Oil soars as Russian energy supply fears intensify
Oil prices jumped on Monday as Western allies imposed more sanctions on Russia and blocked some Russian banks from a global payments system, which could cause severe disruption to its oil exports. Brent crude rose $4.82, or 4.9%, to $102.75 by 1028 GMT after touching a high of $105.07 a barrel in early trade. The Brent contract for April delivery expires on Monday. The most active contract, for May delivery, was up $4.74 at $98.86. U.S. West Texas Intermediate (WTI) crude was up $4.62, or 5%, at $96.21 after hitting $99.10 in early trade. “Growing concerns about disruptions to Russian energy supplies are pushing oil and gas prices up sharply,” said Commerzbank analyst Carsten Fritsch. Russia is facing severe disruption to its exports of all commodities from oil to grains after Western nations imposed stiff sanctions on Moscow and cut off some Russian banks from the SWIFT international payment system. Russian crude oil grades, which account for about 10% of global oil supply, were hammered in physical markets. Goldman Sachs bank raised its one-month Brent price forecast to $115 a barrel from $95 previously. “We expect the price of consumed commodities that Russia is a key producer of to rally from here – this includes oil,” the bank said. President Vladimir Putin put Russia’s nuclear deterrent on high alert on Sunday. Russian forces seized two small cities in southeastern Ukraine, the Interfax news agency said, but ran into stiff resistance elsewhere. Talks between Ukraine and Russia have started at the Belarusian border, a Ukrainian presidential adviser said, aiming to agree an immediate ceasefire. “If there’s any progress made in this meeting, we’re going to see a sharp reversal in markets – we’ll see stocks rise, the dollar rise and oil fall,” said OANDA analyst Jeffrey Halley. British oil major BP decided to exit its Russian oil and gas investments, opening a new front in the West’s campaign to isolate Russia’s economy. BP is Russia’s biggest foreign investor. “The sanctions and the exodus of Western oil companies are likely in the medium to long term to result in lower Russian oil and gas production,” said Fritsch. The Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, a group known as OPEC+, are due to meet on March 2. The group is expected to stick to plans to add 400,000 barrels per day (bpd) of supply in April. Ahead of the meeting, OPEC+ revised down its forecast for the oil market surplus for 2022 by about 200,000 bpd to 1.1 million bpd, underscoring market tightness.
Europe can’t stop buying Russian gas. Here’s why
Three days after Russia invaded Ukraine, and after sweeping sanctions were levelled against Vladimir Putin’s regime, Europe’s appetite for Russian gas shows no sign of diminishing. On Sunday morning, Gazprom, the Kremlin-controlled energy giant, said gas exports from Russia to Europe via Ukraine were proceeding just as expected. On Friday, figures from Ukraine’s grid operator showed that European imports of Russian gas through Ukraine jumped by nearly 40% on Thursday, the day the invasion began, according to Bloomberg. Oil and gas have so far been exempted from Western sanctions on Russia. Here’s why Europe has continued buying Russian gas. The continent came to depend on it Europe once enjoyed reliable gas supplies from the North Sea field – which is now all but depleted. Russia, meanwhile, has the world’s largest reserves of natural gas. The European Union relies on Russia for about 40% of its gas – more than twice as much as Norway, its next-largest import partner. In 2021, Russia sold about $100 billion worth of oil and gas to Europe, William Jackson, an economist at Capital Economics, estimated. Gazprom supplied about a third of Europe’s gas in 2020, according to Bloomberg. Germany came to depend on it Germany, the largest economy in Europe, relies on Russia for more than half its gas. Germany has been phasing out nuclear power in favour of gas, and has been trying to build a new pipeline to bring in more from Russia. This is the Nord Stream 2 pipeline, which would supplement the existing Nord Stream 1 pipeline and follow a similar route through the Baltic Sea. Germany suspended the Nord Stream 2 project shortly after Russia invaded – but notably, it did not cancel the project altogether. The cost is comparatively low Analysts said increased European imports of Russian gas on the day of the invasion were partly because market forces pushed up the price of non-Russian gas. Stefan Ulrich, a gas analyst at BloombergNEF, said on Thursday that non-Russian gas prices were “well above the likely sales price for many Gazprom import contracts.” Georg Erdmann, former chair of the Department of Energy Systems at the Institute for Energy Technology at Berlin University of Technology, told CNBC that the gas industry “assumes Russia to be a rather reliable commercial partner” that fulfils its long-term contracts. Lawmakers have eyes on consumer energy costs Europeans have suffered a winter of soaring gas prices, raising home energy bills. European lawmakers are now wary of spooking their voters with the spectre of further price increases. Ursula von der Leyen, president of the European Commission, has insisted that the EU would be able to cope should there be any disruption to gas imports.
ONGC’s Ultra deep find off Andhra coast yielding results
ONGC is slowly but steadily moving towards putting the country’s east coast on the global map for areas that boast of hydrocarbon production from ultra-deepwater. It is simultaneously working towards inking production enhancement contracts with various contractors to boost output from other blocks too. “Out of four appraisal wells (in ultra-deep find) planned, two wells have been drilled and both wells proved to be gas bearing. Production Testing Performance in these two wells is in line with expectation – 0.75 million cubic metre per day approximately,” an official told BusinessLine. In 2007, about 150 km off the Andhra Pradesh coast is ONGC’s ultra-deep water find, called UD-1, in the famous Krishna-Godavari block KG-DWN-98/2. The progress had been slow on this area of the block due to technological challenges that it was throwing up. ONGC earlier was looking at producing almost 20 million standard cubic metre a day by 2019-2020 from the area. Simultaneously, ONGC is also taking its association with American giant Exxon to the next level and it doesn’t rule out partnering with the latter for ultra-deep find. In 2019 a Memorandum of Association (MOU) was inked between ONGC and Exxon. During Phase-I, ONGC and Exxon were engaged in Joint Technical sessions to discuss and evaluate the Deep water areas of India and had finalised potential areas for collaboration in eastern and western coast of the Indian sedimentary basin. The Phase-II entry letter and Confidentiality Agreement between the two were signed in May 2021. After the first kick-off meeting pertaining to Phase-II held on July 12, 2021, two Joint Technical Workshops have been conducted for West Coast and East Coast Collaboration areas. Data pertaining to East coast is in the process of exporting from the National Data Repository (NDR) for reprocessing by Exxon Mobil at their centre at Houston, USA, an official in the know said. The next Steering Committee Meeting pertaining to Phase-II is planned soon where parties will look to align on mutually agreed collaboration areas for transition to Phase 3 (Joint Collaboration). Meanwhile, to further boost its hydrocarbon output, ONGC is working on production enhancement contracts for six blocks. “As part of its Action Plan, ONGC has been planning for Tariff based production enhancement contract model for six fields,” another official said. ONGC has chalked out a detailed exploration strategy and looking at yet to be tapped 14 sedimentary Basins – Narmada; Ganga-Punjab; Saurashtra- South Rewa; Cuddapah; Chattisgarh; Bastar; Deccan Syneclise; Bhima – Kaladgi; Pranhita-Godavari; Kerala Konkan; Andaman; Karewa; Spiti Zanskar; and in Bengal basin ONGC is consolidating the recent find through appraisal and moving through acreage acquisition under OALP and seismic data acquisition.