arabia and its Asian oil consumers even closer,” BMI said.

Contact Eric Watkins at hippalus@yahoo.com.

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