How China Is Attempting To Control Middle East Oil Chokepoints
Oman occupies an extraordinarily significant geographical position in the world and thus is of equally significant political importance to the two global power blocs: the U.S. and its allies on the one hand, and the China-Russia axis and its allies on the other. The Sultanate has long coastlines along the Gulf of Oman and along the Arabian Sea, away from the extremely politically sensitive Strait of Hormuz, through which passes at least one third of the world’s crude oil supplies. These coastlines offer largely unfettered access to the markets of South Asia, West Asia, and East Africa, as well as to those of its neighbors in the Middle East. For these reasons, Oman is a key logistical land and sea node in China’s multi-generational power-grab project, ‘One Belt, One Road’, and, by default, in the U.S.’s efforts to counter Beijing’s advances in this regard. Oman has long sought to play one superpower off against the other but with an imminent visit to Muscat of Iranian President, Ebrahim Raisi, according to sources close to the Petroleum Ministry in Tehran spoken to last week by Oilprice.com, China’s final push for dominance may be nearing its conclusion. Over and above China’s strategic interest in Oman, Iran has urgent business to conclude with the Sultanate itself, and this is to do, nominally at least, with natural gas. The chief executive officer of the National Iranian Gas Company (NIGC), Majid Chegeni, stated in March that Iran is willing and able to export natural gas to Oman, for which there already exists some infrastructure to do so, as there is with Pakistan and Afghanistan. Such a deal, though, as with all of the similar gas deals struck by Iran for gas exports in the region and analyzed in-depth in my new book on the global oil markets, ties in to Tehran’s ambition to increase its leverage over those countries willing to sign the deals by concomitantly tying them into a regional power grid controlled by Iran. This, in turn, is part of the ongoing attempt by the China-Russia axis – executed in the Middle East principally by Iran – to stoke a true resurgence across the region of a new ‘Pan Arabist’ movement, as highlighted recently by Oilprice.com. The other side of this latest Iranian push, spearheaded by Raisi, is to finalize the long-stalled idea of finishing the pipeline links between the two countries. This will allow for a dramatic increase in gas exports from Iran to Oman but also, and much more importantly from Iran’s perspective, will also allow Tehran to utilize at least 25 percent of Oman’s liquefied natural gas (LNG) capabilities to allow it to realize its long-term target of becoming a world-leading LNG exporter. This pipeline plan was part of a broader cooperation deal made between Oman and Iran in 2013, extended in scope in 2014, and fully ratified in August 2015 that was centered on Oman’s importing at least 10 billion cubic meters of natural gas per year (bcm/y) from Iran for 25 years beginning in 2017 (equating to just less than 1 billion cubic feet per day and worth around US$60 billion at the time). The target for this was then changed to 43 bcm/y to be imported, albeit for a shorter period, of 15 years, and then finally to at least 28 bcm/y for a minimum period of 15 years. According to a statement at the time of the signing of the 2014 memorandum of understanding on the deal from the then-managing director of the National Iranian Gas Export Company (NIGEC), Mehran Amir-Moeini, the Iranian company was already working on the different contracts’ mechanisms for the key phases of the project, including the gas receiving facilities in Oman. Specifically, the land section of the project would comprise around 200 kilometers of 56-inch pipeline (to be constructed in Iran), to run from Rudan to Mobarak Mount in the southern Hormozgan province. The sea section would include a 192-kilometer stretch of 36-inch pipeline along the bed of the Oman Sea at depths of up to 1,340 meters, from Iran to Sohar Port in Oman. Iran is set to not only bring on further phases of development of North Pars but also the development with a view to the LNG market of a number of other major gas fields, including most immediately Golshan, Ferdowsi, Farzad A and Farzad B, and Kish. It should not be forgotten that the major field from which Qatar takes the gas to sustain its status as the number one LNG exporter in the world is exactly the same 9,700 square kilometer reservoir from which Iran draws much of its own gas: Qatar’s 6,000 square kilometer side of the field is the North Dome, whilst Iran’s 3,700 square kilometer side is South Pars (North Pars has been treated as an additional site). The final, tangential, part of this Iranian push is not directly to do with Iran but rather with China. More specifically, it springs from Beijing’s strategic ambition to control all of the major crude oil shipping route chokepoints from the Middle East into Europe and the West that avoid the more expensive and more nautically challenging Cape of Good Hope route around South Africa. The Strait of Hormuz, which allows oil to be shipped out from whichever Middle Eastern countries want to use it, is already effectively controlled by China through its relationship with Iran, cemented in the all-encompassing 25-year deal agreed in 2019. The Bab al-Mandab Strait, through which crude oil is shipped upwards towards the Suez Canal before moving into the Mediterranean and then westwards, lies between Yemen (which is being disrupted by Iran-backed Houthis, just as China wants) and Djibouti (over which China has established a stranglehold, as highlighted by Oilprice.com). There are other key crude oil infrastructure areas in and around the Middle East and China is already working on securing control over those if it has not already done so: most notably Iran’s Guriyeh-Jask route, some of the UAE’s coastal
Russia jumps to fourth position as oil supplier to India
Russia became the fourth-largest oil supplier to India in April, with volumes set to rise further in coming months as low prices spur demand from the world’s No. 3 oil consumer and importer, tanker tracking data showed. Russia’s share in India’s oil purchases rose to a record 6%, about 277,000 barrels per day (bpd) in April, up from about 66,000 bpd in March, when it was in 10th position, according to the data, which was supplied by trade sources. Indian Oil Corp. (IOC.NS), the country’s top refiner, bought its first-ever Russian Arco oil cargo last month. Western sanctions against Russia for its invasion of Ukraine has opened a rare arbitrage flow, prompting Indian refiners to increase buying of cheaper Russian oil shunned by many Western countries and companies. “Prices of Russian Urals crude fell sharply due to sanctions against Russia while Kazakhstan’s CPC blend crude came under pressure as it is loaded from a Russian port,” said Ehsan Ul Haq, analyst with Refinitiv. Indians had bought stranded Russian oil while some European buyers had bought higher volumes of African and U.S. oil, he said. The share of African oil in India’s overall oil imports declined to about 6% in April from 14.5% in March, while that of U.S. almost halved to 3%. Grades from Azerbaijan, Russia and Kazakhstan together accounted for about 11% of India’s imported oil in April, compared with about 3% in March. The share of Middle Eastern oil rose to 71% from 68%.
Govt Considers Selling Part Of Bharat Petroleum, Not Full Stake: Report
India is considering selling up to a quarter of state-run refiner Bharat Petroleum Corp Ltd after failing to attract suitors for the whole firm, two officials said, as the government’s divestment programme moves slower than expected. New Delhi is considering inviting bids for a 20%-25% stake in BPCL, instead of an outright sale of its entire 52.98% holding, the two government officials, who declined to be named, told Reuters. The officials said discussions about the plan were in the early stages. Initially, the government had aimed to raise $8-$10 billion from selling its full stake in BPCL. Having drawn up plans four years ago, it invited bids in 2020, hoping major players such as Russia’s Rosneft might be interested. But Rosneft and Saudi Aramco did not bid, as low oil prices at that time and weak demand curbed their investment plans. The government officials said even a part sale of BPCL was unlikely to be completed this fiscal year as the process would take over 12 months. Sale prospects were hit by inconsistent policies on petrol and diesel prices.