OVL gets extension for five projects
ONGC Videsh, the overseas arm of Oil and Natural Gas Corporation, has received an extension for five projects in Myanmar, Bangladesh, Vietnam, South Sudan and Columbia, which would give the firm more time to explore and boost its growth plans, according to people familiar with the matter. Some of the projects for which ONGC Videsh has received an extension have already started production. An extension means an increased probability of making new discoveries in the exploration acreages. ONGC Videsh has stakes in 32 oil and gas projects in 15 countries. In some cases, it is the operator leading the exploration and production efforts for all stakeholders. In Colombia’s CPO-5 block, which ONGC Videsh operates, production has picked up and is expected to soon touch 25,000 barrels per day, a person familiar with the matter said. Similarly, production at its projects in South Sudan has recovered to a large extent after a devastating flood last year. ONGC Videsh has been present in Myanmar, Bangladesh, Vietnam, South Sudan and Columbia for years. In some projects, it has made discoveries and also put them into production while in others, it is looking for a commercially viable find. The massive Mozambique gas project in which ONGC as well as a few other Indian state-run firms are invested has yet to take off due to the security situation in that country. ONGC Videsh has been looking to invest in new oil and gas projects in West Asia, Africa and South America but would prefer fields that are already producing or may do so in the near term. The company doesn’t want to be left with stranded assets when the demand sharply shifts away from fossil fuel to other sources of energy and so is seeking to lower its risks by investing in projects with near-term monetisation opportunities and by partnering with global companies in projects.
Can Turkmenistan Become An Important Gas Supplier For Europe?
In recent months, traditionally isolationist Turkmenistan has begun to make efforts to open up more to the outside world. As a result, intense competition has ensued among key actors, including Russia, China and the United States, for access to Turkmenistan’s transportation routes and energy resources (see EDM, May 11). One consequence of Ashgabat’s opening has been the revival of interest in establishing the Trans-Caspian Pipeline (TCP) to transport Turkmenistani energy to Europe. In late December 2022, Turkish President Recep Tayyip Erdogan announced Ankara’s intentions to begin work on transporting Turkmenistani natural gas to Western markets. At a trilateral summit between Turkey, Turkmenistan and Azerbaijan, all sides agreed to cooperate on developing the necessary infrastructure for supplying Turkmenistan’s gas to Europe, including the development of the proposed TCP with an estimated cost around $5 billion, a proposed length of 300 kilometers and an annual capacity of 30 billion cubic meters (Daily Sabah, December 14, 2022). The pipeline would run from Turkmenbashi to Baku along the bottom of the Caspian Sea and connect to the Southern Gas Corridor (SGC), allowing Turkmenistani gas to flow into Europe (Aktualinfo.org, April 27, 2022). The TCP has been postponed for a number of years due to various problems; nevertheless, its construction could be significant in bringing energy balance to the region. It is no coincidence that Turkish Foreign Minister Mevlüt Çavu?o?lu and US Assistant Secretary of State for South and Central Asian Affairs Donald Lu have expressed optimism about Turkmenistan’s prospects for supplying gas to Europe in recent months (Trend.az, March 16). Previously, at a conference in the United Arab Emirates, Turkmenistani officials had mentioned their country’s plans to build a pipeline through Azerbaijan to Europe. Turkmenistan has also shown an interest in the TCP by participating in various ministerial meetings of the SGC Advisory Council (Minenergy.gov.az, February 29, 2020). The convention on determining the legal status of the Caspian Sea, signed at the fifth summit of the Caspian states in Kazakhstan on August 12, 2018, allows for the construction of underwater gas pipelines by mutual agreement of the states through whose waters the pipeline would run (Azatlyk Radiosy, August 16, 2018). As a result, Turkmenistan and Azerbaijan can proceed with the TCP initiative on their own without any third-party involvement. The signing of a memorandum of understanding between Azerbaijan and Turkmenistan on the joint exploration, development and exploitation of hydrocarbons in the Caspian Sea’s Dostluk Field in 2021 has increased the chances of this pipeline coming to fruition. In truth, the EU has been working for decades to build the TCP as the final piece of the SGC to transport natural gas from the Caspian to Europe. Importantly, the pipeline would bypass Russia and transport Turkmenistani gas without Russian control. The project was even included in a recent list of projects of common interest for the European Commission, underlining its strategic importance (Turkmenportal.com, January 1, 2021). However, the EU’s desire to expand cooperation with Central Asia, particularly through the TCP, is facing severe challenges. European countries are not willing to enter into long-term contracts for gas supplies due to their goal of stopping gas imports altogether in 10 to 15 years (Lenta.ru, November 21, 2022). For over 20 years, finding primary investors for this project has been difficult. Even so, the EU and US have declared their willingness to help attract investment. As a result, US-based company Trans Caspian Resources has shown an interest in funding the project (Sputnik, December 23, 2022). As expectations are high for the potential transit fees that could be gleaned from this project, Azerbaijan, Georgia, and Turkey are actively working toward the realization of the TCP. Additionally, Azerbaijan and the EU have made proposals to Turkmenistan regarding the transportation of its natural gas. However, Baku has declared that, as the TCP is based on Turkmenistan’s resources, Ashgabat should take the lead in making key decisions regarding further development (Newscentralasia.net, November 28, 2022). Nevertheless, Azerbaijani President Ilham Aliyev announced, in November 2022, Baku’s intentions to broaden cooperation with Ashgabat on various energy projects, including within the framework of the Middle Corridor. Another recent impetus for the TCP’s construction is the discussion to create a gas hub in Turkey from where energy resources will be supplied to European markets in greater quantities. Ankara understands the potential benefits of becoming a major transit country, with the goal of attracting natural gas from additional sources, including from Turkmenistan, and acting as an intermediary for deliveries to Western markets (Daily Sabah, December 14, 2022). Until now, Moscow had monopolized the gas transit routes from Turkmenistan, which it had obtained during the Soviet era, to cheaply re-export gas supplies to Europe and impede any efforts to construct alternative routes that might circumvent Russia (Mitsui.com, January 31, 2020). As the EU is now pushing more fervently for the implementation of the TCP project, Russian Foreign Minister Sergei Lavrov has openly criticized this move, suggesting that the issue should be solved among the Caspian littoral states only. Moreover, Iran opposes the project for alleged environmental reasons and has alternatively offered Turkmenistan the use of Iranian infrastructure, neglecting to mention that its poorly developed pipeline network cannot handle large volumes of gas (Radio Free Europe/Radio Liberty, August 15, 2019). At the same time, Turkmenistan significantly relies on Russia for its security. Yet, due to the instability brought on by Russia’s re-invasion of Ukraine in February 2022, which caused Turkmenistan to turn to China as one of its only export destination, Ashgabat realizes the need to diversify its energy partners (Aktualinfo.org, April 27, 2022). Thus, the TCP presents a crucial means by which Turkmenistan could achieve this diversification. Additionally, as of late, Russia has become China’s primary fuel provider, which makes opening westward ever-more attractive to Turkmenistan. Turkmenistan views the TCP project as an exceptional chance to develop its domestic energy industry. As such, it is no surprise that Batyr Amanov, chairman of the Turkmengaz State Concern, highlighted the importance of the SGC in diversifying energy supplies for the
Traders Grow Even More Bearish On Oil
Despite expectations of a tightening oil market later this year, hedge fund managers and momentum traders continue to be bearish on crude and continue to dump bullish bets. Portfolio managers are now the most bearish on crude oil futures and options in more than a decade as economic concerns and the stalemate in U.S. debt ceiling negotiations are trumping fundamentals. Those fundamentals are now more supportive for price after the latest OPEC+ cut and forecasts that the oil market will see a widening deficit by the end of this year. Yet, near-term concerns about the economy and the growing fears of recession – coupled with the debt ceiling saga – have dictated the positioning of the money managers in the latest reporting week to May 16. And the positioning is not reflective of expectations of a tighter market at all. Across the most important petroleum futures and options contracts, hedge funds’ positions indicated the most bearish sentiment toward petroleum since 2011, according to Bloomberg’s estimates. Selling in crude oil futures and options began in the middle of April, when the OPEC+-fueled rally in prices gave way to renewed macroeconomic concerns. Traders expect a recession, while the U.S. banking sector turmoil, the looming deadline for an agreement on raising the debt ceiling, and signs of a patchy economic recovery in China have also weighed on market sentiment. Moreover, U.S. diesel demand and prices have weakened this year as freight and industrial activities have slowed amid higher interest rates and falling consumer demand for goods. Oil prices booked their first weekly gain last week after four consecutive weeks of weekly losses, snapping the longest weekly losing streak since November 2021. But money managers continued to sell crude contracts. “ICE Brent settled 1.9% higher over the last week, which has left it trading above US$75/bbl. Despite this, speculators remain negative towards the market with the net speculative long in ICE Brent falling by 6,020 lots over the last reporting week to 106,722 lots as of last Tuesday,” ING strategists Warren Patterson and Ewa Manthey said on Monday. “This is the smallest position that speculators have held this year. Looking deeper into the data reveals that the move was driven by longs liquidating, while the gross short position is fairly sizeable at 94,880 lots.” The selling in crude oil extended to a fourth week in the week to May 16, with the combined net long position – the difference between bullish and bearish bets – in WTI and Brent cut by another 17,600 lots to around 267,000 lots, Ole Hansen, Head of Commodity Strategy at Saxo Bank, said, commenting on the commitment of traders reports. The net long is now near the low seen after the mid-March banking crisis and just ahead of the surprise OPEC+ announcement of additional cuts. The net short position in ICE gasoil was reduced, thanks to improved refinery margins, while the ULSD benchmark diesel futures for fuel delivered into New York Harbor returned to a net long after falling into a net short position in the previous weeks, Hansen said. The bearish mood among money managers contrasts with expectations of investment banks and forecasters that the market will become increasingly tighter as the year progresses. Oil prices will return to above $80 per barrel in the second half of this year and could continue rising toward $90 due to a deepening supply deficit, according to Bank of America. Analysts in the latest monthly Reuters survey also see prices rising toward $90 per barrel by the end of this year, driven by Chinese demand and a tightening market following OPEC+’s latest production cuts. The International Energy Agency (IEA) last week said that the decline in oil prices over the past few weeks contrasts with an expected tightening of the market later this year when demand is set to exceed supply by nearly 2 million barrels per day (bpd). Despite these forecasts, hedge fund managers are focused on the near-term drivers of oil, all of which are bearish—recession, debt ceiling, and patchy recovery in China. Ed Moya, senior market analyst at OANDA, said on Friday, “The Chinese economic recovery is struggling and that has been kryptonite for any oil rallies.”
Bangladesh finds gas
The Bangladesh government on Monday announced the discovery of a new gas field in the southern district of Bhola. State Minister for Power, Energy and Mineral Resources Nasrul Hamid formally announced Bhola’s Ilisha-1 as the country’s 29th gas field, reports Xinhua news agency. Ilisha-1’s daily production is around 20 million cubic feet, said Hamid, adding that it’s believed that it has a reserve of 200 billion cubic feet of gas. The whole Bhola area including Ilisha-1 has a reserve of 3 trillion cubic feet of gas. The gas field was discovered by the state-run Bangladesh Petroleum Exploration Company (BAPEX), which discovered over a dozen small- to medium-sized gas fields. Bangladesh previously had 28 gas fields, with the latest one in Zakiganj in Sylhet, some 240 km northeast of the capital Dhaka, discovered in August 2021. The country’s 27th gas field was also discovered in Bheduria of Bhola, an offshore island covering an area of 3,403.48 sq km and about 205 km south of the capital Dhaka, which boasts hundreds of billions of cubic feet reserves.
HPCL commissions flare stack at CBG Budaun Plant using raw biogas
State-owned HPCL in a tweet on Monday said that it has accomplished yet another significant milestone in its journey towards sustainable energy solutions with the successful commissioning of the Flare Stack at its CBG (Compressed Biogas) plant in Budaun. This achievement marks HPCL as the first Public Sector Undertaking (PSU) to commence the production of biomass-based biogas at a self-owned commercial-scale CBG plant, the tweet added. HPCL’s latest accomplishment at the Budaun CBG Plant is a significant step towards meeting the nation’s energy requirements in an eco-friendly manner. The plant will process biomass feedstock to produce biogas, which will subsequently undergo a cleaning and compression process to meet the quality standards necessary for its use as vehicle fuel. Further, the tweet also added, “On Plant stabilisation, the biogas will be cleaned and compressed to be used as vehicle fuel.”
IOC, ONGC arm call off Kenya field stake talks
IndianOil (IOC) and partner ONGC Videsh have called off talks for buying a stake in Tullow Oil’s Lokichar oil field in Kenya, a deal that was estimated last year to be worth about $2 billion. People in the know said the decision to end discussions lasting several months was taken after senior executives from the two Indian suitors visited Kenya in July last year. They, however, did not disclose the reason for pulling out. Tullow has an Indian connection in company chief executive Rahul Dhir, who headed Cairn India at the time the Indian arm of the then independent Scottish explorer made one of India’s largest on-land oil and gas discoveries in Rajasthan’s Barmer district. Cairn was acquired by Vedanta in 2011 and merged with the parent in 2017. IndianOil had in March 2022 shown some interest in acquiring a stake in the project. But those initial contacts with Tullow withered – perhaps because of the project and investment size. Subsequently, IndianOil roped in ONGC Videsh, which brings on the table expertise in operating oil fields.
Domestic crude oil production falls 4%, natural gas declines 3% in April: Oil ministry data
Domestic crude oilproduction fell 4% and natural gas output declined 3% in April from a year earlier, the oil ministry data showed on Monday India imported $1.4 billion worth of natural gas in April compared to $1.3 billion in the year-ago period. Crude oil imports dropped to $10.8 billion in April from $16.8 billion in the same month last year on lower volumes as well as prices. In volume terms, India’s crude imports fell 8% in April. Production of petroleum products also fell by 1% while its consumption declined by 0.2%.