Part 10: Inter-Regional Trade Movements of Petroleum to and from Japan

It may seem odd that I separately cover Japan (JP) in this survey of the trade movements of all major regions of the world.  After all Japan’s population is only 127 million (US international census bureau) which is less than half than the next smallest region by population, the former Soviet Union (FS) at 282 million.   Japan, however, is still presently the third largest economy in the world, and not long ago was the second largest economy, a title Japan held for more than 40 years, before China overtook it in 2010. 

As you will see, as the former second and now third largest economy, Japan has a very high petroleum consumption rate, but virtually no domestic production, making it highly dependent on inter-regional petroleum imports.  Indeed, more dependent than any of the other eight regions examined in this series.  Without these imports, Japan’s economy would grind to a halt and its people’s standard of living would crash.  The dynamics of petroleum trade flow changes in Japan China and the remaining Asia Pacific region (rAP) over the last decade are quite interesting, and one that I will return to several times. 

Part 1, introduced the abbreviations, definitions, data bases and analysis methods used here. 

Japan's Total Petroleum and Crude Oil Production and Consumption Rate Trends

Figure 1 presents JP’s total petroleum consumption rate (i.e., both domestic and imported petroleum) since 1980 as reported by the EIA or BP review (solid red circles and squares, respectively). 

 

As you can see, JP’s petroleum consumption rate (solid red symbols) hit a peak in the mid 1990s at about 2.1 bby and has been slowly declining since them.  By 2010, the consumption rate had dropped about 25 percent to 1.62 bby from the peak in the mid 90s.   I will discuss the possible effects of Fukashima on Japan's petroleum consumption and import rates at the end of this article.

Figure 2 shows JP's total petroleum production rate (i.e., domestic production, solid blue circles and squares for EIA and BP data, respectively) and crude oil production (solid purple circles). 

The 400 times smaller vertical scale of Figure 2 compared to Figure 1 should give you a sense of how little petroleum Japan is producing—only about 2-3 percent of its consumption.  The BP review does not separately report production rates for JP because the rates are below its typical cut off of <0.1 bby, and so I set the BP production number (solid blue squares) for JP equal to zero.  The EIA numbers (solid blue circles) show that there is indeed some production in JP albeit very small—between 0.04 and 0.05 bby for the last decade.

The purple circles, corresponding to crude oil production, are just slightly above the baseline.  That is, crude oil production is almost negligible—less than 0.01 bby, and therefore of what petroleum JP produce, it is must be in the form of petroleum products; most likely products refined from imported crude oil. 

Japan's Gross and Inter-regional Export and Import Rate Trends

Figure 1 also shows JP’s gross and inter-regional imports of total petroleum, crude oil and petroleum products.  The EIA's import data (open circles) only runs from 1982 to 2009, while the BP review's import data (open squares) only runs from 2000 to 2010.  The same applies to the export data in Figure 2.

As illustrated in Figure 1, total imports (open red symbols) are essentially identical to total consumption (closed red circles).  Of course, this is just reflects the fact that Japan’s total petroleum production is very small, and consequently, Japan must import nearly all of the petroleum that it consumes.

As illustrated in Figure 2, Japan actually exports more petroleum (open blue symbols) than it produces domestically. 

How is this possible? 

Well, as also illustrated in Figure 3, the exports are exclusively petroleum products (open green symbols) and there are essentially no crude oil exports (open brown circles and squares).  This implies that a portion of the petroleum JP imports (e.g., crude oil) is refined and then re-exported as a more valuable commodity (e.g., petroleum products). 

Figure 3 shows JP's total petroleum, crude oil and petroleum product imports relative to their respective gross and inter-regional global petroleum import pools.  As usual the EIA and BP data set are separated because, as discussed at length, in other parts of this series (see e.g., Part 1 and Part 2) the EIA data-derived global gross export/import pool is larger than the BP review data-derived global inter-regional export/import pool.

JP’s total inter-regional imports (red open squares) are in steep decline from about 14 percent of the global pool in 2000, to 9.4 and 10 percent in 2009 and 2010 respectively.  The decline in the proportion of the import pool going to JP is mainly due to the decline in crude oil imports—declining from 11.3 to 7.8-8.1 percent of the global import pool from 2000 to 2009-2010.  Inter-regional imports of petroleum product imports have declined less steeply from 2.7 to 1.9 percent from 2000 to 2010. 

Figure 4 shows JP's exports relative to the respective total gross and inter-regional global petroleum export pools, which, of course, is about the same size as the respective global import pool.   This time there is not much separation between the EIA and BP data, possibly  because the gross and inter-regional pools are so small.

The small vertical scale of Figure 4 compared to Figure 3, tells the main story: JP’s exports make up for less than 1 percent of the total global export pool.

There is a jump in JP’s inter-regional exports, from about 0.2 to 0.25 percent of the global pool during 2000-2006 to 0.75-0.7 percent during 2008-2010.  As we will see (Figures 8 & 10) this recent increase in inter-regional exports from JP mainly goes to the rAP region and some to CH.

Comparing EIA and BP Export and Import data

Similar to the analysis of CH in Part 9, JP is a single country region, and therefore the gross (EIA data) and inter-regional (BP data) imports or exports, shown in Figures 1 and 2, respectively, should not differ.

Figure 5 shows the differences between the EIA gross and BP inter-regional total, crude oils and petroleum product imports, which should equal the “intra-regional” values for these quantities, which in this case, for a single country region, should equal zero.  Overall this seemed to be the case.

The difference for JP total imports (red triangles) ispretty close to zero (±0.1 bby) except for the -0.2 bby difference in 2009. 

Figure 6 shows the differences between the EIA gross and BP inter-regional total, crude oil and petroleum product exports, which again, should equal zero. 

The difference in total JP total exports (blue triangles) is indeed very small, and less noisy than the differences shown in Figure 5, no doubt because these are the differences between much smaller numbers than presented in Figure 5.

Trade movements of total petroleum between China and other regions

Figure 7 shows the specific quantities of petroleum, in units of bby, imported by JP FROM each of the eight other regions, and also shows the sum of JP's total inter-regional petroleum imports from all eight of the other regions (black "Xs"), which is the same as presented in Figure 1 (red open squares).  Note these regional and total values are shown on the same scale.

 

It is very clear that the Middle East (ME) is where JP has gotten the bulk of its inter-regional petroleum imports over the last decade—with rAP a very distant second.  For instance, of the total of 1.94 bby imported in 2000, 1.53 bby, or 79 percent, came from ME, and 0.31 bby, or 16 percent, came from rAP.   In 2010, of the total of 1.67 bby that JP imported, 79 percent, came from ME, and 9.5 percent, came from rAP.  Just visible above the "noise" in the figure from the other regions, for 2010 is 0.11 bby, or 6.6 percent of imports coming from the former Soviet Union region (FS).

Figure 8 shows petroleum exports from JP TO each of the eight other regions and again, for reference, I show JP’s total exports (black “Xs” corresponding to the blue squares in Figure 2).  Again, note the much smaller vertical scale of Figure 8 compared to Figure 7, illustrating that JP is a large net importer of petroleum. Also note that I don’t need a separate axis scale to portray the total exports versus regional exports, since they mostly go to two other regions.

As already noted in the context of Figure 4, JP’s total exports are a tiny fraction of JP’s total imports and total consumption, although in the three years the export rate, of petroleum products, has increased.  Figure 8 illustrates that JP exports mainly to rAP and to China.  For instance, in 2010, of the 0.11 bby JP exported, 0.075 (68 percent) went to rAP and 0.021(19 percent) bby went to CH.  EP and NA round out the remaining export destinations. 

Figures 9 and 10 present the same data as shown in Figures 7 and 8, respectively, but expressing JP's petroleum imports or exports, to or from each of the eight regions, as percentages of the total global inter-regional petroleum import/export pool (global inter-regional imports and exports are the same).  For reference, I also show JP’s total petroleum imports and exports as percentages of the total global petroleum import/export pool (“Xs” right vertical axis; again note the different scale in Figure 9).

Additionally, I have taken all of these data and made linear extrapolations of the 2000 to 2010 data (via linear regression analysis) out to 2021. 

Figure 9, shows the major linear trend for declining total imports to JP (r²=0.96). 

The linear regression coefficients for the prominent regional trend lines for declining imports from the ME (r²=0.98) and rAP (r²=0.91) are quite high.  If the trend for declining imports from rAP continues, then by 2015, imports from this source will stop altogether. Other significant, but smaller in magnitude trends, include declining imports from CH (r²=0.81), and increasing imports from FS (r²=0.81).  Imports from CH are predicted to end in 2011.

Figure 10 shows the weaker trend for the JP’s total exports to be increasing (r²=0.70).

Increasing linear trends of increasing regional exports from JP include rAP (r²=0.52), CH (r²=0.67) and EU (r²=0.80).

Figures 11 and 12 show the relative changes in JP's import sources and export destinations, respectively, as a percentage of the JP's total exports or imports in the years 2000 and 2010, and, as predicted for2021, from the linear regression trend lines shown in Figures 9 and 10.

As illustrated in Figure 11, despite the clear trend for declining imports (Figure 9), the ME remains the critical source of petroleum to JP. In fact its relative importance is predicted to increase, as the other former import sources, rAP and CH end.  For instance, if the linear trends shown in Figure 9 continue, then by 2021, roughly 90 percent of JP’s imports would still come from ME, with nothing coming from rAP or CH.  It is that loss of petroleum imports from rAP and from CH what makes the ME of continued critical and perhaps growing importance to JP. 

The remainder of JP’s imports by 2021 would primarily come from FS, the one region showing a substantial trend for increasing import to JP.

Small that they are, JP’s exports trends, summarized in Figure 12, illustrates declining proportions of exports going to rAP and NA and increasing exports to CH and EU.

Summary and Conclusions

Of all the regions in this series, Japan is one that is most highly dependent on petroleum imports.  But Japan hit a peak in petroleum consumption in the mid-1990s and has been in decline since then (Figure 1).  And, because it only produces a few percent of its petroleum consumption (Figure 2), this trend for declining consumption is paralleled by declining petroleum imports (Figure 7).  Over the last decade, for instance, imports of petroleum have shown a remarkably steady linear decline, corresponding to a 0.44 percent decline in imports from the total global import petroleum pool per year (Figure 9; r² = 0.96).

Japan is highly dependent upon the Middle East for its petroleum imports, which Japan must import, since it produces almost no petroleum on its own.  Every year for at least the last decade, Japan has imported about 80 percent of its petroleum from the Middle East.  The trend going forward is for Japan to import even higher proportions of its oil from the Middle East, as other import sources, such as China and the remaining Asia Pacific region countries end, or will end in the next few years.  Only petroleum imports from the former Soviet Union region is on an up-swing.  Japan’s growing dependence on petroleum imports from the Middle East, a region whose total petroleum exports have been flat for the past several years, and whose exports appears to be shifting towards China and the remaining Asia Pacific region (see e.g., Figure 10 in Part 7), does not bode well for Japan having a reliable import source upon which to depend.  Indeed, troubles in the Middle East involving a loss of petroleum exports would be a disaster for Japan as 70 percent of its total petroleum imports must travel through the Strait of Hormuz.

The Effects of Fukashima on petroleum imports

Some readers might wonder: will the total loss of nuclear power, due to the Fukashima disaster  and the ensuing public response, cause Japan’s petroleum imports to greatly spike upwards? 

The short answer is yes, it’s imports may increase somewhat, but not too much, because Japan does not generate too much of it’s electricity by burning petroleum.  

According to the EIA, citing “industry estimates,” fuel oil consumption could increase up to 238,000 bbl/d, or 0.087 bby, to provide electricity.  That would correspond to about 5.4 percent of Japan’s total consumption of 1.62 bby of petroleum in 2010 (Figure 1).  If we assume no further reduction in 2011, then consumption (and corresponding imports) might go up to 1.71 bby (i.e., 0.087+1.62), shown as a red asterisk in Figure 1.  As you can see, the effect is small.  On the other hand, Japan’s exports of petroleum products in 2010, of 0.11 bby (Figure 8) could pretty well cover this size of increased demand, so it possible that, instead of an increase its imports, Japan may simply decreases its exports and use this petroleum domestically.

Again according to the EIA, of the 1 billion kilowatt hours of electrical power it generated in 2008, 63 percent came from “conventional thermal sources,” 27 percent came from nuclear sources, with the balance from hydroelectric other renewable hydroelectric and other renewable sources.  Of those conventional thermal sources, by far the bulk of electricity is from burning coal and liquid natural gases, both of which are also heavily imported.  As explained by the EIA, Japan's aging oil-fired power plants are used primarily as extra capacity to meet peak demand, and less than 10 percent of electricity produced currently is oil-generated.  And, there are no new oil-fired power plants under construction.  I expect that these oil-fired power plants will be continued to be used mainly to provide the needed swing capacity, to help mitigate rolling blackouts, rather than be used all-out to generate electricity. 

Rolling blackouts in Japan this summer are a growing concern and this would no doubt cause a decline in GDP and worsen Japan's trade balance, not to mention the problems created domestically with transportation problems and the reduction in quality of living.  I wonder, how long would this go on before Japan’s citizens and businesses start demanding the nuclear power plants to come back on-line again in spite of the inherent risks?

-------------------

I am coming close to the end of this rather long series!  Next time, I finish wrap up my regional analysis with a description of the remaining Asia-Pacific region’s petroleum Export and Import Trends. 

Part 9: Inter-Regional Trade Movements of Petroleum to and from China

Over the last decade, all four net petroleum exporting regions (ME, FS, AF, SA) have stepped up their exports to CH, often the expense of less exports to one or more of EU, NA or Japan (JP).

For instance, Part 7 and Part 8 illustrated how petroleum exports from the Middle East (ME) and the former Soviet Union (FS) was increasingly flowing to China (CH).  Part 5 showed a similar trend of increasing exports from Africa (AF) to CH with declining exports to the European Region (EU).  Part 4 showed the analogous trend of decreasing export to North America (NA) from South America (SA) and increasing exports from SA to CH. 

Here in Part 9, I show these trends all together, from the perspective of China, and, further explores the trade movements of petroleum between China and the other two Asian regions: JP and the remaining Asia-Pacific countries (rAP). 

Part 1, introduced the abbreviations, definitions, data bases and analysis methods used in this series. 

China's Total Petroleum and Crude Oil Production and Consumption Rate Trends

Figure 1 presents CH’s total petroleum consumption rate (i.e., both domestic and imported petroleum) since 1980 as reported by the EIA or BP review (solid red circles and squares, respectively). 

 

As you can see, China’s petroleum consumption rate has been exponentially increasing for the last 20 years.  As I showed in a previous post (e.g., Figure 1a here) the BP data from 1983-2010 nicely fits the Hubbert Equation with a compounding consumption growth rate of 7.4 percent per year.

And, there are no signs of the consumption rate tailing off anytime soon.  My previous best-fit analysis using the Hubbert Equation suggested that if this consumption trend could continue unabated, then by 2030, China would be consuming 8 bby, which would exceed the USA’s peak consumption rate in the mid-2000s. 

Figure 2 shows CH's total petroleum production rate (i.e., domestic production, solid blue circles and squares for EIA and BP data, respectively) and crude oil production (solid purple circles). 

The purple circles are not too visible in the figure because they overlap with the total production amounts, meaning that CH doesn’t produce much else in the way of petroleum besides crude oil. 

The growth in the petroleum production rate is impressive: from 0.77 bby in 1980 to 1.5 bby in 2010—a doubling in production.  But clearly this doubling was not nearly enough to keep up with the increasing consumption rate shown in Figure 1.  For instance, from Figure 1, consumption increases from about 0.6 bby in the early 1980’s to 3.3-3.4 in 2010—a +500% increase.  Consequently, CH has become a strong and growing net importer of petroleum over the last 20 years.

China's Gross and Inter-regional Export and Import Rate Trends

Figure 1 also shows CH’s gross and inter-regional imports of total petroleum, crude oil and petroleum products.  The EIA's import data (open circles) only runs from 1984 to 2008, while the BP review's import data (open squares) only runs from 2000 to 2010.  The same applies to the export data in Figure 2.

Note: For consistency with other parts in the series I kept the use of the term “gross” in the figures when referring to the EIA data, but, when talking about a single country region, as is the case here, the EIA’s import data and the BP review’s interregional import/export data should be about the same.  That generally appears to be the case here, as illustrated by the confluence of the open circles and squares in Figures 1 and 2.

As illustrated in Figure 1, since about 1990, CH’s total imports (open red circles and squares) have been on a similar exponentially increasing trend as consumption.   The bulk of these exponentially increasing imports have been crude oil imports (open brown circles and squares), but petroluem product imports (open green circles and squares) have also steadily increased.

Despite the dramatic increase in imports, CH still exports some petroleum.  As illustrated in Figure 2, total exports (open blue circles) steadily fell from 1985 to 1999, mainly due to declining crude oil exports (open brown circles).  The trend of declining crude oil exports continued throughout the 2000s until 2010, when CH exports essentially no crude oil (i.e., about 0.01-0.02 bby; open brown circles and squares). 

However during the 2000’s, total exports (open blue circles and squares) began to rise again.  The increase in total exports was due to an increase in petroleum product exports (open green circles and squares).  Thus, of the 0.24 bby that CH exported in 2010, 0.22 bby was petroleum product exports. 

Figure 3 shows CH's total petroleum, crude oil and petroleum product imports relative to the respective gross and inter-regional global petroleum import pools.  Now the EIA and BP data set have separated, because as discussed at length in other parts of this series (see e.g., Part 1 and Part 2) the EIA-derived global gross export/import pool is larger than the BP review-derived global inter-regional export/import pool.

As you can see, CH’s total inter-regional imports (red open square) has rocketed up from 4.7 percent of the global import pool in 2000 to 13.1 percent of the global import pool.  And, as mentioned when discussing Figure 1, this is mainly due to inter-regional imports of crude oil (brown open squares), although petroleum product imports (open green squares) has also been increasing, albeit at a slower rate. In 2010, CH imported 10 percent of the crude oil in the inter-regional export pool.

The gross import data (open circles) follows these same trends.

Figure 4 shows CH's exports relative to the respective total gross and inter-regional global petroleum export pools, which, of course, is about the same size as the respective global import pool.   Again, you see some separation between the EIA and BP data because the sizes of the gross and inter-regional export pools are different.

Note the three times smaller vertical scale of Figure 4 compared to Figure 3, indicative of CH’s role as a major petroleum importer. 

Figure 4 more clearly shows the trends I talked about when discussing Figure 2:  total petroleum exports (blue circles and squares) hit a trough in 1999 due to declining crude oil exports ( brown circles and squares).  Crude oil exports have continued to decline, but, petroleum product exports (green circles and squares) have increased, thereby causing total exports to rise again.  Still, in 2010 CH only provided 1.4 percent of the total global export pool—much less than the contributions to global inter-regional exports from FS (20 percent) or ME (41 percent), and even lower than NA’s and EU’s 4-3 percent contributions.

Comparing EIA and BP Export and Import data

As discussed in previous parts of the series, when dealing with a region having multiple different countries, the difference between the gross (EIA data) and inter-regional (BP data) imports or exports, shown in Figures 1 and 2, respectively, should correspond to intra-regional trade movements of petroleum among the countries within the region.

For the present study, this is not applicable because I have defined CH as a single country region.  Still, I am interested in seeing how the EIA and BP data compare to each other.  In an ideal world, these data would be the same and therefore the differences show in Figure 5 and 6 below would be zero.

Figure 5 shows the differences between the EIA gross and BP inter-regional total, crude oils and petroleum product imports, which should equal the intra-regional values for these quantities. 

Not too bad.  The difference are pretty close to zero with a few notable spikes (e.g., product imports difference in 2000 equals 0.07 bby; difference in total imports in 2009 equals -0.09 bby).

Figure 6 shows the differences between the EIA gross and BP inter-regional total, crude oil and petroleum product exports, which should equal the intra-regional export values for these quantities. 

Once again, not too bad.  There is essentially no difference in crude oil exports, but there is a systematic difference in the product exports—the EIA product exports being about 0.04 bby higher than the BP product exports, with some fluctuations in 2006-2007.  Consequently, the difference total exports reflects this 0.04 bby difference.

Trade movements of total petroleum between China and other regions

Figure 7 shows the specific quantities of petroleum, in units of bby, imported by CH FROM each of the eight other regions, and also shows the sum of CH's total inter-regional petroleum imports from all eight of the other regions (black "Xs"), which is the same as presented in Figure 1 (red open squares).  Note the different scales for the individual regions (lhs axis) and the total (rhs axis).

 

This figure nicely shows where CH’s increased imports have been coming from—there have been large increases in absolute amounts of petroleum imports from ME, AF, FS and SA. 

Additionally, CH gets significant amounts ofpetroluem imports from the remaining Asia Pacific region (rAP).  For instance 0.2 bby was imported from rAP to CH in 2000, after hitting a peak of 0.32 bby in 2004 and then dropping slightly export from the rAP are back up to 0.33 bby in 2010.

CH’s imports of petroleum from NA, EU and JP are all less than 0.03 bby in 2010, although in 2004, JP exported to CH a total of 0.04 bby—most likely correspond to petroleum products.

Figure 8 shows petroleum exports from CH TO each of the eight other regions and again, for reference, I show CH’s total exports (black “Xs” corresponding to the blue squares in Figure 2).  Again, note the much smaller vertical scale as compared to Figure 7, illustrating that CH is a large net importer of petroleum. Also note that this time I don’t need a separate axis scale to portray the total exports compared to regional exports.

As you can see CH’s total exports have increased over the last decade.  Especially in the last two years exports spiked upwards—this is reflecting the increase in petroleum product exports that I discussed in the context of Figure 4.   

Figure 8 illustrates that CH’s exports have been going mainly to rAP, although there is a small but noticeable increase in exports to South America.   For instance, in 2010, of the total exports of 0.24 bby, 0.17 bby (71%) went to rAP and about 0.04 bby (15%) went to SA. 

A distance third place destination is JP, receiving about 0.01 bby (3.5%) of CH’s exports in 2010.  Notice how much exports to JP are down from 2000—in 2000 JP received about 0.04 bby (35%) of CH’s total exports of 0.13 bby.  Even NA, in 2000, was receiving about 12% of CH’s exports, but by 2010, this was down to 1.3%.  

Figures 9 and 10 present the same data as shown in Figures 7 and 8, respectively, but expressing CH's petroleum imports or exports, to or from each of the eight regions, as percentages of the total global inter-regional petroleum import/export pool (global inter-regional imports and exports are the same).  For reference, I also show CH’s petroleum imports and exports as percentages of the global petroleum import/export pool (“Xs” right vertical axis; again note the different scale in Figure 9).

Additionally, I have taken all of these data and made linear extrapolations of the 2000 to 2010 data (via linear regression analysis) out to 2021. 

Figure 9 shows the major linear trend for increasing total imports to CH (r²=0.94; black line).

The linear regression coefficients for the prominent regional trend lines for increasing imports are all quite large: ME (r²=0.93), AF (r²=0.95), FS (r²=0.93), SA (r²=0.93).  Imports from rAP has a flat trend line for (r²=0.008). 

Notice that AF has replace rAP as the second largest supplier of petroleum.  We can see from Figure 9, this transition occurred around 2004.  Also from the trendline in Figure 9, if the expected continued flat imports from rAP continues and increasing imports from FS and SA continue, then, by about 2012 and 2016, respectively, FS and  SA will overtake rAP as the number three and four petroleum suppliers to CH.

Figure 10 shows a weaker trend for the CH’s total exports to be increasing (r²=0.40; black line).

However the regression coefficients for linear trends of increasing regional exports imports to rAP is stronger (r²=0.51) and much stronger for exports to SA (r²=0.87).  The linear regression trendline for decreasing exports to JP also is quite strong (r²=0.81).

Figures 11 and 12 show the relative changes in CH's import sources and export destinations, respectively, as a percentage of the CH's total exports or imports in the years 2000 and 2010, and, as predicted for2021, from the linear regression trend lines shown in Figures 9 and 10.

Figure 11, illustrates that the most prominent relative changes in the import sources involve AF, SA FS on the positive side and ME and rAP on the negative side.

In 2000, 90 percent of CH’s petroleum imports came from three sources: ME (43%), rAP (28%) and AF (19%).  FS was a distance fourth supplier at 5.4% and SA as a source (0.4%) was behind even EU (2.9%).  But by 2010, CH was still getting 40% of its imports from ME—of course this corresponds to a larger absolute increase in imports (Figure 7) to support CH’s increased consumption (Figure 1), but relatively speaking, this corresponds to a slight decrease in the proportion of CH’s imports coming from ME. 

Likewise, although absolute imports from rAP have somewhat increased (Figure 7) as a proportion of CH's imports rAP's contribution declined to 15% of total imports in 2010. 

What has gone up, relatively and absolutely speaking, are imports from AF, at 22%, FS, at 11% and SA at 8% in 2010.  Should the trends discussed in Figure 9 continue, then by 2021, ME is still predicted to be the top supplier at 40%, AF will be a strong second supplier (27%) with FS (13%) and SA (10%) in third and fourth, respectively.  rAP will have fallen to the fifth largest supplier (8%).

Figure 12 illustrates the trend for CH’s exports, small that they are, move away from JP and NA and towards SA, with rAP remaining the major destination. 

In 2000, 96 percent of CH exports went to three destinations: rAP (49%), JP (35%) and NA (12%).  But, by 2010, the proportion of exports to NA (1.2%) and JP (3.5%) had dramatically decreased in favor of an even higher proportion going to rAP (71%) and the new import destination SA (15%). 

A continuation of these trends to 2021 would predict substantially all of CH’s exports going to rAP and SA, with minor amounts to EU and AF and none to NA and JP.

Summary and Conclusions

Although China’s petroleum production rate is up 200% over the last decade, its consumption rate has increased at an even higher rate—500%.  This has caused China to become a major petroleum importer.  In 2010, China imported 2.2 billion barrels.  That’s roughly half of the European region’s and two-thirds of North America’s inter-regional imports in the same year.  If the trends of increasing imports to China (black line, Figure 9, above) and declining imports to North America (black line, Figure 9 from Part 3) were to continue, then China would equal and then surpass North America as the second largest petroleum importing region in about five years, 2017, importing an estimated 17% of global inter-regional export pool of petroleum, up from 13% in 2010. 

While the Middle East continued over the last decade to be China’s major and steady inter-regional petroleum supplier, China’s other imports sources have been shifting over the last decade, away from the remaining Asia Pacific countries and towards Africa, the former Soviet Union countries and South America. 

Although it is a strong and growing net petroleum importer, China does export some petroleum, corresponding to about 1.5 percent of the global inter-regional export pool.  Of the small amount of petroleum it does export, China exports substantially all of it as petroleum products, and mainly to the remaining Asia-Pacific countries with a trend for increasing amounts to South America and decreasing amounts to Japan. 

I find it interesting that the three up-and-coming inter-regional suppliers of petroleum to China: Africa, the former Soviet Union and South America are also all increasing suppliers of petroleum to one or both of North America and Europe. Africa and the former Soviet Union are increasing suppliers to North America, and the former Soviet Union and South America are increasing suppliers to Europe.  If, however, Africa, South America and former Soviet Union are at, or near, peak oil exports, then something will have to give, in one or more of these export trends. 

My hunch is that exports from these regions has become, or is about to become, a zero-sum game. 

For instance, consider the Middle East, whose absolute exports have been flat-to-declining for several years.  Over the last decade, an increase in petroleum exports from the Middle East to one or two regions, like China or other Asia-Pasic countries, has meant decreasing exports to other region or regions, namely North America, Europe and Japan. 

I think that we are starting to see this same zero-sum game for South America and Africa.  South America’s total inter-regional petroleum exports are starting to flatten out, and, as South America exports a greater proportion of its petroleum to China and Europe, it has been exporting less to North America.  Similarly, Africa’s total inter-regional exports are flattening out, and, as Africa exports petroleum more to North America and China, it has been exporting less to Europe and the remaining Asia-Pacific region.  

What has sustained the global export pool over the last decade is the former Soviet Union.  The former Soviet Union has sustained the flow of exports to Europe and North America while the Middle East shifted it exports away from these destinations to supply increasing amounts of petroleum to China and the remaining Asia-Pacific region. 

But when absolute exports from the former Soviet Union starts to flatten out, and maybe this is happening now, the former Soviet Union will no longer be able to continuing increasing exports to North America and Europe and all support the increasing demand in China and the remaining Asia-Pacific region. 

Something will have to give.  

In my opinion, based on the major pipeline projects and negotiations underway for the former Soviet Union to deliver more oil to Asia (see Part 8), it is clear that what will "give" are the exports to North America and Europe.

----------------------

Next time, I describe Japan’s petroleum Export and Import Trends. 

Part 8: Inter-Regional Trade Movements of Petroleum to and from the former Soviet Union Region

In Part 6 we saw how petroleum imports from the Middle East (ME) to the European Region (EU) have gone down over the last decade with the difference being made up from exports from the former Soviet Union Countries (FS), and, in Part 7 we saw that the ME’s exports were shifting away from North America (NA) and EU to Asia, particularly China (CH), and other Asian countries (rAP), with declining exports to Japan (JP) and other regions as well.

Now it’s time to look at the FS directly.  As you will, see the petroleum trade between EU and FS is a co-dependency relationship, but this may be changing soon. 

Part 1, introduced the abbreviations, definitions, data bases and analysis methods used here. 

The former Soviet Union's Total Petroleum and Crude Oil Production and Consumption Rate Trends

Figure 1 presents FS’s total petroleum consumption rate (i.e., both domestic and imported petroleum) since 1980 as reported by the EIA or BP review (solid red circles and squares, respectively). 

Both the EIA and BP data set illustrate fairly stable consumption rate of 3 to 3.3 bby for a decade-long period during the 80’s.  Then after 1991, consumption collapsed, coincident with the dissolution of the Soviet Union in late 1991.  And then, consumption never came back—for instance, after hitting a minimum of 1.35 bby in 1999, consumption by 2010 was up to 1.5 bby, but that is still half of what consumption was in the 1980’s.

Figure 2 shows FS's total petroleum production rate (i.e., the entire region’s domestic production, solid blue circles and squares for EIA and BP data, respectively) and crude oil production (solid purple circles). 

In the 1980s, petroleum production, mostly crude oil, was about 4.4 to 4.6 bby, make FS a net petroleum exporter.  But similar to the consumption story shown in Figure 1, production dropped dramatically after about 1990, reaching a minimum of 2.6 bby 1996.  It took another decade until 2007 before production return to the Soviet-era production rate of 4.6 bby.  There are some signs that the rate of increase in the production rate is starting to plateau.  Indeed, in a previous Hubbert Equation analysis of these data over a year ago the best fit predicted that production would peak in 2012 at about 5 bbs/yr.  We will know in a few years time, I suppose.

What has made the FS a large and growing exporter over the past decade is that, after both consumption and production bottomed out in the mid-90s, the FS’s production rate recovered to its Soviet-era rate but its consumption rate did not.  Let’s look at those import and export trends more closely.

The former Soviet Union's Gross and Inter-regional Export and Import Rate Trends

Figure 1 also shows FS's gross and inter-regional imports of total petroleum, crude oil and petroleum products.  The EIA's import data (open circles) only runs from 1984 to 2008, while the BP review's import data (open squares) only runs from 2000 to 2010.  The same applies to the export data in Figure 2.

As illustrated in Figure 1, during the pre-dissolution Soviet era, petroleum imports, of any kind, were very small.  Even gross imports (open red circles) totaled only 00.9 to 0.14 bby prior to 1991.  But by 1992, there was a huge spike in gross imports, up to 0.92 bby.  It took several years for imports to go back down to 0.34 in 2000, and more recently, gross imports have gone up to about 0.5 bby.

For the last decade, at least, the portion of these petroleum imports that are from inter-regional sources (open red squares) is very small, less than 0.1 bby.

As illustrated in Figure 2, during the past several years, the FS’s gross (open blue circles) and  inter-regional exports (open blue squares) have dramatically increased, however.  For instance, inter-regional exports of petroleum increased from 1.56 bby in 2000 to 3.3 in 2009, although this is down slightly to 3.1 in 2010.  That is still about a doubling of inter-regional exports over the past decade. 

Figure 3 shows FS's total petroleum, crude oil and petroleum product imports relative to the respective gross and inter-regional global petroleum import pools. 

Prior to dissolution, the Soviet Union's gross imports (red circles), which includes intra-regional trade, only amounted to about 1 percent of the global petroleum import pool.  Immediately after the dissolution, in 1992, gross imports spiked up, to nearly 6 percent of the global import pool, before dropping down to below two percent in 1999.  These gross imports were mainly crude oil imports (brown circles) although there was also a spike in petroleum product imports (green circles).  The gross imports of the FS remained above 2 percent from 2001 to the last reporting year, 2008.

The FS's inter-regional imports (red squares) has been a fairly steady 0.3 to  0.2 percent of the inter-regional global import pool, and these inter-regional imports are almost totally petroleum product imports (green squares).

Figure 4 shows FS's exports relative to the respective total gross and inter-regional global petroleum export pools, which, of course, is about the same size as the global import pool.  

Note the three times larger vertical scale of Figure 4 compared to Figure 3, signifying the FS’s important role as a major petroleum exporting region. 

Figure 4 shows that FS's gross export troughed in 1992, spiked up in 1993, and then declined to a trough of about 8-9 percent of the global pool for several years in late 90s before really taking off over the last decade.  This increase is mainly due to inter-regional exports (blue squares) and specifically crude oil (brown squares).  In 2009, FS supplied nearly 20 percent of the inter-regional export pool, 15 percent of that being crude oil and the remaining 5 percent being products. 

This is still far less than the 41 percent of global inter-regional exports that came from the ME in 2010, but still, it has been the FS that is responsible for much of the increase in the global inter-regional export pool over the last decade, because ME's absolute exports have been flat during this period (see Part 7)

Former Soviet Unions Intra-regional Export and Import Trends

The difference between the gross and inter-regional imports or exports, shown in Figures 1 and 2, respectively, should correspond to intra-regional trade movements of petroleum.   For the reasons presented in Part 3, I think that these differences are only rough estimates of intra-regional imports and exports.  But still, I continue to show the differences because they illustrate the intra-regional trends for each region. 

Figure 5 shows the differences between the gross and inter-regional total, crude oils and petroleum product imports, which should equal the intra-regional import values for these quantities. 

The difference between gross and inter-regional total petroleum imports (red triangles 0.3-0.5 bby) is larger than the inter-regional imports (less than 0.1 bby; Figure 1: open red squares), suggesting more intra-regional imports than inter-regional imports.  I can't speculate where these intra-regional imports are going to or from within the FS, but, they appear to be mainly crude oil imports (brown triangles) probably for refining into products.

Figure 6 shows the differences between the gross and inter-regional total, crude oil and petroleum product exports, which should equal the intra-regional export values for these quantities. 

Figure 6 shows the same trends as in Figure 5, but with the usual broader fluctuations—intraregional exports (blue triangles) in the range of 0.3 to 0.8 bby.

Trade movements of total petroleum between the Former Soviet Union region and other regions

Figure 7 was intended to show the specific quantities of petroleum, in units of bby, imported by FS FROM each of the eight other regions, and also shows the sum of FS's total inter-regional petroleum imports from all eight of the other regions (black "Xs"), which is the same as presented in Figure 1 (red open squares).

However, like the ME, there really are no substantial inter-regional imports that the BP review’s data base captures at level of individual regional level.  Indeed, the FS’s total imports, ranging from 0.04 to 0.05 bby over the past 10 years, is only about half of the ME’s total imports. 

Figure 8 shows petroleum exports from FS TO each of the eight other regions and again, for reference, I show FS’s total exports (black “Xs” corresponding to the blue squares in Figure 2).  Again note the much larger vertical scale as compared to Figure 7, illustrating the FS’s role as a large net exporter of petroleum. In essence, because its imports are so low, Figure 8 corresponds to the FS’s net exports and total exports.

The black X’s in the figure illustrate the strong upwards trend in FS’s total exports over the last decade.  The figure also illustrates that a large portion of those inter-regional exports have been going to the EU region (blue squares).  For instance, in 2000, of the total exports of 1.56 bby, 1.21 bby or 78 percent went to EU. In 2010, of the 3.12 bby in total exports, 2.18 bby or 70% went to EU. 

I think that you can get the sense from Figure 8, however, that there is a trend for FS's exports to diversify away from EU to other regions.  That is, the proportion of the FS’s exports to EU has been going down slightly over the last several years in favor of several other regions. 

The other regions that have been getting larger amounts of the FS’s exports include: NA (0.29 bby in 2010, up from 0.02 bby in 2000), CH (0.25 bby in 2010, up from 0.04 bby in 2000), rAP (0.20 bby in 2010, up from 0.05 bby in 2000) and JP (0.11 bby in 2010 uo from less than 0.01 bby in 2000).  Still the total exports to these four other regions only amounted to 0.85 bby or 27 percent of FS’s total exports in 2010. 

Figures 9 and 10 present the same data as shown in Figures 7 and 8, respectively, but expressing FS's petroleum imports or exports, to or from each of the eight other regions, as percentages of the total global inter-regional petroleum import/export pool (global inter-regional imports and exports are the same).  For reference, I also show FS’s petroleum imports and exports as percentages of the global petroleum import/export pool (“Xs” right vertical axis; note the different scale).

Additionally, I have taken all of these data and made linear extrapolations of the 2000 to 2010 data (via linear regression analysis) out to 2021. 

Figure 9, like Figure 7, is not much of a story, because imports from the other eight individual regions are not reported in the BP reviews.  There really is no trend for the FS’s total inter-regional imports to be increasing or decreasing based on the last 10 year’s worth of data reported in the BP reviews  (r²=0.001).

Figure 10 shows the decade long trend for the FS’s total exports to be increasing (r²=0.94), a large portion of this being increased exports to EU (r²=0.78).

 The relative exports to all of the other regions are relatively smaller, therefore, to better illustrate these trends, in Figure 10a, I expanded the vertical scale of the same data shown in Figure 10.

As Figure 10a illustrates there are similar strong trends for increasing exports to NA (r²=0.94), CH (r²=0.93) and JP (r²=0.81).  There is a weaker trend for increasing export to rAP (r²=0.35). 

Figure 10a also shows two negative trends of decreasing exports to SA (r²=0.81), and to the infamous UN (r²=0.61).  As I discussed in Part 6, “UN” is defined in the BP review as “Unidentified,” and this includes “changes in the quantity of oil in transit, movements not otherwise shown, unidentified military use etc.”  Where ever this quantity of petroleum has been going to, from the FS, the trend is for this to be going down over the last decade (e.g., 0.17 bby in 2000 to 0.06 bby in 2010).  Maybe this decline just signifies an improvement in BP’s ability to account for the quantities of petroleum being exported around the world, but, that is just speculation on my part. 

Figures 11 and 12 show these percentage changes in FS's import sources and export destinations, respectively, as a percentage of the FS's total exports or imports in the years 2000 and 2010, and, as predicted in 2021, from the linear regression trend lines shown in Figures 9 and 10.

Again there is essentially no regional story in Figure 11, because the FS's imports of petroleum from the individual other eight regions is negligibly small.

As you can see in Figure 12, exports to EU as a percentage of FS's total exports have been fairly steady at about 75 percent of FS total exports. 

That is, from the perspective of the FS, its proportion of exports to EU have stayed constant, even though the absolute amount of petroleum being exported has gone up (e.g., Figure 2, open blue circles).  However as discussed in Part 6 from the EU region's perspective the proportion of petroleum from FS have gone up as the ME's exports to EU have gone down.    For instance, as discussed in Part 6 by 2021 when EU may no longer be receiving any the ME's petroleum exports (see also Part 7, Figure 10), the EU region would be receiving about 77 percent of its imports from FS.

Figure 12 also illustrates the trends for increase exports to NA, CH, rRAP and JP and declining exports to SA and UN, although all of these individual inter-regional exports compared to EU are quite small.  Still the trend is ther for increases to NA, rAP, CH and JP.

Summary and Conclusions

Although the analogy is not perfect, the relationship between the former Soviet Union region and the European Region reminds me of the relationship between Canada and the USA. 

Both Canada and the former Soviet Union region are large geographic areas with relatively low populations and net exporters of most their petroleum to one regional destination. 

Using EIA data, I estimated a few years ago that Canada exports about 75 percent, and increasing, of its petroleum production to the USA, which is about the same percentage of petroleum production that the former Soviet Union exports to the Europe (Figure 12).  So, just as Canada is the USA's major petroleum import source, so too does the former Soviet Union serve Europe's major petroleum import source.  The analogy tends to break down, however, when you compare the larger import trends for Canada as compared to the former Soviet Union.  The latter's total global imports (0.04 bby) only amounted to about 2.5% of its total consumption in 2010 (Figure 1).

Nevertheless, just as Europe is dependent on the former Soviet Union region for its oil, so to is the former Soviet Union region depends on Europe as its export destination.  And just as Canada wants to diversify its export destinations away from the USA, so too would the former Soviet Union region benefit by diversifying its export destinations away from Europe.   There has been much talk and debate about Canada's desire to build the Keystone XL pipeline and Gulf Coast Pipelines so that Canada could deliver its oil to the Gulf Coast where it could, turn export to Europe and South America, or, the Enbridge Northern Gateway pipeline so that Canada could deliver oil to Asia. 

But, in contrast to Canada's talk and debate, actual pipelines have been built, and are being built, to deliver increasing amount of oil from the former Soviet Union region to China, Japan and other Asian destinations. 

For instance, after resolving a number of border disputes between China and several former Soviet Union countries, a pipeline between Kazakhstan and China was completed in 2005, and is now carrying 2 mbd (0.73 bby) with an expected doubling in capacity in 2012 (see e.g., A new silk route to China).  Construction of the Russian Eastern Siberian-Pacific pipeline is underway and expected to deliver 3.6 mbd (1.3 bby) by 2016, and 6 mbd (2.1 bby) by 2025, to China, Japan and other Asia-Pacific countries.  China is also trying to lock-in a long term contract with Russia to import all 30 million Tonnes per year (4 mbd or 1.5 bby) of oil shipped through the Eastern Siberia Pacific Ocean pipeline.  Previously, about 60 percent of that oil has been exported to Japan, South Korea and North America.  But there is no guarentee of that continuing in the future. 

If all of the planned contracts and pipelines come to fruition, then they will potentially deliver increased quantities of up to 2-3 billion barrels per year from the former Soviet Union region to China, Japan and remaining Asia-Pacific region.  And, from Figure 2, it is clear that the former Soviet Union region's total yearly inter-regional exports for the past fours years have only been only slightly above 3 billion barrels per year, and that these are all-time export highs.  This implies that the mechanism will be in place for the majority of the former Soviet Union's petroleum exports to shift from Europe to Asia, if that is what was more profitable. 

Plus, I don't expect the former Soviet Union's production rates to increase by very much in the coming years. Indeed, the trend in Figure 2 is that production rates are starting to top out (solid blue circles).  Nor do I expect a decrease in regional consumption—rather, the domestic consumption trend shown in Figure 1 show a slow but steady increase in consumption rates (solid red circles). 

So, unless there is a dramatic turn around in these regional trends, something will have to give in the export trends shown in Figures 10 and 10a.  In my opinion, the trend looks clear: those new pipelines to Asia are going to get used.  And, that means that exports to Europe will decline in favor of increased exports to Asia. 

It is interesting to contemplate what consequences will this have for Europe. 

Even if I just assume that the linear trends of increasing exports to China, Japan and the remaining Asia Pacific continue, and, that the former Soviet Union, Middle East and Africa all somehow maintain their same production levels, then by 2021, a total of 0.9 bby of petroleum exports would be exported from the former Soviet Union region to these Asian destinations—an amount that is up from 0.56 in 2010.  As discussed above, I expect the bulk of this difference, 0.34 bby (or 0.93 mbd), to come from declining exports to Europe.  And, if the trend of declining exports from the Middle East, and flat exports from Africa, to Europe also continue, then I estimate that Europe would be getting about 1.4 bby, from the Middle East and Africa, down by about 0.4 bby from 2010.  

Overall then, exports to Europe by 2021 could easily drop by 0.74 bby.  This is probably optimistic, because I expect production from all of the former Soviet Union, Middle East and Africa be down from their present levels, and for domestic consumption to increase.  This means that the amounts of available petroleum exports will also decline.  Coupling shifting imports trends away from Europe, decreasing global export pool, and the trend of declining domestic production Europe's petroleum consumption, makes it highly likely that Europe's future consumption of petroleum will on a strong downward trend.

----------------------

Next time, I am off to Asia to describe China’s petroleum Export and Import Trends.