The Oil Drum

One of the critical factors in making sure that there is enough of an energy supply to meet the growing international demand lies in the logistics of the supply train that is going to have to provide it. When CERA and others point to the totality of the available resource, as Nate is pointing out in his series, they neglect the realities of that chain, and the parts that all have to work if the electric light is to go on the next time that you flip the switch on the wall.

Thus, if for example, Saudi Aramco tells Asian refiners that it is cutting supplies by 9% that does not mean that when a Japanese driver pulls into the gas station tomorrow that he will face a large EMPTY sign. Rather, in March Aramco tells the refiners that it will cut supply in later months, and thus the impact is not immediately evident. :

Saudi Aramco will cut exports of Arab heavy crude by as much as 20 percent to Japan, 9 percent to South Korea and 15 percent to China, refinery officials said. A Taiwanese refiner will receive a 10 percent cut in Arab heavy supply.

The gas that is in the pump came out of the oil well some time ago, and has had to pass though pipelines, storage, tanker shipment, refineries and additional storage before it actually leaves the pump nozzle to flow into the car gas tank. This takes away some of the immediate impact of the OPEC cut back in supply, and if this is, concurrently, occurring when the refineries normally reduce demand because of maintenance, then the impact can be further concealed.

Refineries in Asia typically close from April to June for repairs. Japan will see a peak of 26 percent of its capacity closed in May and South Korea will have 19 percent shut, mainly during the second half of June and the first half of July.

Unfortunately that “not-quite-just-in time-production” nature of the supply train also has a downside at the other side of this situation. When production increases again, if it does, then there will be an equivalent lag-time before our Japanese retailer can take down his EMPTY sign because the gas is back in town.

British Trade and Industry Minister Alan Johnson had eight meetings this year on how to block a potential takeover of British utility Centrica, the country's biggest gas supplier, by Gazprom, the Financial Times said on Monday.

... after three years of a stalemate on plans to open up the huge Kovykta gas field, South Korea, which depends on imported LNG for almost 13 percent of its energy needs, is unwilling to hinge its energy security on a Russian vow.

"It's a very serious problem," said McNease, adding that he expected 15-20 Gulf of Mexico jack-ups to move elsewhere by the end of next year, based on contract negotiations already under way.  Of those on his migration list, McNease said seven would likely depart by this summer.

     "Rigs will continue to leave the Gulf of Mexico unless people offer longer contracts," said McNease, noting that jack-ups could now command terms of two to five years in the Middle East. "The national oil companies are offering longer terms to lure these rigs there," he said.

The Medium-term (above) and Short-term storage pictures. (click to enlarge)

NEW DELHI - Stung by the rising international price of oil and domestic shortages coupled with high requirements of a growing economy, India has revived a plan for an oil and gas grid for the Asian continent.