VIENNA — Russia's rising crude shipments to Asian markets via the Pacific Ocean pose no threat to Middle Eastern producers' position as the largest suppliers to the region, OPEC members including top exporter Saudi Arabia said Tuesday.
Soaring oil demand from China and other developing Asian economies will absorb rising production from Russia and Iraq over coming years, Saudi Arabian Oil Minister Ali al-Naimi told reporters in Vienna, where the Organization of the Petroleum Exporting Countries meets Wednesday.
Russia inaugurated the East Siberia-Pacific Ocean pipeline in December, targeting exports of as much as 250,000 barrels a day of medium sour crude in the first quarter.
Refiners in China, Japan, South Korea, and as far away as the Philippines and Hawaii are processing the new grade, set to become a staple in the region.
"We're not concerned about a blip here and there," Naimi said when asked about Eastern Siberia Pacific Ocean (ESPO) crude exports. "We've got the world's highest reserves, the world's largest production capacity — we can compete with anyone big or small."
Saudi Arabia holds the world's largest proven oil reserves of conventional oil at 264 billion barrels, compared with Russia's 79 billion, according to BP's Statistical Review of World Energy.
OPEC's 12 members hold a total of 956 billion barrels, or 76 percent of the world's total.
The ESPO Blend crude accounts for just 0.3 percent of current world oil supply and that proportion is expected to climb to about 0.7 percent by 2012.
Total ESPO shipments of about 7 million barrels in January were equivalent to less than 6 percent of China's imports for the month, which amounted to 125 million barrels.
Russia plans to ramp up production of the ESPO Blend to about 600,000 barrels a day when it completes construction of a pipeline spur that will link producing fields with northern China.
For now, Chinese refiners say they will limit ESPO purchases to meeting sporadic needs via the spot market as they rely on their staple Middle East crude.
"Apparently the market is not worried about that," said Algerian oil minister Chakib Khelil, referring to ESPO. "So if the market is not worried about that, I am not worried."
U.S. crude oil futures were trading close to 15-month highs near $84 a barrel reached in early January, recovering from less than $40 in early 2009.
But ESPO is putting some pressure on prices of waterborne Middle Eastern crude grades sold in Asia because of its lower shipping costs and shorter delivery times, traders and analysts have said.
ESPO Blend has also reached Hawaii, which means Russia has now supplied refineries in both the U.S. and China, the world's largest oil consumers, with the new grade.
Russian crude goes via pipeline from producing fields in Eastern Siberia to Skovorodino, where it is sent on railcars to the Pacific port of Kozmino near Vladivostok.
Oil producers from the Middle East and Latin America have been trying to establish export hubs in North Asia for some time to increase their share of the world's fastest-growing oil market.
Saudi Aramco and Brazil's Petrobras have stepped up efforts to expand crude storage capacity in the southern Japanese island of Okinawa, located at a comparable distance from the region's refineries as Kozmino. Algeria's Sonatrach and Norway's Statoil are among firms that sell crude to Asian buyers from South Korea storage.
Shipments from the Middle East can take up to three weeks to reach North Asia, while from Brazil the trip takes some five weeks. Most refineries in the region are four days away from Kozmino.