India’s long-term appetite for Russian crude intact despite recent slowdown
India’s insatiable appetite for Russian crude has suddenly slowed due to a rise in Middle Eastern flows, widespread refinery maintenances and increased scrutiny on ships carrying Russian oil, but inflows are likely to bounce back in coming months and help the largest non-OPEC exporter maintain its position as the country’s top supplier in the foreseeable future. After rising to an all-time high of 2.1 million b/d in June and remaining as high as 1.69 million b/d in September, imports of Russian crude by Indian refiners have shown a declining trend in recent months. According to S&P Global Commodities at Sea data, Russia remains India’s primary crude oil supplier, accounting for about 33% of the total crude imports, or 1.51 million b/d, in October, and 35% of the total crude imports, or about 1.55 million b/d, in November. While some state refiners are rushing to fulfill term commitments with Middle Eastern suppliers, the removal of sanctions on Venezuela has whetted the appetite of private Indian refiners to resume purchases from the South American supplier. These developments have also contributed to a slowdown in Russian purchases. “Several factors have contributed to the decline in Russian imports. Elevated maintenance activities during October and November resulted in an overall reduction in crude imports. Crude imports from Iraq, the UAE, Saudi Arabia and Kuwait have experienced a slight uptick in October and November. And lastly, refiners are expressing concerns about shipping and insurance,” said Sumit Ritolia, refinery economics analyst at S&P Global Commodity Insights. Peak maintenance India’s refinery crude distillation unit maintenance peaked in October around 600,000 b/d. Reliance Industries completed the scheduled turnaround of a 327,000 b/d CDU at its 630,000 b/d export-oriented facility in mid-November. This unit had been offline since the second half of September for routine maintenance. In addition, Reliance increased its imports of fuel oil from Russia to 197,000 b/d as of Oct. 23, from around 140,000 b/d observed during August and September. This increase aimed to capitalize on high middle distillate margins by processing fuel oil directly in the secondary unit to enhance middle distillate yields, according to S&P Global. “Russian crude imports experienced a slight decline at the onset of this quarter, attributed to various factors. Externally, challenges such as escalating freight costs and complications in repatriating rupee payments to Russia played a role,” said Rajat Kapoor, managing director for oil and gas at Synergy Consulting. “Internally, factors such as local refinery downtimes and a decrease in fuel demand in India post Diwali contributed to this decline.” The slight uptick in crude imports from Iraq, the UAE, Saudi Arabia and Kuwait in October and November can be attributed to the necessity of fulfilling term commitments by public sector oil refiners to state oil companies. Typically, inflows can fluctuate by about 10% of their term commitments. “It is evident that Russian crude imports by private refiners have remained robust. However, there has been a slight decline in imports by state refiners,” Ritolia said. Trade sources and analysts also said that refiners are currently expressing increasing concerns about rising shipping costs and insurance. Revival expected With crude prices dipping below the psychologically crucial $80/b mark, despite OPEC+ production cuts, India could again record steady Russian crude volumes. As the winter season sets in, demand for diesel is expected to pick up in Europe, and with India now being a major fuel exporter to the continent, Indian refiners are expected to increase their refinery runs, which would boost their demand for crude. “Russian crude has found a welcome market in India, and unless stringent price-cap sanctions are rigorously enforced, which seems likely, India looks to continue buying and processing Russian crudes,” Kapoor said. In addition, with Venezuelan crude available in the market, some Indian refiners are expressing interest in purchasing discounted Venezuelan crude to diversify their imports. “The oil market has ample supplies at the moment. In addition, the market is already looking into February loadings and end February-March processing cargoes,” said Tushar Bansal, senior director at consultancy EY Parthenon, based in Munich. “Seasonally, crude demand declines from the peak in February. Hence buyers would look at competitively priced barrels for their crude diet. Going forward, Venezuelan barrels are expected to add further to the supply mix, providing Indian buyers with ample choices.” Indian refiners started snapping up crude shipments from Venezuela barely weeks after the sanctions eased, opening a new battleground for Chinese independent refiners that have been the most active buyers of the feedstock from the South American supplier in recent years. Shipping fixtures showed that India had returned to the market for November- and December-loading cargoes of Venezuelan crude after a three-year suspension since September 2020.
ONGC to cut gas flaring, use green power at oil wells: Chairman Arun Kumar Singh
State-controlled Oil and Natural Gas Corporation (ONGC) plans to wheel green electricity to its installations in the Arabian Sea to replace natural gas it uses in operation of oil wells as part of its ambitious decarbonisation programme, its Chairman Arun Kumar Singh said. India’s top oil and gas producer has substantially cut gas flaring — burning of methane gas is produced when oil is extracted from below surface — and would look to bring it down to nil as part of its environmental commitments, he said while speaking at the 28th UN Climate Change Conference in Dubai, called COP2 Singh said ONGC uses a lot of gas to generate electricity as well as meet compression and other process needs of an oil and gas field. By 2028, this gas is intended to be replaced with green power wheeled to installations as far as 160 km from the west coast. The gas thus freed will be sold to industries like fertiliser and power plants. Companies around the globe have pledged to slash down methane emissions by 30 per cent from 2020 levels by 2030. Methane, which is a more potent greenhouse gas than carbon dioxide, tends to leak into the atmosphere. This is sometimes deliberate when companies flare the gas that comes alongside crude oil, due to lack of consumption markets. It also can leak undetected from drill sites, gas pipelines and other oil and gas equipment. Controlling methane, which has been rising in atmospheric concentration for decades, is seen as one of the easiest and cheapest ways to make an immediate impact on global greenhouse gas emissions. “We have been working very consistently on reducing methane emissions,” Singh said at the session on ‘Accelerating the Elimination of Methane Emissions and the Decarbonisation of Oil & Gas.’ “Because of the (Indian) geography and population, we hardly have any scope to flare,” he said. However, a “very small” amount leaked unintentionally because of the “prohibitive” cost of capturing it, he said, adding that ONGC was working with technology providers to check that. “We want to help the planet by making zero methane from our operations,” he said. Flaring, which used to be done in the past because of lack of customers for gas, has been reduced by almost 80 per cent, he said. Crude oil pumped out of ground can easily be transported in trucks but to take gas from remote well locations to industries requires pipelines. Sometimes, the amount of gas coming out with oil is so low that laying a pipeline becomes uneconomical. “Earlier, we used to flare 14-15 million standard cubic meters per day, but now we are hardly flaring… now it is around 2 per cent,” he said. “Still 2 per cent needs to go down.” He said this gas can be mobilised for use in industries. Singh the ONGC has a substantial consumption of gas for its internal oil and gas field operations. “Basically (for) power generation, pumping, compression and all that.” “In fact, we have aimed that by 2028 we will have a substantive reduction in that by moving to green electricity and release that gas for market,” he said. Green electricity can either be generated offshore using wind turbines or solar panels or wheeled from shore. “Today, out of total production, 20 per cent of gas we consume ourselves for internal purposes. A substantive portion of this we will take it to green electricity because most production is very close to our shores. So naturally (we can) move green electricity there and run electrification of the rigs, etc,” he said. These efforts, he said, are part of ONGC’s decarbonisation drive which will also see the company putting up 10 gigawatt of plants to generate electricity from solar and wind, and constructing a 1 million tonnes per annum green ammonia plant on the west coast. ONGC is also looking at setting pump storage projects at river dams to meet electricity demand at night when solar power cannot be generated. It will also set up compressed biogas plants to convert agri waste into gas that can be used to generate electricity, make fertiliser or turned into CNG to run automobiles. The company, which accounts for about two-thirds of India’s oil production and about 58 per cent of gas, plans to invest Rs 2000 billion on clean energy projects to meet its 2038 net-zero carbon emissions goal. High pressure gas valued at Rs 8.1608 billion was flared in Mumbai High field — the mainstay fields of ONGC — during 2012-20, according to a CAG report released in December 2021. ONGC, however, accepted flaring is a technical necessity. “During the first quarter of 2022-23, gas flaring has been 2.32 per cent of total gas production. ONGC makes continuous efforts to minimise gas flaring. This gas flaring is a technical necessity for processing of oil and gas at installations to maintain pilot flares for avoiding escape of unburned hydrocarbons into the atmosphere… in order to ensure safety and environmental protection,” he said. During 2012-13 to 2019-20, a total of 1,227.343 million metric standard cubic metres of high pressure gas valued at Rs 10.2108 billion was flared, according to the CAG report. French energy giant TotalEnergies’ Chairman and CEO Patrick Pouyanne said more widely misunderstood than CO2 emissions, methane emissions have 28 times their warming capacity and come from multiple sources, notably agriculture, fossil fuel production and use, or decomposing waste. The oil and gas sector alone accounts for 25 per cent of global methane emissions.