Russia’s market growth in India spells more worries for Nigeria
The growing pace of Russia’s oil in the Indian market is posing a further threat to Nigeria’s oil revenue, indicating uptake of Nigerian crude would diminish in the coming months. Since Russia invaded Ukraine in late February, India’s imports of Russian oil have surged. Bloomberg calculations and Indian government data show that Russian barrels were cheaper than Nigerian barrels from April through June. That spread widened to nearly $19 a barrel in May, before easing to a $13 difference in June. By comparison, in March, Russian crude sold at a $13 premium. “Indian refiners are going to try and get their hands on the cheapest crude possible that works with their refinery and product configurations,” Bloomberg quoted oil market analyst Vandana Hari as saying. In June, Russia beat out Saudi Arabia as India’s second-biggest crude supplier, ranked behind Iraq. Oil from Iraq was about $9 a barrel more expensive than Russian crude in May, but sold cheaper in all other months, per Bloomberg calculations. “Russian crude fits that bill for now. The Saudis and Iraqis are not entirely losing out because they are directing more supply to Europe,” Hari added. This development is significant for Africa’s biggest economy because India represents the largest importer of Nigeria’s crude oil, earning the sub-Saharan country about N13.9 trillion since 2015, according to data gathered by BusinessDay.
An Iran Nuclear Deal Could Send Oil Prices Tumbling Towards $80
Speculation that a new Iran nuclear deal could soon be agreed upon has added downward pressure to oil prices, although the disruption of Russian oil flows to Central Europe is adding to supply worries. – Ever-increasing energy costs are weighing on European consumers, with EU inflation nearing double-digit territory and the UK expecting a spike towards 13%, mostly driven by soaring gas prices. – Almost all European countries will be seeing increases in food prices in the double digits as spot TTF prices continue hovering around €200/MWh, defying recent declines in the UN world food cost index (down 9% month-on-month in July). – According to IMF forecasts, the costs of living for the poorest of UK households have gone up by more than 16% this year, whilst in Hungary (the least suffering of the EU pack) they rose by 3%. – The European Union approved an ad hoc aid package for European companies in the agriculture sector, although the €110 million that went into the package might be too little too late. Market Movers – US investment bank Goldman Sachs (NYSE:GS) reiterated its bullish view, saying that market tightness will remain throughout 2023 and maintaining its 2023 average price forecast of $125 per barrel. – UK-based oil major BP (NYSE:BP) has reportedly started drilling a carbon capture appraisal well in Texas, seeking to bury carbon dioxide from Linde’s hydrogen plant outside of Houston. – Nigeria’s President has approved the acquisition of ExxonMobil’s (NYSE:XOM) offshore shallow water assets by Nigerian oil firm Seplat Energy (LON:SEPL) for $1.28 billion. Tuesday, August 09, 2022 Oil prices bounced back on Tuesday due to news that Russian oil supplies to central Europe via Ukraine had been halted. Meanwhile, it seems that the Iranian nuclear talks will soon creep back into the energy market agenda. The negotiations broke off for a period of national consultations when diplomats returned to their countries to discuss the EU-brokered draft. Now, there is speculation that Iran may agree to this final draft. If that happens, expect oil prices to fall back toward $80 per barrel. Iranian Deal Moves Back into Limelight. The swiftly organized indirect negotiations between Tehran and Washington have reportedly made good progress, according to diplomats participating in the talks, after the EU presented a final text on the revival of the JCPOA. Russia Accuses Ukraine of Halting Pipeline Oil Flows to Europe. According to Russian transportation firm Transneft, Ukraine has halted Russian oil pipeline flows to Central Europe, reportedly because sanctions prevented it from accepting transit fees, jeopardizing crude supply to countries like Hungary, Slovakia, and the Czech Republic. EU Publishes Gas Curtailment Laws. The European Union officially published legislation for cutting the group’s gas consumption by 15%, entering into force on the 9th of August despite Polish and Hungarian vetoes. Colombian President Starts Reign with Oil Levy. Colombia’s new president Gustavo Petro has proposed a tax reform bill that would levy a 10% tax on exports of oil when it exceeds the threshold of $48/barrel, likewise for coal if the benchmark prices move above $87/ton. Japan Wants to Stay in Sakhalin Projects. With Russia temporarily banning Western oil companies from selling their shares in key energy projects, Tokyo has reiterated its willingness to keep the stakes of Japanese consortiums in both Sakhalin-1 and 2. Norway Doesn’t Want to Share its Hydro. With most of Northern Europe suffering from counter-seasonally low water levels, the government of Norway could limit exports of electricity to preserve power at home as it relies on hydro reservoirs for 90% of its domestic needs. Beijing to Clamp Down on Teapots Again. According to media reports, Chinese authorities are preparing to launch widespread tax investigations of independent refiners in Shandong, presumably checking for tax evasion and irregularities with quota trading. PEMEX Eyes Takeover of Mexican Offshore Gem. Mexican state oil company PEMEX is getting ever closer to finalizing the field development plan for the 700 million-barrel Zama field, discovered in 2017 by Houston-based Talos Energy (NYSE:TALO) but given away to PEMEX by the AMLO administration in 2021. Cenovus Keeps on Buying up BP Stakes. Less than two months after it bought BP’s (NYSE:BP) 50% interest in Canada’s Sunrise oil sands, Canadian oil firm Cenovus Energy (CVE) agreed to buy the remaining 50% stake of the UK-based major in the 160,000 b/d Toledo Refinery for $300 million. Kazakhstan Wants to Ban Coal Exports. Kazakhstan, the world’s tenth-largest exporter, will most probably ban coal exports via road for the next six months as the country seeks to keep domestic production at home and accommodate increasing domestic needs of electricity. Government Study Finds Wind Megaproject Unprofitable. A Norwegian government-funded study found that the 3.6 GW capacity of Dogger Bank, the world’s largest offshore wind park currently under construction, will be unprofitable, having a net present value of -$1.3 billion. US Fuel Retailers Stand Up Against SAF Tax Credit. US fuel retailers have voiced their discontent at the inclusion of a tax credit for sustainable aviation fuel (SAF) in Democrats’ $430 billion spending bill, offering $1.25-1.75/USG credit depending on the feedstock, arguing SAF is more carbon-intense and less efficient than renewable diesel. Indonesia Signs up for Tesla Nickel Supply. US carmaker Tesla is rumored to have signed a $5 billion deal with Indonesia that would secure materials for EV batteries from nickel processing companies in Indonesia, a year after CEO Elon Musk visited the island nation to negotiate the deal.
Shell closes USD-1.55bn acquisition of India’s Sprng Energy
Royal Dutch Shell Plc (AMS:RDSA) on Tuesday announced it has wrapped up the acquisition of Indian renewable energy platform Sprng Energy, which owns 2.9 GWp of solar and wind energy assets. Under the USD-1.55-billion (EUR 1.52bn) transaction originally unveiled at the end of April, the oil and gas major has taken possession of Solenergi Power Private Ltd, the direct shareholder of the Sprng Energy group of companies, through its wholly owned subsidiary Shell Overseas Investment BV. The vendor is UK buyout firm Actis. About half of the deal’s total value will be reported as cash capex and the rest will be assumed as debt obligations, Shell said. Pune, Maharashtra-based Sprng Energy’s platform consists of 2.1 GWp of wind and solar energy assets in operation and 0.8 GWp of contracted capacity. The company, created by Actis in 2017, also owns a renewable energy project pipeline totalling 7.5 GWp. The acquisition will triple Shell’s renewable capacity in operation and help it achieve its target of becoming a profitable net-zero emissions energy business by 2050. As of end-April, the oil and gas giant had 1 GW of operating renewable power capacity.
LNG traders absorb huge losses after supply outages
Major energy traders are taking hundreds of millions of dollars in losses as they scramble to plug a liquefied natural gas (LNG) supply gap after several outages hampered efforts to fill European storage ahead of the winter heating season. Unplanned disruptions at LNG plants in the United States, Nigeria and Australia have wrong-footed traders, including BP and Shell, forcing them to pay inflated costs for alternative supplies. In a market already struggling to meet global demand for natural gas after Russia sharply reduced pipeline supplies into Europe, the lost LNG cargoes which can be transported by ship, have pushed global prices sharply higher in recent months. BP (BP.L) took a more than $500 million hit to replace LNG cargoes lost after a sudden shutdown of the Freeport LNG plant in Texas in June, industry sources told Reuters. Freeport, the second-biggest U.S. LNG export plant, supplies BP with 4 million tonnes per year from a total portfolio of 18 million tonnes, BP Chief Financial Officer Murray Auchincloss told Reuters. “Freeport does create an impact in the quarter and we’ve provided for that for the year,” Auchincloss said. The company had deducted the expected costs from its second-quarter profit, but Auchincloss did not specify costs. A BP spokesperson declined to comment on the loss figure. France’s TotalEnergies (TTEF.PA) also said it would replace eight cargoes of LNG it was scheduled to receive from Freeport by buying in the spot market in the third quarter of the year. It was unclear how much the replacement cargoes would cost TotalEnergies. Freeport produces 15 million tonnes of LNG per year. Traders typically sign long-term offtake agreements with LNG producers and agree on separate deals to supply consumers with cargoes from their global portfolios. It’s rare to use plant outages to justify not supplying consumers through what is known as force majeure. Shell , the world’s largest LNG trader with a 20% market share, cut its LNG production volumes in the second quarter by 4%, mainly due to supply losses from the Sakhalin-2 plant in Russia, where it exited operations after Moscow’s invasion of Ukraine in February. The company continues to receive LNG cargoes under existing long-term deals with Sakhalin-2, a company spokesperson said. But the future of the contracts is shrouded in uncertainty after Russia gave foreign investors in the project one month to claim their stakes in a new entity that will replace the existing one. Shell Chief Executive Ben van Beurden said it was “highly unlikely” Shell would join the new entity. The supply loss impacted Shell’s second-quarter profit by around $200 million in the quarter, according to estimates by industry sources. Shell declined to comment on the figure. On top of that, Shell and its partners lost LNG production at the giant Prelude floating LNG off the western coast of Australia after shutting it down amid a pay dispute. Nigeria’s huge LNG export terminal on Bonny Island has also seen output declines in recent months as a result of a shortfall in natural gas supplies due to rampant theft and sabotage to oil and gas pipelines. The money lost is dwarfed by enormous profits both BP and Shell recorded this year on the back of soaring refining margins and high oil and gas prices. But lower availability of LNG has pushed benchmark prices to record highs as Europe sought to ramp up imports rapidly to replace lost Russian pipeline natural gas. At current prices, an average cargo of LNG would cost around $100 million in the spot market. European LNG imports from January to July surpassed a record 100 billion cubic metres (bcm), or 75 million tonnes (Mt), almost reaching the level observed through the entire 2021, according to Nnenna Amobi, senior LNG analyst at Refinitiv. Around 35% of total European imports were received from the United States in July, versus 43% in June, mainly due to the loss of Freeport cargoes. The global LNG market reached 380 million tonnes in 2021, according to Shell.