Sandeep Kumar Gupta Assumes Charge As Chairman & Managing Director, GAIL
Sandeep Kumar Gupta assumed charge as Chairman and Managing Director, GAIL (India) Limited. After joining the position of C&MD GAIL, he addressed the employees of the Company and recognized the balanced business portfolio of the company built over time and overall contribution to development of natural gas sector in the country, the contributions of his predecessors and support of stakeholders including Ministry of Petroleum & Natural Gas and employees, which have played a key role in the growth witnessed by GAIL over the years. He mentioned that the Company is aligned with Government’s vision of having a gas-based economy wherein the share of natural gas in the energy mix is to be taken to 15% by year 2030. He expressed his confidence in the outlook of the Company which is professing relentlessly its growth path in Natural Gas value chain. The Company which had started with a single pipeline project in year 1984, now owns and operates a truly diversified business portfolio including over 14,500 km of Natural Gas Pipeline Network, and an LNG Sourcing portfolio of around 14 MTPA. He further added that the Company has carved out a robust petrochemical expansion move to further strengthen its business. The Company is operating Gas Processing Units and LPG transmission networks, producing LPG and Liquid Hydrocarbon products. It also has considerable presence in Renewal Energy like Solar and Wind, and endeavours in new energy segments like Hydrogen production, CBG, Shipping, Small Scale LNG Liquefaction, Gas /LNG Storage, Bunkering etc. to create a future energy landscape. GAIL, he said is well positioned with future ready ventures. Shri Sandeep Kumar Gupta is a Commerce Graduate and a Fellow of the Institute of Chartered Accountants of India. Before joining GAIL, Shri Gupta held the position of Director (Finance) since August 2019 on the Board of Indian Oil Corporation Limited, the leading PSU integrated Energy Company in Fortune “Global 500”, and several group companies. He has wide experience of over 34 years of Oil and Gas Industry and handled F&A, Treasury, Pricing, International Trade, Optimisation, Information Systems, Corporate Affairs, Legal, Risk management, etc.
OPEC considers slashing crude oil production amid falling prices, worrying US & others
Amid speculations that the OPEC countries are considering slashing production by more than one million barrels a day to revive declining prices of crude oil in their proposed meeting on Wednesday this week, crude oil prices surged to nearing 82 dollar per barrel. This probable reduction would be the biggest cut since the Covid pandemic hit the world in 2020. Final decision is awaited In the meantime, OPEC delegates have said that a final decision regarding reduction in production, would be made when ministers of the concerned countries meet in Vienna to deliberate on all aspects. The possible cut in the crude oil production, has sent shock waves across the globe as majority of the countries including India, are already facing serious inflationary pressures. Rising interest rates It is expected that a large cut of this magnitude may invite flak from the US and other big crude consuming countries. It is also worth-mentioning that energy driven inflation has already forced the central banks of different countries to raise interest rates. In India also, the Reserve Bank of India has raised the repo rates on several occasions ever since the inflationary pressures started building up for over a quarter. Energy demands grew after Covid lockdowns The energy demands across the globe started picking up after Covid impacts got reduced and business and economic activities grew. Earlier, during Covid lockdowns, the crude oil prices tumbled. Now many energy analysts say- it’s just a matter of time when the oil returns to around 100 dollar per barrel. Concerns about global economy The meeting of the OPEC countries, will take place on October 5 against the backdrop of falling oil prices, prompting top OPEC+ producer to say the group could cut production. The fall in crude prices has mainly been spurred by the fears and concerns about the global economy. Pressure on Saudi Arabia In the meantime, the United States has continuously been putting pressure on Saudi Arabia to continue pumping more crude oil to meet the rising needs and to help oil prices soften further. This pressure is also meant to reduce the revenue sources for Russia to punish it for its aggressive posture towards Ukraine. Though, the interesting side of these developments is that Saudi Arabi has not condemned Russia’s action in Ukraine, majorly inspired by its difficult relations with the US. Gas & electricity prices reaching record levels In Europe, Gas and electricity prices also reached record levels in 2021 and again hit all-time highs in 2022 with electricity retail prices having increased by almost 50% year-on-year from July 2021. Similarly, global energy prices increased by more than 26% in the early months of 2022 with Asian Development Bank (ADB) Principal Energy Specialist Kelly Hewitt saying- electricity bills may further rise by 27% by 2025, if energy supply mix of different countries remains unchanged. Russia also cutting its gas export to Europe Russia has just announced that its natural gas exports to the European Union are expected to decline by 50 bcm, which is one-third of last year’s total volumes, which is also worrisome for Europe. America is wrestling with the worst energy crisis in nearly five decades as its fossil fuel plants are closing faster than green alternatives can replace them. Implications for developing countries This steep rise in energy prices has serious implications for especially developing and poor countries. The issue looks more worrying as some experts suggest that the world energy crisis is just starting and may get worse with a few saying potentially much worse. Clearly, this widespread energy crisis is hurting households, businesses and a number of economies alike across the globe. The International Energy Agency terms it the most extreme energy crisis the world has ever witnessed and may have serious implications for the global economy recovering for Covid pandemic. India shows resilience India has shown much resilience in the face of this crisis as the government has taken several measures to minimize and mitigate the volatility of global crude oil and gas prices. Fuel price rise in India has been contained in comparison to exponential rise in developed countries. Most of the developed nations have witnessed significant inflation rise in Gasoline price by almost 40% during July 21 to Aug’22, while in India, it reduced by 2.12%. The gas price of all the major trading hubs has seen massive increase during July 21 to Aug’22. Henry Hub of USA has seen an increase of 140%. JKM Marker has seen an increase of almost 257% and UK, NBP has increased by 281%. While in India CNG and PNG prices has been increased by only 71%.
Oil Prices Could Be Set For Another Sharp Rise
It’s been a rough couple of weeks in the energy market. As potential energy company investors, we are not sorry to see the back of last week in particular. That’s the understatement of the year. Pretty near every negative sentiment-Recession, Fed tightening, Dollar strength, China demand, Inventory builds, or what amounts to the entire oil price Closet of Anxieties, came to pass this week. Oil-WTI took a tumble below $80 for the first time since Jan 11th of this year, closing Friday below its 200-day moving average of $89.00.This move has WTI nearing an important psychological level in the lower $ 70s, past which producers will sharply curtail capex to raise prices. In this article, I will argue that the selling is overdone and neglects one basic truth about the oil market. It is under-supplied, and it is only the SPR releases that have been masking that fact. We are on the verge of an energy calamity that will begin to manifest itself in the coming months. As the economy of the world begins to accelerate in 2023, the era of energy insecurity will begin. The important takeaway is that there is nothing that can be done to prevent this “train from barreling into the station.” A recent NY Times article put it succinctly- “That’s because there’s just no extra supply out there today at all. There’s a very little extra supply that the Saudis and the Emiratis can put on the market. And that’s about it. We’ve used the strategic petroleum reserve, and that’s coming to an end in the next several months. There’s just no extra cushion in the oil market right now.” How did we get here? The short answer is that for the period since 2014, producers have been disincentivized to explore for or sanction the mega-project that was the mainstay of the 2000-2013 era. The graph above is telling us that for a lot of reasons-low oil prices for much of the period, governmental preferences shifting to alternative energy and discouraging production of “fossil fuels,” and capital restraint by producers globally that we have under-invested in upstream supply by hundreds of billions. Longer term, we are confident that oil prices will rebound, probably toward the end of the year, as the SPR releases that have put excess oil on the market come to a halt. The graph above, compiled from SP Global and Worldometer tells a compelling story. Every year approximately 80 mm new people join the nearly 7.9 bn folks already here, all needing (but not always having) energy to power their lives. In six years from 2014 to 2020 spending on new upstream sources fell by 55%, while the world’s population rose by ~8%. The math doesn’t work. The oil market is undersupplied as the EIA graph below shows. Since March when the government announced the SPR releases to bring down domestic gas prices, inventories have risen about 15 mm barrels. If you back out the 172 mm barrels withdrawn from the SPR over this time, inventories would have shrunk to ~248 mm bbls. That may sound like a lot, but in reality with our ~19 mm BOD habit, it’s a ~13-day supply. Less than 2-weeks! Not only are inventories being artificially inflated by SPR releases, the productivity of new wells as reported in the EIA-Drilling Productivity Report is on the decline. This is an admittedly simplistic measure as it just takes active rigs at a given point, and divides into new well production as reported by various sources-usually state regulatory agencies. The fact the yardstick is done in 4th grade arithmetic without sophisticated modeling, doesn’t mean it’s not instructive. It does reveal an undeniable trend in new well production. Across every key basin with the exception of the North Dakota and New Mexico basins, there is a pronounced decline in spite of steady growth in the rig count for most of this year. Reading it carefully a case can be made that the Drilled but Uncompleted well-DUC, count withdrawal that occurred from mid-2021 through January of this year was largely responsible for gains in production registered so far this year. There is certainly an observable trend that well performance in the shale basins began to fall off as DUCs declined. This is true regardless of the underlying reason, which I have postulated in the past could be due to exhaustion of premium drilling inventory. This has been documented several times recently in widely read publications that include the Wall Street Journal. Here and here. The data from the DPR is confirmed by information compiled from the EIA 914-monthly report. Only in North Dakota and in the Gulf of Mexico-GoM, do we see a gain from May to June. In the case of the GoM Murphy Oil’s, (NYSE:MUR) Kings Quay production contributed about 80K BOPD, and BP’s Herschel provided another 20K BOEPD, toward the 179K BOEPD shown for the month. Higher drilling costs are also beginning to impact profitability as was noted in an even more recent WSJ article. What this means is that maintaining or increasing production will come under a sharper lens as margins compress, and operator’s balance sheet priorities come into play. Almost without exception shale drillers have told us that their priorities are returning capital to shareholders through special dividends and share buybacks, paying down debt, and holding production to low single digit growth. If oil prices hover in the $70’s for any time, expect cuts in operating budgets which will show up in the rig count soon. The takeaway from this section is that U.S. production will rise to 12.6 mm BOEPD in 2023 as the EIA suggests in this month’s edition of the STEO, isn’t very high. Current trends are heading in the other direction, and the catalysts for a reversal of course are just not present. The current weakness in oil prices has producers sharpening their budgetary knives. Inflation is eating at already tight budgets, and nature itself may intervene with poorer quality rock than
IEA: Global Gas Markets To Remain Tight Through 2023
The International Energy Agency (IEA) has predicted that global gas markets will remain tight next year as Russian piped gas supplies dwindle despite gas demand falling in Europe in response to high prices and energy saving measures. According to the agency, global natural gas markets have been tightening since 2021 despite global gas consumption declining by 0.8% this year as a result of a record 10% contraction in Europe and flat demand in the Asia Pacific region. However, global gas consumption is forecast to inch up by 0.4% next year. Gas consumption has fallen the most In Europe after contracting 10% in the first eight months of the current year driven by a 15% drop in the industrial sector as businesses curtailed production due to soaring prices. Meanwhile, Russian pipeline gas supply to Europe has dwindled to just a trickle after the shutdown of the Nord Stream 1 pipeline from Russia to Germany in early September If Moscow carries out a threat to sanction Ukrainian energy firm Naftogaz, one of the last functioning Russian gas supply routes to Europe could be shut, exacerbating the energy crisis just as the crucial winter heating season begins. Europe has managed to fill the gap of Russian pipeline gas this year, mainly through increased liquefied natural gas (LNG) imports. The IEA has forecast that Europe’s LNG imports will increase by over 60 billion cubic meters (bcm) this year, more than double the amount for the rest of the globe. On the other hand, Asia’s LNG imports are expected to stay at lower levels than last year for the rest of 2022, in large part due to high gas prices in Europe helping the continent draw in more cargoes. In contrast, China’s LNG imports are expected to rise in 2023 under a series of new contracts concluded since the start of 2021 as well as a colder-than-average winter leading to additional demand from northeast Asia. The IEA has predicted EU gas storage would be less than 20% full in February if LNG supply remains robust in the event that Russian supply to Europe completely stops from Nov. 1, but could go as low as 5% full by February if LNG supply dwindles.