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We pick up the question from part 1:

Asia_oil_production_consumption_2005-2015_fill_in-2035

Fig 11: Homework for governments

Let’s have a look where all the net imports into Asia have come from in the past:

Asia_net_imports_2001-2015

Fig 12: Asia net imports – overview

BP’s data on inter area oil movements start in 2001. Oil imports from the Middle East increased from 11.5 mb/d in 2001 to 15.5 mb/d in 2015 or 4 mb/d. This is an amazing “performance “ because Middle East exports to all countries increased only by 0.8 mb/d (crude) and 0.7 mb/d (products) in 15 years!

World_crude_oil_exports_2001-2015

Fig 13: World’s crude oil exports

Global crude oil exports in 2015 were not higher than in 2007. Canadian exports (dirty tar sands mainly to the US) increased by 1.9 mb/d since 2001.

Middle East exports to Asia

Fig 14: Middle East oil exports share to Asia

Asia’s share of Middle East exports has increased from 60% in 2001 to 75% in 2015. Let’s have a look to which countries/regions these Middle East exports go:

Middle_East_oil_exports_by_destination_2001-2015

Fig 15 Middle East oil exports by destination

In the above graph we stack Asian countries on top of other countries which shows that Asia took away Middle East exports from the US and Europe which are in decline.

So how would that continue into the future? Let’s do a very simplified trend analysis without regard to oil prices, the type of oil, oil reserves and geo-political events and assuming no declining oil production in Asia.

…click on the above link to read the rest of the article…

Peak Oil in Asia (part 1)

June 23, 2016

Peak Oil in Asia (part 1)

According to data recently published in BP’s 2016 Statistical Review Asian oil production remained at around 8.3 mb/d for 4 years now.

Asia_oil_production_1965-2015

Fig 1: Asian oil production

We see the dominance of China (52% of total). The peak for all other Asian countries together was already in 2000, 15 years ago, followed by decline of around 0.9% pa which has now accumulated to around 600 kb/d (equivalent to 60% of Australia’s consumption). Since 2000, China was able to offset this decline and grow the Asian system but this has stalled now as confirmed by the latest data from the National Bureau of Statistics in China.

China_crude_oil_production_Jun2013-May2016

Fig 2: China crude oil production

Data are from here: http://data.stats.gov.cn/english/easyquery.htm?cn=A01

No matter how this Asian production plateau evolves it is dwarfed by ever rising Asian consumption. Let’s have a look at net oil imports country by country, alphabetically:

Australia_oil_production_vs_consumption_1965-2015

Fig 3: Australia’s oil balance

…click on the above link to read the rest of the article…

The Banking Turmoil Spreads—-Massive Banking Crisis Brewing In Singapore

February 17, 2016

The Banking Turmoil Spreads—-Massive Banking Crisis Brewing In Singapore

By Singapore Business Review

The three biggest banks are losing capital.

A crisis of staggering proportions is looming in China, and tiny Singapore will be caught right in the middle of the storm once the disaster finally erupts.

Speaking at the annual Barron’s roundtable, Swiss billionaire investor Felix Zulauf warned that Singapore’s largest banks are at risk of massive capital outflows if the Chinese economy experiences a hard landing, which he expects will happen this year.

“We are in a down cycle that will end with crisis and calamity. China in today’s cycle is what US housing was during the financial crisis in 2008,” Zulauf warned.

Zulauf warned that capital outflows in China will continue, prompting regulators to devalue the yuan by as much as 15% to 20% within the year. When this happens, Asian economies which are heavily dependent on China—particularly Singapore—will suffer because Chinese corporates will cut their imports even more, while indebted Chinese companies will be placed at greater risk of default.

“I expect the situation the deteriorate to a point where we will witness a banking crisis in Asia that will hit Singapore and Hong Kong particularly hard,” Zulauf said.

“It is conceivable that Singapore, which has attracted a lot of foreign capital over the years because of its image as a strong-currency state, will be extremely exposed to the situation in China. Singapore’s banking-sector loans have grown dramatically in the past five or six years. Singapore is now losing capital, which means the banking industry is losing deposits,” Zulauf said.

He said that such a situation will cause carry trades to go awry, which will result in steep losses for heavily-leveraged traders.

…click on the above link to read the rest of the article…

For US and Russia, All Roads Lead to China

January 25, 2016

For US and Russia, All Roads Lead to China

Recently I attended an event where the speaker referred to the interplay between economics and security in Asia as being that of Dr. Jekyll and Mr. Hyde. Dr. Jekyll represents the positive economic growth and interaction within the region, while Mr. Hyde represents the increasing security competition between the great powers of the area, namely Japan and China.

Asia, however, does not exist within a vacuum and China in particular has been used as a hedge by Russia whenever its relations with the West have been threatened. Until fairly recently, the U.S. has historically used China as a spoiler to contain Soviet ambitions and nowadays would hope for improved U.S.-China ties contain a resurgent Russia. Both Russia and the U.S. have traditionally fixated on China as a wedge to contain the other’s ambitions, with this resultant Cold War mentality still presently accounting for the failure of their respective economies to fully take advantage of integration opportunities within Asia.

Attention Deficit Disorder

With Russia’s turn towards China in the wake of negative Western sentiment and sanctions from its Ukraine and Syria maneuvers, it’s easy to forget that this is a transparent tactic Russia has used before to try to gain political leverage with the West. Russian efforts to improve ties with China economically and politically go back at least thirty years to Gorbachev’s 1986 Vladivostok visit and 1989 Beijing visit respectively. Efforts to integrate the Russian Far East (RFE) into the Asian economic dynamic were subordinated to politics yet again with Russia’s brief partnership with the U.S. in the wake of 9/11. Only after it was apparent that Russia would not be treated as a genuine partner with its own security interests did it turn again towards the East in order to gain leverage.

…click on the above link to read the rest of the article…

Slouching Toward Global Disaster

January 1, 2016

Slouching Toward Global Disaster

Syrian-warplane

There are many disturbing signs that the West is creating conditions in the Middle East and Asia that could produce a wider war, most likely a new Cold War, containing, as well, menacing risks of World War III. The reckless confrontation with Russia along its borders, reinforced by provocative weapons deployments in several NATO countries and the promotion of governing regimes hostile to Russia in such countries as Ukraine and Georgia seems to exhibit Cold War nostalgia, and is certainly not the way to preserve peace.

Add to this the increasingly belligerent approach recently taken by the United States naval officers and defense officials to China with respect to island disputes and navigational rights in the South China Seas. Such posturing has all the ingredients needed for intensifying international conflict, giving a militarist signature to Obama’s ‘pivot to Asia.’

These developments are happening during the supposedly conflict averse Obama presidency. Looking ahead to new leadership, even the most optimistic scenario that brings Hillary Clinton to the White House is sure to make these pre-war drum beats even louder.

From a more detached perspective it is fair to observe that Obama seems rather peace-oriented only because American political leaders and the Beltway/media mainstream have become so accustomed to relying on military solutions whether successful or not, whether dangerous and wasteful or not, that is, only by comparison with more hawkish alternatives.

The current paranoid political atmosphere in the United States is a further relevant concern, calling for police state governmental authority at home, increased weapons budgets, and the continuing militarization of policing and law enforcement.

Such moves encourage an even more militaristic approach to foreign challenges that seem aimed at American and Israeli interests by ISIS, Iran, and China. Where this kind of war-mongering will lead is unknowable, but what is frighteningly clear is that this dangerous geopolitical bravado is likely to become even more strident as the 2016 campaign unfolds to choose the next American president.

…click on the above link to read the rest of the article…

Things Fall Apart

October 24, 2015

Things Fall Apart

“Things fall apart”is an apt sub-title for historians to apply to the first half of the 21st century. The phrase properly describes the collapse of the domestic and foreign policy of the United States. Further, it also is appropriate to describe the happenings in Europe, the Middle East and Asia.

freedom15 Things fall apart describes the economy of every developed nation and the balance of power that the world has known since the end of World War II.

The powers that be have lost control. After almost a century of playing the Wizard of Oz, the curtain is disintegrating. Institutions to ensure control, stability and prosperity are failing. People and markets were not to be trusted and most of these institutions were established to protect against such freedom. Bureaucrats, central planners and big governments were to be the answers for a better world.

The damage of nearly a century of this nonsense is suddenly becoming evident. Things fall apart is characterized by institutions that no longer are trusted or believed in. Few institutions are seen to work and when they do they are increasingly seen as favoring the elites at the expense of the masses. No institution is under greater scrutiny as the cloak of wisdom is being destroyed by the hard facts of reality is that of central banking, the corner piece of socialism even at the height of the Thatcher–Reagan movement back toward markets. The Daily Bell writes about the US Federal Reserve, although other central banks are incurring similar doubts and distrust:

Things Fall Apart Around Janet Yellen

By Daily Bell Staff – October 16, 2015

Fed policymakers downplay divisions on U.S. rate hike … Federal Reserve policymakers are not as divided as it may appear and are generally operating under the same framework for determining when to raise interest rates, one Fed official said on Thursday, while another said the differences of opinion reflect the countervailing economic data. Many Fed watchers are exasperated by the mixed messages from the U.S. central bank in recent weeks. Fed Chair Janet Yellen and other officials have said they expect a rate hike will be needed by the end of this year, but two Fed governors this week urged caution. – Reuters

…click on the above link to read the rest of the article…

BLACK MONDAY: The First Time EVER The Dow Has Dropped By More Than 500 Points On Two Consecutive Days

August 25, 2015

BLACK MONDAY: The First Time EVER The Dow Has Dropped By More Than 500 Points On Two Consecutive Days

On Monday, the Dow Jones Industrial Average plummeted 588 points. It was the 8th worst single day stock market crash in U.S. history, and it was the first time that the Dow has ever fallen by more than 500 points on two consecutive days. But the amazing thing is that the Dow actually performed better than almost every other major global stock market on Monday. In the U.S., the S&P 500 and the Nasdaq both did worse than the Dow. In Europe, almost every major index performed significantly worse than the Dow. Over in Asia, Japanese stocks were down 895 points, and Chinese stocks experienced the biggest decline of all (a whopping 8.46 percent). On June 25th, I was not kidding around when I issued a “red alert” for the last six months of 2015. I had never issued a formal alert for any other period of time, and I specifically stated that “a major financial collapse is imminent“. But you know what? As the weeks and months roll along, things will eventually be even worse than what any of the experts (including myself) have been projecting. The global financial system is now unraveling, and you better pack a lunch because this is going to be one very long horror show.

Our world has not seen a day quite like Monday in a very, very long time. Let’s start our discussion where the carnage began…

Asian Markets

For weeks, the Chinese government has been taking unprecedented steps to try to stop Chinese stocks from crashing, but nothing has worked. As most Americans slept on Sunday night, the markets in China absolutely imploded…

As Europe and North America slept on Sunday night, Chinese markets went through the floor — the Shanghai Composite index of stocks fell by 8.49%, the biggest single-day collapse since 2007.

…click on the above link to read the rest of the article…

The Saudi Oil Price War Is Backfiring

August 7, 2015

The Saudi Oil Price War Is Backfiring

Saudi Arabia has long enjoyed the status of being the top crude oil exporter in the world. With record production of 10.564 million barrels per day in June 2015, Saudi Arabia has been one of the major driving forces behind the current oil price slump.

The Saudis have kept their production levels high since last year in order to drive other players (especially U.S. shale drillers) out of business. Equally clear is the fact that this strategy of maintaining the glut and driving out rivals hasn’t worked so far.

Even when we look at the refining sector, we see that the oil kingdom has been following a similar strategy of flooding the markets with refined fuel. The Saudis have already sparked an oil price war with the Asian refiners downstream by offering close to 2.8 million barrels of low sulfur diesel to the European and Asian markets. This has caused Asian refining margins to fall drastically, the effects of which can ironically now be seen on Saudi Arabia itself.

Saudis are now reducing their crude oil price hikes in Asia in order to save their market share

As the refining margins have fallen in Asia, refiners there have been compelled to cut their refining outputs. This could eventually result in refiners cutting their crude oil imports.

Asia has been one of the biggest cash cows for Saudi Arabia and there have already been some cuts in some of the most crucial markets. India, which was earlier importing most of its crude oil from Saudi Arabia, is now changing its strategy and buying more crude oil from Nigeria, Iraq, Mexico and Venezuela.

…click on the above link to read the rest of the article…

Asia’s oil consumption at record high while production peaked in 2010

June 24, 2015

Asia’s oil consumption at record high while production peaked in 2010

The annual BP Statistical Review has come out, as usual in June. In this post we focus on the Asia Pacific region. This is important because the Australian government has offered the help of “Team Australia” to build the “Asian Century”. The question no one asks (or wants to ask) is how much oil there is to carry Asia through the decades to come. No one can give an answer of course but it is clear that if past oil consumption and production trends continue the region will slide into a huge oil crisis.

Overview

Oil production in the Asia Pacific peaked in 2010 (China offshore!) at 8.4 mb/d while consumption continued to increase to 30.9 mb/d.

Fig 1: Asia-Pacific oil production and consumption

The difference between consumption and production (net imports) is now 73% of consumption, up from 68% ten years ago.

Oil consumption changes

Let’s zoom into the last 10 years. Consumption growth dropped from 6.2% in 2009/10 to 1.5% in 2013/2014 but this is still an annual 440 kb/d. If this reduced consumption growth were to continue an extra 2.2 mb/d would be needed by 2020 and 4.4 mb/d by 2025.

Fig 2: Asia’s oil production and consumption changes since 2005

Since global crude oil production started to peak in 2005 (base year in above graph), Asia did remarkably well to suck additional oil out of the global market, around 6 mb/d

…click on the above link to read the rest of the article…

Asian Financial Sector Hit Hard By Low Oil Prices

June 4, 2015

Asian Financial Sector Hit Hard By Low Oil Prices

Cheap oil can often be a double edged sword. On the one hand, it has been beneficial for the emerging global economies of India and China, who seized the opportunity to expand their strategic petroleum reserves (SPR), while on the other hand, it has created an economic crisis for energy dependent nations like Russia, Venezuela and Libya.

Gone are the days when oil majors would freely invest billions of dollars in mega projects, as shrinking revenues have created significant cost pressure that needs to be reduced first and foremost. So, at a time when most of the major oil and gas players are shying away from new investments, it was expected that mergers and acquisitions would be the best alternative to increase the market value, reduce operational costs and increase service portfolio. However, much to the dismay of industry experts and market watchdogs, 2015 has been pretty lackluster for mergers and acquisitions.

According to reports from PWC, the total number of M&A deals in the U.S.-oil and gas industry for the first quarter of 2015 was lower (both in terms of deal value and volume) than the last quarter of 2014. There were 39 oil and gas deals (with each deal worth more than $50 million) worth a combined total of $34.5 billion in first quarter of 2015.

Out of this, there were only four mega-deals whose values were greater than $1 billion. Shell and Statoil were some of the few global energy players who showed any real inclination towards acquiring new assets. Shell is already in process of acquiring BG group and Statoil is rumored to be targeting US-based driller EOG. Apart from a handful of big deals, the mergers and acquisition market at present looks pretty dull.

…click on the above link to read the rest of the article…

Meanwhile In India, It Is So Hot The Roads Are Melting, “One Billion People Impacted”

May 28, 2015

Meanwhile In India, It Is So Hot The Roads Are Melting, “One Billion People Impacted”

While we patiently await Wall Street’s weathermen, formerly known as economists, to blame the next swoon in US GDP on California’s relentless drought, now in its fourth year, we wonder how many double seasonally-adjusted, pro-forma, non-GAAP GDP points India’s blistering heatwave will bring. Because if California thinks it has it bad, India has it far worse.

According to the National Post, soaring summer temperatures in India have left more than 1,400 people dead over the past month, officials said Thursday. Most of the 1,412 heat-related deaths so far have occurred in Andhra Pradesh and neighbouring Telangana, where temperatures have soared up to 47 C, according to government figures.

AccuWeather described India’s scorching weather as the most intense heat wave in India in recent years, adding that “a very active typhoon season, combined with drought in much of India, could have a significant impact on lives and property for more than a billion people in Asia during the summer of 2015.”

“The rains which have eluded us for the last couple of years have created serious drought conditions,” said state minister K.T. Rama Rao in Telangana, which was carved out of Andhra Pradesh as a separate state just last year.

India’s response to the stifling heat? In line with that of the Greek government and stockholders everywhere in the new normal: hope.

“This is unprecedented … so there is a little bit of panic,” he said. “Hopefully the monsoon will be on time. Hopefully we will receive rain very, very soon.”

For the locals it’s no laughing matter: “If I don’t work due to the heat, how will my family survive?” said construction worker Mahalakshmi, who earns a daily wage of about $3.10 in Nizamabad, a city about 150 kilometres north of the state capital of Hyderabad.

Other examples of just how bad it is:

…click on the above link to read the rest of the article…

BC LNG Lost Its Window of Opportunity, Study Finds

May 23, 2015

BC LNG Lost Its Window of Opportunity, Study Finds

Projects unlikely to be economic for another decade: Oxford Institute energy report.

The window of opportunity to capture Asian gas markets has eluded proposed liquefied natural gas projects in British Columbia, and as a consequence it is unlikely that any LNG projects will likely be commissioned or economic for another decade.

That’s the central conclusion of a new study on the prospects for natural gas extraction and export in Canada by the London-based Oxford Institute for Energy Studies released earlier this month. The institute operates as a non-profit charity that has looked at the economics and politics of energy since 1982.

Despite large volumes of shale gas and government hype over the industry, the study found that changing energy markets, global price volatility, increased competition, and LNG cost overruns have dramatically changed the demand picture for high-risk and capital intensive LNG projects around the world.

Even Asian demand for natural gas has softened significantly over the last year. Demand for imported gas in Japan is now “flat,” and in Korea it has “dampened,” the report says.

China’s thirst for natural gas has also slackened since 2010 due to pipeline expansions and the signing of long-term LNG contracts.

According to Cambridge Energy Associates, spot LNG imports into China dried up last summer, “and spot prices last winter, usually a peak demand season, were reported to be less than $7 per million BTU, from as high as $20 several years ago.”

(The BTU is a standard unit of energy which represents the amount of heat energy needed to raise the temperature of a pound of water by one degree Fahrenheit. It is equal to 1055 joules, another common energy measurement.)

Furthermore, LNG construction in the United States, Australia and other countries will be bringing more gas to global markets between 2015 and 2020, explains the Oxford Institute study.

…click on the above link to read the rest of the article…

Great War of the American Empire or Great War II

February 16, 2015

Great War of the American Empire or Great War II

Looking at a map of current American military engagements overseas, one cannot help but notice their wide geographical spread and their seemingly interminable nature. Battles have raged in Europe (Yugoslavia and Ukraine), in Africa, in the Middle East, and in central Asia. The American Empire has launched this country into a series of battles that have no end in sight and no location that may not become a focal point of military force. These battles, each a war in its own right, have drawn in forces and resources from U.S. allies in Europe through NATO and even drawn in Japan. The scope of this war is global. In fact, one part of this war has been called the Global War on Terror. To understand this war and grasp its meaning, in the hope of bringing it to an end, a descriptive name is needed that tells us what this war is about. The name suggested here is the “Great War of the American Empire”. Since World War I, another disastrous war that American joined, is called the Great War, we can refer to the Great War of the American Empire also as Great War II.

Great War II comprises a number of sub-wars. The American Empire is the common element and the most important driver in all the sub-wars mentioned below. American involvement has never been necessary in these sub-wars, but the decisions to make them America’s business have come from the Empire’s leaders. The name “Great War of the American Empire” emphasizes the continuity of all the sub-wars to produce one Great War, and the responsibility of the American Empire in choosing to participate in and create this Great War. Had America’s leaders chosen the radically different path of non-intervention and true defense of this continent, rather than overseas interventions, Great War II would not have occurred and not still be occurring.

…click on the above link to read the rest of the article…

Saudis Re-Unleash Oil Weapon, Slash Asia Prices By Most In 14 Years

February 7, 2015

Saudis Re-Unleash Oil Weapon, Slash Asia Prices By Most In 14 Years

“This is further evidence that they are hellbent on protecting their market share in China,” warns one strategist as just when US talking-heads thought things were ‘stabilizing’ Saudi Aramco slashes its official selling price for Arab Light crude by 90 cents to $2.30 a barrel less than Middle East benchmarks – the biggest discount in 14 years. As Bloomberg reports, the desert kingdom is continuing to fight for market share, and using the oil weapon by “trying to stay competitive in what is the biggest area of growth,” as Middle Eastern producers are increasingly competing with cargoes from Latin America, Africa and Russia for buyers in Asia.

Biggest discouint to Asia since records began…

As Bloomberg reports,

…click on the above link to read the rest of the article…

This Week In Energy: Asian Energy Empire Expansion

January 11, 2015

This Week In Energy: Asian Energy Empire Expansion

This week saw WTI prices break the psychological $50 threshold, compounding trader and oil company woes further. However, recent price updates from certain shale areas in the U.S. would seem to indicate many producers arereceiving far less for their oil (as low as $34 per barrel in some cases). As the oil markets now appear to be in contango, near-term prices are cheaper than longer term futures, more and more companies are storing crude in the hopes of reaping profits later in the year once the market stabilizes. Trading firms Vitol and Trafigura as well as oil major Royal Dutch Shell have all reserved oil tankers for up to 12 months, according to Reuters. However, with OPEC digging their heels in, stating that there was “no chance” of reassessing their position prior to their June meeting and that, “Naimi made it clear: OPEC will not cut alone,”when this market stabilization will occur is anyone’s guess. While bearishness abounds amid capex cuts, increased surplus forecasts for 2015 and slow economic growth in various key economies of the world, for others, it’s hunting season.

The state oil companies of major Asian players are, at present, replete with cash and see the coming year as an opportunity to snap up assets around the globe on the cheap. The Oil And Natural Gas Company of India (ONGC) is predicting crude prices to stay at around current levels for 10 months. This provides a once-in-a-decade opportunity to pick off debt-laden exploration companies in Africa, Latin America as well as North America. Competition is rife among Asian state oil companies with India, China, Malaysia and Thailand all looking to expand amid the current oil crisis. ‘‘The current oil and gas prices offer a new opportunity for us to leap-frog our growth trajectory,” ONGC’s Narendra KumarVerma said in an interview. ONGC is predicted to have a budget of around $4 billion to splurge on assets. However, this is dwarfed by China’s PetroChina Co. with an estimated budget of $12 billion. “They’re likely to scour Russia and traditional destinations including South America, Iraq and Africa,”said Shi Yan, an analyst at UOB-Kay Hian Ltd. in Shanghai. Meanwhile, Indonesia’s state-owned energy company PTPertamina, purchased a 30 percent stake in US-based Murphy Oil Corp. (MUR)’s oil and gas assets in Malaysia for $2 billion last year. Expect such predatory spending to change the face of global energy production and shift dynamics eastward should oil prices continue to remain low as we move further into 2015.

…click on the above link to read the rest of the article…

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