Russia Is Prioritizing Gas Exploration In The East To Supply Asian Partners
Russia plans to ramp up geological prospecting and exploration of hydrocarbons – gas in particular – in the country’s east as it looks to increase supplies of gas to Asian partners, Russian Natural Resources and Environment Minister Alexander Kozlov has revealed in an interview. “We have set a priority for ourselves in geological prospecting and exploration and in aiding the search for mineral resources, particularly hydrocarbons, to be geographically closer to future consumers and transport infrastructure. For example, the Power of Siberia pipeline, gas from which goes to China. We have made the decision to carry out geological exploration throughout Yakutia and to do everything to [understand the production potential] in relation to hydrocarbons, particularly with gas, to be known. So that there’s not one, but more pipelines going in the eastern direction. Because this is guaranteed revenue for our country, guaranteed sales to a major partner,” Kozlov said. Last week, Russian President Vladimir Putin inaugurated the Kovykta natural gas field in eastern Siberia, located strategically to allow Russia to increase gas exports to China amid growing tensions between Moscow and the West. The inauguration is the culmination of efforts that began about a decade ago to develop new fields and build the Power of Siberia pipeline to deliver to the rapidly expanding market. “We are launching the unique Kovykta gas field, the largest in eastern Siberia. Its recoverable reserves are 1.8 trillion cubic meters of gas,” Putin said via video link during a televised ceremony. Currently, Russia lacks pipelines to transport gas from its Western Siberian and Arctic gas fields that serve China and Europe. The first Power of Siberia pipeline began to deliver gas from eastern Siberia to China at the end of 2019. It won’t be the last. Moscow has laid out plans to build a Power of Siberia 2 pipeline as Russia increasingly turns to the Middle Kingdom in the face of heavy western sanctions. China and India have become some of the biggest buyers of Russian oil and gas, with Bloomberg’s oil strategist Julian Lee revealing that Russia’s flagship Urals crude oil has been trading at a massive discount of more than per barrel $30, or about 40% to the international Brent crude oil.
Putin Bans Oil Sales To Countries That Comply With G7 Oil Price Cap
Having promised that it would reveal its response to the recently implemented by the G7 price cap on Russian oil exports, moments ago the Kremlin did not disappoint, and as the WSJ reports, Russian President Vladimir Putin banned the supply of Russian oil and oil products to countries that impose a price cap, allowing deliveries to those nations only on the basis of a special permission from the Kremlin leader. According to the decree, the retaliatory measures are scheduled to come into effect Feb. 1 and last through July 1, 2023. Russia’s actions are a response to what the decree described as unfriendly actions of the U.S., foreign states and international organizations that contradict international law, and are designed “to protect the national interests of the Russian Federation,” the decree said. The European Union and the U.K. earlier this month banned the import of seaborne Russian crude, while the Group of Seven nations put a ceiling on other sales by barring Western companies from insuring, financing or shipping Russian crude at above $60 a barrel. And now, Russia has flipped the story on its head, saying the not only will it not sell below $60, but it has banned the sale outright to all countries that engaged in this most glaring virtue-signaling exercise, one which paradoxically was not meant to punish Putin but to keep Russian oil flowing. While the price cap has not seen a major impact on pricing so far, that will likely change soon: As shown below, Urals oil is trading with a generous discount to spot Brent, and was last seen around $50. In other words, those nations buying Urals – mostly China and India – are not violating the G-7 pact… yet. However, once Urals follows Brent higher, and its price rises above $60/barrel that will change, and at that point it will be interesting to see how the G7 responds to the two fastest growing economies and two most populous nations openly defying the G7’s Russian oil price floor. The news, which was largely as expected, has not had an impact on the price of oil with WTI and Brent both trading at three week highs following news that China was ending zero-covid policies and reopening its economy. As for the US stepping in a providing emergency cover to nations who may be caught in the crossfire, sorry – Joe already drained a third of the SPR to get Democrats reelected.
China poised to remain LNG demand centre
China’s imports of LNG may gain momentum with the signing of new sales and purchase agreements (SPAs) due to start in 2023, alongside new infrastructure coming on line the same year. This is despite a tumultuous year for the country as it battled repeated Covid-19 resurgences, which capped demand for LNG. But some Covid-19 controls in the country are gradually being relaxed, raising hopes that downstream demand in China could soon rebound, although the full extent of this potential rebound is unclear, market participants said. China is expected to lose its crown to Japan as the top LNG importer in 2022. Japan’s LNG imports totalled 49.2 million ton between January-August 2022. In comparison, China imported 40.9 million ton and South Korea imported 29.9 million ton over the same period. China, previously the top importer, imported a total of 79.3 million ton in 2021 when it overtook Japan for the very first time, by 5 million ton. High and volatile prices have dampened Chinese demand for spot LNG, with the country turning to lower-priced pipeline gas imports and domestically produced gas instead, as well as alternatives such as coal, LPG and other fuels. Continued Covid-19-related lockdowns in China have also kept gas demand suppressed because of a slump in industrial demand. The number of tenders that China issued in 2022 has also dwindled. The country has issued less than five tenders so far in 2022, far fewer than India, which has issued an average of about four tenders each month up to November 2022. This is significant as India has similarly been hit with weaker gas demand as a result of high spot prices.