CNOOC’s Bohai overtakes Daqing as China’s largest oil field
China’s offshore oilfield cluster Bohai, run by state-run CNOOC Ltd , has become the country’s largest crude oil producer with output hitting 30.132 million tonnes (602,640 barrels per day) in 2021, state news agency Xinhua reported. Bohai field, off north China, overtook the country’s flagship onshore producer Daqing, in northeast China, which pumped 30 million tonnes last year as reported by state media a week earlier. CNOOC Ltd, the listed vehicle of China National Offshore Oil Company, produced 48.64 million tonnes of crude oil last year, up by 3.23 million tonnes, which accounted for up 80% of the national increment in crude oil production. Developed in 1965, the Bohai cluster fields are considered marginal assets with relatively high development cost and poor crude oil quality. But CNOOC has in the past two decades sharpened its exploration and development know-how, such as shortening the average drilling time to under 10 days from 57 days, and has made several major discoveries like Kenli 10-2 and Bozhong 19-6 fields. In response to Beijing’s call to boost energy supply security, national producers – CNOOC, PetroChina and Sinopec – have in the past several years accelerated drilling more challenging terrains at home, including shale oil, to make up for depleting mature fields like Daqing. China, the world’s second-largest oil consumer which imports three quarters its oil needs, eked out a 2.5% increase in domestic crude output in the first 11 months of 2021 over a year earlier, official data showed.
Shrink to fit: The year Big Oil starts to become Small Oil
Europe’s Big Oil companies are planning to spend their windfall from high energy prices on becoming Small Oil. Surging oil and gas prices in 2021 delivered billions of dollars in profits to top oil companies, in stark contrast to the previous year when energy prices collapsed as the coronavirus pandemic hit travel and economic activity. Typically, companies would invest the lion’s share of that cash in long-term projects to boost oil and gas production and reserves after the previous year’s deep cuts. But unlike any other time in their history, BP, Royal Dutch Shell(RDSa.L), TotalEnergies , Equinor (EQNR.OL) and Italy’s Eni are focusing on returning as much cash as possible to shareholders to keep them sweet as they begin a risky shift towards low-carbon and renewable energy. “All of the large oil companies are managing decline to a degree,” by shifting to fields that provide larger investment returns for shareholders and leaving more mature assets behind, said Ben Cook, portfolio manager with BP Capital Fund Advisors. The growing pressure from investors, activists and governments to tackle climate change means that European oil giants are turning off the taps on spending on oil even as the outlook for prices and demand remains robust. The two-pronged strategy of reducing oil output and boosting shareholder returns was underscored when Shell sold its Permian shale oil business in the United States for $9.5 billion in September, promising to return $7 billion to investors. Investors in U.S. companies can also expect their payouts to rise to record amounts, but Exxon Mobil (XOM.N) and Chevron (CVX.N), the top U.S. oil and gas companies, plan to continue ploughing money into new oil projects, encouraged by White House calls for more oil output to tackle high energy prices and inflation. read more In 2022, European firms are set to return to investors a record $54 billion in dividends and share buybacks, according to analysis by Bernstein, while Exxon and Chevron are set to pay more than $30 billion combined. SMALLER OIL As investments in new oil projects dwindle, oil production by Europe’s top five energy companies is set to drop by over 15% to below 6 million barrels per day (bpd) by 2030 after reaching a peak of around 7 million bpd in 2025, data from Bernstein Research showed. Britain’s BP has said it will cut its oil output by 40%, or roughly 1 million barrels per day, by 2030 from 2019 levels. Shell has said its oil output peaked in 2019 while Eni said its output will plateau in 2025. With the energy transition entering full swing, investors have welcomed the renewed focus on their returns. Having trailblazed oil and gas extraction for over a century, from drilling in the Middle East to pioneering deepwater production, oil majors have a history of pouring billions of dollars into huge, complex projects which ran over budget and behind schedule, leading to a decade of poor returns after 2010. “Strategies for the energy transition are becoming more defined, but investors won’t buy a story given the failures of the past, so the companies will need to prove they can deliver on these strategies effectively and profitably,” said Alasdair McKinnon of the Scottish Investment Fund. HARVEST TIME Some oil production will remain a key fuel in the energy transition and natural gas output is set to increase as countries such as India and China look to substitute gas for the most polluting fossil fuel – coal. At the same time, European oil majors are diverting spending to renewables such as wind and solar power, promising that returns from their low-carbon businesses will match or even grow beyond those of oil and gas in the long run. That is in contrast to U.S. companies, where Exxon and Chevron have largely stayed away from renewables. Chevron Chief Executive Mike Worth has said renewables “don’t generate the double digit returns that investors want.” The sharp drop already seen in investments in new oil developments by European companies in recent years has helped push long-term oil prices higher on the expectation of supply falling short of demand. “Such caution could underpin hydrocarbon prices, since energy demand looks set to continue to grow… and supply could be restrained, especially as renewable and alternative sources of power do not yet look ready to take up the baseload slack,” said Russ Mould, investment director at online platform AJ Bell. Demand for oil is expected to peak around 2030 according to the U.S. Energy Information Administration. “Oil executives are aware of public pressure, their environmental responsibilities and the opprobrium that any major new work could bring,” Mould said, adding that companies will resist the temptation to ramp production back up. Shell’s Chief Executive Officer Ben van Beurden said the company is looking longer term and while it wants to enjoy the strong oil prices, “we are not minded to invest in a big way in a rising market because we believe that by the time we can start to harvest it, we will be beyond that peak again.” Europe’s strategy will be a test case, said BP Capital Fund’s Cook. “It is hard to say who is right in the pace of the transition. Time will tell if Europe went too fast.”
Why BPCL sale is unlikely this fiscal, and what it means to the govt
The Centre is looking to disinvest a nearly 53% stake in energy PSU Bharat Petroleum Corp Ltd. When the Centre first announced the privatisation of oil & gas company Bharat Petroleum Corp Ltd (BPCL), it triggered a lot of angst. Employees of the public sector undertaking (PSU) were worried about job losses. There were concerns that foreign entities may end up holding a majority stake in a domestic energy major. Queries rose on why the Centre was walking away from a profit-making PSU. Now, with less than three months to go for the financial year to end, it is increasingly evident that the disinvestment is not happening immediately. Media reports indicate that BPCL has attracted just three bids till date; of these, two are yet to arrive at a financing plan for the estimated Rs. 600 billion purchase. The non-sale of BPCL hits the Centre’s disinvestment plan in two ways. One, the Centre is likely to miss its ambitious FY 2021-22 disinvestment target of Rs. 1750 billion, which in turn may hurt its fiscal deficit target. Two, it pulls down the morale around its privatisation proposals. What it gained in selling off Air India to the Tata Group after several years of struggle could be undermined by the apparent lack of bidder interest in BPCL. Pandemic and other disruptions On April 10 last year, the Centre gave interested parties access to BPCL data. The initial plan was to call financial bids by August, so that an agreement would be signed by September, and the sale completed by March 2022. The second wave of COVID, however, put paid to the plan, as physical inspection of BPCL’s plants could not be carried out. The PSU operates a refinery each in Mumbai, Kochi, Bina (Madhya Pradesh) and Numaligarh (Assam). (Later in the year, BPCL sold off its stake in the Numaligarh refinery.) This apart, the year saw volatile crude prices, and a decline in production as well as capital expenditure. Now, March 31 does not seem a viable deadline for the BPCL disinvestment. Among several elaborate processes, the buyer may need to get approval from the lenders to PSU, which typically takes a few months, said media reports. Private players who have expressed interest in BPCL so far include mining and energy billionaire Anil Agarwal’s Vedanta group, private equity company Apollo Global, and Think Gas Distribution, which is backed by I Squared Capital. Why did the sale not go through? Corporate observers say the size of the stake on the block may have put off bidders for BPCL. In earlier disinvestments, such as Balco and Hindustan Zinc, the Centre had sold a 26% stake with management control. However, in BPCL’s case, a 52.98% stake was offered. This made the deal size so big that several players could not arrange the finances; not many were keen to undertake such large debt either. Also, amid rising climate concerns, oil & gas is increasingly viewed as a risky play, which again worked against BPCL. The initial public offering (IPO) of Life Insurance Corporation (LIC), also slated for the current fiscal, is now all the more critical to the Centre. The insurance behemoth is expected to file its draft prospectus with the Securities and Exchange Board of India (SEBI) by the third week of January and get listed by March 31. The IPO, estimated at Rs. 1000 billion, would be India’s largest ever, and considerably bolster government finances.
RIL’s Jamnagar refinery to soon get 500 MW renewable power
The Central Electricity Regulatory Commission (CERC) has given Reliance Industries permission to approach Power Grid (PGCIL) for connectivity to the inter-State transmission system (ISTS) for supply of 500 megawatt (MW) renewable energy (RE) as a bulk consumer for the oil-to-telecom conglomerate’s Jamnagar refinery in Gujarat. The power sector regulator in an order on Wednesday said: “Petitioner (RIL) is at liberty to approach PGCIL for implementation of the said transmission line from RIL refinery (Jamnagar) to Jamkhambaliya S/S (pooling station) of ISTS, with the cost of construction of transmission lines for connectivity to ISTS to be borne by the Petitioner”. RIL is also at liberty to approach other licensees for laying down transmission lines. Charges for the transmission line shall be mutually agreed between the company and PGCIL or other licensees, it added. The Jamnagar refinery has a total load of 1,450 MW and captive generation capacity of 1,750 MW. It has been operating in island mode from the local grid since last 20 years. The company had approached the regulator to direct PGCIL for connectivity to the ISTS. The development is part of RIL’s efforts to turn net carbonzero by 2035.Reliance has increased the use of renewable energy to power its operations. The company used 6,91,217 giga joule (GJ) of RE for its operations. It has also installed rooftop solar panels, conducted trials of co-firing biomass with coal and invested in alternate energy solutions such as fuel cells and biofuels. Besides, the company has also announced plans to invest Rs 750 billion in RE to build 100 gigawatt (GW) capacity and aims to set up four large manufacturing units involving an investment of Rs 600 billion in three years at Jamnagar. The remaining Rs 150 billion will be utilised for developing value chains, partnerships and technologies. In June last year at RIL’s annual general meeting billionaire Mukesh Ambani announced, “We have started work on developing the Dhirubhai Ambani Green Energy Giga Complex on 5,000 acres in Jamnagar. We will build an integrated solar photovoltaic module factory. We will build an advanced energy storage battery factory, an electrolyser factory, and for converting hydrogen into motive and stationary power, we will build a fuel cell factory. Reliance will thus create a fully integrated, end-to-end renewables energy ecosystem”. To that effect, RIL has already announced partnerships worth around Rs 90 billion with REC, NexWafe, Faradion, Sterling and Wilson, Stiesal and Ambri for developing a RE ecosystem comprising of solar modules, battery storage and green hydrogen.
Govt okays Rs. 120.31 billion in green energy push
The government on Thursday cleared a Rs. 120.31 billion plan to set up infrastructure to transmit electricity from renewable energy projects as it seeks to boost the output from green sources and meet half of the nation’s energy requirement from them by 2030. The investment approval by the Cabinet Committee on Economic Affairs (CCEA) is for the second phase of the green energy corridor, which will help supply 20 gigawatts (GW) of renewable energy to the national grid from Gujarat, Himachal Pradesh, Karnataka, Kerala, Rajasthan, Tamil Nadu and Uttar Pradesh. The project is expected to help India meet the climate commitments it made at the COP-26 summit in Glasgow. At the November summit, Prime Minister Narendra Modi pledged to increase the country’s non-fossil fuel power generation capacity to 500GW and meet 50% of its energy requirements from renewable sources by the end of this decade. The Central Electricity Authority estimates India’s power requirement will rise to 817GW by 2030. The second phase of the green energy corridor project will involve adding approximately 10,750 circuit km (ckm) of transmission lines and 27,500 mega volt-amperes (MVA) transformation capacity of substations, the ministry of new and renewable energy said in a statement. “This will promote ecologically sustainable growth and contribute to the long term energy security of the country,” Union power and new and renewable energy minister Raj Kumar Singh said in a tweet. “Today’s CCEA decision adds strength to India’s efforts of achieving the target of 450GW in the renewable energy sector. Other benefits include a boost to energy security and environment friendly growth,” Modi said in a tweet. The corridor is expected to help ensure that the huge injection of electricity into the national grid from intermittent energy sources such as solar and wind doesn’t threaten the grid. The corridor forms an important component of the plan to maintain the grid frequency within the 49.90-50.05 Hz (hertz) band. An automatic generation control recently made operational sends signals to power plants every four seconds to maintain frequency, ensuring the power grid’s reliability. The project will receive central financial assistance of Rss. 39.7034 billion, or a third of the project cost. The transmission systems will be created over a period of five years through 31 March 2026, the government said. The first phase of the green energy corridor is under implementation in Andhra, Gujarat, Himachal Pradesh, Karnataka, Madhya Pradesh, Maharashtra, Rajasthan and Tamil Nadu. It will help supply around 24GW of renewable energy by 2022. The first phase will add 9,700ckm of transmission lines and 22,600MVA capacity of substations at an estimated cost of Rs. 101.4168 billion, the statement said. Recently, Union ministries of power and new and renewable energy approved 23 inter-state transmission system projects at an estimated cost of Rs. 158.93 billion. India has achieved its nationally determined contributions target with a total non-fossil based installed energy capacity of 157.32GW, which is 40.1% of the total installed electricity capacity. Of this, solar, wind and hydropower account for 48.55GW, 40.03GW and 51.34GW, respectively. India’s nuclear energy-based installed electricity capacity stands at 6.78GW.The government on Thursday cleared a Rs. 120.31 billion plan to set up infrastructure to transmit electricity from renewable energy projects as it seeks to boost the output from green sources and meet half of the nation’s energy requirement from them by 2030. The investment approval by the Cabinet Committee on Economic Affairs (CCEA) is for the second phase of the green energy corridor, which will help supply 20 gigawatts (GW) of renewable energy to the national grid from Gujarat, Himachal Pradesh, Karnataka, Kerala, Rajasthan, Tamil Nadu and Uttar Pradesh. The project is expected to help India meet the climate commitments it made at the COP-26 summit in Glasgow. At the November summit, Prime Minister Narendra Modi pledged to increase the country’s non-fossil fuel power generation capacity to 500GW and meet 50% of its energy requirements from renewable sources by the end of this decade. The Central Electricity Authority estimates India’s power requirement will rise to 817GW by 2030. The second phase of the green energy corridor project will involve adding approximately 10,750 circuit km (ckm) of transmission lines and 27,500 mega volt-amperes (MVA) transformation capacity of substations, the ministry of new and renewable energy said in a statement. “This will promote ecologically sustainable growth and contribute to the long term energy security of the country,” Union power and new and renewable energy minister Raj Kumar Singh said in a tweet. “Today’s CCEA decision adds strength to India’s efforts of achieving the target of 450GW in the renewable energy sector. Other benefits include a boost to energy security and environment friendly growth,” Modi said in a tweet. The corridor is expected to help ensure that the huge injection of electricity into the national grid from intermittent energy sources such as solar and wind doesn’t threaten the grid. The corridor forms an important component of the plan to maintain the grid frequency within the 49.90-50.05 Hz (hertz) band. An automatic generation control recently made operational sends signals to power plants every four seconds to maintain frequency, ensuring the power grid’s reliability.
Fuel prices up: Piped gas for cooking now Rs 39.5, CNG Rs 66
The price of compressed natural gas (CNG) has seen an unprecedented hike of over Rs 18 in less than a year in Mumbai, with a fresh hike of Rs 2.50 per kg from Sunday morning. The rate of piped gas has also gone up by Rs 1.50 a unit. The hikes have raised fears of a possible auto-taxi fare hike in the region this year, and an increase in school bus fees besides hiked fares for transportation in private buses running on CNG. The CNG hike will be a huge burden for over 8 lakh consumers, including over 3 lakhcar users who opted for the green fuel as it was cheaper than petrol and diesel besides being environment-friendly. This is the fifth hike since October and it has gone up by Rs 14 since October. The revised prices of CNG — inclusive of all taxes — in Mumbai metropolitan region from Sunday morning will be Rs 66 per kg while rate of piped gas will rise to Rs 39.50 per unit. Mumbai Taximen’s Union and Mumbai Rickshawmen’s Union have already petitioned the state transport department for hikes of Rs 5 and Rs 2 for taxi and autos respectively. “The fuel cost taken into account while calculating the fare hike announced in 2021 was less than Rs 50 per kg of CNG. Now this has gone up to Rs 66 which is too high,” said Thampy Kurien of the rickshaw union. However, one of the unions demanded that the price be rolled back so that there is no fare hike burden on consumers. Mumbai Autorickshawmen’s Union leader Shashank Rao said that the government should avoid a fare hike and roll back CNG hikes. “Citizens will not tolerate another fare hike and it will not be proper to demand for one. So we are writing to chief minister Uddhav Thackeray and transport minister Anil Parab to intervene,” he said. Drivers of cabs like Ola or Uber are also seeking a hike in fares as many have switched to CNG from diesel. A spokesperson from Mahanagar Gas Limited (MGL) said: “In order to meet the shortfall in domestic gas allocation, MGL is sourcing additional natural gas to cater to the rising demand by consumers. On account of substantial increase in the market price of natural gas, we have to increase prices of CNG and piped gas.” She further said that even after the price revision, CNG offers attractive savings of about 59% and 30% as compared to petrol and diesel respectively at current prices in Mumbai. The comparative price of petrol is Rs 109.98 a litre and diesel is retailing at Rs 94.14 per litre. “Also, domestic piped gas offers 22% saving compared to current price of domestic LPG cylinder that costs nearly Rs 900 a cylinder in Mumbai. Piped gas is safe, reliable and environment friendly,” she added.