Global oil prices rise as producers agree on supply compromise
Oil prices rose on Friday, heading for a fifth week of gains, after major producers agreed to continue to restrain production to cope with coronavirus-hit demand but the compromise fell short of expectations. Brent was up 19 cents, or 0.4 per cent, at $48.89 a barrel by 0102 GMT after gaining around 1 per cent on Thursday. West Texas Intermediate had risen 18 cents, or 0.4 per cent at $45.82 a barrel. OPEC and Russia on Thursday agreed to ease deep oil output cuts from January by 500,000 barrels per day, failing to come to a compromise on a broader policy for the rest of next year. “They came up with the ultimate compromise,” said Stephen Innes, chief market strategist at Axi. OPEC+ will meet once a month to review conditions and monthly increases will not be greater than 500,000 barrels per day (bpd). “These meetings will bring some volatility to the market and, importantly, stand to make hedging harder for U.S. producers,” Innes said. The increase means the Organization of the Petroleum Exporting Countries (OPEC) and Russia, a group known as OPEC+, are set to reduce production by 7.2 million bpd, or 7 per cent of global demand from January, compared with current cuts of 7.7 million bpd. OPEC+ was expected to continue existing cuts until at least March, after backing down from plans to raise output by 2 million bpd. Also supporting prices, Republicans in the U.S. Congress struck a more upbeat tone on Thursday during coronavirus aid talks as they pushed for a slim $500 billion measure. The funding measure was earlier rejected by Democrats who say more money is needed to address the raging pandemic.
India Desperate To Diversify Oil Imports
India has announced its intention to resume oil imports from Iran and Venezuela, as part of its objective to diversify its oil suppliers. Imports from Iran and Venezuela were halted after President Trump imposed sanctions on the two OPEC countries when he came to office in 2017. But President-elect Biden’s new office offers high hopes to countries wanting to resume trade with the oil-rich nations. Oil minister Dharmendra Pradhan announced on Wednesday, “As a buyer, I would like to have more buying places. I should have more destinations to go for purchasing (oil),”. He hopes resuming trade with Iran and Venezuela will help diversify the country’s oil import sector. In the financial year 2019-2020, India imported $92.8 billion worth of oil, gas, and petroleum from OPEC members. Diversifying the sources of this importation would help India to cut its high import bill, as the world’s third-largest importer of oil. India currently imports 85 percent of its oil needs, mainly from Iraq and Saudi Arabia. Before the sanctions, India was the second-largest importer of Iranian oil after China. However, importations halted in May 2019 due to the sanctions imposed by the Trump administration. The country’s imports from Venezuela stopped in June 2020, which was previously India’s fourth-biggest supplier. Biden has said he wants to move towards diplomacy with Iran once again, signaling to the U.S.-Iran relationship during the Obama Administration. During his election campaign, Biden stated that he would “offer Tehran a credible path back to diplomacy”. The question now is whether Tehran would accept such an offer, following three years of growing distrust for the USA. Ryan Bohl, Middle East analyst at risk consulting firm Stratfor, believes the U.S. would have to make notable concessions to get a nuclear deal with Iran back on the table. However, there are high hopes in the region as demand for oil in India is projected to keep increasing over the next two decades, with greater potential for the Asian export market. Energy consumption in India is expected to increase by 3 percent per annum between now and 2040, faster than other major world economies. This could make the country’s energy consumption as high as 11 percent of the global total within the same timeframe. The slump in India’s oil market following Covid-19 pandemic restrictions seems to be over. We are seeing an increase in demand thanks to India’s festive season as well as businesses reopening. According to Pradhan earlier in November, “India’s energy sector has shown remarkable resilience and our energy demand has almost recovered back to the pre-Covid levels, particularly for petroleum products, due to [the] rejuvenation of economic activities,”. India’s oil sector bounce back comes as many other countries are still struggling to recover, as further lockdowns are imposed across Europe. While Europe and North America’s oil sector still face uncertain times, Asia provides a safer bet. When it comes to India, everyone wants a piece of the pie. While other countries are expected to slow down their consumption as more regulations are imposed to shift towards sustainability, India’s energy market does not look set to slow any time soon.
From bunkering to biogas, India’s Petronet embarks on diversification drive
India’s state-run Petronet is embarking on a major diversification drive to embrace new businesses — such as bunkering, compressed biogas and renewable energy — as it prepares for a changing energy landscape, but at the same time not diluting its focus on its core LNG portfolio. Company officials and analysts told S&P Global Platts that the new business plans are a part of its effort to broaden domestic business presence and expand its international footprint in a bid to spread the risk evenly at a time when energy transition is the catchphrase. Petronet’s diversification drive comes at a time when many other oil and gas firms in India are stepping up efforts to become integrated energy firms, while shedding their image of being known as oil and gas companies. “A lot of other state-run companies are also diversifying to other forms of energy. It’s a push by the government. Petronet is also joining the efforts but the new initiatives by Petronet will be small, to begin with, if you compare them with their LNG business,” said Sumit Pokharna, vice president at Kotak Securities. Petronet LNG Ltd. was formed in 1998 and operates LNG regasification facilities in the South Asian region. It is India’s biggest LNG importer and caters to around 75% of the country’s LNG requirement by supplying 70 million cu m/d of LNG collectively from its Dahej and Kochi terminals. It owns 53% share of the country’s existing regasification capacity, with a capacity of 17.5 million mt/year at its Dahej terminal and 5 million mt/year at its Kochi terminal. Company officials said Petronet is diversifying to many other businesses across the LNG value chain, offering services like providing LNG as automotive fuel through its chain of LNG stations in collaboration with other state-run oil firms and city gas distribution companies, LNG supply for industrial usage through trucks, LNG supply to earth movers in the mining sector, compressed bio gas and LNG bunkering. Petronet is also planning to have an ethane import facility at Dahej, an FSRU at Gopalpur on the east coast and foray into renewable energy. In addition, it plans to expand internationally and cater to LNG and related infrastructure in Sri Lanka, Maldives, Bangladesh, Myanmar and Mauritius. Bunkering push Petronet is set to form a dedicated subsidiary catering to LNG bunkering and gassing-up and cooldown, or GUCD, facility at its Kochi Terminal to establish itself as a key player in the growing Asian gas bunkering market, company sources said. The company is also at an advanced stage of discussion for going for an LNG bunker vessel which will be ready for service to anyone crossing the Indian Ocean. Highlighting the vision to get into bunkering, company officials said that in 2015 the MV Kvitbjørn short sea cargo vessel was the first ship to transit between Asia and Europe fueled solely by LNG. During the milestone transit from China to Norway, the ship was fuelled at Petronet’s terminal in Kochi. “This milestone bunkering, which saw the MV Kvitbjørn fuelled directly from Petronet’s Kochi terminal, was predicted to kickstart LNG bunkering in India. Since then, Petronet has been catering to sporadic demand,” a company source said. The strategic location of Kochi terminal is expected to spur bunkering activity in the region at competitive prices. With LNG-fueled tonnage set to increase in Asia in the coming months, Kochi LNG terminal is expected to provide a potentially valuable refueling point for East-West trade, company sources added. “Moving to LNG bunkering is very logical for Petronet as they have a big LNG presence. But the company is evaluating its other upstream and overseas investment decisions carefully as spot gas prices are getting very competitive. The COVID-19 situation and other factors are forcing Petronet to move on some of their investment plans cautiously,” Pokharna of Kotak Securities added. Core focus Officials and analysts said that with India’s LNG imports expected to reach as high as 50 million mt by 2030, more than double the current 22 million-23 million mt, this would provide one of the biggest opportunities to LNG producers expanding their capacities. Petronet can’t afford to dilute its focus on LNG even if it diversifies into new businesses, sources added. “The LNG opportunity is vast and will run for decades. That will remain the core for Petronet in the years to come,” said one company official. The commercial transportation sector and the city gas distribution network offer some of the best potential to help boost India’s LNG consumption in coming years, company officials said. India’s gas consumption is split between locally produced gas and imported LNG. However, a large portion of the gas which is allowed to be marketed freely is re-gasified LNG. India’s domestic gas output falls under the Administered Pricing Mechanism under which it’s sold at a price set by the Petroleum Planning and Analysis Cell on a half-yearly basis.
Woodside Petroleum matches ONGC unit offer to buy FAR’s Sangomar stake
Australia’s Woodside Petroleum Ltd said on Thursday it had exercised its right to match an offer by a unit of India’s ONGC Videsh Ltd to buy FAR Ltd’s stake in the Sangomar oil project in Senegal. FAR had said last month it would exit the troubled $4.2 billion Sangomar project off Senegal by selling its 15% stake to the ONGC unit for $45 million. “The acquisition is value-accretive for Woodside shareholders and results in a streamlined joint venture which will assist in our targeted sell-down in 2021,” Woodside Chief Executive Officer Peter Coleman said in a statement. Woodside said its offer would include $45 million payment and reimbursement of FAR’s share of working capital from Jan. 1 to completion, similar to the deal between FAR and ONGC. The offer is subject to approval by the Senegal government and FAR shareholders. Woodside’s stake in the Sangomar joint venture will increase to 90% and the company will remain as operator. It plans to commence drilling next year in order to meet its targeted first oil in 2023. The Perth-headquartered firm in August had exercised its right to match a $400 million offer by Russia’s Lukoil to buy Cairn Energy’s stake in the project, making it the largest shareholder.
Trump administration rule would reduce environmental reviews of LNG projects
The Trump administration’s Energy Department on Thursday issued a rule to exclude some licensing of liquefied natural gas (LNG) projects from environmental reviews that have been required by U.S. law, in a show of support for the fossil fuel industry. The rule, which the Department of Energy issued in a pre-publication notice in the Federal Register, frees LNG export and import license applications from including environmental reviews that have been required under a bedrock environmental law, the National Environmental Policy Act. The rule is expected to be overturned by President-elect Joe Biden’s administration and challenged by environmental groups in the courts, analysts said. “The new rule could be rescinded as part of early executive actions on climate,” by Biden, who will be inaugurated on Jan. 20, analysts at ClearView Energy Partners said in a note to clients. The Biden transition team did not immediately respond to a request for comment. The Energy Department said in the notice the rule would “save time and expense in the NEPA compliance process.” The rule is effective 30 days after Federal Register publication on Friday, or a little more than two weeks before the inauguration. The Trump administration has pursued a policy it calls energy dominance to boost production and exports of fossil fuels. It has touted LNG exports to Europe as an alternative to pipelined gas from Russia and wants to ship the fuel to Asia. The rule rests on the basis that the applications qualify for categorical exclusion from environmental review, which the department had already applied to license applications for increased capacity at existing LNG facilities. The rule would not affect environmental reviews by the Federal Energy Regulatory Commission, the other government office that reviews LNG projects.