Iran-Asia Potential Energy Market
Saeid Khoshrou
Asia crude Demand at a glance
Asia is home for some of the biggest crude oil consuming countries. Asia Demand growth pace is faster than any region else and amounted to more than 1 million barrel per day in the first five months year on year. China is the second largest economy in the world with an apparent demand of around 12 mb/d. As the top Asian importer of crude oil, China has imported some 8 mb/d recently where more than 52% came from Middle East. Indian oil demand continued on its growth path and added to 280 kb/d y-o-y, while the country as the second Asian market for crude oil, imported around 4 mb/d from which more than 60% produced in Middle East. South Korea oil demand is reported to increase 250 kb/d in the last five months compared to the same period last year. According to the latest data from Korea National Oil crop., the country imported about 3 mb/d on average, an increase of 14% m-o-m. Going to Japan as the third oil consumer in Asia, the country’s oil import has decreased steadily over the years. However, it is still one of the main destinations for crude came from M.E with an import of around 3.5 mb/d. Having this picture in mind, it is not surprising that Middle East Producers are increasingly focusing on Asia Market.
Iran is well-known by its practical and potential role in the oil and gas market. 35tcm gas and 157 mmb crude reservoir has brought a strategic position to this country. Iran has been a key member of OPEC with the current crude production of around 3.9 mb/d and more than 2.5 mb/d as export. Iran has boosted crude oil production and exports due to the new political environment in the country and international relationship.
Iran aimed to raise its oil output to 4 million b/d by end of this year and to 4.8 million b/d in five years. Achieving this goal is not so far and it gives the country a very specific opportunity to make a more strategic relationship with Asian oil consuming countries.
China, imported an average of 7.92 million b/d, of crude oil in May, surging 38.7% year on year from a low base in the same month of last year. Recently, Tehran and Beijing have signed a deal that is indicating Iranian crude supply to China will rise to more than 1 million b/d. This cooperation agreement includes exploration, enhancement of recovery and development [of oil and gas], manufacturing oil and gas equipment and also different investments in these areas. Iran's crude used to cover 11% of China's oil needs, and it can easily to reach that peak very soon. China's crude oil imports from Iran peaked at 557,413 b/d in 2011 but fell to 430,585 b/d over 2013 before recovering to 534,506 b/d in 2015. It is currently around 800,000 b/d and is planned to continue on growing to 1 mb/d.
Over the first five months, India's oil products demand rose more than 12% year on year to an average of 4.23 million b/d. The International Energy Agency in the Oil Market Report released in May named India as a star performer based on first quarter demand, which was up 400,000 b/d year on year and accounted for almost 30% of the global increase. This provides further support for the argument that India is taking over from China as the main growth market for oil.
Indian crude oil import is around 4.1 mb/d and from which more than 300 kb/d comes from Iran. India’s crude oil import from Iran is doubling and is going to boost to over 400 kb/d in near future.
According to METI, Japan's total crude imports in April averaged at 3.47 million b/d, up 3.4% from a year ago, marking the first year-on-year increase in monthly crude imports in five months. Japan used to import an average 120 kb/d of crude from Iran before lifting the sanctions. Japanese crude imports from Iran have shown more fluctuation over March-April than other months because of the change in financial year which affects insurance renewals for vessels. However the latest news shows that Iran is going to increase its oil exports to Japan drastically and have a new record of around 250 kb/d in very near future.
South Korea’s crude oil imports averaged about 3 mb/d recently and imports of Iranian crude averaged 237 kb/d almost double the level seen a year earlier. South Korea and Iran have agreed to triple their annual trade to $18bn (£12.2bn) as the two countries sign several business deals. South Korea as the world's fifth-largest oil importer remains one of the major crude importers for Iran.
China, India, Japan and South Korea are importing some 18 mb/d of crude oil. Iran can easily take a share of 12% to meet this requirement, in such case 2 mb/d of Iranian crude oil is going to destined for Asia. That’s the reason make someone confident in saying that there is a really huge potential market between Iran and Aisa.
Condensate Supply - Demand
Apart from crude production, non-crude liquids production by OPEC averaged 6.6 million b/d in 2015, and it is forecast to increase by 0.3 million b/d in both 2016