ENERGY Caribbean newsletter (April 2014 • Issue no. 72)

20/20 ENERGY VISION
How the US is shaking
up world oil trade
China’s hunger for crude is also setting new trading patterns
While the US is boosting
its domestic crude oil
production and reducing its
need for imported oil, China is being
forced to increase its imports, which are
expected to hit 9.2 million b/d by 2020.
The US cut its need for imported crude
to about 10.8 b/d in 2013 by raising its
own production to around 8 million
b/d, the highest since 1989. Consultants
Wood Mackenzie predict that its need for
oil imports will drop below China’s by
2017 as domestic output rises. The US
could become the world’s biggest crude
oil producer as early as 2016, according
to the International Energy Agency,
overtaking Saudi Arabia and Russia,
which both produce around 10 million
b/d.
Weakening demand for oil is also a
factor. Analysts predict that demand
will stay at its present level, around
18.8 million b/d, for some time, and
may even fall as vehicle fuel efficiency
improves. The Energy Information
Administration (EIA) predicts a 25%
reduction in demand for fuel by cars
and light trucks over the next 28 years,
and President Obama plans to raise
fuel efficiency standards to 55 miles per
gallon for new vehicles by 2025. Mixing
corn-based ethanol with the gasoline
pool is also reducing demand.
In China, on the other hand, car
ownership is currently 70 cars per 1,000
people, and is likely to increase to 400
per 1,000 by 2034. China produces only
3.3 million b/d of crude compared with
total oil demand of 12.5 million b/d,
and its need for imports is forecast to
rise from 2.5 million b/d (2005) to 9.2
million b/d by 2020.
The trend is clear. OPEC countries are
already switching exports to China and
other Far East countries. According to
the EIA, crude oil shipments from OPEC
to the US fell to as little as 3.9 million b/d
in 2013, from the peak of 6.7 million b/d
in 1977. Its need for crude is the main
reason why China has been assiduously
wooing resource-rich African countries.
If the US decides to export some of
its crude – currently not allowed except
to Canada – the picture could change
again. Much new US production is of
light, “sweet” crude, while the domestic
refinery sector is geared for heavier
crudes. The US could thus become
not only a smaller importer but also
an exporter of crude as well as refined
petroleum products such as diesel and
gasoline.
LATIN AMERICA ENERGY
Venezuela may restart
Aruba refinery
Decision not to buy delayed coker clears the way for PdVSA
Since Trinidad and Tobago decided
not to buy the delayed coker
unit from the mothballed Valero
refinery in Aruba, Venezuela’s PdVSA
has been eyeing the unit for itself.
Petrotrin is engaged in a bottom-ofthe
barrel upgrade of its 160,000 b/d
refinery at Pointe-à-Pierre in Trinidad,
and considered buying the coker
outright when the Aruba refinery closed
in 2012. But relocation costs alone were
about 85% of a new coker, so an inhouse
upgrade became the preferred
route.
Venezuela needs as much refinery
capacity as it can find, despite today’s
challenging refinery economics. It
already leases and operates the 335,000
b/d Isla refinery in Curaçao. In addition
to wanting the Aruba delayed coker
restarted, PdVSA is negotiating with
Valero to bring other refinery facilities
back on line, such as two crude
distillation units, a hydrotreater and a
hydrocracker.
PdVSA suffered a disastrous explosion
at its Amuay refinery in 2012, a storage
tank fire at the Puerto La Cruz refinery
in August 2013, and a shutdown at the
El Palito refinery due to a power cut.
The Aruban government desperately
needs activity of some sort resumed at
the refinery. Prime minister Mike Eman
wants to see a deal reached between
Valero and PdVSA, which would put the
Venezuelan company in charge of the
restarted units.
One of the benefits for PdVSA of
restarting the Aruba refinery would be
to access naphtha, which it can use as
a blend with the increasing amount of
extra heavy oil likely to be extracted
over the coming years as joint ventures
with international oil companies take
shape in the Orinoco oil belt (“the Faja”).
Because of cash flow problems,
PdVSA uses crude oil to reduce debt.
Almost a third of the 640,000 b/d of
crude exported to China goes towards
servicing Chinese loans, and PdVSA
pays for storage space at the Valero
complex with crude shipped directly to
the US.
16