Sunday, June 3, 2012

Part 11: Inter-Regional Trade Movements of Petroleum to and from the remaining Asia-Pacific Region

As discussed in Part 1, the Asia-Pacific remainder countries (APr), or, the remaining Asia-Pacific (rAP—a better acronym, I think) corresponds to the countries of the Asia-Pacific region as defined in the BP review (see Definitions: Brunei, Cambodia, China, China Hong Kong SAR*, Indonesia, Japan, Laos, Malaysia, Mongolia, North Korea, Philippines, Singapore, South Asia (Afghanistan, Bangladesh, India, Myanmar, Nepal, Pakistan and Sri Lanka), South Korea, Taiwan, Thailand, Vietnam, Australia, New Zealand, Papua New Guinea and Oceania)  minus China and Japan. 

Because the inter-area movement and total oil import/export data for China (CH) and Japan (JP) are reported separately for the last decade’s worth of BP reviews, I can derive a separate sum for the remaining countries in the Asia-Pacific.  The analysis gets more complicated as the BP review has progressively split out more and more sub-regions or countries (e.g., Australasia, then Singapore then India), which to ensure that I was analyzing a constant region from year to year, I add back in to the sum for rAP, minus the intra-regional exchanges.

Similarly, the BP review separately reports the annual petroleum consumption rate for Japan and China, and therefore I can derive the analogous consumption data for rAP by subtracting the reported consumption rate for total Asia-Pacific by the consumption rate for JP and CH.   As noted in Part 10, JP’s petroleum production data is not split out because it is below the BP’s review typical cut off for these tables, and therefore is essentially nil.  CH’s substantial domestic petroleum production rate is split out, so I can likewise derive the production rate for the rAP, by likewise subtracting the reported production rate for total Asia-Pacific by the production rate CH.

I refer the interested reader to Part 1 for further discussion of the abbreviations, definitions, data bases and analysis methods used in the series. 

As you will see, rAP’s petroleum consumption rate has been increasing, but it’s domestic production rate is flat to declining.  Consequently, rAP like CH, for the last decade has greatly increased its inter-regional petroleum imports, and like JP, it mainly looks to the Middle East (ME) for the bulk of its inter–regional imports.   

The remaining Asia-Pacific's Total Petroleum and Crude Oil Production and Consumption Rate Trends
Figure 1 presents rAP’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, rAP’s petroleum consumption rate was increasing at a very steep rate from 1988 to 1997—nearly doubling from 1.9 bby to 3.73 bby over this period.  Then, a glitch occurred with the consumption rate decreasing in 1998, following the 1997 Asian financial crisis.  Thereafter, rAP’s consumption rate has increased, but at a slower rate.  For instance, from 2001 to 2010 the consumption rate increased from 4 to 5 bby.  That consumption rate of 5 bby in 2010 is about the same as the consumption rates of CH and JP combined in the same year.

Figure 2 shows r-AP'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 EIA and BP are in pretty tight agreement until 1997, and then diverge thereafter, with the BP production numbers being consistently about 0.1 bby lower than the EIA numbers.  The EIA production data shows a peak in production in 2000 at 1.76 bby—the BP data also shows a peak in production in 2000 at 1.69 bby.  Thereafter, both the EIA and BP production data suggest flat to declining production rates.

The remaining Asia-Pacific's Gross and Inter-regional Export and Import Rate Trends
Figure 1 also shows the rAP’s gross and inter-regional imports of total petroleum, crude oil and petroleum products.  The EIA's import data (open circles) only runs from 1986 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, gross imports (open red symbols) are very high and run roughly parallel with total consumption (closed red circles).  Gross imports from the EIA is the sum of both intra-regional imports within rAP and inter-regional imports into rAP from other regions.  For gross imports to be so high, even higher than total consumption itself must mean that there are a lot of trade flows of petroleum with the rAP  and that some of this petroleum gets re-exported.  This is probably reflecting, in part, intra-regional trade flows between significant oil producers like Indonesia, Malaysia and Vietnam to the substantial consumers like India, Australia, South Korea and Taiwan.     

Given the 1 bby increase in consumption over the last decade (solid red symbols, Figure 1) and flat to declining production (solid blue symbols, Figure 2) it is not surprising to see why total inter-regional petroleum imports (open solid squares) have increased from 3 to 4.1 bby over this some period.  Interestingly, inter-regional imports of crude oil (open brown squares, Figure 1) have only increased slightly over the last decade.  Rather, it is inter-regional imports of petroleum products (open green squares, Figure 1) that have increased far more, from 0.6 to 1.5 bby, over the last decade. 

Figure 2, shows rAP’s total gross and inter-regional exports of total petroleum, crude oil and petroleum products.  We see the increasing rates of gross exports (open blue circles) outstripping total production, again suggesting significant increases in intra-regional trade movements of petroleum, in particular, exports of petroleum products (open green circles).  In comparison, for the last decade, inter-regional exports of petroleum to destinations outside of rAP have been flat to declining, except for an up-tick in 2010 (blue open squares).  The decline in total inter-regional petroleum exports is mainly due to a steep decline in crude oil inter-regional exports (open brown squares).  It fact, the declining trend in crude oil exports is opposed by increasing inter-regional exports of petroleum product exports (open green squares), but still, the over all inter-regional export trend appears to be down. 

Figure 3 shows rAP'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.

The rAP’s total relative inter-regional imports (open red squares) have increase slightly over then past few year to about 24 percent of the global inter-regional pool from about 22 percent.  This is in contrasts to JP’s declining share of inter-regional imports, from 14 to 10 percent (see Figure 3, Part 10), and CH’s increasing share of inter-regional imports, from 5 to 13 percent (see Figure 3, Part 9).  The reason for the relatively moderate increase in relative imports as compared to CH, for example, is because two opposing trends are occurring: a declining share of inter-regional crude oil imports (open brown squares) and an increasing share of inter-regional petroleum product imports (open green squares).  For the last three or four years, the increase in imports of the global inter-regional pool corresponding to petroleum product imports has outstripped the decline in imports of crude oil, and so the overall trend is for increased imports from the inter-regional pool.

Figure 4 shows rAP'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.  

Over the last decade the rAP’s contribution to the inter-regional export pool has ranged from 4.8 to 3.4 to 4.6 percent of the global export pool (open blue squares).  The clear trend is for a decline in inter-regional crude oil exports, which has gone from 2.6 to 1.0 percent of the global export pool.  At the same time, inter-regional exports of petroleum products were slowly trending upwards from 2.2 to 2.7 percent of the global export pool, until 2010, when petroleum products exports jumps upwards to 3.6 percent.  From Figure 8, below, it doesn’t look like this spike can be traced to increased exports to any one particular other region, but rather reflects slight increases in exports to CH, JP, EU, NA, SA and AF in 2010.

Comparing EIA and BP Export and Import data
As a multi-country region, the difference between the rAP’S 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, however, 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 values for these quantities. 

The difference between gross and inter-regional total petroleum imports (red triangles) increased from 0.86 bby in 2000 to 1.24 in 2008, suggesting a substantial 0.4 bby increase in intra-regional imports.  This increases appears to be mainly due to increasing intra-regional imports of crude oil (brown triangles) with petroleum product imports being flat to declining (green triangles). 

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. 

Again like Figure 5, the trend is for total intra-regional exports to have increased from about 1 to 1.5 bby from 2000 to 2008—a net increase of 0.5 bby.  But here, it is intra-regional exports of petroleum products that have increased while crude oil exports have stayed flat. 

To me this result, in view of Figure 5 doesn’t make sense (and caused me to double and triple check my calculations), because, if intra-regional crude oil imports have increased (Figure 5), there should be a parallel increase in intra-regional crude oil exports (Figure 6) or at least the same trend.  Likewise the flat intra-regional imports of petroleum products calculated in Figure 5 should be matched by flat, not increasing, intra-regional exports of petroleum products such as calculated for Figure 6.

Once again in the absence of a better explanation, I am forced to write off these discrepancies as reflecting discrepancies between the EIA and BP data sets, and, accordingly, not put to much weight on the intra-regional trends suggested in these two figures—other than to say than the total trends are consistent with each other and indicate increasing intra-regional trade movements of petroleum on the order of 0.4 to 0.5 bby. 

Trade movements of total petroleum between the remaining Asia-Pacific and other regions
Figure 7 shows the specific quantities of petroleum, in units of bby, imported by rAP FROM each of the eight other regions, and also shows the sum of rAP'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 scales.

Very similar to JP (Part 10), rAP is highly dependent on ME for its inter-regional imports over the last decade—with AF a very distant second.  For instance, of the total of 2.94 bby imported in 2000, 2.31 bby, or 78 percent, came from ME, and 0.36 bby, or 12 percent, came from AF.    In 2010, of the total of 4.08 bby that rAP imported, 3.02 bby or 74 percent, came from ME, and 0.31 bby 7.6 percent, came from AF.  Just barely discernable in the Figures are imports from FS, CH and SA, all in the 0.1 to 0.2 bby range in 2010.

Figure 8 shows petroleum exports from rAP TO each of the eight other regions and again, for reference, I show rAP’s total exports (black “Xs” corresponding to the blue squares in Figure 2).  Note the much smaller vertical scale of Figure 8 compared to Figure 7, illustrating that rAP is a large net importer of petroleum. Also note the separate axis scale used to portray the total exports versus regional exports (rhs) and individual regional exports (lhs).

Figure 8 illustrates fairly flat total inter-regional exports (black “Xs”), of about 0.6 bby, until the spike to 0.76 bby in 2010.  Figure 8 also illustrates the two primary destinations for rAP exports has been JP and CH, with a clear trend for declining exports to JP and a rougher trend for increasing exports to CH.  Other important regional destinations for rAP’s petroleum exports include a flat to declining trend of exports to NA and increasing trend for exports to EU, SA and even AF.

Figures 9 and 10 present the same data as shown in Figures 7 and 8, respectively, but expressing rAP'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 size).  For reference, I also show rAP’s total petroleum imports and exports as percentages of the total global petroleum import/export pool (“Xs” right vertical axis; note the different scale in Figure 10).

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 trend for increasing total imports to rAP (linear r2=0.41). 

The linear regression coefficients for the most prominent imports sources show increase imports from ME (r2=0.52) and declining imports from AF (r2=0.71).  If the linear trend for declining imports from AF were to continue, then I estimate that imports from AF to rAP would end around 2029.

Figure 9 (expanded) shows the trends for smaller import sources.

There are rough, small trends for increasing imports from CH (r2=0.53), FS (r2=0.34), SA (r2=0.39) and JP (r2=0.52). 

Figure 10 shows the rough trend for the rAP’s total exports to be decreasing (r2=0.17).   Of course that upward spike in exports spike in 2010 is what causes the very low r2 (e.g., r2 = 0.82, if the 2010 data was excluded),

The linear trend for declining exports to JP is pretty strong (r2=0.91) as are the trends from increase exports to EU (r2=0.82), SA (r2=0.78) and AF (r2=0.82), and, somewhat less strong for declining exports to NA (r2=0.51).  The export trend to CH is pretty flat (r2=0.01) with a slight upwards slope.

Overall, the linear trends in Figures 9 and 10 are not as strong as I saw for CH and JP, or even some other multi-country regions.  This is probably because rAP is a conglomeration of many countries with very diverse economies and populations. 

Figures 11 and 12 show the relative changes in rAP's import sources and export destinations, respectively, as a percentage of the rAP'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, the ME remains the major supplier of petroleum to rAP, providing for plus 70 percent of rAP’s imports for the last decade, and likely for the next decade to come.  Imports from AF are likely to decline, and the trend is for this decline in imports to be made up from small incremental imports from several sources such as SA, FS and maybe even CH or JP.  For reasons presented in Parts 9 and 10 I have my doubts imports from these latter two regions, but maybe this will happen if the imports are in the form of petroleum products.  That is, importing crude oil and then refining it into high value petroleum products for re-export could provide CH and JP with some important sources of petroleum export income.    

The rAP’s inter-regional exports are much smaller than imports, and what it does exports it has exported mostly to CH and JP.  For instance, in 2000 rAP’s top two export destinations were JP (53%) and CH (30%) with NA a distant third at 14%.  By 2010 the top two export destinations were these same two countries but now it was CH (55%) getting more exports than JP (20%) with increasing amounts to EU (13%) over NA.  If these trends continue, then from rAP exports to JP would end around 2015 and CH and EU would be the top two export destinations with SA and AF also becoming larger export destinations than NA. 

Summary and Conclusions
The remaining Asia-Pacific region’s total petroleum consumption has increased at an incredible rate for the past 20 years, and is still increasing, albeit at a slowing rate (Figure 1).  Its 2010 consumption rate of 5 billion barrels per year is only slightly below that of European region (5.5 billion barrels per year) and is the same as China’s and Japan’s consumption rates combined.  In contrast, the remaining Asia-Pacific region’s petroleum production rate hit its peak at 1.7 billion barrels per year in 2000 and is now in a slow decline (Figure 2). 

In view of the large discrepancy between the remaining Asia-Pacific region’s growing consumption rate and flat to declining production rate, it is no surprise that inter-regional import rates over the last decade have increased from 3 billion barrels per year in 2000 to 4.1 billion barrels per year in 2010, while inter-regional exports are flat to declining at 0.6 to 0.7 billion barrels per year.  These imports amount to 82 percent of the remaining Asia-Pacific region’s total consumption.  In 2010, the remaining Asia-Pacific region was importing about 24 percent of the total global inter-regional import pool, which is just slight below the 27 percent imported by the European region.  Similar to Japan, the remaining Asia-Pacific region is highly dependent upon one region for these imports—over 70 percent of its inter-regional imports come from the Middle East with a much smaller, and declining, amount coming from Africa.     

Consequently, my conclusion is the same as it was for Japan—such a high dependence on a single region for a high percentage of it’s petroleum consumption needs does not bode well for the remaining Asia-Pacific region having a stable, resilient import source of petroleum to rely on.  Like Japan, troubles in the Middle East a loss of petroleum export would be disastrous for the remaining Asia-Pacific region. 
This wraps up my nine-region analysis of inter-regional import and export trends.  Next time, in the twelve and final part of this series, I will consolidate my results and see what insights I can provide into petroleum import and export trends going forward.