Russian Upstream Oil And Gas Investment Set To Plunge By $15 Billion
Investment in the upstream oil and gas industry in Russia could decline by $15 billion this year as a result of Western sanctions, Rystad Energy has calculated, saying the total for the year could end up around $35 billion. The analytical firm noted that Russian upstream investments stood at $45 billion last year, increasing from $40 billion in 2020. Before Russia’s invasion of Ukraine, upstream investments in the country were expected to rise to $50 billion in 2022, but sanctions have begun to bite and investment is set to decline substantially amid the exodus of Western oil companies from the country. According to Rystad, investments would remain lower than normal until at least 2025 but this would likely affect smaller oil companies, while Gazprom and Rosneft will be able to continue spending as they were spending until this year, the company said. The situation appears to be particularly worrying for the LNG industry, where several large-scale projects have been delayed because of sanction-related problems with technology and funding. “The war in Ukraine has cost the Russian oil and gas sector dearly, with project investments taking a significant hit. Covid-related disruptions in 2020 dragged down spending but this year looks set to be the start of a multi-year slump that will make the Covid years pale in comparison,” said Swapnil Babele, a senior analyst with Rystad. The worst affected projects will be Greenfield ones, the analytical firm also said, with investment in new field development set to decline by 40 percent this year from last, to $8 billion from $13.7 billion. Next year Rystad does not expect any significant new oil and gas projects to receive approval amid the lingering effects of Western sanctions. In 2024, however, there will be a boost in production as Gazprom begins extraction from one new field and Rosneft launches production at one of the fields comprising the giant Vostok Oil project.
Russia: Oil Price Cap Is An ‘Anti-Market Measure’
The planned price cap on Russian oil is an anti-market measure that will have devastating effects on all and could significantly complicate the situation on the global markets, Maria Zakharova, spokeswoman for Russia’s Foreign Ministry, said on Wednesday. “We have repeatedly said that the introduction of the so-called ceiling on Russian oil prices is not just a non-market mechanism, it is an anti-market measure,” Zakharova said at a briefing, reiterating that Russia would not supply oil to countries that will have joined the price cap mechanism. The ongoing disagreements over the actual price cap within the EU show how “detached the initiative is from the economic reality,” Zakharova said. “The creation of a certain cartel of buyers sets a very dangerous precedent in global trade,” the spokeswoman added. The EU member states are still at odds over the price they and the G7 would set for a ceiling for Russia’s oil if Western companies are to continue providing maritime transportation services for Russian oil cargoes. The price cap and the EU embargo on imports of Russian oil are set to enter into force in just a few days, on December 5. Reports emerged last week that the EU was discussing capping the price of Russian oil at somewhere between $65 and $70 per barrel. Such a cap, if approved, would not effectively lower the price of the flagship Russian crude currently being traded on the market. Talks continue, but there are differences among member states. One group of EU countries, including Russian neighbors Poland, Lithuania, and Estonia, believe the proposed price cap is too high and will still give Russia a handsome revenue from oil. Another group of mostly southern EU members with large shipping industries – Greece, Malta, and Cyprus – have said a $65-$70 cap is too low and demand compensation for the potential loss of Russian oil trade to their shipping.
Essar Oil UK to build carbon capture facility
Essar Oil UK Limited has announced its plan to build a 360 million-pound major new carbon capture plant at its Stanlow refinery in line with its ambition to become a leading low-carbon refinery by 2030. Essar is investing over 1 billion pounds into a range of energy efficiency, fuel-switching, and carbon capture initiatives, designed to decarbonise its production processes significantly by 2030 and put Essar at the forefront of the UK’s shift to low-carbon energy. Essar’s energy transition strategy is based on five principles: running the core Stanlow refining processes as efficiently and safely as possible; decarbonising Stanlow’s operations; building a hydrogen future through the launch of Vertex Hydrogen (“Vertex”) and as a key part of the HyNet consortium; developing green fuels (including Sustainable Aviation Fuels); and establishing the UK’s largest biofuels storage facility through Stanlow Terminals Limited. Essar will achieve its decarbonisation targets through a combination of incremental (energy efficiency and operating improvements) and transformational projects, including the 360 million-pound carbon capture plant announced, but also as a result of the significant investments, Essar is making into hydrogen and biofuels. Kent plc has been awarded a pre-FEED engineering contract to develop the facility that will take the CO2 emitted from one of Europe’s largest full-Residue Fluidised Catalytic Cracking units, located at the Stanlow refinery.
ONGC retains 20% stake in Russia’s Sakhalin-1
Oil and Natural Gas Corporation (ONGC) has received approval from Russia to retain a 20 percent stake in the Sakhalin-1 oil and gas fields in the far east region of the country, said Rajarshi Gupta, Managing Director of ONGC Videsh. “We have received the approval and are back with a 20 percent stake in Russia’s Shakalin-1,” said Gupta. Last month, Russia had asked foreign shareholders in the project to apply for regaining their shares after Exxon Neftegaz, the Russian unit of Exxon Mobil Corp, declared force majeure on the project. The US giant, which had a 30 percent stake in Sakhalin-1, said it would not invest in the project to comply with sanctions imposed on Moscow. Russian President Vladimir Putin signed a decree to set up a new operator for the Sakhalin-1 oil and gas project. According to the decree, the Russian company would own the investors’ rights, including the operator’s rights of Exxon Neftegaz. ONGC’s overseas investment arm, ONGC Videsh has 20 percent shares in the project while Japan’s Sodeco consortium—which has also decided to retain its shares—has a 30 percent stake.
Reduction in price of crude oil: Rates of petrol, diesel likely to drop by Rs 14
Due to the fall in the price of crude oil, the rates of petrol and diesel in the country may drop by up to Rs 14, according to the various reports. Crude oil prices in the international market are at a low level since January. Meanwhile, amid dip in the price of crude oil in the international market, the Indian oil companies have kept the prices of petrol and diesel stable even on November 30, 2022. Today on the 190 consecutive day, there has been no change in the prices of petrol and diesel in the country. The price of crude oil in the international market has been stable for the last several days. At present, the price of WTI crude has come down to $ 78 per barrel and Brent crude is around $ 85 per barrel.
Why 2023 Is Likely To See Much Higher Oil Prices
Earlier this week, oil prices plunged to 2022 lows as energy markets panicked about demand amid COVID chaos in China that has resulted in an unexpected and extraordinary manifestation of street protests and even calls for Chinese President Xi Jinping to step down. The market’s response to this, according to Rystad Energy, was an overreaction. Rystad believes that China’s zero-COVID policy and its new wave of lockdowns to counter a surge in new cases will have only a minor impact on its short-term oil demand. Indeed, the market is sentimental and fickle these days, with volatility running at an all-time high. By Wednesday, oil prices were trending in the opposite direction with just as much zeal. Brent crude was up over 2.8%, to $85.37 per barrel, at 10:53 a.m. EST, and WTI was up 3.45% to $80.90 per barrel. Suddenly forgetting its China fears despite a worsening COVID situation there, the oil markets flip-flopped mid-week to refocus on the pending EU ban on seaborne Russian oil and a G7 price cap on Urals crude next week. Gains would have been even higher were it not for rumors of OPEC+ preparing for more output cuts. The oil markets are trading on the day’s news, and have been since earlier this year. Unable to grasp true fundamentals. Fundamentals are now a moving target thanks to Russia’s war on Ukraine, the renewed power to control the markets by OPEC+, an uncooperative American shale industry and China’s zero-COVID policy. Wall Street is in a state of disarray, and for commodities traders, it’s either boon or bust–on a day-to-day basis. The volatility would be far greater without OPEC, the expanded cartel suggests. In a new study published by KAPSARC (King Abdullah Petroleum Studies and Research Center), during the height of the COVID pandemic, OPEC reduced oil price volatility by 50% due to the management of its spare capacity. OPEC intervention, the report claims, boosted average oil prices during the pandemic from $18 to $54 per barrel. Now, this is serving as a justification for OPEC+’s recent decision to cut output at a time when Washington was gunning for a production increase to bring prices down. True to form, OPEC rumors likely succeeded mid-week in calming the reversal of losses in oil price once the market decided to drop its Monday fears coming out of China and refocus on Russian oil. So what about Wall Street? As the Wall Street Journal notes, Wall Street is overall bullish on oil, even if that is not necessarily reflecting current prices. It’s a case of “mind the gap”. There is a clear belief that oil prices will be much higher in 2023. Goldman Sachs forecast $110 oil for next year, but recognizes the uncertainty. On Tuesday, Goldman Sachs’ Jeff Currie, global head of commodities, said that recent downgrades to oil prices were because of the dollar and China. “First and foremost, it was the dollar. What is the definition of inflation? Too much money chasing … too few goods,” Currie told CNBC. And on China’s COVID situation, Currie said “it’s big”. “It’s worth more than the OPEC cut for the month of November, let’s put it in perspective. And then the third factor is Russia is just pushing barrels on the market right now before the December 5th deadline for the export ban.” JP Morgan now forecasts $90 oil for 2023, down from its earlier forecast of $98, “on the grounds that Russian production will fully normalize to pre-war levels by mid-2023”. Rystad Energy also thinks the recent oil price plunge based on Chinese demand is overblown. While it is true that in November, OPEC and the IEA both reduced their 2023 oil demand growth estimates because of what is happening in China, Rystad believes it will have far less impact than the market panic of Monday suggested. “Oil markets may be misjudging news of China’s lockdown,” said Claudio Galimberti, senior vice president at the Norway-based consultancy, as reported by Bloomberg. The latest curbs “appear to be mimicking previous ones, with nationwide road traffic only marginally affected while selected provinces undergoing comparatively severe lockdowns try to suppress Covid outbreaks”. While street protests continued in China and daily infection rates surged beyond 40,000 by Tuesday, the overall effect is not worth a 4% plunge in oil prices, as we saw on Monday. And Wall Street seems to view this as a mere “gap” and not a long-term situation that will keep oil prices from JP Morgan or Goldman Sachs’ $98-$110 ranges next year. Brent crude delivered in August next year has a 46% probability of settling more than $20 higher than its current price, WSJ notes. China could actually end up being the icing on the oil price cake. It’s like saving up for a surge. “The pent-up demand out of China is going to be enormous. “That could swing demand by at least a million barrels a day, and that could easily make the difference between an oil price forecast of $95 to $105 versus $120 to $130. Easily,” Amrita Sen, director of research for Energy Aspects, told WSJ.