China Emerging as U.S. Rival for Canada's Oil

[KurtNYC]

From today's (12/23) NY Times:

Canada, the largest source of imported oil for the United States, has historically sent almost all its exports of oil south by pipeline to help quench America's thirst for energy. But that arrangement may be about to change as China, which has surpassed Japan as the second-largest market for oil, flexes its muscle in attempts to secure oil, even in places like the cold boreal forests of northern Alberta, where the oil has to be sucked out of the sticky, sandy soil.

"The China outlet would change our dynamic," said Murray Smith, a former Alberta energy minister who was appointed this month to be the province's representative in Washington, a new position. Mr. Smith said he estimated that Canada could eventually export as many as one million barrels a day to China out of potential exports of more than three million barrels a day.

"Our main link would still be with the U.S. but this would give us multiple markets and competition for a prized resource," Mr. Smith said. Delegations of senior executives from China's largest oil companies have been making frequent appearances in recent weeks here in Calgary, Canada's bustling energy capital, for talks on ventures that would send oil extracted from the oil sands in the northern reaches of the energy-rich province of Alberta to new ports in western Canada and onward by tanker to China.

http://www.nytimes.com/2004/12/23/business/worldbusiness/23canada.html?position=&ei=5094&en=428b0d964982d1eb&hp=&ex=1103864400&adxnnl=1&partner=homepage&pagewanted=print&adxnnlx=1103814066-mfBo0aRAnrqR/f0/UCWeTg

[clapton]

1. What about the Russian Supply?

Can anybody give us the Global Oil Supply breakdown by country? I am curious to find out how much of the market Putin has control over.

Recent intel documents that Russian oil primarily moves east to west to support the EU. Ukraine is currently up for grabs: Nato or Russian ally. The article mentions that Halliburton's KBR group finished 674km of pipeline in May 2002 from the Caspian region to the Black Sea... and it is currently very dry over the Ukraine issue.

Can Russia amply supply China in the near future? If so, what does this lead to in the greater scheme of things to come of such a venture for the Far East and the Bear?

[KurtNYC]

2. The kernel I take from this article is

that China is betting on oil staying above $30USD (or whatever number it takes to make it economically reasonable to suck oil out of sand). There is a lot of oil that doesn't get pumped unless the market prices are high enough -- Brent crude, north sea oil, etc. The bigger equation is the Cost of extraction + the cost of transportation + the cost to refine (varies with the quality of oil) + cost of delivery to market.

Last I heard the Russians were pumping at only one-third of their capacity so in theory they could pump much more. But again it depends on pipelines and refineries.

China also made a deal to buy Iranian oil recently so they seem to be in a move-forward mode recently.

I have to think this deal strengthens the Looney. The Canadian government had a target of $.83 to the USD feeling that anything stronger would hurt trade with the US. But the Looney rides with the price of oil and that seems certain to stay strong.

[clapton]

3. Absolutely, Smashing --Baby. Russia is #2 in World Oil Supply

"Russia is currently the number two oil producer in the world, and plans to be on par with Saudi Arabia by 2010. As the U.S. looks beyond the Middle East for alternative sources of oil, President Vladimir Putin is positioning his oil-rich nation to take Saudi Arabia’s place."

Here's my favorite part,

"The bottom line: If Putin is successful in exerting control over the Russian oil industry, the U.S. economy will be directly dependent on decisions made by the Russian president and Kremlin. President Putin, a former KGB operative who has systematically populated the top tiers of Russian government with anti-western members of Russia’s current and former security service, will hold the reins of U.S. oil imports."

Now, isn't that special? :P

http://www.future-of-russia.org/issues/oil.cfm

[arikara]

4. Isn't there something in NAFTA and other trade agreements though

where if a country starts selling a commodity at a particular level to the US (or anyone else but the US is the one who really matters here...) that the selling country has to maintain that level at the agreed upon price even if they don't have enough for their own domestic needs.. Which is the situation that we quickly coming up to with natural gas. And which may well interfere with selling lots of oil to other countries because the US has first dibs on it. Unless of course we really step up production and deplete our resources faster than ever.

And remember when the chimp was first plotting the invasion of Iraq and someone asked about possibly temporarily losing the Iraq oil supply; and the chimp smirked and said that he already had a guaranteed supply. He was meaning from Canada.

[Joel]

5. I believe

that only applies if the price offered by, in this case, the USA is the same as the price offered by the other country. You don't really think they would force businesses to make less profit do you?