Move Over Saudi Arabia, Russia Is Selling More Oil To China Than You

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Russia is challenging Saudi Arabia’s spot as top oil exporter to China

Russia is challenging Saudi Arabia’s spot as top oil exporter to China . In fact, Russia has sold more oil to China than the Saudis seven times since May 2015. According to statistics from China’s General Administration of Customs, Russian oil exports to China increased nearly 42% to over 22 million tons from January to May. For the same period, Saudi oil exports to China totaled 21.8 million tons.

However, the big story isn’t Russia’s slight edge over Saudi Arabia for the first part of the year, but the increase in Russian oil exports to China over the past five years, which have doubled – up by 500,000 barrels per day (bpd). At the beginning of the decade, Saudi oil exports to China were around 20%, while Russian crude exports were below 7%.

Moreover, going forward Russia has a decided advantage over Saudi Arabia since Russian-Chinese oil pipelines are already in place, while the voyage for Saudi crude to China (a distance of around 6500 nautical miles) can take three weeks or more.

Khalid Al-Falih Minister of Energy, Industry and Mineral Resources of Saudi Arabia speaks to journalists prior to the start of a meeting of the Organization of the Petroleum Exporting Countries, OPEC, at their headquarters in Vienna, Austria, Thursday, June 2, 2016. (AP Photo/Ronald Zak)
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Sergey Andropov, the vice-president of Transneft , Russian’s oil export monopoly, said in March that China was ready to import 27 million tons of Russian crude in 2016 via the Eastern Siberia-Pacific Ocean (ESPO) pipeline.

In May, state-owned China National Petroleum Corp., (CNPC), China’s largest oil and gas producer, announced that it would start laying a second domestic oil pipeline to allow for increased Russian crude supplies to flow to China’s northeastern city of Daqing. The 942 kilometer (585 mile) pipeline will run parallel to an existing spur off of the ESPO pipeline. Combined, both pipelines will be able to import 30 million metric tons of crude per year to China.
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Bloomberg said that the energy relationship between the two neighbors (one of the world’s biggest oil producers next door to the biggest oil user after the U.S.) has continued to deepen since Russia started sending oil supplies to China via the ESPO pipeline in 2011.

Increased Russian oil exports to China also has geopolitical overtones as Russia’s energy sector is still suffering amid U.S. and EU sanctions over Moscow’s involvement in Ukraine. Russia also needs petro-dollars to offset the two year long downward trend in global oil prices. As much as half of Moscow’s state revenue is derived from oil and natural gas exports, though Moscow claims a much lower figure.