August 22, 2010
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Home / Issue Archive / 2010 / July - August #7 / East Siberian Crude: Closer To California Refineries

№ 7 (July - August 2010)

East Siberian Crude: Closer To California Refineries

Russia crude delivered from the East Siberia-Pacific Ocean pipeline (ESPO) is in demand not only on the Asia market, but in North America as well. It has even acquired its own mark - ESPO Blend. Probably the main advantage the new sort of crude has is its relatively low sulphur content of 0.53 per cent and its API density of 34.7 degrees.

By Roman Besedovskiy

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Of course, this is not a really remarkable indicator when compared to Tapis crude from Malaysia (0.1 percent sulphur content and API density of 45.5 degrees), but the main competitor for access to refineries in the United States, Oman crude (1.04 percent sulphur content and API gravity of 33.3 degrees) loses significantly to ESPO.

This year, 15 million tons of crude has been delivered through the ESPO pipeline. It is produced by Russia's largest oil companies, including Rosneft, Gazpromneft, Surgutneftegaz and TNK-BP. This volume will only grow in the future – by 2013, up to 50 million tons of crude a year is to be pumped through the ESPO pipeline and even that figure could rise is production continues to increase. Of course, the lion's share of these resources will go to the Asia-Pacific Region which is considered to be one of the most rapidly-developing commodities markets. Nevertheless, the United States remains a very promising sales market for Russia's new ESPO Blend which is successfully competing with both Middle East crude and American crude produced in Alaska.

ESPO Blend's good quality is attracting the attention of American refiners. While Alaskan crude currently accounts for 30 percent of their loading, in the future Alaskan oil is likely to feel pressure from ESPO Blend. This could all arise due to more stringent requirements being imposed on oil production in Alaska and adjacent off-shore fields.

Today, just 100,000 barrels a day of Russian crude is being delivered to the United States, or less than 4 percent of refinery capacity in the Western U.S. However, this figure is still worthy of respect - last year no East Siberian crude at all was delivered to the United States. Last year, Saudi Arabia, which has traditionally been the United States' largest supplier of crude, lost that position to Nigeria and Mexico. The main reason for this was two-fold: first, the United States is trying to cut dependency on crude from unstable regions and second, the key deliverers of Middle East crude are paying more and more attention to China and other Asian countries. In light of the fact that the United States satisfies 60 percent of its oil needs with imports, Russia has good chances of seeing its sales to the United States increase.

Of course, it is too early to say Russian crude could carve out a dominate position in the mid-term, but it is possible the country could take as much as 10 to 15 percent of the Western U.S. market.

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