Clean fuel. Indian PSU refiners to set up 137,000 tpa green hydrogen facility by 2030
The Indian public sector oil refineries have together planned to set up 137 kilo tonnes per annum (ktpa) of green hydrogen facilities by 2030. This was revealed by Dr S S V Ramakumar, Director – R&D, Indian Oil Corporation, at the India Energy Week, held recently in Bengaluru. Participating in a panel discussion on green hydrogen, Ramakumar said Indian Oil would first put up a 7 ktpa electrolysis plant at its Panipat refinery. He pointed out that IOC had entered into an agreement with the renewable energy company, ReNew Power and the engineering major, L&T, for putting up green hydrogen plants, not only for IOC but for other refiners also. He pointed out that IOC had entered into an agreement with the renewable energy company, ReNew Power and the engineering major, L&T, for putting up green hydrogen plants, not only for IOC but for other refiners also.
Indian refiners may buy Russian fuel, export own
Some Indian refiners are planning to import Russian diesel and other refined products for domestic consumption so they can free up locally produced fuels for export to the West, which has nearly stopped taking refined products from Russia, according to people familiar with the matter. The European Union has banned the import of refined petroleum products from Russia, including petrol, diesel and jet fuel, from February 5. The European Union, along with G-7 countries, has also placed price caps on Russian refined products. Russia has already become the top supplier of crude to India, accounting for 28% of India’s crude imports, up from less than 1% in 2021. India’s imports of Russian refined products have also risen to record levels in recent months, though mostly limited to fuel oil. They may soon expand to petrol and diesel.
Reliance seeks $12.75 for CBM gas, ONGC wants $9.35
Billionaire Mukesh Ambani’s Reliance Industries Ltd and state-owned Oil and Natural Gas Corporation (ONGC) are separately auctioning natural gas extracted from coal seams at prices linked to Brent crude oil price. Reliance is seeking a minimum USD 12.75 per million British thermal unit for coal bed methane (CBM) from a block in Shahdol district of Madhya Pradesh, while ONGC wants USD 9.35 for the same kind of fuel from North Karanpura in Jharkhand, according to tender documents. Reliance has sought bids for sale of 0.65 million standard cubic meters per day from CBM block SP(West)-CBM-2001/1 for one year beginning April 1, 2023, the company’s tender document showed. It asked bidders to quote a variable ‘v’ as a percentage of dated Brent crude oil price. Starting bid price has been kept as 15 per cent of Brent (‘v’ = 15 per cent). At the current Brent price of USD 85 per barrel, this translates into a price of USD 12.75 per mmBtu. e-bidding will happen on February 24. ONGC has offered 0.015 mmscmd of gas from North Karanpura (NK) block in Jharkhand for 3 years. It asked bidders to quote a premium ‘p’ as a percentage of Brent price. The reserve or bid start price has been kept at 11 per cent of Dated Brent price (USD 9.35 per mmBtu at Brent oil price of USD 85 per barrel). Price of gas “shall be higher of the reserve gas price plus quoted premium (p) or floor price plus quoted premium (p),” ONGC said. The floor price will be USD 1 per mmBtu higher than the domestic gas price (which currently is USD 8.57 per mmBtu). The e-auction of ONGC gas will take place on March 2, it said.
Russia To Sell Most Of Its Oil To “Friendly” Countries: Novak
Russia’s Deputy Prime Minister Alexander Novak announced the country’s plans to sell more than 80% of its crude oil exports to “friendly” countries this year. These “friendly” countries include countries such as China and India, which haven’t participated in product bans, sanctions against Russia, and oil and oil product price capping—as well as Sri Lanka, which is in the throes of an economic crisis. While India has been criticized for its Russian crude purchases, it has maintained that it must make good economic decisions by purchasing the cheapest crude oil possible. After India refines the crude into fuel, it is often exported to the United States and Europe. Novak also said that it is these “friendly” countries that will also receive two-thirds of its refined oil products, adding that the country was also on the hunt for new markets. In addition to its war in Ukraine, Russia has undertaken an energy war against the West—mainly European Union member countries—which has resulted in Russia offering its crude oil at steep discounts to the Brent crude benchmark. It also has resulted in Russia’s budget swinging into a $24.7 billion deficit last month, with state revenues from oil and gas falling by nearly 50% as it was forced to slash the price of Urals. Urals has been trading somewhere near $30 per barrel below Brent. Novak warned last week that there was a risk of lower oil production this year on the back of the EU’s import bans and price caps on Russian crude oil and its oil products. Shortly after this statement, the country announced it would cut its crude oil production by 500,000 barrels per day. But Novak said that Russian crude oil production held fast at somewhere between 9.8 million bpd and 9.9 million bpd last month.
Low Natural Gas Prices Could Cause A Supply Crunch
Earlier this month, the benchmark price for U.S. natural gas fell below $3 per million British thermal units for the first time in almost two years. Forecasts are that it will remain below $3 until at least the middle of the year. The natural gas price drop is already forcing producers to taper production plans just as Europe begins to plan for its summer gas storage refill season when demand is expected to surge. Since the start of the year, U.S. natural gas prices have slumped by 46 percent. The number of drilling rigs in gas-rich parts of the shale patch rose by 48 percent in the first half of 2022 but now this trend is about to reverse as oilfield service providers warn they will be moving equipment out of gas fields, Reuters reports, citing Liberty Energy and Helmerich & Payne. The surge in drilling rig additions last year was quite understandable: a whole new LNG export mark opened up in Europe, and prices for U.S. natural gas ended up averaging $5.46 per mmBtu for the year. This was the highest price for the commodity in more than ten years, according to Reuters. Of course drillers would add rigs. But then the warm winter that provided a much-needed break for Europe changed things. With storage sites full to the brim and demand lower than the seasonal average, Europe stopped taking so much U.S. LNG. Winter in the United States itself was, for the most part, warm, keeping domestic demand down as well. Prices, consequently, fell. But this may spell trouble for the future. In Europe, gas prices remain highly volatile and much higher than they were before 2022. Early this month, after a substantial slump, these jumped once again on forecasts for a cold spell across much of the continent. Germany’s chief of the energy market watchdog, Klaus Mueller, once again warned Germans were saving too little gas. In Asia, there are signs of recovering demand, thanks largely to the lower prices at which gas is being sold. With China returning to normal after a series of Covid lockdowns last year, this demand is expected to increase even further. Yet it might not be enough to push prices to where they were last year because demand from Europe may remain lukewarm. Related: Oil Prices Fall On Renewed Inflation Fears The continent is ending winter with more gas in storage than it usually has at this time of the year. This is the result of Europe’s luck with the weather from November to January. And this means it would need to buy less gas to replenish that storage in the spring and summer. According to Morgan Stanley, Europe’s higher-than-usual levels of gas in storage means that the risk of a supply gap for next winter is much lower than previously suspected. The bank’s analysts, as quoted by Bloomberg, actually expect there to be enough gas in storage in Europe to offset the drop in Russian pipeline flows and secure enough gas in storage for winter 2023/24. Russian gas supplies to Europe this summer will be 18 billion cubic meters lower than they were last year, Morgan Stanley said, and Europe will have 29 billion cubic meters of gas in key EU members by the end of March. The figures appear to be based on Russian gas exports to Europe after the flow cuts and the sabotage of Nord Stream, which took 5 cubic meters of pipeline export capacity offline last summer. Yet all this means that U.S. gas prices will remain lower for longer, and if prices remain lower, so will production. And if this year Europe doesn’t have last year’s luck with the weather, prices could surge once again because even the most nimble U.S. gas producer cannot respond to a sharp change in gas demand in a matter of hours. Forecasts about U.S. gas production are already being revised dramatically. Enverus expects growth of 1.7 billion cubic feet daily this year, down from 3 billion cubic feet. The Energy Information Administration expects a lower price for U.S. natural gas this year, which also suggests lower production. Yet the EIA also forecast an 11-percent increase in U.S. LNG exports this year in its latest Short-Term Energy Outlook. It probably hinges on strong demand from Europe. Meanwhile, traders seem to be anticipating a tighter gas market. According to Reuters, gas futures with delivery dates in early 2024 are trading at over $4 per mmBtu. This could, of course, change over the course of the year, but it does suggest some on the market are preparing to benefit from the possibility of a gas supply tightening before too long. The upside potential, however, may be limited. The EIA noted in its STEO that it expected lower domestic gas demand from the industrial sector because of subdued activity, itself the consequence of runaway inflation. The picture is even grimmer in Europe, where exorbitant gas prices last year prompted many businesses to curb activity and downsize. And this means that there will hardly be a repeat of last year’s gas prices situation that encouraged LNG investors to forge ahead with new capacity plans.