Asian buyers to know more about East Siberian crude
Russia is having a big marketing push for its crude oil from Siberia. The construction of the Eastern Siberia Pacific Ocean pipeline has opened the markets in Asia.
The pipeline is not yet complete, but Russia wants potential customers to be aware of the new source of oil in advance. The main competition for Siberian oil comes from the Middle East, but the Russian product does have another selling point according to Jason Feer, Senior Vice president at Argus Media.
“It's a better quality crude than Dubai, Oman and some of the other competing crudes and that means that overtime the market should resolve that issue. Right now it trades at a discount because it's new, because the demand for it is still soft. But those things should change over time.”
At present Russia's main customers in the Asian market are China, Japan and South Korea, but it also plans to expand to other countries like India, Indonesia, Taiwan, Thailand, Singapore as well as the US.
If the Siberian crude gains wide enough acceptance then Feer says it's likely to become one of the world's benchmarks.
“I think it will take at least a couple of years until the final blend is established when the new fields are tied in to the blend. So I think it needs to be fairly consistent quality. The other thing you really need is acceptance from a wide range of buyers – and that's happening, I think it won't be a big issue. And the other thing you need is reliable infrastructure.”
ESPO crude currently trades at a discount. But that is likely to change as refiners become better acquainted with the quality of the product. And as a possible benchmark it offers potential advantages over West Texas and Brent crude, as it is not rapidly running out.