Halting Russian gas imports would cause supply problems for Italy: Minister
Italy will face short-term energy supply problems if Russia opts to cut gas sales to the country, Italian Ecological Transition Minister Roberto Cingolani has said. Speaking on the sidelines of the City Enterprise Festival in Vicenza, Cingolani said Italy’s transition away from Russia had already started, but will take time. Like other European Union member states, Italy is seeking to reduce its dependency on Russian natural gas due to the ongoing conflict in Ukraine, Xinhua news agency reported. Previously, Italy imported around 29 billion cubic meters of gas from Russia every year. Italy has now struck deals that will replace most of those imports. “Imports of 25 billion cubic meters of gas are ensured from 2024 onwards,” Cingolani said. The gap between previous levels of Russian imports and the new supply deals will be covered by imports of liquified natural gas, alternative energy sources, and conservation he explained.
Assam: Piped gas to Cachar homes soon to be a reality
The Cachar district administration said Oil and Natural Gas Corporation will provide piped gas to homes in the district soon. “ONGC authorities recently said projects are being taken up for supply of LPG gas through pipelines throughout Cachar district in the near future,” said an official communiqué. At present, the facility is available in Sonai town in the southern Assam district. Cooking gas is being supplied through pipelines in this town from ONGC’s plant at Dhanehari Part II near Sonabarighat. “Sonai people are lucky enough to get piped cooking gas. In the first phase, 100 families of Sonai town were provided piped LPG from that plant and new connections are also being given,” Cachar deputy commissioner Kriti Jalli said while addressing the oath-taking ceremony of Sonai municipal board on Saturday.
Europe May Face LNG Crisis This Winter
A liquified natural gas (LNG) crisis is brewing for European countries dealing with energy insecurity in the wake of Russia’s invasion of Ukraine, as demand will outstrip supply by the end of this year, Rystad Energy research shows. Although soaring demand has spurred the greatest rush of new LNG projects worldwide in more than a decade, construction timelines mean material relief is unlikely only after 2024. Global LNG demand is expected to hit 436 million tonnes in 2022, outpacing the available supply of just 410 million tonnes. A perfect winter storm may be forming for Europe as the continent seeks to limit Russian gas flows. The supply imbalance and high prices will set the scene for the most bullish environment for LNG projects in more than a decade, although supply from these projects will only arrive and provide relief from after 2024 The European Union’s REPowerEU plan has set an ambitious target to reduce dependence on Russian gas by 66% within this year – an aim that will clash with the EU’s goal of replenishing gas storage to 80% of capacity by 1 November. By shunning Russian gas, Europe has destabilized the entire global LNG market that began the year with a precarious balance after a tumultuous 2021. The decision to sharply reduce reliance on Russian gas and LNG from current levels of between 30-40% will transform the global LNG market, resulting in a steep increase in energy-security based European LNG demand that current and under-development projects will not be able to supply. Russia last year sent 155 billion cubic meters (Bcm) of gas to Europe, providing more than 31% of the region’s gas supply. Replacing a significant portion of this will be exceedingly difficult, with far-reaching consequences for Europe’s population, economy, and for the role of gas in the region’s energy transition. This will also likely create a boom for LNG producers elsewhere of a scale and duration not seen in over a decade. “There simply is not enough LNG around to meet demand. In the short term this will make for a hard winter in Europe. For producers, it suggests the next LNG boom is here, but it will arrive too late to meet the sharp spike in demand. The stage is set for a sustained supply deficit, high prices, extreme volatility, bullish markets, and heightened LNG geopolitics,” says Kaushal Ramesh, senior analyst for Gas and LNG at Rystad Energy. The expected reduction in Russian gas for Europe in 2022 is 37 Bcm, rising to more than 100 Bcm by 2030. As a result, Europe’s gas consumption likely peaked in 2019 and will now decline steadily through to 2030. Gas and LNG is therefore set to play a reduced role in Europe’s energy mix, providing further impetus for renewables and potentially a greater role for nuclear and coal. Europe was in fact on course to increase Russian imports of gas and LNG to over 40% of its supply by 2030, if the now stalled Nord Stream 2 pipeline had been approved. This will instead drop to around 20% by 2030 as current contracts are not renewed. To facilitate additional LNG imports, a slew of regasification terminals has been planned across Europe – some new and some reactivated from deep slumber. If Russian flows were to stop tomorrow, the gas currently in storage (about 35% full) would likely run out before the end of the year, leaving Europe exposed to a brutal winter. Under this scenario, in the absence of joint buying arrangements and countries competing for limited molecules, the TTF gas price could climb to more than $100 per million British thermal units (MMBtu), resulting in industrial curtailments and widespread fuel switching in the power sector. We have already seen curtailments to fertilizer, steel and paper manufacturers in Europe, underscoring the economic pain that awaits. In an extreme scenario of a severely cold winter, not even the residential sector would be safe. LNG markets go bullish with wave of new projects More than LNG 20 projects with a combined capacity of over 180 million tonnes per annum (tpa) have reported some development progress recently. To be certain of LNG supply in 2030, the market will need more than 150 million tpa of production from the 186 million tpa planned, which means more than 80% of the project pipeline must be realized. US projects are in pole position – some of which have been dormant waiting for demand to rise, and have now been given new life. Projects such as Energy Transfer’s Lake Charles and NextDecade’s Rio Grande that were previously on ice have reported 9.45 million tpa worth of deals after the invasion, including an about-face deal by French player Engie, which pulled out of negotiations with NextDecade in November 2020 but recently closed a 1.75 million tpa deal with the same project. However, the project pipeline globally remains far from able to rescue the market. It includes the 15 million tpa Rovuma Area 4 LNG project, to be located adjacent to TotalEnergies’ Area 1 LNG in the currently at-risk Palma region of Mozambique. We expect little to no progress on this project until TotalEnergies resumes construction. Mexico is also well-positioned for Asian exports due to geographical proximity and non-dependence on transit through the Panama Canal, and appears to be gaining momentum among Asian buyers. At the same time, higher prices will slow Asian LNG demand growth in the medium term, which means the continent will remain dependent on fuel oil and coal. In some scenarios, Asian LNG demand may be permanently dented, and deployment of renewables accelerated.
Gasoline Prices May Have Finally Peaked
Following Russia’s invasion of Ukraine and the subsequent sanctions on Russian oil, the price of crude oil rapidly climbed above $120 a barrel. Gasoline prices — which had already been climbing since bottoming out in April 2020 — rapidly followed. For the week ending March 14, 2022, the Energy Information Administration (EIA) reported a weekly retail average gasoline prices across all grades of $4.41 a gallon. That was the highest weekly average ever reported by the EIA (but it isn’t adjusted for inflation). Previously the highest weekly average reported took place in July 2008, when crude oil prices reached nearly $150 a barrel. However, since reaching $4.41/gal, the national average dropped to about $4.20/gal as oil prices pulled back to ~$100/bbl. Barring a new geopolitical event that impacts the oil markets, it seems likely that the price of gasoline will remain below that March peak for now. That doesn’t mean we will see significant relief any time soon. Refiners are currently switching over to the more expensive summer blends. These blends are mandated to have lower vapor pressure to help minimize smog formation in the summer. But, they are more expensive to produce, and the supply of ingredients to produce summer gasoline is less than for winter gasoline. This all coincides with peak driving season. That’s why we rarely see significant drops in the price of gasoline in the summer. The only thing I can imagine that could make this happen is if Russia withdraws from Ukraine in the near future and some of the sanctions on Russian oil are dropped. In the slightly longer term, however, the situation looks a lot better. U.S. oil production continues to climb. This past week U.S. oil production reached 11.6 million BPD, up 1 million BPD from a year ago and up 600,000 BPD since January. If we can maintain that pace for another year, the U.S. will be back at record levels of oil production. The number of rigs drilling for oil reached 552 this past week (source), which is up 210 rigs from a year ago. That represents a year-over-year increase of 61%, and is the highest level of drilling since the Covid-19 pandemic took hold in the U.S. Taken altogether, these signs point to the likelihood of much lower gasoline prices later this year. But you are probably going to have wait until after summer.
G7 countries pledge to stop Russia oil imports
The G7 club of wealthy nations committed Sunday to phasing out its dependency on Russian oil and issued a scathing statement accusing President Vladimir Putin of bringing “shame” on Russia with his invasion of Ukraine. The statement from the Group of Seven — France, Canada, Germany, Italy, Japan, Britain and the United States — did not specify exactly what commitments each country will make to move away from Russian energy. But it was an important development in the ongoing campaign to pressure Putin by crippling Russia’s economy, and underscores the unity of the international community against Moscow’s actions. We commit to phase out our dependency on Russian energy, including by phasing out or banning the import of Russian oil. We will ensure that we do so in a timely and orderly fashion, and in ways that provide time for the world to secure alternative supplies,” the joint statement said. his will hit hard at the main artery of Putin’s economy and deny him the revenue he needs to fund his war,” the White House said. The announcement came as the G7 held its third meeting of the year on Sunday via video conference, with Ukrainian President Volodymyr Zelenskyy participating.
Europe Sees Huge Hydrogen Opportunity In Asia
Hot on the tail of Europe, which has expanded its green hydrogen production over the last year, Asia is developing its hydrogen industry to become a major producer over the next decade. As several countries announce renewable energy strategies, green hydrogen, as well as hydrogen produced using carbon capture technologies, will play a major role. Green hydrogen demand is expected to increase dramatically as the world transitions away from fossil fuels to renewable alternatives. Hydrogen demand could reach anywhere between 150 to 500 million metric tonnes per year by 2050, depending on global climate ambitions, according to a PWC report. While green hydrogen is much more expensive to produce than grey hydrogen – derived from natural gas production – the push by governments around the world to curb carbon emissions by the end of the decade is already driving up demand for the green alternative. Companies are now racing to produce low-cost green hydrogen, using new technologies and techniques, in the hope that they can become more competitive. Last year, India announced a new green hydrogen strategy, although its technology for the production of green hydrogen is still in its infancy. Despite skepticism around the anticipated rapid growth of India’s green hydrogen industry, it has already developed its solar energy sector substantially over the last decade, showing what can be done with enough political will. India now has 50 GW installed solar capacity, adding a record 10 GW in 2021 alone. India expects to produce 5 million tonnes of the fuel by 2030, promoting the country as a green hydrogen hub. Several initiatives have been seen in recent months supporting this production goal, including an investment of $75 billion by India’s Reliance Industries in the green energy market, including green hydrogen. In addition, in April Greenko group and Belgium-based John Cockerill committed to the construction of a 2GW hydrogen electrolyzer gigafactory in India. This would be the biggest in the world outside of China. The Indian Oil Corporation also announced a partnership with two private firms for green hydrogen production. Now, European governments are eyeing Asia’s green hydrogen potential, as Germany announces an agreement for German-Indian hydrogen cooperation. This comes as part of the country’s plan for “hydrogen diplomacy” as it seeks to develop more friendly energy allies in the wake of Russian energy provision. Germany’s Minister of Economic and Climate Affairs Robert Habeck stated “As part of our energy partnership with India, we have agreed to work together in more depth on developing innovative solutions for sustainable green hydrogen production. An important milestone in reducing our dependence on fossil fuels.” With 7,500 kilometers of coastline and an abundance of sun, India is well-located to produce the renewable energy required to support green hydrogen production. Germany and India are now expected to create a task force, which will develop a road map for the development of the green hydrogen industry and how that will look for the two countries.
Work on piped natural gas network proceeding slowly
The piped natural gas (PNG) network has often been touted as being a potential gamechanger in India’s energy sector. Unfortunately, despite the initiative’s obvious benefits, the apathetic attitude of the stakeholders involved has resulted in its implementation lagging considerably behind schedule, at least in Hubballi-Dharwad. Thus far, IOAGPL has laid pipelines that cumulatively stretch to a length of 600km. With demand for PNG connection growing across Hubballi-Dharwad, there is a need to expedite work on the project. Deputy general manager for IOAGL Vinod Papal attributed the lag to lack of awareness among the people. “Not many people were aware if the facility. But more households will now be integrated in the network since more people are coming forward asking to be supplied natural gas through the piped network,” Papal said. The spike in price of petrol and diesel is pushing consumption of compressed natural gas, Papal said. “Autorickshaws need up to three kilos of CNG daily, while the figure is four kilos for taxis. Given the rising demand for CNG for motorised vehicles, the authorities have decided to increase the number of CNG pumping stations. As of now, there are five such stations across the twin cities, and there are plans to add seven more,” he said. Papal said that they were facing difficulties in obtaining permission from the civic authorities to dig the ground for laying pipes owing to lack of knowledge among the officials about the benefits of PNG. “Union minister Pralhad Joshi, former chief minister Jagadish Shettar and MLA Arvind Bellad have helped us get permission to dig up the roads. Thankfully, we do not have to dig up any more roads since we have met our target,” Papal said.
India buyers grab discounted Russia LNG shunned by rest of world
India’s liquefied natural gas importers are purchasing extra volumes from Russia at a discount as most other spot buyers shun the fuel. Companies including Gujarat State Petroleum Corp. and GAIL India Ltd. recently bought several LNG spot shipments from Russia at prices below prevailing market rates, according to traders with knowledge of the matter. They may purchase more as long as the Russian fuel remains cheaper than rival suppliers, the people said, who requested anonymity to discuss private details. GSPC, GAIL and India’s ministry of petroleum and natural gas didn’t respond to requests for comment. India gets almost three-quarters of its LNG under long-term contracts, but sweltering heat and ongoing blackouts are forcing the nation’s utilities to top up with spot shipments, which are trading at well above normal due to a global supply crunch. With demand for gas in the fertilizer sector also rising, some importers are snapping up the discounted Russian shipments. The Russian LNG shipments were purchased by Indian firms via recent spot tenders, as those cargoes were offered at lower prices than other suppliers, the people said. Outside of India, few LNG importers allow for suppliers to offer Russia-origin shipments in purchase tenders. The South Asian nation, which is also seeking deeper discounts on Russian oil, has emerged as a last resort for Russian fuels traded on the spot market and shunned by the world due to President Vladimir Putin’s invasion of Ukraine.