China oil demand helps Saudi Arabia challenge Russia’s export crown

Fresh demand from new Chinese refineries could boost the country’s Saudi oil imports, nudging the OPEC giant back to the top spot as China’s biggest supplier. (AFP)
Updated 30 November 2018
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China oil demand helps Saudi Arabia challenge Russia’s export crown

  • Demand stirred up by new Chinese refiners pushing the Kingdom back into contention with Russia as top supplier to the world’s largest oil buyer
  • Saudi Aramco to sign five crude supply agreements that will take its 2019 contract totals with Chinese buyers to 1.67 million bpd.

SINGAPORE: Saudi Arabia is set to expand its market share in China this year for the first time since 2012, with demand stirred up by new Chinese refiners pushing the Kingdom back into contention with Russia as top supplier to the world’s largest oil buyer.
Saudi Arabia, the biggest global oil exporter, has been surpassed by Russia as top crude supplier to China in the past two years as private “teapot” refiners and a new pipeline drove up demand for Russian oil.
Now fresh demand from new refineries starting up in 2019 could increase China’s Saudi oil imports by between 300,000 barrels per day (bpd) and 700,000 bpd, nudging the OPEC kingpin back toward the top, analysts say.
Saudi Aramco said last week it will sign five crude supply agreements that will take its 2019 contract totals with Chinese buyers to 1.67 million bpd.
“With the recent crude oil supply agreements and potential increase of refinery capacity, the Saudis could overtake the Russians and reclaim (the) crown as the biggest crude exporter to China,” Rystad Energy analyst Paola Rodriguez-Masiu said.
Saudi Arabia has already gained ground this year. China imported 1.04 million bpd of Saudi crude in the first 10 months of 2018, China customs data showed. This is equivalent to 11.5 percent of total Chinese imports, up from 11 percent in 2017, Reuters calculations showed.
Saudi Arabia’s market share in China could jump to nearly 17 percent next year, if buyers requested full contractual volumes, analysts from Rystad Energy and Refinitiv said, while growth in Russian supply to China could slow.
China imported 1.39 million bpd of Russian crude in January-October this year, about 15 percent of total Chinese imports, customs data showed. Russia had a 14 percent share at 1.2 million bpd in 2017.
“We expect Chinese imports of Russian crude to remain at a similar rate in 2019 as a large share of these Russian barrels are imported via pipeline,” Refinitiv analyst Mark Tay said.
The biggest boost to Saudi exports to China comes from contracts inked with new refineries starting up this year and next, owned by companies other than state oil giants Sinopec or PetroChina.
The contracts include 130,000 bpd to Dalian Hengli Petrochemical and up to 170,000 bpd to Zhejiang Petrochemical Corp, each of which has a 400,000-bpd refinery.
Saudi Aramco has also agreed to increase Sinochem Corp’s supplies, which will be processed at its Quanzhou and Hongrun refineries. Sinopec, PetroChina and China National Offshore Oil Corp. have all kept their term Saudi volumes for next year unchanged.
Beijing-based consultancy SIA Energy expects Saudi crude imports to rise by 300,000 bpd in 2019, raising its market share
to 13.7 percent, but leaving it behind Russia.
“We expect lower Saudi crude demand from Hengli and Rongsheng as it is unlikely for them to run their refineries at full rate in 2019,” analyst Seng Yick Tee said.
A source familiar with Aramco’s export plans said there is tremendous appetite from China’s independents, and that it needed to be more aggressive in its marketing strategy.
The state oil company did move more swiftly to seal the most recent deals than it used to in the past, industry sources said.
Aramco’s first deal with Hengli was to supply 20 million barrels of crude, about 55,000 bpd, in 2018, said a senior source. “Hengli executed the 2018 deal nicely, which helped build trust,” he said.
Hengli is designed to process 90 percent Saudi crude, a mix of Arab Medium and Arab Heavy, while the remaining 10 percent is Brazilian Marlim crude. Rongsheng’s plant is identical to Hengli, the industry sources said.
The sources spoke on condition of anonymity.
Aramco is also supplying PetroChina’s refinery in China’s southwestern Yunnan province with about 4 million barrels a month of crude via a pipeline from Myanmar between July and November, Eikon data showed, although sources said talks for Saudi Arabia to acquire a stake in the refinery have stalled.
Saudi Aramco CEO Amin Nasser said on Monday the company will push to expand its market share in China and is still looking for new refining deals there despite OPEC’s likely limits on output next year.
Saudi Aramco will supply up to 70 percent of the oil required at its 300,000-bpd joint venture refinery in Malaysia with Petronas. Between China and Malaysia alone, Saudi Arabia will have to increase exports to
Asia by more than 500,000 bpd next year.
This comes as OPEC is discussing production cuts of as much as
1.4 million bpd for next year to prop up oil prices.
Between balancing global supplies and increasing market in Asia, Aramco may decide to “forgo market share in other markets like the US, where the surge in domestic production will make it difficult for the Saudis to retain market share anyway,” Rystad’s Rodriguez-Masiu said.
Saudi’s oil shipments to the US have risen recently to above
1 million bpd, but US output is also increasing, said the source familiar with Saudi Aramco’s export plans.


Red Sea’s oxygen balance under strain, experts warn

Updated 13 sec ago
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Red Sea’s oxygen balance under strain, experts warn

  • Scientists say warming waters, nutrient runoff and coastal development could quietly erode coral resilience

RIYADH: The Red Sea may not have dead zones, but its fragile ecosystem is vulnerable to oxygen depletion — a quiet decline that can undermine coral health and disrupt marine life.

Sea dead zones are hypoxic or low-oxygen pockets that form most often when nutrient pollution — especially nitrogen and phosphorus from farm runoff and wastewater — fuels blooms that ultimately strip oxygen from the water.

Experts say the risk is not inevitable, but it depends on earlier detection and tighter control of the conditions that drain oxygen from coastal waters.

A sea that relies on its own “breathing” is also a sea shaped by geography.

FASTFACT

DID YOU KNOW?

  • The Red Sea is naturally low in oxygen because of its warm waters and high salinity — making it especially vulnerable to further oxygen decline.
  • The Red Sea’s narrow Bab Al-Mandab strait limits deepwater exchange, meaning the basin largely depends on its own internal circulation to ‘replenish’ oxygen.
  • Saudi Arabia’s coastline features steep underwater drop-offs, allowing deep, oxygen-poor water to move closer to coral reefs near shore.

Matheus Paiva, a senior oceanographer, told Arab News that “the Red Sea’s shallow Bab Al-Mandab choke point limits deepwater exchange,” meaning oxygen replenishment depends heavily on internal overturning circulation.

He said this circulation is driven as surface waters flow north, cool, become denser and sink, helping ventilate deeper layers through vertical mixing.

Paiva said the Saudi coastline’s underwater topography makes the risk more immediate close to shore.

Coral reefs along Saudi Arabia’s Red Sea coast, where scientists say warm, salty waters and limited deep-water exchange can leave ecosystems vulnerable to low-oxygen stress. (Unsplash.com)

“Unlike regions with wide, gradual shelves, our coast features narrow fringing reefs that drop sharply into deep water via steep underwater cliffs and canyons,” he said.

“This ‘step-and-drop’ topography brings deep oxygen-poor water close to shore.”

Paiva said warming at the surface can intensify stratification and reduce vertical mixing. He said that can allow low-oxygen water to creep upslope and affect shallower reef zones.

How oxygen gets consumed faster than it’s replaced is where human pressure can tip the balance.

Carlos Duarte, executive director or the Coral Research and Development Accelerator Program at KAUST, told Arab News that the Red Sea’s baseline conditions create vulnerability. “Because of its warm waters and high salinity, the Red Sea is inherently low in oxygen and, therefore, vulnerable to processes that decline oxygen further.”

He said algal blooms and heat waves raise biological oxygen demand, linking low oxygen to coral mortality.

Duarte said human-driven nutrient and organic inputs can intensify these declines.

He said poorly managed urban development and aquaculture operations can contribute nutrient and organic loads that fuel algal blooms.

Coral reefs along Saudi Arabia’s Red Sea coast, where scientists say warm, salty waters and limited deep-water exchange can leave ecosystems vulnerable to low-oxygen stress. (Unsplash.com)

Duarte said that as bloom material decomposes, it strips oxygen from the water and can lead to hypoxia.

The Red Sea’s celebrated clarity reflects a naturally nutrient-poor system. “The risk is amplified because the Red Sea is naturally oligotrophic. It is nutrient-poor and crystal clear,” Paiva said.

He added that wastewater releases and heavy rain events that trigger flash floods can push large nutrient loads into coastal waters in a short time.

In turn, those pulses can threaten biodiversity and the marine environment that underpins tourism investments along the Kingdom’s Red Sea coast.

Seeing low oxygen coming — rather than reacting after the fact — is the promise of new monitoring and analytics.

Paiva said high-accuracy oxygen data still relies on direct measurements collected during vessel surveys.

Carlos Duarte, executive director or the Coral Research and Development Accelerator Program at KAUST.

“We still depend heavily on classic vessel surveys,” he said. Teams deploy multiparameter sondes to profile the water column and collect water samples to establish a baseline.

“This ‘water-truthing’ remains the industry standard for high-accuracy data,” he said.

Saeed Al-Zahrani, general manager for Saudi Arabia at NetApp, said continuous data can help teams intervene earlier. “Oxygen depletion is rarely sudden; it tends to build over time when conditions line up,” he said.

Al-Zahrani said AI can flag anomalies, learn what “normal” looks like in specific locations, and generate short-horizon risk forecasts.

He added that it creates a decision window — guidance on when to increase sampling, where to focus response efforts, and when to tighten controls around discharges.

Coastal development that reduces oxygen risk starts, Duarte said, with what never reaches the sea.

Duarte said Saudi Arabia’s west coast investments have an advantage compared with older coastal destinations: the opportunity to design sustainability into projects from the outset rather than trying to retrofit after degradation becomes evident.

Duarte said nutrient control is a direct lever to reduce oxygen-depletion risk. “Achieve circular economies where organic products and nutrients are recycled and reused in the system to avoid discharging nutrients to the marine environment,” he said.

Al-Zahrani said wastewater and environmental systems produce huge volumes of information, but fragmentation can slow decisions.

He said connecting data in near real time can help detect problems earlier and anticipate load spikes tied to rainfall, tourism peaks, or industrial activity.

Reef resilience depends on reducing stress before heat and low oxygen overlap.

Duarte told Arab News: “Coral reefs are extremely vulnerable to oxygen depletion.” He added that it can contribute to bleaching and mortality in a warmer ocean.

He said marine heat waves can worsen oxygen stress by reducing oxygen solubility and limiting ventilation of subsurface waters, while increasing oxygen demands of organisms.

Duarte said reducing nutrient inputs and managing reefs to avoid excessive growth of seaweed can build resistance.

He also said models that account for how waves and currents interact with reef topography — work he said is being developed at KAUST — can help guide restoration toward sites more likely to remain oxygenated during heat stress.