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APPEC INTERVIEW: Equinor boosts market presence in Asia as oil sales double

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APPEC INTERVIEW: Equinor boosts market presence in Asia as oil sales double

Highlights

Oil sales to Asia doubled over last two years

Norway is China's 10th largest crude supplier January-July

Signs 5 million-barrel oil storage deal with KNOC

Tokyo — Norway's state-controlled Equinor is boosting its presence in the Asian oil market, having doubled its crude sales to the region, as the European major takes the opportunity to grab as much market share as possible amid the ongoing output cuts by OPEC+.

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"We have doubled our sales of light and medium crude to Asia over the last two years," Molly Morris, Equinor's senior vice president of crude, products and liquids, said in an interview with S&P Global Platts ahead of the 36th Annual Asia Pacific Petroleum Virtual Conference, or Platts APPEC. "We are a major supplier to the Chinese independent refineries as well as refineries in South Korea, Japan and Taiwan and also to Southeast Asia."

Equinor, which sells oil from the North Sea as well as locations like North America, Brazil and West Africa, is increasing its crude sales from its global portfolio to Asia, which is estimated to be around 200 million barrels in 2020, up from the 170 million barrels -- most of which was sourced from the Atlantic Basin -- in 2019, Morris said. This growth compares with its global crude trading volume of about 85 million barrels to Asia in 2017.

Increased demand

Despite the coronavirus pandemic, Equinor's crude sales to Asia has been on the rise this year as demand for its Atlantic Basin supply has increased due to the ongoing OPEC+ cuts, Morris said.

"Actually we have some good news compared to many of the other gloomy markets out there," Morris said. "We have seen the Chinese ... demand recovered reasonably early, and now around 95% of pre-COVID levels. China is our most important Asian market."

Norway was China's 10th largest crude supplier over January-July when the Asian giant imported 7.96 million mt of crude oil, significantly higher compared with just 119,000 mt it had received from the European producer a year ago, latest data from China's General Administration of customs showed.

"We shipped around four VLCCs per month of North Sea crude to Asia so far this year," Morris said. "Actually of the four VLCCs per month that we have been selling to Asia, from the Johan Sverdrup alone we have shipped more than two VLCCs per month this year."

"Due to the OPEC cuts globally, the volume of Atlantic Basin crudes [has] increased in market share for the Asian refineries," she added.

In May, OPEC and its allies implemented the accord to cut 9.7 million b/d of production. The cuts taper to 7.7 million b/d from August to December, and then down to 5.8 million b/d from 2021 through April 2022.

Strong commitment to Asia

Currently, roughly 30% of Equinor's global oil supply is going into Asia, Morris said. Its North American supply to Asia average at about 150,000 b/d, which include its third-party as well as equity volumes.

"We of course have our Brazilian equity grades as well which is an important part of our global portfolio," Morris said. "About 40% of the Brazilian equity is going into China, and around 15% to India.

"In addition, we have our West African volume that produces around 200,000 b/d, and about 62% of that volume is going to Asia," she added.

As part of its commitment to its Asian customers, Morris revealed that Equinor has extended its crude oil storage contract with the Korea National Oil Corporation.

"We have had that position for 20 years, and we have extended it for an additional period of time," Morris said. "But nonetheless we are trying to show our long-term commitment to the Northeast Asian crude market."

Under the deal, Equinor is storing approximately 5 million barrels of oil at KNOC's Yeosu storage tanks for marketing purposes in Northeast Asia, she added.

"Our ambition is to increase our volume into the Asian market because we have our strong commitment... our portfolio works for crude, products and LPG in Asia -- our key stronghold for our strategy going forward is on the liquids side," Morris said.

When asked about Equinor's forecast for demand to recover to pre-pandemic levels, Morris said: "In our most likely scenario we see the demand recovery to a pre-pandemic level by 2023."

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