China's Iraqi Oil Lifting Seen up 50 Pct in 2012

Source: Reuters 11/18/2011, Location: Middle East

China is likely to lift a total of up to 500,000 barrels per day of crude oil next year from Iraq, the fastest-growing oil producer in the Middle East, a volume nearly 50 percent more than this year, Chinese traders said. The volume includes estimated equity oil secured through mega service contracts that PetroChina and CNOOC Ltd entered in 2009 and 2010 in Iraqi oil auctions after the removal of the Saddam Hussain regime.

At 500,000 bpd, or roughly one-tenth of China's total crude imports, the volume would rank Iraq's just next to Iran, which is now China's third-largest crude supplier. Leading lifters would be Sinopec Corp and Sinochem Corp, followed by PetroChina, CNOOC Ltd and smaller state oil trader Zhenhua Oil.

"The Chinese increased their volume but the rest of the buyers were the same as last year and so were their allocations," a trader from a Western firm said.

The big rise in Iraqi oil liftings may help Chinese oil firms ease dependence on imports from Saudi Arabia and Iran; OPEC's top two exporters.

"This is indicative of China's desire to expand their supply and Iraq is a fast-growing producing area where the Chinese have a possibility of getting a toehold in production," said John Vautrain, director at consultancy Purvin & Gertz.

Despite easing growth, China, the world's second-largest oil user, has recorded implied oil demand growth of nearly 7 percent in the first nine months of this year, according to Reuters' calculations from official data. And the world's No.2 economy, which has contributed more than half of incremental global oil use this year, is seen leading the world's oil demand once again in 2012, with near 6-percent growth. Iraq, which currently pumps 2.7 million bpd, is the fastest-growing producer among OPEC countries, with its output expected to rise by 1.5 million bpd by 2016, the International Energy Agency estimates.

Chinese firms are expected to ship most of the Iraqi barrels home, where refineries have become increasingly sophisticated to process lower-quality oil. But companies like PetroChina and CNOOC Ltd, which are producing oil at Iraqi oilfields such as Rumaila and Maysan, may be allowed to sell oil lifted from service contracts in the open market, traders said.


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