UPI Energy Watch

WASHINGTON, Sept. 6 (UPI) -- As China's economy continues to rapidly grow, the gap between supply and demand of petroleum and natural gas keeps widening. China's demand for oil increased by 11.4 percent in 2003, which made China the world's second largest oil importer after the United States. Experts project China's oil demand may soar to 400 million tons in 2020, with an average increase of 12 percent annually. China heavily relies on imported oil. By 2020 approximately 60 percent of China's oil consumption may come from imports. Feng Fei, researcher, for the Development Research Center of the State Council said, "In the near future China's own oil output will probably not rise by a big margin, and we have to control oil import amounts for security reasons. So what we require to do is to make the economic use of petroleum a top priority, and establish an energy-conserving society." Chinese-made auto fuel consumption stands at approximately 10 percent to 15 percent higher than fuel produced by developed countries. China's auto industry has been booming since the country's accession to the World Trade Organization in late 2001. China manufactured 2.07 million sedans and sold 2.04 million in 2003, with an 80.7 percent production increase year-on-year. The annual average fuel consumption per car in China is 2.28 tons, 10 to 20 percent higher than the United States and 100 percent higher than Japan.

Mexico's state-owned Petroleos Mexicanos, also known as Pemex, has discovered massive deep-water oil reserves in the Gulf of Mexico, which could place Mexico in the group of major producers. New deposits could reach 54 billion barrels of oil, increasing the country's total reserves to over 90 billion. According to Pemex Exploration and Production Manager Luis Ramirez Corzo, Mexico can now expand current production from 4 million barrels per day to 7 million. Corzo said, "It would position us in terms of reserves among the major producing countries such as Iraq (with 112.5 billion barrels in reserves), United Arab Emirates (with 97.8 billion barrels in reserves) and Kuwait (with 94 billion barrels in reserves), besides the fact we could reach production levels of Saudi Arabia (with 7.5 million barrels produced per day) and Russia (with 7.4 million barrels produced per day)." Pemex invested almost $4.5 billion in oil and gas exploration in the Perdido area in the Gulf of Mexico, he said, "where seven blocks have been clearly identified and mapped with gas and oil extraction potential. Tri-dimensional surveying clearly shows the existence of 45,000 billion barrels. That is the good news; the bad news is that given the complexity to access deposits, the technology required and the volume of investment needed, we can't go alone on this."

Illegal tapping on the Malgobek-Tikhoretsk oil pipeline in Russia's Krasnodar region resulted in an oil spill that caused damage totaling over $513,308 as oil spread over hundreds of square miles. According to pipeline owner Chernomortransneft, clean-up teams are working at the site trying to remove more than 3,924 cubic yards of polluted soil. The criminals who tapped into the pipeline trying to steal oil remain unidentified. This is the 50th attempt to steal oil from Chernomortransneft's pipelines this year. According to Krasnodar's law enforcement agencies, they have detected the group involved and the illegal market where the stolen oil was sold. Chernomortransneft's security service remains unable to ensure effective protection of the company's pipelines. In an effort to combat oil theft, Krasnodar is creating a new crime unit. According to Regional Fuel and Energy Department Head Vladimir Chepel, officers will be gathered from the main office of the Ministry of Interior and the Federal Security Service's Office Directorate in the Krasnodar region.

The National Iranian Gas Export Co. Managing Director Rokneddin Javadi had announced that Iran has not signed any agreement with India to sell liquefied natural gas to the country. Javadi told Petroenergy Information Network, "Iran is yet to sign a deal to sell liquefied natural gas to India." Iran's Fars News Agency meanwhile quoted the Middle East News Line, "The National Iranian Oil Co. had signed an LNG deal with Gail India according to which Iran would export 5 million tons of LNG per year to India at a price 31 cents cheaper than the LNG exported to the country from Qatar. The deal set the price of LNG at $2.22 per 1 million British thermal units." According to the report, the price of Iranian LNG after delivery would be over $4 per million British thermal units. Iran's LNG price is lower than that of Qatar, the leading LNG exporter in the Persian Gulf region. Qatar is said to have offered LNG for $2.53 per MBTU. India meanwhile is reported to have demanded a price of less than $2 per MBTU, according to MENL.

Iraqi Oil Ministry senior official, Mohammed al-Khawaja, had announced that Iraq's oil exports continued to remain normal despite pipeline attacks. Khawaja said: "Our exports are going on according to the plans. We usually take a weekly rate of the oil exports, and this rate continues as planned despite the sabotage attacks. Last week, Iraq's southern infrastructure suffered eight attacks, (but) still I can say the rate of the oil exports is normal." Khawaja did not provide further details about the amount of oil exports. Iraq's oil infrastructure continues to come under frequent attacks by insurgents. In August, insurgents attacking oil pipelines disrupted the country's exporting capacity, which helped send world oil prices to record highs.

According to Egypt's Minister of Petroleum Sameh Fahmi, the al-Hamra northern coast port will be the major outlet for oil exports after improvements are made to the port. Fahmi said the port is being utilized to export crude shipments. Western desert fields of high-quality production will be exported monthly; the fields' production amounted to 210,000 barrels per day. Fahmi noted that the Nasr Petroleum Co. has received 1 million barrels in shipments of Kuwaiti crude oil for refining in Suez as part of a bilateral cooperation agreement between the two the governments of Egypt and Kuwait.

Closing oil prices, Sept. 6, 3 p.m. London

Brent crude oil: $41.04

West Texas intermediate crude oil: $43.71