German Federal Government Signals Energy Crisis Aid Is Not Sustainable
Germany’s government has warned local authorities that the money it has been distributing amid the energy crisis since last year will not become a new norm. “All of this burden sharing is based on decisions taken in exceptional political and economic situations,” deputy finance minister Luise Hoelscher said in the ministry’s regular monthly report, as quoted by Bloomberg. “It’s clear that it cannot be the yardstick for coping with future challenges,” Hoelscher also said. “The financial situation of the federal government has in fact deteriorated considerably in recent years compared with the financial position of the states.” The federal government of Germany incurred a budget deficit of more than $130 billion in 2022 (129.3 billion euro) largely as a result of pandemic aid and financial support for companies, households, and local governments amid the energy crunch that squeezed the country last year. Despite the aid, the largest German state, North Rhine-Westphalia, was forced to declare an emergency situation last November in order to be allowed to take on new debt to survive. North Rhine-Westphalia, home to 20 of the 50 largest German companies, declared an “extraordinary emergency situation” in order to be able to access more loans which would otherwise be denied to the state because of a rule on how much debt a state can borrow Germany last year doled out as much as 270 billion euros, or close to $290 billion, to protect consumers from the worst effects of the energy crunch, topping the spenders’ list in Europe, including the UK. The European Union’s total bill for energy aid to businesses and consumers came close to 700 billion euro, or about $720 billion. Some EU member states were not really happy with Germany’s generosity, accusing it of gaining an unfair advantage for its businesses thanks to its deeper pockets.
U.S. Oil Exports To Europe Hit Record High
U.S. crude oil exports to Europe hit a record high in March, due to a wide WTI to Brent discount in January which prompted many spot deals for the cheaper U.S. crude, analysts and tanker-tracking firms told Reuters this week. The U.S. has shipped so far in March a record 2.1 million barrels per day (bpd) on average of crude oil to Europe, according to estimates cited by Reuters. In January, the discount of the U.S. benchmark, WTI Crude, to the international benchmark, Brent, widened to over $7 per barrel at the end of the month, as U.S. refineries processed lower volumes of crude after the Winter Storm Elliott at the end of December shut refineries on the U.S. Gulf Coast for several days. At the end of December 2022, as much as 1.5 million bpd of the U.S. Gulf Coast’s refining capacity was shut down due to the freezing temperatures. Refineries run by Motiva Enterprises, Marathon Petroleum, and TotalEnergies outside Houston were shut. Operations at other refineries in Texas, run by ExxonMobil, Valero Energy, and LyondellBasell, were also disrupted by the severe winter storm. As a result, demand for crude from U.S. refiners was lower in January, when the cargoes arriving in Europe in March were likely contracted. Many refiners have also said they would enter longer periods of scheduled maintenance, further reducing domestic U.S. crude demand. “Oil majors and independent refiners alike have warned of a heavy US maintenance period to start the year. For many refiners, H1 2023 is a chance to catch-up on much needed regular maintenance as numerous refiners deferred larger maintenance projects in recent years amidst the pandemic and record margins,” Wood Mackenzie said in a recent report. Some U.S. grades have seen their prices go up, due to the higher export demand. For example, the price of WTI Midland has jumped by almost 50% so far in 2023 compared to Q4 2022, while the price of WTI at East Houston has increased by around 30%, according to Reuters estimates.
India plans to extend fuel export curbs beyond March
Indian Oil Corporation (IOC) is the country’s largest oil marketing (OMC). It Is also the largest refiner. Of Late, it has been moving towards cleaner fuel, natural gas. It has quite a few landmark achievements in the area. India plans to extend restrictions on the export of diesel and gasoline after the current fiscal year ends this month to ensure the availability of refined fuels for the domestic market, two government sources with direct knowledge of the matter said. The extension of rules may discourage some Indian refiners, mainly private companies, from buying Russian fuels for re-exports to countries including those in Europe that have stopped purchases of refined products from Russia due to its invasion of Ukraine. India, the world’s third-largest oil consumer, imposed a windfall tax on refined fuel exports last year and mandated that companies sell the equivalent of 50% of their gasoline exports and 30% of their diesel exports domestically in the current fiscal year to March 31. New Delhi issued the rare restrictions after private refiners Reliance Industries (RELI.NS) and Nayara Energy, key Indian buyers of discounted Russian supplies, began reaping major profits by aggressively boosting fuel exports instead of domestic sales.
Gail inks ethane supply deal with Shell Energy
Indian state-controlled gas distributor Gail has signed an initial agreement with Shell Energy India to import ethane, as part of feedstock diversification for its petrochemical plant. It is unclear how much ethane Gail is seeking to import from Shell Energy India. But Gail had expressed interest in importing US ethane in February, for 20 years starting from mid-2026 on very-large ethane carriers with a capacity of 80,000-99,000m³, for its petrochemical plant in Pata, Uttar Pradesh. The 810,000 t/yr polymer-producing plant reached its full capacity utilisation in February using LNG from alternative sources, the company said in an exchange filing. Gail was referring to sources other than Russia after imports from state-controlled Gazprom fell sharply following the Russian invasion of Ukraine. Gail faced a gas shortage last year following a disruption in supplies from Gazprom, which led to it having to reduce output at the Pata plant by 40pc and even shut it down during October, with only a partial facility operating later in the year, Gail’s director of finance Rakesh Jain told investors in January. The firm is looking for alternative fuel supplies for the Pata plant on a long-term basis, he added. The ethane imported via Shell Energy with be transported to demand centres through Gail’s 14,830km of natural gas pipelines. Despite the recent decline in natural gas prices, Indian petrochemical producers are not completely relying on gas, but eyeing different feedstock such as ethane and naphtha as part of feedstock diversification, according to market participants. Private-sector Reliance Industries also has been optimising naphtha and ethane as feedstocks for its polymer production. Ethane is produced in large volumes in North America because of the US shale gas revolution, which generated an abundance of LNG and LPG.
How India’s gas companies benefit from halving of Spot LNG prices
A sharp 50 percent decline in spot LNG prices to $14 per MMBtu is a clear positive for most Indian gas companies, according to brokerage firm CLSA Indian city gas distributors such as Indraprastha Gas Ltd. (IGL), Gujarat Gas Ltd., and Mahanagar Gas Ltd. (MGL) should see strong margins in the last quarter of the current fiscal due to the halving of spot LNG prices compared to that in December, according to the brokerage. High gas prices have hit the margins and earnings of the city gas companies in past quarters. As the gas companies resorted to price hikes following an increase in international gas prices, their volumes were hit due to a reduced price gap between CNG and piped natural gas and other fuels like diesel. CLSA mentioned that due to the decline in the prices, the demand for LNG has rebounded by 2-3 percent on a monthly basis. The brokerage expects that higher demand is likely to drive a volume recovery in the January-March quarter for gas distributors Gujarat State Petronet Ltd., Petronet, and GAIL. Also, a unified tariff is likely to be implemented within two weeks, CLSA said. The oil sector regulator, PNGRB, this month proposed to raise the average tariff across all pipelines for GAIL by 41 percent. CLSA said that the unified tariff could drive a 50 percent hike in GAIL’s integrated pipeline tariff which will boost its margins and profits. GAIL shares are trading 0.14 percent lower at Rs 110 and Petronet LNG shares are trading 0.54 percent lower at Rs 231.30. GSPL shares on the other hand are trading 1.57 percent higher at Rs 274.25. Shares of city gas companies like IGL, Gujarat Gas, and MGL are also trading lower by up to 2 percent.