OPEC+ Is Now 3.6 Million Bpd Below Its Oil Production Target
The OPEC+ group continues to vastly underperform its collective oil production target, with the gap between the quota and actual output widening to a massive 3.58 million barrels per day (bpd) in August, according to delegates and OPEC data Argus has seen. The 10 OPEC members bound by the pact saw their collective crude oil production hit 1.399 million bpd below the quota, while the non-OPEC producers in the deal were more than 2 million bpd behind quota, at 2.185 million bpd, per OPEC data Argus has seen. In July, OPEC+ was already 2.9 million bpd below its target. In August, the two biggest laggards in production quotas were Russia of the non-OPEC group and Nigeria of OPEC, the data showed. Russia’s oil production was 1.25 million bpd below its target, while Nigeria was 700,000 bpd behind its quota. Russia’s output is constrained by the Western sanctions following the Russian invasion of Ukraine, while Nigeria has had troubles for years with a lack of investment and oil theft. Crude oil exports out of Nigeria plunged to below 1 million bpd in August, their lowest level on record, oil export analytics firm Petro-Logistics said earlier this month. Persistent underinvestment in the Nigerian oil industry and the perennial problem of oil theft from pipelines have plagued the sector in recent years. Oil majors are not investing in Nigerian supply, and many foreign firms have either sold assets or signaled they would pursue divestments in Nigeria’s oil industry. OPEC+ was widely expected to continue to underperform by a lot compared to its production targets for July and August after the group decided to accelerate the rollback of the cuts and have them completely unwound by the end of August. The underperformance in September will be even higher because the group lifted its collective target by 100,000 bpd for the month of September. This increase will be reversed in October, OPEC+ decided at a meeting earlier this month.
Blue Energy Motors Launches India’s First LNG-fuelled Truck, Range up to 1400km
Pune-based Blue Energy Motors has launched India’s first Liquified Natural Gas (LNG) powered truck. The launch was organised at the company’s manufacturing plant in Chakan, Pune. The plant was also launched in the first week of September. The LNG-fuelled green truck launched by the company is named 5528 4×2. The model was launched by CEO of Blue Energy Motors, Anirudh Bhuwalka, who was accompanied by Iveco Group’s CEO Gerrit Marx, President of Iveco Group’s Powertrain Business Unit, Sylvania Blaise, and Italy’s ambassador to India, Vincenzo de Luca. LNG is a form of natural gas that is generally used in heavy-duty vehicles that have to meet long range requirements. LNG is formed by super-cooling natural gas and cryogenically storing it in liquid form. Since the gas is in liquid form, more fuel can be stored on board the vehicle, and thus, giving the vehicle a longer range. The Blue Energy Motors-manufactured 5528 4×2 truck is fitted with the industry’s first 1000-litre capacity fuel tank that offers a range of 1400 kilometres when full.
Chabahar-Central Asia transit route to boost India-Iran cooperation: Raisi
Terming the relations between India and Iran as “friendly and cordial”, Iranian President Ebrahim Raisi said the Chabahar-Central Asia transit route can help both nations strengthen the grounds for cooperation. “Using the existing capacities in the oil and gas industry, transportation and especially the Chabahar-Central Asia transit route, as well as cooperation in regional and international issues that the two countries are concerned about and have common positions can provide a suitable ground for improving the level of relations and expanding grounds for cooperation between the two countries,” read a press release by the Iranian Ministry. Raisi had a meeting with Prime Minister Narendra Modi where he described the development of the interactions with the country as one of the priorities of Iran’s foreign policy. “Indian independent figures, like Mr Gandhi, who have stood against arrogance are always respected by the Iranian nation,” he said, referring to historical, cultural and civilisational common grounds between the two countries. Referring to Iran’s progress in various scientific and industrial fields, Raisi emphasised, “Cruel sanctions could not interrupt the progress of the Iranian nation”. In the sideline meeting, PM Modi pointed out the key role and importance of Chabahar Port in the transportation of goods in the region. “The development of this port will contribute to the economic development of the countries in the region,” he said. The Prime Minister of India also mentioned the common positions of the two countries regarding the developments in Afghanistan and called for the continuation of Tehran-Delhi international and regional cooperation in this field.
U.S. Energy Producers Warn European Buyers: No Bailout Is Coming
The threat of power rationing across Europe persists even after EU officials held an emergency meeting last week to starve off the impending winter energy crisis. EU countries have increasingly relied on US energy imports, though shale bosses warned the ability to boost oil and gas supplies would be challenging. “It’s not like the US can pump a bunch more. Our production is what it is,” Wil VanLoh, head of private equity group Quantum Energy Partners, one of the shale’s most prominent investors, told Financial Times. “There’s no bailout coming,” VanLoh added. “Not on the oil side, not on the gas side. Europe can thank the Democrats and the Biden administration for their war against crushing the US energy industry that led to massive divestments across the sector, which crippled oil production growth and refining capacity, and pressured/shamed the world into withdrawing any capital allocations to fossil fuels. Ben Dell, chief executive of private equity group Kimmeridge Energy, said the shale industry’s investors on Wall Street would not give their blessing to a big production increase, preferring a low-production, high-profit model. “Investors generally don’t want shale companies to pursue a growth model,” he said. “The capital availability is extremely limited.” Rig counts in the US have started to fall and production has flatlined well below pre-pandemic levels… On top of the Democrat-led crippling of the US energy industry, EU leaders have been on an ESG-crazed mission to decarbonize their power grids with renewable (now finding out — not so reliable) energy and are frantically bringing back crude oil, coal, and natural gas power generators ahead of the cold season. Some EU countries are even extending the life of nuclear power plants. The problems don’t end there — in 80 days, or on Dec. 5, the EU will embark on another suicide mission of banning seaborne imports of Russian crude. Then on Feb. 5, 2023, a ban on Russian petroleum product imports kicks in. These sanctions were enacted over the summer. However, piped imports of Russian crude and petroleum products will be exempt in some EU member countries, like Hungary, Slovakia, and the Czech Republic. Back to the US shale patch where Scott Sheffield, CEO of Pioneer Natural Resources, explained significant production increases aren’t coming online: “We’re not adding [drilling] rigs and I don’t see anyone else adding rigs,” said Sheffield, who runs one of the biggest oil producers in the US. He added that crude prices could rise above $120 a barrel this winter as supplies tighten. Shale’s inability to rapidly increase crude production is no surprise, regarding Halliburton Co.’s CEO Jeff Miller and Exxon Mobile’s Darren Woods’s warnings over the summer that markets will remain tight for years due to a lack of production growth. A perfect storm of factors plagues Europe: the inability of US shale to ramp up production (because of Democrat’s war on oil), Russia reducing energy exports, grid decarbonization, and EU’s Russian oil embargos. … and why could crude prices have bottomed earlier this week? Well, maybe Bloomberg’s report that Biden administration officials plan to refill the SPR when crude falls around $80 a barrel. Also, SPR draws end in October, which means less crude on the market and possibly higher prices. Even as demand in China slumps, cities are reopening from Covid lockdowns, a sign demand could soon rise in Asia.
The World’s Largest Floating LNG Platform Restarts Production
The Prelude floating LNG production facility off the coast of Australia has resumed production and exports, operator Shell said today. Operations at the project were halted earlier this year due to a dispute between the company and workers that led to industrial action. Following weeks of negotiations, the two parties managed to strike a deal last month and end the suspension of operations at the facility. “The enterprise agreement has now been supported by a majority of employees in a formal vote and is expected to come into effect in early October 2022,” Shell said, as quoted by Reuters. The Prelude project has an export capacity of 3.6 million tons of liquefied natural gas annually, as well as 1.3 million tons of condensate and 400,000 tons of liquefied petroleum gas. It began production in December 2018 and the first LNG was shipped from the facility a year later. The operation disruption that the dispute caused earlier this year contributed to an already difficult supply situation in global gas amid the European Union’s rush to stock up on gas ahead of winter. Under normal circumstances, bringing LNG all the way to Europe from Australia would not make economic sense but this year even this option was on the table as Russia gradually reduced the flow of gas via Nord Stream 1 until it halted it completely in late August. The biggest market for LNG produced at the mega-projects offshore Australia is Asia but LNG cargos have been diverted from their Asian destinations or resold by their Asian buyers to Europe as the latter was prepared to pay a premium for the fuel. The mega-projects in Australia helped the country reach the number-one spot in LNG exports a couple of years ago. It was the top exporter last year as well, with a total of 80.9 million tons of LNG exported globally. It is likely to retain the top-exporter crown this year as well.
German Gas Buyers Resume Nominations For Nord Stream 1 Supply
German energy importers have resumed nominations of gas volumes to be delivered via the Nord Stream 1 pipeline even though no gas is flowing along the pipe right now. According to a Reuters report, this is the first time nominations have been made since Gazprom suspended the flow of gas via the pipeline at the end of August. The data came from the websites of German pipeline operators in charge of the infrastructure that connects Nord Stream 1 to end consumers. The data showed buyers had nominated volumes of 3.65 million kWh per hour for Monday morning, for delivery to eastern Germany via the OPAL pipeline. Another 14.29 million kWh per hour was nominated for the NEL pipeline. Gazprom shut down Nord Stream 1 after it said it had found an oil leak at a compressor station. It also said it was waiting for Siemens Energy to repair compressor station equipment and deliver turbines that the Russian company says are stranded in Germany because of EU sanctions. Siemens Energy, for its part, says an oil leak is an easily fixable problem that should not prevent the operation of the pipeline and that the turbines are ready to be shipped to Russia. There is currently only one turbine remaining at the Portovaya compressor station at Nord Stream 1, which Gazprom says is the reason for reduced flows and more frequent halts for maintenance work. Meanwhile, Russia’s President Vladimir Putin suggested that Europe needs to lift sanctions on Nord Stream 2 to get more gas from Russia. “The bottom line is, if you have an urge, if it’s so hard for you, just lift the sanctions on Nord Stream 2, which is 55 billion cubic meters of gas per year, just push the button and everything will get going,” Putin said at the Shanghai Cooperation Organisation summit in Uzbekistan.
Oil India Begins Exploration For Underground Oil & Natural Gas In Puri
Oil India, the nation’s second-biggest state-owned oil producer, on Sunday, began drilling to explore underground oil and natural gas at Gop Kushupur area in Puri district. According to reports, Oil India has taken eight-acre land in lease for three years and also paid compensation of Rs 10 million to families of 37 farmers displaced due to the project. Last year, extensive exploratory drilling and surveys had been carried out at an investment of Rs 12.48 billion, including Rs.2.20 billion in seismic surveys, at five coastal blocks and eight districts i.e. Puri, Khordha, Cuttack, Jagatsinghpur, Kendrapara, Jajpur, Bhadrak, and Balasore. After surveying 3000 square km of five blocks, oil and natural gas deposits were found at two places in Gop block. Eight acres of land at Kusupur Mouza and another eight acres of land at Chitra Mouza under Mahalpada panchayat were identified through satellite map.
ONGC wants govt to scrap windfall tax, $10 gas price
India’s top oil and gas producer ONGC wants the government to scrap windfall profit tax levied on domestically produced crude oil and instead use the dividend route to tap into bumper earnings resulting from surge in global energy prices. The firm also favours a floor price for natural gas at USD 10 per million British thermal unit — the current government-dictated rate — to help bring deposits in challenging areas to production, two sources aware of the matter said. State-owned Oil and Natural Gas Corporation (ONGC) management during discussions with government officials stated that levying windfall profit tax on domestic oil producers, while at the same time reaping rich savings from buying discounted oil from Russia was unfair. Buying discounted Russian crude oil, which was shunned by the West since the Ukraine conflict, has helped save Rs 350 billion and this savings should be ploughed back by boosting domestic output, they said. ONGC management has told the government the savings from Russian oil buy should be allowed to be passed on to the company which will invest the same in identified projects. It feels companies should be allowed to reap higher revenues and profits from elevated oil and gas prices instead of levying windfall profit tax on prices above a threshold. This higher profit can be then tapped for dividends which are a more equitable way of distributing wealth, the company management told the government. As per the extant guidelines, ONGC pays a minimum annual dividend of 30 per cent of net profit or 5 per cent of the net worth, whichever is higher. Following this policy, the firm will pay a higher dividend to the government, which holds almost 59 per cent shares in the firm, as well as other investors, boosting their confidence in the company. This would boost company share price and valuation, benefiting the government the most. This route will also allow the company to retain a fair amount of money for spending on finding oil and gas in unexplored areas and bringing even smaller resources to production which will ultimately help the nation cut down on its imports, sources said. India first imposed windfall profit tax on July 1, joining a growing number of nations that tax super normal profits of energy companies. Export duties of Rs 6 per litre (USD 12 per barrel) were levied on petrol and aviation turbine fuel and Rs 13 a litre (USD 26 a barrel) on diesel. A Rs 23,250 per tonne (USD 40 per barrel) windfall profit tax on domestic crude production was also levied. The duties were partially adjusted in the five rounds on July 20, August 2, August 19, September 1 and September 16, and were removed for petrol exports. Tax on domestically produced crude oil currently is Rs 10,500 per tonne while export duty on diesel is Rs 10 a litre and that on ATF is Rs 5. Sources said ONGC believes that allowing free market pricing of oil and gas will help attract big companies with technical knowhow and financial muscles. An ad-hoc tax adds to fiscal uncertainties for investors, they said. Following the similar principle, the government should also allow companies to discover market price for natural gas and tax only gains accruing over and above a minimum USD 10 per mmBtu threshold. While crude oil is priced at parity with international rates, the government currently fixes the price of natural gas bi-annually based on rates prevailing in gas-surplus nations like the US and Russia. Even this gas price fixation is now being reviewed with a view to bring down the rates for consumers. The cost of producing gas from deepsea and difficult areas such as high-pressure, high-temperature fields is very high and any attempt to artificially control rates would lead to investments in such fields becoming economically unviable, they said. ONGC has told the government that it recently discovered a price of USD 22 per mmBtu that users were willing to pay for its coal-bed methane (CBM) gas. The government could look to tax any price that accrues over and above USD 10, sources said. The government-dictated gas price for ONGC’s legacy fields is USD 6.1 per mmBtu for the six-month period ending September 30. The rate is close to USD 10 per mmBtu for difficult fields such as deepsea. These rates are expected to climb to over USD 9 per mmBtu and USD 12 respectively from October 1.