* Low oil stockpiles in Asia, reliance on product imports
* Oil price surge would hit South Asian importers hardest
* Diverse supply, forex surplus would shield China from any
(Adds quotes from Global Oil Forum)
By Florence Tan
SINGAPORE, May 7 Asia's growing dependence on
Middle Eastern oil has amplified the risks it faces if the
Strait of Hormuz is suddenly shut, making it more vulnerable to
such a disruption than other regions, U.K. think-tank Chatham
House said on Wednesday.
Asia is more at risk than Europe and the United States to a
cut in Middle Eastern supplies as it buys 75 percent of the
region's oil exports, said Chatham House energy security expert
John Mitchell in a report - Asia's Oil Supply: Risks and
Despite Iran's threat to shut the key Strait of Hormuz
shipping route for Middle East oil in 2012, Mitchell said most
Asian countries have not built up sufficient reserves to cushion
the impact of a disruption. A strong reliance on oil product
imports in Asia has also heightened their risk, he said.
Asian countries import nearly 30 percent of their
consumption needs, mostly from refineries in South Korea,
Singapore and India, which are in turn dependent on the Middle
East for more than half of their crude supplies.
"How product-exporting companies and countries chose to
allocate reduced supplies would affect Australia and Thailand in
particular," said Mitchell, who started his career in with U.K.
oil major BP Plc in 1966.
Australia has seen a series of refinery closures, and by
2015, it is expected to become the largest net importer of
diesel and second-largest net importer of gasoline in Asia,
importing more than half of its fuel needs.
Product-importing countries, particularly Australia and
Thailand, could face shortfalls of 5-10 percent of consumption
in the event of a significant disruption to Middle Eastern
supplies, Mitchell said in the report.
If Middle East oil producers choose to look after their own,
by supplying to joint venture refineries in Asia and the United
States first, however, this could lessen the impact of a
disruption at the expense of European countries, he said. China
will not have a shortfall under this scenario.
China is more secure than other Asian countries "mainly
because it is also a large producer of oil and has a greater
diversity of oil supply," the London-based Mitchell said later
in remarks in Thomson Reuters Global Oil Forum on Wednesday.
China "already has oil pipelines from central Asia, which is
expanding (output), and (it) can look forward to increasing
supplies from Russia," he said.
Yet, Western sanctions on Russia due to the Ukraine crisis
may affect other investments from Asian companies, such as in
new Russian gas supplies, Mitchell said.
Gazprom, with more than 15 percent of global gas
production and reserves, is expected to sign a deal next month
to begin exporting gas to China from 2018.
The push to secure long-term oil supplies in Asia has seen
tensions flare up between some states over the oil and gas-rich
South China Sea, which is claimed wholly or in part by six
countries. Vietnam this week condemned the movement of a giant
Chinese oil rig into what it said was its territorial waters.
WORRY OVER INDIA
Low levels of oil stocks, especially in India, remained a
worry, Mitchell said in the report, adding that there needs to
be greater coordination on emergency oil stocks release among
the International Energy Agency (IEA), China and India.
"The Indian government is building storage for oil stocks,
but this is not yet being filled. And the cost of doing so is a
deterrent," he said in the forum's chatroom.
"At the other extreme, the Chinese government is not only
building storage but is also filling it, and aims to achieve IEA
levels of storage of 90 days' worth of imports within a few
years," he said.
The burden of a spike in oil import costs will be greater on
South Asian countries - Pakistan, Sri Lanka and India - as more
than 30 percent of their revenues from non-oil exports were used
to pay for oil imports in 2012, the Chatham House study showed.
"In theory China could cover a 50 percent increase in the
price of oil imports by drawing down foreign reserves at about 3
percent annually for 30 years," Mitchell said in the report.
"Pakistan's reserves would be exhausted within one year and
those of India, Australia and Sri Lanka within about five
years," he said.
(Reporting by Florence Tan; Editing by Tom Hogue)