Indian companies sometimes face delays in paying for Russian oil above $60/bbl: Oil secretary
Indian companies “sometimes” face delays in paying for Russian oil priced above the $60 cap per barrel fixed by the Western nations, India’s oil secretary Pankaj Jain said on Monday. “Nobody stops us from buying Russian oil at above the price cap level provided. We are not using western service,” Jain told reporters on the sidelines of an event. In case of Russian oil priced above the cap, the companies on their own manage to find alternative mechanisms to settle payments, he said, adding most Russian oil supplies to India are made at below the price cap level. He also said India is seeking to buy oil at discounts from other countries depending on grades. India has significantly increased oil imports from Russia since the beginning of the conflict in Ukraine.
Oil & Gas In The Age Of Climate Change
Rising sea levels, wild-fires, heat waves and extreme weather events are already wreaking havoc everywhere and could cost the global economy hundreds of billions of dollars in crumbling infrastructure, reduced crop yields, health problems, and lost labor. When most people think about climate change, the oil and gas industries tend to take the lion’s share of the blame due to their high levels of CO2 and GHG emissions. Few people, however, pause and consider that the same ecological fallout that is hurting communities is also taking a toll on the fossil fuel industry. Climate change is making it costlier for oil and gas companies to operate. Indeed, climate-related?supply threats have already begun to manifest in the oil and gas industry, with more than 600 billion barrels equivalent of the world’s commercially recoverable oil and gas reserves, or 40% of total reserves, facing high or extreme risks. According to UK-based global risk and strategic consulting firm Verisk Maplecroft, the risk of?climate related events disrupting?the flow?of oil?to global markets?is highest in Saudi Arabia, Iraq and Nigeria. This revelation is worrying considering growing signals of peak oil supply. A growing number of U.S. industry executives expect US. oil production to peak within the next five or six years while others think the peak will come much earlier, Expectations for another shale boom are quickly dying thanks to rising costs as well as limited supplies of labor and equipment hamstringing efforts by U.S. shale producers to quickly ramp up production. Thankfully, the oil and gas industry is committing itself more to efforts aimed at slowing down climate change. The Carbon Capture Opportunity While trees and other plants naturally remove carbon dioxide from the atmosphere, most climate change experts now agree that we are just not capable of planting enough, fast enough, to limit the damage. Carbon capture is one technology that has been proposed to limit global warming and climate change. Both the Intergovernmental Panel on Climate Change (IPCC) and International Energy Agency (IEA) consider carbon capture, utilization and storage (CCUS) an ideal solution for many hard-to-abate sectors such as aviation, hydrogen production and cement from fossil fuels. Unfortunately, the world has fallen woefully short when it comes to investing in CCUS: according to the International Energy Agency (IEA) there are only 35 commercial facilities globally that are applying CCUS to industrial processes, fuel transformation and power generation, with a total annual capture capacity of ~45?Mt?CO2. However, McKinsey estimates that global CCUS uptake needs to be 120x higher, rising to at least 4.2 gigatons per annum (GTPA) of CO2 captured, for the world to achieve its net-zero commitments by 2050. Still, Big Oil is beginning to step up in a big way, even if it is, in the end, more of a way of extending life than contributing to a lessening of the effects of climate change. Over the past few years, Big Oil firms have started investing heavily in CCUS, which many argue is simply Big Oil’s way of extending the life of oil and gas fields because captured carbon is used for enhanced oil recovery (EOR). Two weeks ago, Exxon Mobil (NYSE:XOM) CEO Darren Woods told investors that the company’s Low Carbon business has the potential to outperform its legacy oil and gas business within a decade and generate hundreds of billions in revenues. Woods outlined projections showing how the business has the potential to hit revenue of billions of dollars within the next five years; tens of billions in 5-10 years, and hundreds of billions after the initial 10-year ramp-up. However, whether Exxon is able to actualize its goal will depend on regulatory and policy support for carbon pricing, as well as the cost to abate greenhouse gas emissions, among other changes, Ammann said. Exxon believes that this will result in a “much more stable, or less cyclical” that is less prone to commodity price swings through predictable, long-term contracts with customers aiming to lower their own carbon footprint. For instance, Exxon recently signed a long-term contract with industrial gas company Linde Plc. (NYSE:LIN) that involves offtake of carbon dioxide associated with Linde’s planned clean hydrogen project in Beaumont, Texas. Exxon will transport and permanently store as much as 2.2M metric tons/year of carbon dioxide each year from Linde’s plant. Back in February, Linde unveiled plans to build a $1.8B complex which will include autothermal reforming with carbon capture and a large air separation plant to supply clean hydrogen and nitrogen. SLB New Energy Back in February, oil field services giant Schlumberger Ltd (NYSE:SLB) discussed its newly carved SLB New Energy unit with Bloomberg New Energy Finance (BNEF). According to SLB New Energy president Gavin Rennick, the unit is expected to hit revenue of $3 billion by the end of the current decade and at least $10 billion by the end of the next decade. SLB will focus on five key niches, each with a minimum addressable market of $10 billion.: •Carbon solutions •Hydrogen •Geothermal and geoenergy •Energy storage •Critical minerals Of these segments, Rennick says carbon capture, utilization and sequestration (CCUS) is the fastest growing opportunity thanks to the significant boost it got from the U.S. Inflation Reduction Act (IRA). Occidental To achieve our climate goal, McKinsey has proposed the creation of CCUS hubs, essentially a cluster of facilities that share the same CO2 transportation and storage or utilization infrastructure. Currently, there are only 15 CCUS hubs across the globe; MckInsey estimates that there’s the potential to build as many as 700 CCUS hubs globally, located on, or close to, potential storage locations and Enhanced Oil and Gas Recovery (EOR/EGR) sites. The U.S. government is currently backing four hubs, with two major Occidental Petroleum Corporation’s (NYSE:OXY) projects seen as strong contenders. The government is offering three levels of funding, ranging from $3 million for early stage feasibility studies to $12.5 million for engineering design studies to up to $500 million for projects ready to complete the procurement, construction and operation phases. Swiss start-up Climeworks, which has raised more than
Guyana Refuses To Sell Discounted Oil To India
One of the world’s growing hotspots for crude oil exploration has refused to sell discounted crude oil to India, Guyana’s Vice President Bharrat Jagdeo said this week. Guyana’s crude oil production has increased three-fold from a year ago, with the government of Guyana holding the rights to about 12.5% of the country’s vast oil riches. BP has a one-year contract to market those government-controlled barrels. India has lobbied Guyana for two years—well before Guyana’s oil boom took off, but the two have been unable to come to an agreement, Jagdeo said, adding that any crude oil sales from Guyana to India would “have to be on commercial terms, not a discounted terms.” ndia said it is interested in sourcing discounted crude oil to make up for the increased costs for shipping the crude oil to India. “Guyana crude is costly for us because of high freight. Instead of paying a high freight for their oil, we will prefer to buy oil from the Middle East and east and west Africa,” a person familiar with the Indian traders thinking said, according to Reuters. “Without concessions their crude doesn’t make commercial sense for us.” Despite Guyana’s unwillingness to offer India crude oil on the cheap, the oil-rich nation is eager to invite India to the auction table for its first competitive oil auction, which is scheduled to be held later this summer. In that auction, 14 offshore blocks will go up for bid. India has not said whether or not it will participate. Jagdeo confirmed, however, that although an oil deal has not been reached, it will continue to discuss with India other areas of cooperation, including in agriculture and health.
Four Scenarios That Could Send Oil Prices To $200
It was the talk of the town last year. Traders bet on oil hitting $200 by March this year. Hedge fund managers warned it could even reach $250 before 2022 was over. None of that happened, and in hindsight, it’s easy to see why: global oil markets have time and again proved they are a lot more resilient than traders give them credit for. But is oil at $200 still a possibility? It always is, under certain scenarios. #1 Major Ukraine escalation It was because of Russia’s invasion of Ukraine last year that people started talking about $200. Pierre Andurand went even further, warning that oil could rise to $250 because “I think we’re losing the Russian supply on the European side for ever.” It turned out that the European side is not losing Russian supply but is simply getting it through third countries now, so that’s saved the global economy from a major oil price-induced headache. Oil always finds a way. Yet a major escalation in the conflict, possibly through more direct NATO involvement, could send prices flying high. It’s not certain they would reach $200 even in an escalation scenario because it’s highly unlikely the market could bear this price for any length of time, but it’s not impossible. #2 More OPEC+ cuts As far as chances go, this scenario is less likely than the first one. To get prices to $200, OPEC+ would need to cut much deeper, but more importantly, the group would have to want it. It doesn’t. Because $200 is way too high a price, and it would sap demand. OPEC+ has suggested with its latest moves that its sweet price spot is around $80-90 per barrel, so it is trying to keep prices around that level. Production outages could push oil prices higher, as they invariably do, even when the outage is as small as 400,000 bpd, as we recently saw with the Kurdistan-Iraq export dispute. Yet outages do not move prices so radically as to take them from sub-$90 to $200, so this is an even less likely scenario. An attack on Saudi production facilities could do the trick if it’s very successful, but with the war in Yemen nearing its end after the Chinese-brokered thaw between Riyadh and Tehran, such an attack has become purely hypothetical. #3 Russia production cuts All the $200-per-barrel forecasts from last year had to do with Russian oil. Most forecasters who saw oil rising to $200 cited European and U.S. bans on Russian oil imports as the basis for their forecasts, and at the time, it did seem like a sound basis. Of course, those forecasts never considered the option that Russia would simply switch buyers and Europe and the U.S. would switch sellers, which is exactly what happened. Another thing few considered was Russia cutting oil production in retaliation for Western sanctions. It already has announced certain cuts, but those, some commentators say, are a result of Russia’s inability to pump as much as before rather than deliberate action. Whatever the case with those cuts, the simple fact is that Russia can reduce its production deliberately. And if it does, prices will jump. How high is anyone’s guess, and it would depend on the rate of cuts. As for how likely that is—not very. #4 Underinvestment comes to bite The scenarios outlined so far are more of a mental exercise than realistic scenarios. None of them are particularly likely, even though at least a couple seemed so likely they made traders buy $200 Brent options. Yet there is one more scenario that is a realistic one. It’s not as bombastic as a war, but that makes it all the more dangerous. It is the scenario where consistent underinvestment shrinks supply so much, that prices have nowhere to go but up. Saudi Arabia has been warning about it. U.S. shale producers have been warning about it. And the G7 just declared they would fight “unabated fossil fuels,” which essentially means discouraging more oil and gas production. Of course, that declaration is worth little more than the paper it was written on, and that is the world’s greatest hope that oil will not hit $200 anytime soon, if ever. If those governments get serious about what they call unabated fossil fuels, the world’s oil supply will be at risk. Analysts love to say that the cure for high oil prices is high prices, and they are correct. A very efficient way to control the price of a commodity is to let it rise so much it kills demand. But what happens if that commodity is as essential as oil? Not using oil takes people back through the ages to a simpler but a lot less abundant, wealthy time. Just ask a Kenyan farmer how he likes that. Luckily for all, even the consistent underinvestment in new oil and gas exploration may not be enough to take prices all the way to $200. Because the industry, with the help of technology, will always respond to demand by adjusting production. Underinvestment has made this harder but not impossible. And even the most ambitious G7 government is not ready to impose an outright ban on oil. That would be political and economic suicide.
Reliance Industries to commence deep-sea gas production from MJ field in current quarter
Reliance Industries Ltd is set to commence natural gas production from its deepest discovery in the KG-D6 block this quarter and is expected to cover for 15% of India’s gas demands. KG-D6 block is located off the coast of Andhra Pradesh and is India’s only deep-water block under production. According to an investor presentation after the March quarter earnings, the company reported that it produced an average of 20 million standard cubic meters per day during the January-March quarter.
Asia’s longest oil pipeline laid across B’putra to connect Majuli with Jorhat
The Indradhanush Gas Grid Limited (IGGL) has accomplished the Herculean task of laying Asia’s longest river crossing oil pipeline of bigger size (24-inch diameter and above), which is also the second longest in the world, connecting river island Majuli with Jorhat in upper Assam. The IGGL said the laying of the hydrocarbon pipeline beneath the mighty and aggressive Brahmaputra by horizontal directional drilling (HDD) method was completed on Friday. “With the completion of the Brahmaputra HDD, the IGGL has achieved more that 71% physical progress of the North East Gas Grid (NEGG) project and we will be able to complete the Guwahati-Numaligarh section of the NEGG by February 2024. I’m extremely proud of my team, which has worked tirelessly to achieve this milestone overcoming challenges of monsoon rain and floods in Assam. I am also thankful to the government of Assam, which has been extremely supportive in implementing this project,” Ajit Kumar Thakur, CEO of IGGL, said on Saturday.
India’s dependence on Russian oil soars to 30%
India’s dependence on Russian oil has increased to account for 30% of its imported total in March, according to a Nikkei analysis of shipping data. India, which had previously relied almost exclusively on the Middle East, imported more than 6 million tonnes of Russian oil last month. Western sanctions stemming from Moscow’s invasion of Ukraine have made oil from Russia relatively inexpensive, leading to the shift in procurement. Nikkei analyzed British market research company Refinitiv’s maritime transport data as of April 14 for crude oil, fuel oil and refined petroleum products. Figures reflect the amount transported by tankers from Russian ports to their destination by the end of March. The 30% dependence on Russian oil marked a new high for India since the Ukraine invasion. But the percentage is expected to increase further to 40% to 50% for April, including expected arrivals. In January 2022, Russia accounted for slightly under 2% of India’s imports. China imported over 4.7 million tonnes of Russian oil in March, second only to India. China’s dependence on Russia reached 10%. Russia’s benchmark Urals crude is currently hovering in the $62 range, 20% to 30% lower than the international benchmark North Sea Brent. As part of Western sanctions introduced in December, the Group of Seven major economies and the European Union set a ceiling of $60 per barrel for the trading price of Russian crude oil. If the oil is purchased at a price exceeding this ceiling, the sanctions restrict the necessary insurance policies for marine transportation. More than 90% of such insurance is provided by European companies. With the number of buyers of its crude oil decreasing, Russia has been forced to sell at a discount to India, China and other countries not participating in the sanctions. Russian exports of crude oil and petroleum products have returned to pre-invasion levels, according to an International Energy Agency report in April. India and China are offsetting the decrease in European imports. An analysis of the Refinitiv data shows that global imports of Russian oil in March totaled about 24.2 million tonnes, the highest since the Ukraine invasion. For India, which is under pressure to cope with high inflation, there are advantages to procuring oil at a discounted price. According to the IEA, oil accounted for 25% of India’s energy consumption in 2020, second only to coal at 44%. However, Russian oil takes as much as eight times longer to transport than Middle Eastern oil, making it difficult to respond flexibly to sudden increases in demand. Price increases also pose a risk. Although India and China have not joined the sanctions, they face the prospect of international criticism for continuing to buy Russian oil above the $60 ceiling.