Oman sees 13.5% jump in production of refineries, petroleum industries
The production of refineries and petroleum industries in the Sultanate of Oman increased by 13.5 percent at the end of July 2023, according to a new report. The preliminary statistics issued by the National Centre for Statistics and Information (NCSI indicate that the production of standard grade petrol (M-91) by Omani refineries at the end of July 2023 rose by 31.2 percent to 1.22 million barrels, compared to the same period in 2022. Exports of M-95 fuel decreased by 84.9 percent while exports of gas oil (diesel) amounted to about 11.95 million barrels, an increase of 26.9 percent. The exports of aviation fuel rose by 71.6 percent 4.42 million barrels while exports of liquefied petroleum gas (LPG) amounted to 369,800 barrels. Paraxylene exports reached 311,400 metric tonnes, gasoline 97,500 metric tonnes and polypropylene exports increased by 26.5 percent to 147,000 metric tonnes. NCSI statistics indicate that the production of standard grade petrol increased by 27.1 percent to reach 9.61 million barrels at the end of July 2023 while its total sales amounted to 8.29 million barrels. The production of M95 fuel was estimated at 7.20 million barrels while its sales decreased to 6.90 million barrels. Diesel gas oil production increased by 9 percent to reach 19.86 million barrels, with its sales reaching 8.11 million barrels. Aviation fuel production also increased by 64.6 percent to reach 6.85 million barrels while its sales reached 2.53 million barrels. The liquefied petroleum gas (LPG) production rose by 41.4 percent to reach 4.91 million barrels. With regard to petrochemicals, gasoline production increased by 260.1 percent to 93,500 metric tonnes, paraxylene 305,400 metric tonnes and polypropylene production rose by 14.4 percent to 156,700 metric tonNES
Natural Gas Stands To Win As Offshore Wind Takes A Hit
While the total number of offshore wind projects, both existing and projected, continues to surge, the sector now grapples with typical economic and financial challenges. In recent weeks, offshore wind companies have sounded alarms about escalating product costs, manufacturing expenses, and price volatility, all of which are poised to significantly impact their ongoing and future endeavors. A striking financial upset in recent days came from the Scandinavian offshore wind behemoth, Orsted, which witnessed its stock market value plummet by over 25%, attributed to elevated global cost estimates and potential financial liability issues in the USA. In filings submitted to the New York state regulatory authority, other prominent offshore wind developers, such as Norway’s energy major Equinor and British oil major BP, have officially requested a staggering 54% increase in the price of electricity generated at three planned offshore wind farms. These projects, known as Empire Wind 1, Empire Wind 2, and Beacon Wind, located off the coast of New York, collectively boast a capacity of 3.3GW (3300MW). According to a filing by the New York State Energy Research and Development Authority (NYSERDA), the implementation of Empire/Beacon’s request would result in an average 54% price hike across their portfolio. Specifically, the strike price for Empire Wind 1 is expected to rise from $118.38 per megawatt-hour (MWh) to $159.64/MWh, Empire Wind 2 from $107.50/MWh to $177.84/MWh, and Beacon Wind to a projected $190.82/MWh, compared to its previous rate of $118.00/MWh. Both European developers candidly attribute these increases to “runaway inflation, global supply chain disruptions, and skyrocketing interest rates driven by the COVID-19 pandemic, the Russia-Ukraine conflict, and the accelerating pace of the energy transition.” Let’s zoom in on Orsted, a favorite among ESG (Environmental, Social, and Governance) investors. The Danish company disclosed on August 29th that it would need to book 16 billion Danish crown impairment (equivalent to $2.3 billion) to its U.S. portfolio, resulting in a sharp decline in its share value. Equinor and BP, thus far, have not reported similar impairments. During an earnings call on August 30th, Orsted officials outlined a total impairment of approximately $2 billion. These developments and filings are expected to exert a substantial adverse impact on current and future offshore wind projects in the United States. Rising financing costs (interest rates) and product expenses (turbines and components) are poised to remain persistent challenges. Key industry players have voiced the opinion that while U.S. offshore wind remains a long-term attractive investment, it requires additional government support, primarily through tax incentives or renewable energy credit subsidies. While tax benefits and credits can be favorable tools, the primary concern in the global sector revolves around increased limitations and adverse effects on the supply chain. Analysts have primarily focused on financials and regulatory hurdles, yet the offshore wind sector faces supply chain disruptions far larger than anticipated. The main driver of these cost increases is the sector’s current success and heightened attention, which has overwhelmed supply chains ill-equipped for such demand or lacking adequate investments. As noted by the international consultancy giant Wood Mackenzie, global wind turbine order intake in the first half of 2023 surged by 12% year-on-year, reaching an impressive volume of 69.5GW. Most new clients and projects are originating outside of China, demonstrating a year-on-year order demand increase exceeding 47%, totaling more than 25GW. While China remains the largest market with 44GW, North America and Europe are witnessing significant demand and order projections. With global wind turbine orders reaching $25.3 billion in the second quarter of 2023 and $40.5 billion in the first half of the year, the market appears to be approaching a potential breaking point. The increased demand in the United States, driven by the Infrastructure Investment and Jobs Act, has not been matched by sufficient investments in metals, minerals, manufacturing, and installation capabilities. While onshore wind, still the dominant market, boasts relatively straightforward installation, offshore wind, especially floating platforms, is sensitive to supply chain disruptions. A lack of offshore installation vessels and the infrastructure to construct and transport them are causing mounting project delays. As offshore wind orders continue to surge, posting a 26% year-on-year order increase in the first half of 2023, reaching a record-breaking 12GW, the capacity for offshore orders in the second quarter of 2023 surged by 48% year-on-year. Despite these challenges, some positive news emerges, as several major new projects have been announced. Leading wind turbine manufacturers, such as Spanish-German Siemens Gamesa Renewable Energy (SGRE) and its Chinese rival Goldwind, are poised for record-setting order levels. Nevertheless, global offshore wind is sailing into what appears to be a perfect storm. In July, the Swedish renewable energy group Vattenfall made headlines when it decided to halt the development of a major offshore wind project in the UK. Vattenfall cited increased costs and supply chain issues as the primary reasons. Similar to the USA, higher interest rates and inflationary pressures are impacting future projects. Concurrently, the guaranteed electricity prices for produced power are perceived as insufficient to ensure profitability. Major players like Orsted and others have already cautioned the UK government that investor and operator interest in offshore wind is waning due to significantly higher costs and existing caps on electricity prices. This issue is not unique to the USA but is also increasingly affecting Europe. As indicated by Vattenfall in July, the costs for its Norfolk Boreas offshore wind project increased by 50% in 2023, significantly exceeding agreed-upon inflation-linked fixed electricity prices. As mentioned earlier, supply chains are encountering substantial difficulties. The success story of offshore wind, built on the principle of “bigger is better,” is now facing new challenges. The growing demand for larger wind turbines, potentially reaching capacities of 20-25MW, not only places immense pressure on global turbine manufacturers but also necessitates longer blades. These developments are currently hindered by a shortage of installation vessels, harbor infrastructure, and investor confidence. The latter group harbors concerns about the long-term viability of their investments as the offshore wind boom begins to slow. A fierce competition is underway to increase
LNG Market Grows More Mature, But Supply Risks Remain
European gas prices spiked earlier this month as workers at three LNG facilities in Australia threatened industrial action. Strikes were avoided at one of the facilities, but the danger remained for the other two, keeping a floor under gas prices. But over the past year, attempts have been made to put a sort of a ceiling on gas prices in Europe—and more specifically, LNG prices. The effort is beginning to pay off. Until last year, the global LNG market featured long-term contracts indexed to crude oil futures prices, and spot deals. After Russia invaded Ukraine, the EU started shooting sanctions, and pipeline gas flows began to shrink, LNG suddenly became extremely important for Europe. And that prompted a race to lower the pricing risks associated with the state of the LNG market at the time. That race resulted in the launch of the Northwest European LNG futures contract based on the S&P Global NWM, or Northwest Marker. The LNG market matured fast. Traders in an extremely volatile market could hedge European LNG cargos. They could also no longer care so much about pipeline gas and its price when trading LNG. The reason, once again, was the market disruption caused by the Ukraine conflict, chief among them the decimation of gas flows from Russia, especially after the sabotage of the Nord Stream pipeline. A mature market is a lower-risk market, and this is what has been happening to the LNG market over the past year and a half. This, however, has not really reduced the extent of volatility in that market, as evidenced by the effect that news of the potential strikes at Australia’s top three LNG facilities had on LNG prices, especially in Europe. Hedging is important in trade, but when there is a danger of a supply shortage, all bets are off. And there was a danger of a supply shortage equal to a tenth of total global supply—this is how much the North West Shelf, Gorgon, and Wheatstone produce together. Ultimately, supply and demand continue to trump any other factors traders might use to reduce risks inherent in commodity markets. No doubt, it is good to have a liquid market, and now, thanks to the rise of the Dutch benchmark TTF at the expense of the UK’s National Balancing Point, LNG traders have such a liquid market. Trade is more active than ever and easier than ever, even intercontinental trade with Asia. At the same time, however, prices, whatever benchmark they are based on, remain supersensitive to the threat of potential outages. The good news is that perhaps a repeat of last year’s price spikes may be less likely this year or in the future because of the maturing LNG market. On the other hand, tight supply, in case of a cold Northern Hemisphere winter, could push prices significantly higher during peak demand season. The good news, for now, is that Europe’s gas storage is fuller than usual for this time of the year. Thanks to leftover volumes from last year, which were bought at record prices, and it made no sense to resell them at a huge loss, the continent’s storage is now 92.5% full. This could provide a comfortable buffer in case of an outage, especially if the outage does not last very long. Even with this buffer, however, Europe will continue to be a major rival for Asia in LNG cargos as it has been forced to reduce its reliance on pipeline gas. Demand from Asia is already picking up ahead of the winter season. This season will probably be the first big trial for the new, more mature, global LNG market.
OPEC’s Crude Oil Production Rose Slightly In August: Survey
Crude oil production from the OPEC alliance actually climbed in August by 40,000 bpd, according to a new survey published by Bloomberg on Friday. Saudi Arabia’s output may have fallen in August by 170,000 bpd, according to the survey, but Nigeria and Iran’s production increased, largely offsetting Saudi Arabia’s cuts. Overall, the group produced 27.82 million barrels per day in August, the survey said. Analysts largely expect Saudi Arabia to extend its 1 million bpd supply cut into October, even though crude oil prices rose to 2023 highs on Friday, with WTI reaching $85 per barrel. Saudi Arabia’s extra cut began in July. Saudi Arabia produced 8.98 million bpd in August, according to the survey, while Iran boosted production to more than 3 million bpd, and Nigeria’s reached 1.34 million bpd—an increase of 80,000 bpd according to Bloomberg’s survey data, which is based on ship-tracking data, information from officials, and estimates from firms like Kpler and Rystad. Russia said earlier this week that it had reached another deal with OPEC regarding crude oil supply volumes, promising to provide details of the deal next week. Earlier this week, a Reuters survey had estimated that OPEC’s total production rose in August by 220,000 bpd over July figures—the first rise since February. According to that survey, OPEC’s production reached 27.56 million bpd in August. Production for the 10 members that are part of the supply cut agreements fell by 10,000 bpd in August, the Reuters survey said. The OPEC+ group is set to hold a meeting on October 4, although a full ministerial meeting isn’t scheduled until late in November. The production increase for August comes as a group of 37 economists raised their 2023 oil price forecasts for the first time in four months on the notion that the OPEC+ cuts would offset weak economic growth in China.
After solar alliance, India makes case for biofuels grouping to support energy transition: PM Modi
India’s proposal for a global alliance on biofuels among members of the Group of 20 major economies will help accelerate sustainable biofuels deployment in support of the global energy transition, Prime Minister Narendra Modi has said. The biofuels alliance, which the world’s third biggest oil consumer wants to push during its G20 presidency, mirrors the International Solar Alliance (ISA) piloted by New Delhi and Paris in 2015 to bring clean and affordable solar energy within the reach of all. “Such (biofuel) alliances are aimed at creating options for developing countries to advance their energy transitions,” the Prime Minister told PTI in an exclusive interview late last week. “Biofuels are also important from the perspective of a circular economy. Markets, trade, technology, and policy – all aspects of international cooperation are crucial in creating such opportunities,” he said. Biofuel is a renewable source of energy which is derived from biomass. India, which imports over 85 per cent of its crude oil needs, is gradually building capacity to produce fuel from items including crop stubble, plant waste, and municipal solid waste. “Such alternatives can enhance energy security, create opportunities for domestic industry, and create green jobs – all crucial elements in ensuring a transition that leaves no one behind,” Modi said. While India is on schedule to double the mixing of ethanol extracted from sugarcane and agriculture waste to 20 per cent with petrol by 2025, dozens of compressed biogas (CBG) plants are being set up. The alliance is aimed at facilitating cooperation and intensifying the use of sustainable biofuels, including in the transportation sector. Its focus primarily is on strengthening markets, facilitating global biofuels trade, development of concrete policy lesson-sharing, and provision of technical support for national biofuels programs worldwide.
LPG price cut, Ujjwala expansion could cost over Rs 370 billion annually
The government’s decision to slash domestic cooking gas prices by Rs 200 per 14.2-kg cylinder and expand the Pradhan Mantri Ujjwala Yojana (PMUY) by adding 7.5 million poor households to its beneficiary base could cost upwards of Rs 370 billion on an annualised basis, an analysis of liquefied petroleum gas (LPG) consumer base and average gas refill data suggests. For the computations, it is assumed that the LPG cylinder refill rates will stay at the levels recorded for 2022-23 (FY23) and fuel retailers will continue to sell LPG to households at a price that is Rs 200 lower than what they would have charged for a cylinder had the price cut not been announced. On its part, the government has not provided any estimate of the cost of the twin decisions. Speaking on condition of anonymity, a senior official in the finance ministry said that the actual cost could be somewhat “lower” than this estimate as there are a number of variables in the equation. These include possible over recoveries on LPG sales by fuel retailers, movement in international crude and LPG prices going ahead, and currency fluctuations. The official, however, did not provide any estimation of what the actual cost might be. The government on Tuesday announced the price cut, which was implemented by public sector oil marketing companies (OMCs) on Wednesday. While the government has so far not officially clarified whether or not it plans to foot the bill for this price reduction, which will benefit over 310 million domestic LPG consumers in the country, the finance ministry official quoted above said that OMCs will bear the impact of the price cut. The official, however, clarified that the government will cover the Ujjwala subsidy of Rs 200 for the 7.5 million new beneficiaries, as is the case for existing beneficiaries under the scheme. For Ujjwala beneficiaries, the price cut is over and above the subsidy, which implies that they will get a cumulative relief of Rs 400 per cylinder.
A potential hub for Green Hydrogen
The global demand of over 100 MMT of Green Hydrogen and its derivatives like Green Ammonia is expected to emerge by 2030 of which India can potentially export about 10 MMT of Green Hydrogen/Green Ammonia per annum which will be about 10 per cent of the global market. India is expected to achieve Net Zero emissions by 2070. India currently imports over 40% of its primary energy requirements, worth over USD 90 billion every year. Dependency on imported fossil fuels in the transportation and manufacturing sectors is necessitating a shift towards technologies that enable an enhanced share of renewable sources in the energy mix, and progressively reduce the dependency on fossil fuels. Green Hydrogen has the potential to play a key role in such low-carbon and self-reliant economic progress. It can directly replace fossil fuel-derived feedstocks in petroleum refining, fertilizer production, steel manufacturing etc. Hydrogen-fueled long-haul automobiles and marine vessels can enable the decarburization of the mobility sector. The asymmetries in expected demand and production capabilities for Green Hydrogen, in different countries and regions, are likely to result in international trade of Green Hydrogen and its derivatives like Green Ammonia and Green Methanol. This presents a unique opportunity for India to capitalize on its abundant renewable energy and land resources and the growing global demand for Green Hydrogen, to become a leading producer and exporter of Green Hydrogen and its derivatives.
Govt cuts windfall tax on domestic crude, hikes levy on export of diesel, ATF
The Government on Friday cut special additional excise duty (SAED) on crude petroleum to Rs 6,700 per tonne with effect from September 2. In the last fortnightly review on August 14, windfall tax on domestically Besides, SAED or duty on export of diesel will increase to Rs 6 per litre from Rs 5.50 per litre, currently. The duty on jet fuel or ATF will be doubled to Rs 4 per litre effective Saturday, from Rs 2 per litre currently, according to a finance ministry notification.produced crude oil was set at Rs 7,100 per tonne. Besides, SAED or duty on export of diesel will increase to Rs 6 per litre from Rs 5.50 per litre, currently. The duty on jet fuel or ATF will be doubled to Rs 4 per litre effective Saturday, from Rs 2 per litre currently, according to a finance ministry notification. It said SAED on petrol will continue at nil. India first imposed windfall profit taxes on July 1, 2022.