Can The U.S. Kick Its Reliance On Russian Uranium?
Back in early March shortly after Russia’s invasion of Ukraine, President Biden signed an executive order to ban the import of Russian oil, liquefied natural gas, and coal to the United States. Although the ban together with EU sanctions have been blamed for skyrocketing global energy prices, U.S. refiners are none the worse for wear since Russia supplied just 3% of U.S. crude oil imports. However, the punters were quick to point out that one notable export was left off of that list: uranium. The U.S. is far more reliant on Russian uranium, and imported about 14 percent of its uranium and 28 percent of all enrichment services from Russia in 2021 while the figures for the European Union were 20 percent and 26 percent for imports and enrichment services, respectively. Russia is home to one of the world’s largest uranium resources with an estimated 486,000 tons of uranium, the equivalent of 8 percent of global supply. Recently, Ukrainian President Volodymyr Zelenskiy reiterated his calls on the U.S. and the international community to ban Russian uranium imports following the Russian shelling near Ukraine’s Zaporizhzhya power plant. Many experts, however, contend that banning Russian uranium is easier said than done thanks to Russia’s status as the world’s leading uranium enrichment complex–accounting for almost half the global capacity–and that is something that cannot be easily replaced. The U.S. currently has one operational plant managed by its UK-Netherlands-Germany owners that can produce less than a third of its annual domestic needs. Further, the country currently has no plans to develop or find sufficient enrichment capacity to become domestically self-sufficient in the future. In contrast, China’s China Nuclear Corporation is working to double its capacity to meet the needs of China’s rapidly growing civilian nuclear reactor fleet, so that by 2030 China plans to have nearly one-third of global capacity. Alternative Fuels With the Biden administration having set a goal of reaching 100 percent carbon-free energy by 2035, nuclear power will likely continue to be a hot-button issue despite being a low-carbon fuel mainly because conventional nuclear fuel creates a lot of hazardous waste. What would give nuclear energy a major boost would be a significant technological breakthrough in substituting thorium for uranium in reactors. The public would likely be far easier to bring on board with the removal of dangerous uranium. Thorium is now being billed as the ‘great green hope’ of clean energy production that produces less waste and more energy than uranium, is meltdown-proof, has no weapons-grade by-products and can even consume legacy plutonium stockpiles. The United States Department of Energy (DOE), Nuclear Engineering & Science Center at Texas A&M and the Idaho National Laboratory (INL) have partnered with Chicago-based Clean Core Thorium Energy (CCTE) to develop a new thorium-based nuclear fuel they have dubbed ANEEL. ANEEL (Advanced Nuclear Energy for Enriched Life) is a proprietary combination of thorium and “High Assay Low Enriched Uranium” (HALEU) that intends to address high costs and toxic waste issues. The main difference between this and the fuel that is currently used is the level of uranium enrichment. Instead of up to 5% uranium-235 enrichment, the new generation of reactors needs fuel with up to 20 percent enrichment. Last year, the U.S. Nuclear Regulatory Commission (NRC) approved Centrus Energy’s request to make HALEU at its enrichment facility in Piketon, Ohio, becoming the only plant in the country to do so. However, more could be on the way if the new fuel proves to be a success. While ANEEL performs best in heavy water reactors, it can also be used in traditional boiling water and pressurized water reactors. More importantly, ANEEL reactors can be deployed much faster than uranium reactors. A key benefit of ANEEL over uranium is that it can achieve a much higher fuel burn-up rate of in the order of 55,000 MWd/T (megawatt-day per ton of fuel) compared to 7,000 MWd/T for natural uranium fuel used in pressurized water reactors. This allows the fuel to remain in the reactors for much longer meaning much longer intervals between shut downs for refueling. For instance, India’s Kaiga Unit-1 and Canada’s Darlington PHWR Unit hold the world records for uninterrupted operations at 962 days and 963 days, respectively. The thorium-based fuel also comes with other key benefits. One of the biggest is that a much higher fuel burn-up reduces plutonium waste by more than 80%. Plutonium has a shorter half-life of about 24,000 years compared to Uranium-235’s half-life of just over 700 million years. Plutonium is highly toxic even in small doses, leading to radiation illness, cancer and often to death. Further, thorium has a lower operating temperature and a higher melting point than natural uranium, making it inherently safer and more resistant to core meltdowns. Thorium’s renewable energy properties are also quite impressive. There is more than twice thorium in the earth’s crust than uranium; In India, thorium is 4x more abundant than uranium. It can also be extracted from sea water just like uranium making it almost inexhaustible. The thorium curse? Hopefully, ANEEL could soon become the fuel of choice for countries that operate CANDU (Canada Deuterium Uranium) and PHWR (Pressurized Heavy Water Reactor) reactors such as China, India, Argentina, Pakistan, South Korea, and Romania. These reactors are cooled and moderated using pressurized heavy water. Another 50 countries (mostly developing countries) have either started nuclear programs or have expressed an interest in launching the same in the near future. Overall, only about 50 of the world’s existing 440 nuclear reactors can be powered using this novel fuel. Nuclear energy is enjoying another mini-renaissance of sorts. The ongoing energy crisis has been helping to highlight nuclear energy’s billing as the most reliable energy source, which ostensibly gives it a serious edge over other renewable energy sources such as wind and solar which exist at the lower end of the reliability spectrum. Meanwhile, Unite, Britain and Ireland’s largest union, has backed the UK’s Nuclear Industry Association (NIA) call for massive nuclear investments by saying that
Is The Oil Market Really Broken?
“The oil futures market is completely broken. Moving down $10 in a day for no apparent reason,” tweeted hedge fund celebrity Pierre Andurand this week. Indeed, volatility these days is not what it was just a couple of years ago. Yet it may be a little excessive to claim the market has broken in an echo of the EU’s claims that the gas market there no longer serves its purpose. The degree of oil price volatility has changed but the sources of this volatility have not. As always, it’s about fundamentals, the economy, and geopolitics. Fundamentals served traders a surprise last year as economies began to reopen after the pandemic lockdowns. Demand for oil, which BP had stated peaked in 2019, surges so fast and so much everyone got surprised by higher prices. Meanwhile, over time, the supply risks began to emerge like rather nasty rocks from retreating water. The oil industry as a whole had been reducing its investments in big new production additions in anticipation of the energy transition to renewable power. The results of this underinvestment, as OPEC officials have called it, was bound to manifest itself sooner or later. It did, in the form of even higher prices and heightened price volatility. Then there was central bank policy in the face of looming inflation, in big part resulting from higher energy prices. The Fed, the ECB and others decided to go all in on the tightening and interest rates flew higher in evidence that fighting fire with fire is a dangerous game. For those who follow oil price news, the image of a seesaw would be fitting … Oil falls one day because of concerns about the economy as central banks try to fight inflation with higher rates in the United States in Europe, and as China’s government pours billions into industry to stimulate growth, which goes with oil demand. Then, oil falls on the next day because an OPEC official suggests that the cartel might reverse production growth plans and opt for cuts instead. Or, a G7 leader says the discussions of a price cap on Russian oil are progressing. Indeed, G7 finance ministers agreed today to implement a broad price cap on Russian oil, even though Russia already made it clear it would not take it lying down. In fact, Deputy PM Alexander Novak said it directly yesterday. “This is completely ridiculous,” Novak said, as quoted by Kommersant. “We will simply stop supplying crude and fuels to countries that introduce a price cap because we will not work in non-market conditions.” This is geopolitics territory now. Sanctioning the world’s largest exporter of crude oil and oil products may have seemed a good idea to signal what can only be described as ‘virtue’ at the time, but it has since become clear Russia isn’t just surviving–it’s not suffering losses and is both producing as much oil than before the war in the Ukraine began and bringing in more revenues for its war coffers. Meanwhile, politics is a big reason why U.S. shale drillers are going about production growth a lot more slowly and cautiously than they normally do, contributing to oil price volatility. With the Biden administration unwavering in its support for the energy transition, the industry has seen it as less risky to avoid rushing into production growth just because Washington begs it to do so. Incidentally, the U.S. is not the only government supporting fossil fuels despite climate change pledges. In fact, a study by the IEA and the OECD found that government support for oil and gas rose almost twofold last year. This means support for fossil fuels from governments seemingly dedicated to a transition to low-carbon energy. If these are not mixed signals, it would be interesting to see what are. The extreme swings in prices, then, have a perfectly rational background. The price of oil can swing on a single news report quoting anonymous sources. It would just swing harder now because of the excessive sensitivity of traders with so much going on around oil. The good news for those traders who, unlike most in that field, dislike volatility, is that extreme volatility does not last, just like extreme weather. It will take a while until that faceless market made up of thousands of people like Pierre Andurand calms down. The wild swings could become the new normal or they could even out over time. It’s really an either-or situation, a zero-sum game. Central banks’ rate war on inflation will either work or it won’t. Price caps on Russia will either be imposed, which would result in yet another jump in prices, or quietly shelved, which would stabilize prices. That is, until OPEC decides to cut, which could happen as early as next Monday.
U.S. Rig Count Slips Amid Retreat In Crude Prices
The number of total active drilling rigs in the United States dropped by 5 this week, according to new data from Baker Hughes published on Friday. The total rig count fell to 760 this week—263 rigs higher than the rig count this time in 2021. Oil rigs in the United States fell by 9 this week, to 596. Gas rigs rose by 4, to 162. Miscellaneous rigs stayed the same at 2. The rig count in the Permian Basin dropped by 6 to 342 this week. Rigs in the Eagle Ford rose by 1 to 71. Oil and gas rigs in the Permian are 92 above where they were this time last year. Primary Vision’s Frac Spread Count, an estimate of the number of crews completing unfinished wells—a more frugal use of finances than drilling new wells—rose 7 to 287 for the week ending August 26, compared to 240 a year ago. Crude oil production in the United States fell unexpectedly in the week ending August 26. U.S. crude oil production fell by 3.3 million bpd for the second consecutive week, according to the latest weekly EIA estimates. At 418.3 million barrels, the current U.S. crude oil inventory is now 6% below the five-year average for this time of year. Gasoline inventories also shed 1.2 million barrels for the week ending August 26, though the decline was smaller than the previous week’s. At 1:107 p.m. ET, the WTI benchmark was trading up 1.44% on the day, struggling to pare losses from recession-related demand fears and a new wave of COVID lockdowns in China. WTI was trading at $87.86—up $1.25 per barrel on the day, but down over $5 from a week ago. The Brent benchmark was trading up at $93.97 per barrel, up $1.61 (+1.74%) on the day, but also down around $5 per barrel since last Friday.
Bulk LPG carriers to seek extension of contract
Bulk liquefied petroleum gas (LPG) tanker owners have planned to seek an extension of supply contract with public sector undertaking oil marketing companies (OMCs). These 5,500 tankers form a crucial link in the LPG supply chain in Tamil Nadu and its neighbouring States. K. Sundarrajan, recently elected president of the Southern Region Bulk LPG Transport Owners Association, told The Hindu that the extension of contract was needed to help tanker owners, who were badly affected by the pandemic. “Perhaps for the first time, a large section of tanker owners had defaulted on loan repayments. A two-year extension of contract would help owners settle their dues and allow completion of on-going pipeline projects,” he said. Bulk LPG tankers, of which 4,000 are from Namakkal area, carry a bulk of the gas in south India. “Pipelines are laid everywhere and once those works are completed, we will know how many tankers would be required during the next contract period. Of the 5,500 that are under contractual obligation with the OMCs, already 400-odd do not have work. The present contract period ends in August next year,” he said.
Petronet to invest ₹400 billion in 5 years
Petronet LNG Ltd, India’s biggest gas importer, will invest ₹400 billion in the next five years for expanding import infrastructure as well as foraying into new business to boost profitability to ₹100 billion. Petronet, which operates two liquefied natural gas (LNG) import facilities at Dahej in Gujarat and Kochi in Kerala, is looking to foray into the petrochemicals business, according to the firm’s latest annual report. The company has formulated a ‘1-5-10-40’ strategy for exponential growth and diversification. “The company aims at achieving an annual turnover of ₹1000 billion over next five years and annual profit after tax of ₹100 billion with investments of ₹400 billion,” it said. It had a net profit or profit after tax of ₹33.52 billion on a turnover of ₹431.69 billion in fiscal 2021-22 (April 2021 to March 2022). LNG is natural gas that has been cooled down to liquid form for ease of transporting in ships. At the import terminal, LNG is regassified into its gaseous state before piping it to users like power plants for production of electricity and fertiliser units for making urea and other crop nutrients. Petronet said it is raising import capacity of the Dahej terminal from 17.5 million tonnes per annum to 22.5 million tonnes at an estimated cost of ₹6 billion. Also, it is adding two more LNG storage tanks to the present six tanks at Dahej at a cost of ₹12.50 billion. This is in line with the government vision of raising the share of natural gas in the primary energy basket of the country from 6.7% to 15% by 2030. With both its terminals on the west coast, Petronet is now eyeing a third import facility on the east coast. A floating LNG import terminal on high-seas “will cater to the increasing gas demand of the eastern and central part of the country,” it said, adding a detailed feasibility report (DFR) for the 4 million tonnes FSRU based terminal with further scope for expansion to land based terminal of 5 million tonnes capacity has been completed. Petronet’s Kochi terminal has a capacity to import and regassify 5 million tonnes per annum of LNG. The company said it also plans to set up a petrochemical complex based on imported propane at Dahej LNG terminal. It is also “exploring the option of setting up a propylene derivative complex in the near future.” It, however, did not give cost estimates or the timelines for the project. Petronet said it is also eyeing overseas projects and has been shortlisted as one of the potential bidders for an LNG terminal at Matarbari, Cox’s Bazar in Bangladesh. It is also “exploring the business opportunities in LNG value chain in Sri Lanka and in process of collaborating with potential counterparts including the government of Sri Lanka,” the annual report said. The firm “envisages to be a global LNG player and has thereby incorporated a wholly-owned subsidiary company ‘Petronet LNG Singapore Pte Ltd’ on March 7, 2022.” “Petronet LNG Singapore Pte Ltd has been incorporated to carry out business/activities, including but not limited to purchase of LNG on long, spot and short-term basis and sale of LNG, trading of LNG to Indian and foreign companies, optimisation and diversion of LNG under its portfolio, carry out hedging, investments in overseas ventures etc,” it added. Petronet currently imports LNG on long-term contracts from Qatar and Australia. The re-gassified LNG is supplied to offtakers GAIL (India) Ltd, Indian Oil Corporation (IOC) and Bharat Petroleum Corporation Ltd (BPCL) for further sale to actual users. GAIL, IOC, BPCL and Oil and Natural Gas Corporation (ONGC) hold 12.5% stake each in Petronet. “In order to meet this challenging target (of 1-5-10-40), your company also identified a need for optimization of the decision-making process for its executives at various levels. Accordingly, the company undertook an extensive exercise to re-visit the existing delegation of authority, wherein the executive powers were rationalized to align with its growing business needs. “Similarly, Petronet also recognizes that strategic goals require harmony and alignment with the company’s HR policies and practices, therefore, it became imperative to revisit the entire spectrum of HR policies and align it with industry best practices,” the annual report said.