Japan’s Government Will Buy LNG If Private Companies Can’t Afford To
Japan’s government is amending laws that will allow state firm Japan Oil, Gas and Metals National Corporation (JOGMEC) to buy liquefied natural gas this winter if private companies cannot afford to do so, Industry and Trade Minister Yasutoshi Nishimura said on Friday. Japan and all other large importers of LNG in Asia have been in intense competition with Europe this year to procure gas cargoes as the EU races to replace Russian pipeline supply while Russia has significantly restricted its gas exports to Europe. Japan’s new legislation also allows the trade and industry minister to order gas use restrictions at large consumers if supply further tightens or in case of a gas emergency, Nishimura said at a news conference carried by Bloomberg. Japan is heavily dependent on imported energy for a lack of local resources. Amid the current crunch following the Russian invasion of Ukraine and the Western sanctions on Russia, Japan is even considering giving nuclear a second chance in a reversal of the stance Japanese leaders have had since the 2011 Fukushima disaster. The heightened competition of LNG supply just ahead of the winter has sent LNG prices high, and freight rates to record highs, as Europe looks to import as much gas as it can to avoid a winter of blackouts and rationing. Higher prices in Europe have so far this year drawn more spot LNG supply there, unlike in previous years when Asia with its top importers Japan and China dictated demand on the LNG market. Earlier this week, LNG carrier rates hit an all-time high, driven by growing prompt demand for gas in Europe as the continent tries to procure supply ahead of the winter. The freight rate to charter an LNG carrier in the Atlantic basin surged to $397,500 per day on Tuesday, according to Spark Commodities estimates. The race to buy LNG and charter LNG carriers could create the next big shortage in the energy market—not enough vessels to transport LNG from exporters to buyers, analysts and traders say.
India offers over 2,40,000 sq.km of land and sea for oil and gas E&P
About 36 blocks in these regions are estimated to have an oil and gas resources potential of 1,775 metric million tonnes of oil equivalent (MMTOE). In the highest ever bid on offer to find new oil and gas fields, the Director General of Hydrocarbons (DGH) has offered over 2,00,000 square kilometres of India’s land and sea for exploration and production of oil and gas. A DGH notification says the Offshore Bid Round (OALP Bid Round-IX) under Hydrocarbon Exploration and Licensing Policy (HELP) will offer 26 blocks spread over 9 sedimentary basins covering an area of approximately 2,23,000 Sq.km for Exploration and Development through international competitive bidding. About 36 blocks in these regions are estimated to have an oil and gas resources potential of 1,775 metric million tonnes of oil equivalent (MMTOE). Interested parties can submit their Expression of Interest (EoI) in three rounds throughout the year until March 2003. Since the launch of HELP on March 30, 2016, replacing the New Exploration Licensing Policy (NELP) 1999, with more attractive incentives for E&P, India had offered about 2,00,000 sq. kilometers rounds of bidding for 134 blocks. Winners of Round-VIII blocks of 36,316 sq km are yet to be announced, and if that is also added, the total area on offer will increase to 2,44,007 sq km. Under HELP, the hydrocarbon licensing policies were re-modelled to make E&P investment commercially attractive with incentives like lower and graded royalty rates, no revenue sharing for category II and III basins which are less prospective, 100% Participating Interest (PI) allowed for foreign/private players etc. DGH says of the 26 blocks on offer, 15 are in ultra deep-water, 8 are in shallow water and 3 blocks are on land. Ultra deep-water blocks cover an area of 1,59,439.82 Sq. km in Krishna Godavari, Mahanadi, Saurashtra, Andaman-Nicobar and Bengal-Purnea shores. Shallow water blocks covering an area of 59,925.27 sq.km are spread over Mumbai Offshore, Krishna Godavari, Saurashtra and Bengal-Purnea areas. These three categories belonging to the ‘Government offer’ category constitute about 15 blocks. Another 8 blocks at Cauvery, Cambay, Assam Shelf and Saurashtra basins will be bidded out based on Expression of Interest (EoI) from potential investors. Besides, the DGH is offering 16 CBM blocks in a special bid round spread over Madhya Pradesh(4), Chhattisgarh, Telangana (3 each), Maharashtra, Odisha (2 each), Jharkhand and West Bengal (one each). The DGH was established in 1993 as an independent regulatory body under the Ministry of Petroleum & Natural Gas for regulating the leasing, licensing, development, conservation, and management of oil and natural gas resources in India.
France Sends Germany Natural Gas To Ease Its Energy Crisis
On Thursday, France started sending natural gas directly to Germany in an attempt to alleviate the energy crisis in Europe’s biggest economy, which used to rely heavily on Russian gas supply before the war in Ukraine. As of October 13, French gas network operator GRTgaz is transporting natural gas to Germany at the Obergailbach interconnection point, the French firm said in a statement today. “In an unprecedented energy context linked to the war in Ukraine, France is in solidarity with its German neighbor by sending gas directly to it,” GRTgaz said. The marketing of the first physical flows of gas has already taken place, the company added. The only existing interconnection point between France and Germany at Obergailbach was originally designed to operate in the Germany-to-France direction. GRTgaz and its German counterparts have made the necessary technical adjustments so that gas can now flow in the direction from France to Germany. Klaus Müller, the president of the German Federal Network Agency, Bundesnetzagentur, thanked GRTgaz in a tweet and said that the French gas deliveries help Germany’s security of supply. Germany’s energy regulator insists that “significant” gas and energy savings are necessary to avoid a winter of rationing and gas emergency. Households, industry, and businesses need to cut consumption by at least 20%, the regulator’s head Müller said earlier this month. Germany may be unable to avoid a gas emergency this winter if all consumers don’t significantly cut consumption in Europe’s biggest economy, the regulator and its president have said multiple times since the summer. Gas storage sites in Germany are now 95% full, the regulator said in its latest update on the gas supply and demand situation on Thursday. Wholesale gas prices are very volatile but remain at very high levels. Businesses and households need to prepare for significantly higher gas prices, the regulator said and called once again for gas and energy savings.
OPEC+ Cuts Could Lead To Supply Deficit In Oil Markets
Last week, OPEC+ said it would reduce its oil production target by 2 million barrels daily, with actual cuts of between 1 and 1.1 million bpd. The announcement pushed prices higher. By the end of the week, the resulting oil price rally had run out of steam, and prices were once again sliding on recession fears. And these fears might mask how the oil market tips into a shortage. When the cartel said it would be cutting production, OPEC officials explained the reasons for the decision had to do with anticipating a drop in demand and saving spare production capacity for the eventuality of a sudden output outage such as one in Russia following the EU embargo entering into effect at the end of the year, for example. The U.S. signaled it saw the move as a political one, amounting to a snub by Riyadh, which will be one of three OPEC members actually reducing production, and a declaration of siding with Russia. The latter Riyadh already did six years ago when OPEC+ was born, so it shouldn’t have come as a surprise, but the snub appears to have come as a shock to Washington, prompting President Biden to threaten “consequences” of a yet unidentified nature. While the White House ponders its options, some analysts have noted that the move of OPEC+ would tighten an already tight oil market. Recession worry seems to be reigning in oil markets right now, but the risk of an oil shortage is there, and none other than OPEC has been warning about it, most vocally Saudi Arabia in the face of its energy minister. Meanwhile, there is more bad news: global oil inventories are in a decline that would be difficult to reverse. This is what Reuters’ John Kemp noted in a column this week, saying U.S. inventories have shed 480 million barrels in the past two years, to reach the lowest level for this time of the year since 2004. The situation with fuel inventories is even more worrying, with U.S. distillate inventories down to the lowest since records began in 1982, and European distillate inventories at the lowest since 2002. Distillate inventories in Singapore are also at a multi-year low, shedding 9 million barrels over the past two years. The fall in distillate inventories is perhaps even more concerning than the decline in crude stocks because distillates are used to make diesel fuel, and diesel fuel is used in the freight transport of goods, which is vital for every economy. A reserve depletion means price hikes, and price hikes mean good fuel for inflation. Still, despite the precarious state of global oil and distillate inventories, Saudi Arabia just said this week that the decision to reduce output was a purely economic one. In an official response to U.S. accusations, the Saudi foreign ministry issued a statement that said: “The Kingdom clarified through its continuous consultations with the U.S. administration that all economic analyses indicate that postponing the OPEC+ decision for a month, according to what has been suggested would have had negative economic consequences.” Whatever the motives for the decision, it has been made, and those unhappy with it have few options at their disposal for punishing those that made it. Oil prices remain subdued, meanwhile, although analysts updated their fourth-quarter price forecasts after the OPEC+ decision. Again, this is largely because the fear of recession has been fuelled by a stable flow of pessimistic forecasts, the latest coming from the IMF this week. Indeed, the immediate future of the global economy does not look good, and when the economic outlook is bad, so is the oil price outlook. Yet a shortage of oil could certainly change this, especially when it coincides with an oil embargo and a price cap.