Japan’s Crude Oil Imports Increase For The First Time In A Decade
Crude oil imports in Japan, the world’s fourth-largest crude buyer, jumped by 8.5% annually in 2022, the first yearly increase in a decade, while the value of crude imports nearly doubled to a record, data from the Japanese Finance Ministry showed on Thursday. Last year, many large energy importers – including resource-poor Japan – focused on energy security after the Russian invasion of Ukraine and the spike in commodity prices as a result of the war. So Japan imported last year a total of 156.62 million kiloliters of crude oil, or 2.7 million barrels per day (bpd), according to the data. The value of the imports surged by 91.5 % compared to 2021 and hit $103 billion (13.27 trillion yen), due to the jump in oil prices and a weakening of the Japanese yen. The average price of crude per kiloliter of imports hit the highest level on record in data going back to 1979, according to the finance ministry. Meanwhile, Japan’s imports of LNG fell by 3.1% in volume but almost doubled in value as it surged by 97.5%. Thermal coal imports for power generation rose by 2.5% but the value jumped by 196.7% after global thermal coal prices hit records last year following the Russian invasion of Ukraine and the EU ban on coal imports that came into effect in August. To limit its dependence on fossil fuel resources it has to import, Japan is bringing back nuclear power as a key energy source, looking to protect its energy security in the crisis that has led to surging fossil fuel prices. The Japanese government confirmed in December a new policy for nuclear energy, which the country had mostly abandoned since the Fukushima disaster in 2011. A panel of experts under the Japanese Ministry of Industry decided that Japan would allow the development of new nuclear reactors and allow available reactors to operate after the current limit of 60 years.
A Lesson From The Energy Crisis: We Need More American Oil & Gas
At the start of 2023, the main U.S. oil lobby resumed calls on the Biden Administration to increase access to domestic oil and gas resources, reform the permitting process, and reverse the hostile rhetoric toward the industry, which could bolster America’s energy security if given the right incentives to do so. The American Petroleum Institute (API) issued a report outlining a plan for the 118th Congress to “make, move and improve America’s energy.” “As consumers face growing energy costs, API urges policymakers to take a more realistic approach and ensure that American natural gas and oil are prioritized as long-term strategic assets,” the oil lobby said. The U.S. has the resources to ensure homegrown production of oil and gas, which in turn would ensure that America doesn’t deepen its reliance on foreign resources, according to API. “If America doesn’t lead, others will,” API President and CEO Mike Sommers said. Global oil and gas demand is expected to continue rising this year and in the coming years, he said in the State of American Energy 2023 keynote address last week. “That demand will be met one way or another. If America does not meet it, it will be met by countries that do not share our security interests, environmental standards, or values.” Sommers called on the Administration and the new Congress “to craft and enact bipartisan policies to make, move, and improve American energy.” “Last year, our friends in Europe learned the hard way that energy security is national security. It’s time to implement that lasting lesson here in America, with business and government working together.” API’s report, entitled “The Solution is Here” focuses on three pillars—make, move, and improve—that is, policy recommendations to boost oil and gas production, increase takeaway capacity to demand centers, and support innovation in solutions to lower the industry’s carbon emissions. In energy production, the problem, as identified by the API, is that there isn’t enough energy to meet rising demand. Despite the recovery in oil and gas demand post-Covid and despite the dire need for non-Russian energy in Europe after the Russian invasion of Ukraine, “Since the end of World War II, no presidential administration over its first 19 months in office leased as few acres on federal lands and waters for oil and natural gas production as the Biden administration,” the API said. The policies to address this problem include the Administration increasing access to federal offshore and onshore drilling and signaling government support for needed energy investments, according to the oil and gas industry body. The Biden Administration is currently finalizing the next five-year offshore leasing program, which has been delayed by several months already, creating yet more uncertainty for the U.S. oil industry, which has had to grapple with numerous mixed messages from Washington since President Biden took office. In oil and gas transportation, America lacks sufficient infrastructure to meet demand as permitting and review delays block necessary infrastructure, the API said. Ten major infrastructure projects, reflecting $34 billion in capital expenditures, were canceled, stalled, or were at risk of cancellation due to permitting and review delays in recent years, API noted. The canceled projects include four natural gas projects in Appalachia that could support 4.6 billion cubic feet per day of production needed by families and businesses in the region. “In fact, many homes in Boston use fuel oil or imported natural gas for heat, because they lack access to cleaner American natural gas. That’s the sad irony of blocking pipelines on environmental grounds,” the API’s Sommers said in his keynote address. API calls for reforms in the permitting and review processes, uniform environmental reviews with established time limits, an end to FERC overreach of permitting authority, an end to steel tariffs to alleviate supply-chain bottlenecks, and the use of performance-based regulation to help advance new technologies. The global energy crisis, the result of a post-pandemic surge in demand and a war in Europe, won’t be resolved by asking other countries to produce more, Sommers said. “We won’t resolve it by tapping the nation’s emergency petroleum reserve. That’s a band-aid, not a cure,” he added. “The solution is right here in America, right under our feet. We just need to seize it.”
Searching for oil and gas
There is no alternative to stepping up domestic production for greater energy security. To reduce its vulnerability to high and volatile global energy prices, India must make efforts on a war footing to increase the levels of relative self-sufficiency by stepping up domestic oil and gas production over the medium-term. Unfortunately, however, this is not happening. Domestic crude production, for instance, has been steadily declining, from 38.1 million metric tonnes in FY12 to 29.7 mmt in FY22. Till November this fiscal, production at 19.6 mmt is not different from a year earlier, according to the Petroleum Planning & Analysis Cell. Domestic production is falling sharply for various reasons including declining output from old and marginal fields. India lacks the technological capability for deep water exploration. There have also been no major hydrocarbon discoveries of late either. India is currently increasing expenditure on seismic surveys of domestic hydrocarbon assets. Domestic producers and global giants clearly must be incentivised to explore and produce more as costlier energy prices imply a higher import bill and inflation besides straining the current account, which is the broadest measure of India’s goods and services transactions with the rest of the world. The big question is how likely is an increase in domestic output. Grounds for cautious optimism in this regard were indicated in a speech of the petroleum and natural gas minister, Hardeep Singh Puri, at the Voice of the Global South Summit last Friday. Puri said India will see an investment of $58 billion in exploration and production (E&P) of oil and gas by 2023, and global majors like Chevron, ExxonMobil, and TotalEnergies are showing interest. Prima facie, this is indeed a huge number considering the capex plans of state-owned oil giants and the largest private player and the relatively modest cumulative FDI equity inflows in petroleum and natural gas till September 2022. ONGC plans to spend $4 billion to increase exploration from FY22 to FY 25. The Vedanta Group, too, plans to triple its production and account for 50% of India’s oil production. ONGC and ExxonMobil have an agreement to collaborate on E&P in deep waters off the east and west coasts. Whether ExxonMobil is an investor or just a provider of technological services is far from clear. TotalEnergies, for its part, has inked a deal with the Adani Group to invest $50 billion in green hydrogen production over the next 8-10 years. Expectations of big-ticket investments in E&P stem from plans to double the current net area being explored for oil and gas to 500,000 sq km by 2025 by reducing the prohibited or no-go areas in India’s exclusive economic zones by 99% and incentivising the discovery of potential basins like in the Andamans, Kutch-Saurashtra, and Mahanadi by E&P players at the government’s cost. India has around 26 sedimentary basins covering an area of 3.3 million square kms, of which only seven category 1 basins have established commercial production of oil. Prospecting the remaining areas entails a huge amount of resources and technology. Over the years, the sedimentary basin exploited has remained stagnant at 6-7%. On the floor of Parliament, the petroleum minister stated that this has gone up to 10% since 2016, and the expectation is that it will rise to 15% very shortly and go on to 30% after that. This is the frontier that must be tapped if the drive to step up domestic production is to bear fruition.
India’s Russian oil binge drags down OPEC’s share to lowest in 2022
Russia became the third-largest oil supplier to India in 2022, making up about 15% of total purchases, dragging down OPEC’s share to the lowest in more than a decade, data obtained from industry sources show. Refiners in India, the world’s third-biggest oil consumer and importer, have been gorging on Russian oil sold at a discount after some Western companies shunned buying from Moscow following its invasion of Ukraine last February. In 2021, Russia was at the 17th spot, supplying about 1 per cent of India’s overall imports. Last month India’s oil imports from Russia surged to an all-time high of 1.25 million barrels per day (bpd), about a quarter of overall 4.9 million bpd purchase, the data showed. India’s December oil imports were the highest in seven months as refiners were drawn to Russian oil due to the deeper discounts offered ahead of a Dec. 5 embargo by Europe and a price cap by the European Union and G7 nations to cut Moscow’s oil revenue. Members of the Organization of the Petroleum Exporting Countries (OPEC), mainly from the Middle East and Africa, saw their share in India’s crude imports shrinking to 64.5 per cent in 2022, from a peak of 87 per cent in 2008, a Reuters analysis of the data since 2006 showed. Still, Iraq and Saudi Arabia remained India’s top two suppliers last year. “India’s oil imports from Russia would continue to rise this year as well mainly because of discounts if there are no further stringent actions by the Western countries targetting Russian oil,” said an official at an Indian refiner who declined to be named as he was not authorised to speak to the media. Russia remained the top oil supplier to India in December followed by Iraq and Saudi Arabia. Higher intake of Russian oil reduced India’s appetite for African grades, whose share in 2022 imports declined to a 17-year low while that of Latin America plunged to the lowest in 15 years, the data show. In April-December, the first nine months of this fiscal year, Russia replaced Saudi Arabia as the second largest oil supplier to India, while Iraq remained on the top spot, the data showed. Imports from Russia, about a fifth of India’s oil imports in April-December, led to OPEC’s share falling to about 61.5 per cent, according to Reuters calculations.