Saudi Aramco Is Taking A Page Out Of The U.S. Shale Playbook
Saudi Aramco, (ARMCO) reported Q-2, 2022 earnings this week and set tongues wagging with the sheer amount of cash being generated in its daily operations. Net income of $48.4 bn, Free Cash Flow of $34.6 bn for the quarter, and $65 bn for the first half, substantially eclipsed year-ago numbers of $22.6 bn and $40.9 bn for the same period. All of this was driven by price realizations for crude topping the $113.00/bbl mark for the quarter, exceeding year-ago prices ($67.90) by ~66%. What was noteworthy, and documented in a recent Wall Street Journal article, was the company’s capital allocation budget toward increasing production remained largely unchanged at the lower end of its previously announced range of $40-50 bn for 2022. The Journal article went on to note- “To be fair, $40 billion is a lot, much more than in 2021, but Aramco is very flush. It earned more than $65 billion in free cash flow in the first half of this year. That spending also includes diversifying into natural gas, wind, solar and blue hydrogen. And while capital discipline is laudable, surely if management really believes that oil demand is growing for the next decade, it should at the very least accelerate plans to expand its maximum sustainable oil capacity to 13.0 million barrels a day, currently set for 2027.” Where the Saudi mindset appears to depart from their oil-producing cousins on the other side of the planet, is what is to be done with the excess cash now being realized. While U.S. shale producers are raining wealth on their shareholders, in the form of stock buybacks and special dividends, KSA-94% owner of ARAMCO, has focused on paying down debt, and diversifying its energy portfolio. In some ways mimicking the actions of the mega oil producers like ExxonMobil, (NYSE:XOM) Chevron (NYSE:CVX) and BP (NYSE:BP), by delving into alternative energy forms. The supermajors, tired of being clubbed by the climate alarmists, and having totally bought into the Paris Accord Net Zero by 2030 dictums, have been diverting capital away from legacy sources and toward cleaner energy forms that raise their ESG scores. Author of, The End of Fossil Fuel Insanity, Terry Etam, summarized their plight in an article carried in the BOE Report discussing the coming gap between supply and demand- “There is little producers can do to help out. Their ‘inventory’ – oil and gas reserves – is in incredibly high demand, and is being bid up in price. What would help alleviate this situation is to find and develop more reserves, but the world’s cultural elite, the group that dominates western political schools of thought, has ‘scientifically’ linked any weather event – anything at all – with climate change, which is linked to ‘fossil fuel combustion’, which is therefore bad, and the mere suggestion of increasing production is unacceptable.” In this regard, the supermajors have been “Greenwashing” their portfolios in some cases and beginning to transition them in others. Here they depart from the Saudis who intend to straddle the gap between petroleum and green energy into the foreseeable future. In spite of a publically asserted view by Aramco CEO, Amin Nasser that oil demand will grow for the rest of this decade, KSA appears to be in no hurry to accelerate the timetable for achieving the 13 mm BOPD upper threshold set for 2027. Instead, KSA has embarked on an ambitious decade-long quest to diversify its economy away from its sole reliance on oil and gas, choosing a multi-pronged approach that includes hydrogen, wind, and solar. One area where they are focusing their efforts is in the production of hydrogen-H2. A Financial Times-FT article notes that the Saudis plan to dominate the production of H2, a few years hence. With its abundant supplies of gas nearby the City of Neom, a Blue-H2 plant is being built with $110 bn of capital. This plant is planned to take 2.2 bn cubic feet of gas daily from the supergiant Jafurrah gas field, for processing Blue H2. It is forecast to come on line in 2026. Another massive hydrogen project will produce Green H-2, with power supplied by a 99-turbine wind farm. SP Global discusses this in an article focusing on Acwa Power’s 240K mt/ton per year, green hydrogen project that will make 1.2 mm MT of ammonia. It also is expected to start production in 2026. Finally, solar is thought to have unlimited potential in the Kingdom. It makes sense as the sun shines brightly there more than 300 days per year. Accordingly, KSA is fielding a number of new solar farm projects getting underway. The sovereign wealth fund of the Kingdom just this year let two awards for a total of 1 GW IPP One went to Acwa Power for a 700 MW farm at Al-Rass and a second smaller, 300 MW farm at Saad. The Kingdom has a goal of installing 54 GW of solar generation by 2030. Solar is also finding industrial uses as the Glass Point complex takes shape. This 1.5 GW project, the biggest solar farm in the world will power an aluminum smelting plant designed to use the solar mirrors on water-filled pipes to produce solar steam. This will save approximately 600K tons of carbon annually. Your takeaway It is fairly clear from the decisions that KSA is making about the capital allocation for renewable forms of energy that their feet are firmly planted in both camps. The higher price regime that has settled on the oil market since 2021 has provided the cash to fund the projects we have discussed, that will fuel the Saudi Vision 2030 initiative. At the same time, like their shale counterparts in the U.S., they are committed to an orderly development of their legacy oil reserves in a way that will preserve value as far into the future as possible. That’s just good stewardship. What this means is that in spite of entreaties by world leaders including the American president to produce more oil to lower
Iran Set To Boost Oil Exports In August
Iran could increase its oil exports in August as its crude is now estimated to be much cheaper than Russia’s in China, the key oil customer for both exporters, oil flows tracking firms told Reuters on Wednesday. Iran, as well as Russia, offer their crude at discounts to China, but the discount of Iranian crude to Russia’s Urals grade has doubled in recent weeks, which could prompt China to buy more oil from Iran, traders and analysts told Reuters. Iran’s crude for August is now being offered at around $8 a barrel below the price of Russia’s Urals, compared to a smaller discount of up to $4 per barrel at the end of last month. Exports out of Iran have increased in June and July, tanker-tracking firms have estimated, and expect more flows out of Iran due to the wider discount to Russia’s crude. China has been the main outlet for Iranian crude oil exports since the U.S. re-imposed sanctions on the Islamic Republic’s oil industry in 2018 when then-President Donald Trump pulled the United States out of the so-called Iranian nuclear deal, officially known as the Joint Comprehensive Plan of Action (JCPOA). In recent days, there has been a lot of talk about the latest developments in the negotiations about a possible restoration of the nuclear deal. Last week, the European Union presented the two sides with the final version of the proposed deal, aiming to settle the differences. Iran said this week it had submitted a written response to the latest version of the nuclear deal that is being brokered by the EU between Tehran and Washington. However, no details of the response have been provided, which may suggest it was not a positive one as some issues remained unresolved. “The differences are on three issues, in which the United States has expressed its verbal flexibility in two cases, but it should be included in the text,” the AP quoted IRNA as saying. “The third issue is related to guaranteeing the continuation of (the deal), which depends on the realism of the United States.” A legitimate return of Iranian exports on the market could add to recession fears, ease concerns about Russian supply once the EU embargo kicks in at the end of the year, and drive oil prices lower.
AG&P plans extra LNG terminals in India
AG&P, a worldwide downstream gasoline and logistics firm, is alternatives to arrange extra LNG terminals in India to fulfill the rising demand for pure gasoline within the nation. “We’re in negotiations with two or three gamers, however it’s nonetheless not crystallized when it comes to placement. The plan is to search for alternatives on each the east and west coasts,” mentioned Karthik Sathyamoorthy, president of LNG terminals and logistics at AG&P. Potential investments in greenfield initiatives are estimated to be within the vary of $400-$600 million or Rs 32-48 billion. The corporate is already establishing a terminal with a capability of 1 million tonnes each year on the Karaikal port in Puducherry. AG&P had received metropolis gasoline distribution enterprise licenses in 12 geographical areas through the ninth and tenth public sale rounds of the Petroleum and Pure Fuel Regulatory Board. The licenses have been for Tamil Nadu, Kerala, Andhra Pradesh, Karnataka and Rajasthan. Nearly all of its 12 geographical places are in southern India and it plans to fulfill the pure gasoline necessities of those places by the Karaikal terminal on the east coast. The Firm additionally expects LNG provide alternatives from initiatives supplied by the Petroleum and Pure Fuel Regulatory Board throughout numerous auctions as soon as commissioned. India’s west coast has a extra developed gasoline market with established LNG terminals at Dahej and Hazira in Gujarat, Raigad in Maharashtra and Kochi in Kerala; a number of others are additionally within the pipeline. It is usually effectively related to the nationwide gasoline community and presents robust growth alternatives. “We’re each superior greenfield and growth initiatives in India,” Sathyamoorthy mentioned. The upcoming initiatives can have greater capability and scalable as in comparison with the Karaikal Port terminal. “These initiatives are prone to be 2-3 tonnes each year and scalable in comparison with the preliminary 1 MTPA capability of Karaikal Port,” he mentioned. Work on the Karaikal LNG terminal is in full swing and is prone to be commissioned by FY24. “It would meet the demand for compressed pure gasoline for the automotive phase, piped pure gasoline for residential and LNG for industries in our present geographies,” Sathyamoorthy mentioned. AG&P has about 200 CNG stations, about 1,000 km of gasoline pipelines and over 50,000 residential prospects throughout geographies, Sathyamoorthy mentioned. It’s at the moment catering to the demand of present suppliers like GAIL Ltd. and gasoline allotted to the CGD gamers by the federal government. “Going ahead, we can have a mixture of spot and baseload long-term contracts for LNG,” he mentioned. The loading bays on the Karaikal Port will allow supply of LNG to distant prospects by AG&P’s personal fleet of vans, in accordance with the Karaikal Port web site. The LNG terminal will embody a floating storage unit leased by a long-term constitution settlement with the logistics and repair division of Abu Dhabi Nationwide Oil Co., which is able to present an environment friendly answer to make the provision of LNG inexpensive, in accordance with the web site.
The petroleum Russia is selling to India at a discount has Ukrainian blood in it: Dmytro Kuleba
The petroleum Russia is selling to India at a discount has Ukrainian blood in it, is the message from Kiev. The foreign minister of Ukraine Dmytro Kuleba today said that he knew India was buying Russian crude oil. “We are not surprised,” he began, adding that “throughout human history, in every war there were those who suffer from the war and there are those who make money from the war and India buying (is) crude from Russia on high discount (that is) paid with Ukranian blood, Ukrainians killed, tortured, raped.” Kuleba’s remarks came after the external affairs minister S. Jaishankar, asked about buying crude oil from Russia, said: “We have been very open and honest about our interest. I have a country with a per capita income of $2,000. These are not people who can afford higher energy prices. It’s my moral duty to ensure the best deal.” Currently, many major European countries including Germany are buying Russian natural gas. Speaking about India, he said his country has always been open and friendly. He said one of his first tasks as the war began was to take foreign students to safety and there were many Indians studying in the Ukraine, a country many considered was “their second home.” Kuleba also spoke about the strong economic relations between India and the Ukraine, particularly the export of sunflower oil. But he added that “We are very open to building a relationship with India. Under the circumstances, we won’t be hiding (that) we expected stronger practical support from India to Ukraine.” Since the beginning of the war five months ago, India has spoken about the immediate cessation of hostilities and diplomatic dialogue between the two countries. India has also condemned the massacre in Bucha and called for an investigation. India has also sent humanitarian aid to the Ukraine. Asked whether China could intervene to try and bring an end to the war, he said the conversation between Beijing and Kiev would be good for both China and the Ukraine. He added that China, as a permanent member of the United Nations Security Council, had a responsibility to ensure peace and security in the world. And the war in the Ukraine had international repercussions. Replying to a question about the presence of Imran Khan (then prime minister of Pakistan) in Moscow when the war in the Ukraine began, he said it was a choice every leader made but to shake hands with Putin at a time like this was “shameful.” About Russia reaching out to Myanmar, he said it was natural for Moscow to make friends with an authoritarian state. Speaking about Russians exporting weaponry, he said Moscow was facing a shortage of advanced weaponry and all it had in large quantities was Soviet era material. While the war was being fought in the east and south east of his country, all of Ukraine was being targeted by Russian missiles. He said even in western Ukraine, far from the frontline, the missile attacks could cause casualties. About the efforts to ensure that Ukraine managed to export grain and corn, particularly to countries that needed it, he said that since the first shipment in July 450,000 tonnes of grain and corn have gone out and if the “corridor” remained, it would ship to needy countries large quantities of foodstuffs.
ONGC inks agreement with ExxonMobil for deepwater exploration in India
Indian oil explorer and producer Oil and Natural Gas Corp said on Wednesday it signed a Heads of Agreement (HoA) with global petroleum giant ExxonMobil Corp for deepwater exploration in India’s East and West coasts. The Heads of Agreement document was signed in the Ministry of Petroleum & Natural Gas by Rajesh Kumar Srivastava, Director (Exploration), ONGC and Monte K Dobson, CEO & Lead Country Manager, ExxonMobil India in the presence of Pankaj Jain, Secretary, Ministry of Petroleum & Natural Gas. “The collaboration areas focus on the Krishna Godavari and Cauvery Basins in the eastern offshore and the Kutch-Mumbai region in the western offshore. There has been a scientific exchange of exploration data in the last few years, which has led to this partnership,” said ONGC in a stock exchange filing. Collaboration between ONGC and ExxonMobil will be a strategic fit where ONGC’s knowledge and past experience in these areas will be coupled with ExxonMobil’s global insights, said the state-owned firm Speaking at the event, Petroleum Secretary Pankaj Jain said: “Partnerships between a National Oil Company (NOC) like ONGC and an International Oil Company (IOC) like ExxonMobil will bring tangible benefits in the entire energy value chain and open new vistas to Exploration & Production paradigm. This collaboration will boost our confidence in going further ahead in deepwater exploration in the east coast of India where the potential is quite significant.” Director (Exploration), ONGC, Rajesh Kumar Srivastava said: “With this strategic collaboration to pursue exploration, I look forward to long lasting partnership. Through the discovery route, ONGC hopes to move to development wherein the inherent strength of ExxonMobil would be beneficial for efficient fast-track monetization. This will enable ONGC to ensure steps towards Energy Security for India.” ExxonMobil India’s CEO & Lead Country Manager Monte K Dobson said, “It’s an exciting opportunity to collaborate with ONGC. Great things happen when the rightpeople collaborate. He further added that 25 per cent of the ExxonMobil brain power is currently engaged in evaluating Indian deepwater. ExxonMobil is geared up to take this collaboration to the next level.” India, the world’s third biggest oil importer and consumer, ships in over 85% of its oil needs from overseas. The country wants to quickly monetise its oil and gas resources to reduce its reliance on costly imports. India’s crude oil production fell 1.6% to about 600,000 barrels per day (2.44 million tonnes) in June, dipping over 4% versus the previous month.