China became the dominant purchaser of Russian eastern crude grade ESPO in 2016, having bought over two-thirds of all cargoes loaded from the Kozmino port in Russia's Far East last year, and significantly outstripping other buyers, data from national oil pipeline operator Transneft showed Tuesday.
Russia exported a total of 31.8 million mt (or 636,868 million b/d on average) of ESPO crude from Kozmino in 2016, up 4.6% year on year and estimates the deliveries to remain roughly flat this year as the volumes have been exceeding the port's installed capacity.
Of the total, China bought 22.2 million mt, up 51% year on year, taking its share of total ESPO cargoes delivered from Kozmino to 69.8% in 2016, compared to just over 48% in 2015, when it was competing with Japan as the biggest purchaser of ESPO cargoes from Kozmino.
The increase in Chinese imports was due to a significant boost in purchases by independent refineries, which received the right to import crude in 2015.
In addition to Rosneft's term buyers CNPC and ChemChina, independent refineries, including Luqing Petrochemical, Kenli Petrochemical, and Hongrun Petrochemical, Haiyou Petrochemical, as well as trading companies Kunyang and Yijia, took delivery of the barrels.
Russia, which also pumped around 23.5 million mt of pipeline crude to China, competing with Saudi Arabia as the main crude supplier to China through the year.
Apart from China, Malaysia was the other country which significantly increased purchases by ESPO blend, becoming the fourth-biggest buyer of the Russian crude.
The imports rose eightfold to 1.6 million mt, although from a low basis of just two cargoes, each 100,000 mt, bought in 2015, Transneft data showed.
Russia was the second-largest supplier to Malaysia in 2016 after Saudi Arabia, even knocking the Saudis off the top spot in some months.
JAPAN, SOUTH KOREA IMPORTS DOWN
Other traditional buyers of ESPO blend from Kozmino, including Japan and South Korea, reduced their offtake.
The two countries were increasingly buying alternative crude blends, primarily from Saudi Arabia and Iran.
Nonetheless, Japan remained the second biggest buyer of ESPO cargoes in 2016, even though it more than halved its purchases to just 3.9 million mt on the year.
South Korea also maintained its position as the third-largest ESPO buyer, while its offtakes reduced by 25% year on year to 2.4 million mt.
Transneft estimates crude deliveries via Kozmino at between 31.3 million and 31.8 million mt in 2017, as the supplies have already reached the port capacity and exceeded it slightly following the dredging of the port.
Russia's ESPO blend, a medium-sweet crude popular among North Asian refiners, typically loads in 100,000 mt Aframax-sized cargoes.
In late 2015, larger, Suezmax-sized cargoes started loading at the port for the first time since deliveries from Kozmino began at the end of 2009.
In 2016, the company completed the dredging work of the port and its two berths are now able to load 140,000 mt tankers, Transneft's first vice-president Maxim Grishanin said Friday.
Nonetheless, standard cargoes of 100,000 mt enjoy greater interest from buyers, he said.
Kozmino is the end point of the East Siberia-Pacific Ocean pipeline, which runs across East Siberia, and also sends over 330,000 b/d of crude to China, via a pipeline offshoot from Skovorodino to Mohe.http://www.platts.com/latest-news/oil/moscow/analysis-china-buys-70-of-russian-espo-cargoes-27753440