TotalEnergies Boosts Its Renewables Business With $1.66 Billion Deal
TotalEnergies is buying out all remaining shares in renewable energy developer Total Eren for $1.66 billion, thus raising its stake in the firm to 100% from 30%, the French supermajor said on Tuesday. The acquisition of the 70.8% stake in Total Eren that Total Energies did not already own is part of the energy giant’s strategy to pursue profitable growth in the renewable energy sector. The deal follows a strategic agreement signed between Total Energies and Total Eren in 2017, which granted Total Energies the right to acquire all of Total Eren after a five-year period. Currently, Total Eren has 3.5 gigawatts (GW) of renewable capacity in operation worldwide and a solar, wind, hydroelectric, and storage projects pipeline of more than 10 GW in 30 countries, including 1.2 GW in construction or late-stage development. “With the acquisition and integration of Total Eren we are now opening a new chapter of our development as the expertise of its team and its complementary geographical footprint will strengthen our renewable activities and our ability to build a profitable integrated power player,” TotalEnergies chairman and CEO Patrick Pouyanné said in a statement. TotalEnergies has recently signed several deals to expand its renewables business in several countries, including in Turkey, Algeria, and Germany. In Turkey, TotalEnergies signed on Monday an agreement with Rönesans Holding to buy a 50% stake in Rönesans Enerji and jointly develop, through this joint venture, renewable projects in Turkey, which is a liberalized growing electricity market. Earlier this summer, the French supermajor extended its partnership with Algerian state firm Sonatrach to cooperate in the development of renewable energy projects in Algeria and signed a collaboration agreement with Petronas’s company Gentari Renewables to develop renewable energy projects in the Asia Pacific region. Earlier this month, TotalEnergies was awarded two offshore licenses in the German North Sea and German Baltic Sea for offshore wind development, with capacity potential of 2 GW and 1 GW, respectively. Germany held a landmark offshore wind tender, in which energy supermajors BP and TotalEnergies won all of the 7 GW capacity on offer. BP secured leases at two North Sea sites off the coast of Helgoland with total generating potential of about 4 GW, while TotalEnergies secured the other two sites.
India may feel oil pinch as Russia looks to lower crude discount to $20/bbl
The finance ministry of Russia is planning to cut the discount to $20 per barrel from $25 that it presently uses to decide taxes on the country’s crude oil exports, Reuters reported citing the Finance Minister Anton Siluanov on Tuesday. The Kremlin had to change the way it taxes oil sales due to several factors including western sanctions over Russia’s invasion of Ukraine. The $60 a barrel price cap on Russian crude exports and the European Union’s import ban are also to be duly noted. In February, a law was signed by the Russian President Vladimir Putin, fixing the discount on Russia’s dominant Urals blend of crude oil for tax calculations. “Now the discount is $25 per barrel to Brent crude, we plan to reduce it to $20 per barrel. We are considering further measures to improve the calculation of taxes on oil exports,” Siluanov told the news site Argumenty i Fakty in an interview published on Tuesday, Reuters reported. While the Russian Finance Minister did not elaborate what measures are being considered, he added that in oil and gas revenues this year, the ministry will collect 8 trillion roubles ($88.5 billion), at the current price of about $80 a barrel. Russia’s crucial oil and gas revenues were 47% lower year-on-year in the first six months, which the finance ministry put down to lower Urals crude prices and reduced natural gas exports. Siluanov also said that by the end of the year, the budget deficit will be around 2%-2.5% of the gross domestic product. “We have enough of resources to meet the planned expenses, and additional ones that arise,” Siluanov said. Combined with Western sanctions and the closure of many financial markets to Russia, significant outlays to support Moscow’s military campaign in Ukraine have been depleting government coffers. On July 21, Reuters reported that Russia may consider introducing quotas on the export of oil products, in an attempt to stabilise gasoline prices globally. Gasoline wholesale prices are currently at an all-time high amid risk-on sentiment in broader markets and signs that Russia is making good on its pledge to curb supplies. Average gasoline prices at Saint-Petersburg International Mercantile Exchange (SPIMEX) rose earlier last week by 1.8% to 62,653 roubles ($694.5) per tonne, reaching a new all-time high. As Russian oil is becoming more expensive, buyers such as India are now considering boosting purchases from traditional sources in the Middle East instead. Adding to supply shortages, Moscow aims to reduce its third-quarter crude export plans by 2.1 million tons, in line with its previously stated pledge to cut overseas shipments by 500,000 barrels a day. Earlier pledges by Russia and Saudi Arabia to cut back production helped spark the rally in crude that started in late June.
The EU Has No Plans To Revise Its Russian Oil Price Cap
The European Union has no plans to revise the $60 price cap imposed on Russian oil exports even though Russian crude is selling above the cap. “There is no movement currently in the Council [of the European Union] with the oil price cap,” an unnamed diplomat from the Baltics told Energy Intelligence. The news outlet noted that officially, the price cap is subject to review once every two months, in order to ensure it is 5% below the market price for Urals. Russia’s flagship Urals crude blend traditionally sells at a discount to Brent, with that discount widening after the imposition of a price cap on all Russian oil exports as part of a sanction push following the invasion of Ukraine. In the past few weeks, however, the discount between Urals and Brent has been narrowing, until this month, when it topped $60. At the time of writing, Urals was trading above $63 per barrel. The Wall Street Journal noted in a report that this price rebound for Urals was evidence that Russia had adjusted to the sanction regime. It would also mean Russia’s oil export revenues would move higher, preventing which was one of the main goals of the price cap. The other goal was to keep global markets well supplied with oil. From its inception, the idea of the price cap, conceived by the G7 last year, had its critics. These argued the goals of the cap are mutually exclusive, while advocates said it is possible to both keep Russia’s revenues lower and exports high. In the end, the outcome has been kind of mixed, with Russia indeed seeing lower export revenues as the price of Urals remained depressed for months. Yet both Russian oil sellers and their clients have been using alternatives to Western shippers and insurers, essentially finding a way around the price cap, which only applies for buyers intending to use Western tankers and insurance coverage. In the past few weeks, however, the discount between Urals and Brent has been narrowing, until this month, when it topped $60. At the time of writing, Urals was trading above $63 per barrel. The Wall Street Journal noted in a report that this price rebound for Urals was evidence that Russia had adjusted to the sanction regime. It would also mean Russia’s oil export revenues would move higher, preventing which was one of the main goals of the price cap. The other goal was to keep global markets well supplied with oil. From its inception, the idea of the price cap, conceived by the G7 last year, had its critics. These argued the goals of the cap are mutually exclusive, while advocates said it is possible to both keep Russia’s revenues lower and exports high. In the end, the outcome has been kind of mixed, with Russia indeed seeing lower export revenues as the price of Urals remained depressed for months. Yet both Russian oil sellers and their clients have been using alternatives to Western shippers and insurers, essentially finding a way around the price cap, which only applies for buyers intending to use Western tankers and insurance coverage.
Subsidy On Petroleum
Government is committed to ensure access to affordable and clean energy to all. It has been endeavour of the Government to encourage usage of cleaner fuels like Compressed Natural Gas (CNG)/Piped Natural Gas (PNG), Liquefied Petroleum Gas (LPG), Compressed Bio Gas (CBG), BS IV Grade Petrol and Diesel, Ethanol Blended Petrol, Sustainable Aviation Fuel etc. in the country. Government of India is determined to promote usage of natural gas, as a fuel across the country, and to increase its share in primary energy mix from around 6.7 % to 15 % by 2030. As a major step towards its objective to provide cleaner fuels to households, Government launched Pradhan Mantri Ujjwala Yojana in May 2016, under which adult women from poor households are provided a deposit free LPG connection. Till December 2022, 960 million PMUY connections have been provided to poor households in the country. The coverage of LPG in country has gone up from 62 % in 2016 to almost 100% as on today. Number of active domestic LPG consumers have increased from 145.2 million on 01.04.2014 to 315 million as on 01.07.2023. Traditionally, rural population in India had been mainly using fuels such as firewood, coal, cow-dung, kerosene etc. for domestic cooking. It was primarily, due to issues relating to affordability, accessibility, and awareness. These traditional cooking fuels however cause significant harm to health and environment. To increase LPG usage amongst PMUY households, Government has started a targeted subsidy of Rs 200 per 14.2 Kg domestic LPG refill for upto 12 refills per year for 2022-23 and 2023-24 for PMUY beneficiaries. As a result of steps of the Government and Oil Marketing Companies to encourage LPG usage amongst consumers, per capita consumption of LPG by PMUY households has gone up from 3.01 refills in 2019-20 to 3.71 refills in 2022-23. The funds allocated for Direct Benefit Transfer for LPG (DBTL) Scheme (Budget Estimates) for 2023-24 are same as funds for 2022-23 (Revised Estimates) at Rs. 1800 million. Government reviews its budgetary requirements during the course of year based on emerging situations and expenditure position. For instance, the funds allocated for PMUY for the year 2022-23 at Budget Estimates stage were Rs. 8 billion which were revised to Rs. 8.010 billion at Revised Estimates stage. Further, to insulate domestic LPG consumers from fluctuations in international prices, Government continues to modulate the effective price to consumer for domestic LPG. During Covid Pandemic, Government had also provided about 141.7 million free LPG refills to PMUY households under Pradhan Mantri Gareeb Kalyan Package during 2020. To increase awareness of benefits of the usage of LPG, Government and OMCs have been organising massive awareness programmes through print, electronic and social media. LPG consumers including PMUY beneficiaries can book a refill by various methods including Interactive Voice Response System(IVRS), Short Message Service(SMS), Whatsapp, calling directly on the phone of distributor, e-commerce platforms, OMC mobile applications, OMCs web-portals etc. Further, OMCs continuously expand the distribution network by commissioning new LPG distributorships.
U.S. Shale Slowdown Weighs On Oilfield Services
The first signs of a slowdown in activity in the U.S. shale patch emerged earlier this year as declining oil prices prompted drillers to reduce the number of active rigs. Then data suggested that well yields were also dropping—a sign of potential natural depletion that would make drillers think twice before going all in on output expansion. Now, the financial results of oilfield service providers are adding to the growing body of evidence that despite the EIA’s upbeat forecasts about record oil production, the industry was going its own way—and it is the way of caution. The Financial Times reported that the reduced drilling activity that the Dallas Fed Energy Survey reported earlier this year was beginning to affect the financial performance of the companies that actually carry out that activity. The report cites Liberty Energy’s Chris Wright as saying on a call with analysts, “During the second quarter, we saw reduced frack activity that resulted in increased white space in our calendar.” In the presentation of the company’s results, Wright also forecast lower activity in the U.S. shale patch over the second half of the year as a whole. This interestingly coincides with a recent production update from the Energy Information Administration. Earlier this year, the EIA consistently predicted a new record high for U.S. oil production thanks to the shale industry. Now, it has changed its tune. In May, the EIA predicted that U.S. shale oil output would hit a record in June, at 9.5 million bpd. A month later, the agency reported in its June edition of the Drilling Productivity Report total estimated production for the month of 9.37 million bpd. Output then inched up in July to some 9.42 million bpd across the big shale basins, but now the Energy Information Administration forecasts a decline in August to 9.397 million barrels daily. “It is hard to be in the production business these days.” This is what one of the respondents to the Dallas Fed’s quarterly energy survey said in comments published with the second-quarter edition of the report. It found more signs of a slowdown as well as increased cautiousness among industry executives when production growth was concerned. “Our country’s leadership for the last two years has created a lot of uncertainty in the energy sector. The crystal ball says that this same leadership over the next two years will maintain that uncertainty and it will grow exponentially,” another executive said for the survey. Indeed, uncertainty seems to be here to stay, discouraging ambitious growth plans, especially in the context of cost inflation that, despite some encouraging signs from monthly CPI readings, is far from comfortable for many players in the shale field. “The environment in North America has levelled off and we’re hearing some of the customers requesting discounts, particularly in the more commoditised markets like pressure pumping,” Baker Hughes’ chief executive Lorenzo Simonelli said, as quoted by the Financial Times, confirming the perception of a slowdown despite relatively high oil prices on international markets. There is also the gas conundrum to consider in the shale patch. Last year, thanks to the energy crunch in Europe, U.S. gas prices reached as high as $9 per mmBtu at one point. Now, that’s collapsed to less than $3 per mmBtu. Gas rigs, therefore, are also declining in numbers. The great thing about shale oil and gas is that producers can respond relatively fast to changes in demand patterns. The trouble is that demand uncertainty is plaguing the industry. It will continue to plague it until it becomes clear one way or another if the world is going into a massive recession or if it will just be Germany and the rest of the eurozone. The more important factor over the longer term is well inventory. As the Wall Street Journal reported earlier this year, there has been concern among industry executives that the best inventory has been drilled through. It is, indeed, a concern that has been voiced repeatedly by Scott Sheffield, Pioneer Natural Resources’ CEO. “Most companies are drilling tier two and tier three inventories now,” having tapped their best prospects, Sheffield told Reuters in an interview in January. “Less quality production is coming out of the Permian, out of the Bakken.” With such a combination of factors—lower inventory quality, higher costs, demand uncertainty, and an anti-industry government—it would be nothing short of reckless to keep boosting production. So, the U.S. shale industry is doing what any industry would do under the circumstances, curbing production growth and waiting for signs that any growth-discouraging factors are about to change. The risk: a global supply squeeze. “If you still believe the global demand picture for oil is higher over the coming years and the US isn’t growing the way it used to . . . everywhere else has to fill that void,” Raymond James analyst Jim Rollyson told the FT last week.
RIL, BP ramp up KG-D6 gas output
Indian private-sector refiner Reliance Industries (RIL) and BP have raised gas output from “difficult fields” located in the KG basin off India’s east coast during April-June. RIL and BP ramped up production from the fields to 20.9mn m³/d of gas, as the two companies commissioned the MJ field during the period, RIL said in its earnings call on 21 July. The firm has two more wells to come on stream and is on track to achieve gas output from the KG-D6 block at 30mn m³/d during 2023-24, accounting for 30pc of India’s overall gas production, it added. India produced 34bn m³ of natural gas in April 2022-March 2023, preliminary oil ministry data show. RIL and BP have signed several gas sale and purchase agreement with fertilizers, city gas distribution, power, refinery, steel, and ceramics after conducting two rounds of e-auctions for a cumulative volume of 11mn m³. Their gas price realisation also remains higher by 11pc on the year at $10.81/mn Btu during April-June, but was lower by 5.1pc on the quarter as the government lowered the ceiling price at $12.12/mn Btu from $12.42/mn Btu earlier. RIL and BP have jointly developed three main gas fields in the KG basin. RIL owns around 67pc of the KG-D6 fields, with the rest owned by BP. RIL expects gas price volatility to continue this year, particularly because of high storage levels in Europe and higher nuclear output from Japan and France as well as demand recovery in China. RIL posted a consolidated net profit of Rs182.58bn during April-June, down by 6pc on the year owing to weak oil-to-chemical (O2C) demand following a decline in fuel cracks, weak petrochemical demand and a fall in crude oil prices. RIL’s revenue from the O2C business was at Rs1.33 trillion over April-June, down by nearly 18pc from a year earlier, the company said in a stock exchange filing. RIL’s refinery throughput was at 19.7mn t (396,000 b/d) during April-June, largely unchanged from January-March and from April-June 2022. It said that the impact of the cyclone Biparjoy was minimised because of depleted inventory and as two shutdowns of the FCC hydrotreater and Dahej cracker had been completed in the April-June quarter.