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. Last Updated: 07/27/2016

Sakhalin-1 Crude Flows Set to Redraw Asia Trade Map

Itar-TassThe oil platform Orlan at Sakhalin-1, which is set to begin exports in August.
SINGAPORE -- Sakhalin-1, the biggest new source of Pacific basin crude in over a decade, will redraw the oil trading map in Asia, displacing Abu Dhabi crude in Japan and briefly freeing extra West African oil for U.S. buyers.

But the flow of 250,000 barrels per day of light, gasoline-rich Sokol crude, due to begin being exported in August and expected to plateau in the first half of 2007, will provide a marginal dip in Japan's reliance on the Middle East and temporary relief for China's growing import needs.

"Proximity is a multiplier of force. You are talking about large volumes of crude literally on the doorstep of five major importers -- it can have a huge impact," said Al Troner, managing director of Asia Pacific Energy Consulting.

The brunt of the impact could be borne by Abu Dhabi's Murban crude, the most similar grade to Sokol, which may have to seek new buyers as Japanese refiners with limited growth prospects cut imports to make room for two-thirds of the new Russian grade.

Murban-- coveted for its high yield of distillates, such as jet-kerosene, used for heating in winter -- is valued at about $3.60 higher than benchmark Dubai, but traders say that premium could easily fall when Sokol comes out.

Japan is the biggest buyer of Murban, one of the most actively traded Middle East grades, and buys about 40 percent of the UAE's total output. A demand drop would send sellers, such as oil majors Total, Shell and BP, seeking new markets.

Lower premiums could prompt China, which buys limited volumes of the Abu Dhabi grades, to increase its purchases, temporarily tempering demand for more distant oil from West Africa.