EU Proposes First Batch Of Sanctions On Russian LNG
Over the past two years, the U.S. and its Western allies have imposed a raft of sanctions on Russian energy commodities, including a $60-a-barrel cap on Russia’s seaborne exports of crude oil. Europe has, however, shied away from placing limitations on Russian gas, hardly surprising considering that the share of Russia’s pipeline gas in EU imports exceeded 40% before Russia invaded Ukraine. Since then, the continent has been largely successful in weaning itself off Russian energy, with gas imports from Russia falling dramatically. And, now Europe is getting ready to pull the trigger: Politico has reported that the European Commission has proposed sanctions on Russia’s LNG sector as part of Brussels’ 14th sanctions package against Russia. The proposed sanctions would prevent EU countries from re-exporting Russian LNG after receiving it and also ban EU involvement in upcoming LNG projects in Russia. However, the measures wouldn’t directly bar Russian LNG imports to the EU. Similar to previous sanctions, the import ban is intended to disrupt Putin’s ability to continue financing his war in Ukraine. Although Russian LNG accounted for just 5% of the bloc’s energy consumption in 2023, it still netted the Kremlin ~$8 billion in revenues. The proposal also suggests prohibiting the use of EU ports, finance and services to re-export Russian LNG, essentially meaning that Russia would have to overhaul its LNG export model. Currently, Russia supplies LNG to Asia through Europe, where Spain, Belgium and France are major hubs. “If they can’t transship in Europe, they might have to take their ice-class tankers on longer journeys,” Laura Page, a gas expert at the Kpler data analytics firm, has told Politico, adding that Russia “may not be able to get out as many loadings from Yamal because their vessels can’t get back as quickly.” Norway and the U.S. have replaced Russia as Europe’s biggest gas supplier: Last year, Norway supplied 87.8 bcm (billion cubic meters) of gas to Europe, good for 30.3% of total imports while the U.S. supplied 56.2 bcm, accounting for 19.4% of total. Natural Gas Rally Lately, natural gas has staged a big rally, with Henry Hub prices jumping from $1.61/MMBtu on 26th April to $2.40 on Monday before pulling back to trade at $2.19/MMBtu in Tuesday’s intraday session as markets increasingly price in more risk premium on the heated-up situation in the Middle East and Europe gets ready to ditch more Russian gas. Although ceasefire talks kicked off again in Egypt on Monday, Israel has started its ground offensive in Gaza’s southern city of Rafah with a deal far from certain. Israel has, however, assured the U.S. that its Rafah offensive will be limited and will be focused on blocking weapons and financial support from being smuggled into Gaza. Meanwhile, Australian LNG exports are expected to drop substantially with Chevron Corp’s (NYSE:CVX) Gorgon plant expected to remain offline for at least five weeks after the oil major discovered leaks. Long-suffering gas producers appear set to enjoy a rare boon if Europe weans itself off more Russian energy commodities. TotalEnergies (NYSE:TTE) CEO Patrick Pouyanne has predicted that natural gas and LNG prices will spike after EU sanctions Russian gas from the Yamal LNG project. “If the EU sanctions Yamal LNG, the price of LNG will go up quickly and globally our portfolio will benefit. It’s a positive if there were sanctions, not a negative, because the cash from Yamal is quite limited. European leaders understand that their security of supply today relies on LNG and they don’t want to see price rises again… what I understand is that they might have some ideas, but from 2027 on, not before,” Pouyanne told Reuters. TotalEnergies owns a 19.4% stake in private Russian LNG producer Novatek, owner of the Yamal LNG project in eastern Russia. Meanwhile, U.S. natural gas futures have climbed to their highest since January, driven by rising LNG feedgas demand, a decline in U.S. gas production, and a strong demand outlook thanks to hot weather forecasts for Texas. Gas flows to the seven big U.S. LNG export plants have so far hit 12.4B cf/day in the current month up from 11.9B cf/day in April. That said, it’s going to be interesting to see whether the natural gas price gains will hold with Europe having exited the winter withdrawal season with record amounts of natural gas in storage. The continent ended the season with more than 70 bcm of natural gas in its stores, the highest on record for this time of the year. The continent’s ongoing injection season was recently interrupted by more than a week of withdrawal due to a surprise cold spell; however, Standard Chartered has predicted that the reversal in trend will only delay the timing of when Europe’s gas stores fill up again by around three weeks.
LNG futures trading surges in April as India prepares for summer demand surge
In the wake of rising demand and geopolitical tensions, liquefied natural gas (LNG) futures traded volumes experienced a notable surge in April, marking robust activity in anticipation of the summer season. Amidst these dynamics, India, a significant player in the LNG market, continues to see an upward trajectory in its LNG imports, driven by various sectors including power, industry, and transportation. According to data from March 2024, India’s total LNG imports, including long-term and spot purchases, stood at 1.9 million metric tonnes (MMT), amounting to USD 1113 million. For the fiscal year 2023-24, India’s cumulative LNG imports reached 23.3 MMT, valued at USD 13266 million. Forecasts suggest a further 7-8 per cent increase in LNG imports in 2024, fuelled by burgeoning demand and ongoing infrastructure development initiatives.
Gautam Adani in talks with banks to borrow $600 million for gas unit
Billionaire Gautam Adani’s conglomerate is seeking an offshore loan of about $600 million to refinance existing debt, according to people familiar with the matter. The loan will be raised by Dhamra LNG Terminal Pvt., a unit of Adani Total Pvt., the people said, asking not be named because the details are private. The debt’s tenor could range from three to five years, with the pricing likely linked to the Secured Overnight Financing Rate, they said. The port-to-power group is discussing the planned transaction with lenders including Credit Agricole, DBS Bank Ltd., BNP Paribas, Mitsubishi UFJ Financial Group Inc., and Mizuho Bank Ltd., two of the people said. Adani is likely to conclude the borrowing in the next two months. Adani Group did not immediately respond to Bloomberg’s requests for comment. The conglomerate is regaining the confidence of investors since being targeted early last year by US short seller Hindenburg Research. In March, the group saw robust demand for its first public bond sale since the shortseller crisis. Adani Total is an equal venture between Adani and TotalEnergies. Prime Minister Narendra Modi’s government is trying to increase the country’s ability to import LNG to lift the share of natural gas in its energy mix to 15% by 2030 from about 7% now. The move is to help lower the dependence on dirtier fossil fuels, such as coal and oil.
Reliance renews bid for US license to import Venezuelan oil, sources say
Indian oil refiner Reliance Industries has resubmitted a request to the U.S. for an authorization to import crude oil from sanctioned Venezuela, three people close to the matter said, and resume oil trade between the OPEC producer and the once second-largest destination for its oil. French oil producer Maurel & Prom separately on Monday said the U.S. on Friday granted it a license to conduct oil and gas operations in Venezuela for the next two years. The U.S. in April did not renew a general license for Venezuela to export oil and fuel to its chosen markets, and gave 45 days to companies to wind down transactions. But the U.S. had said some individual authorizations to foreign firms seeking to do oil business with Venezuela would be issued. The license had broadly eased Venezuela oil sanctions first imposed in 2019, moving to reimpose punitive measures in response to President Nicolas Maduro’s failure to meet his election commitments.
April fuel consumption rises by 6.1% year-on-year: Oil ministry data
India’s fuel consumption rose by 6.1 per cent year-on-year in April, data from the Petroleum Planning and Analysis Cell of the oil ministry showed on Tuesday. WHY IT IS IMPORTANT India is the world’s third-biggest oil importer and consumer. The data is a proxy for the country’s oil demand. KEY QUOTE “The rise in total fuel consumption in April can be attributed to the increased activity in the run up to elections across the country,” said Prashant Vasisht, vice president and co-head, corporate ratings at ICRA. “We expect Indian fuel demand to grow by 3 per cent-4 per cent, with the GDP set to grow. The bulk of the rise will be lead by petrol and diesel demand. Air travel in India also has shown good growth.” BY THE NUMBERS Total consumption totalled 19.86 million metric tons (4.85 million barrels per day) in April, up from 18.71 million tons last year, data showed. Demand was down 5.8 per cent on a monthly basis from the 21.09 million metric tons consumed in March. Sales of diesel, mainly used by trucks and commercially run passenger vehicles, rose by 1.4 per cent year-on-year to 7.93 million tons in April. Sales of gasoline in April rose 14 per cent from the previous year to 3.28 million tons. Demand for bitumen, used for making roads, fell by over 5 per cent annually. Cooking gas, or liquefied petroleum gas sales rose by nearly 10 per cent to 2.36 million tons, while naphtha sales gained by 3.9 per cent to about 1.16 million tons, compared with last April, the data showed. Fuel oil use decreased by more than 16 per cent year-on-year in April. CONTEXT Asia’s third-largest economy is the fastest growing among major peers and its GDP is expected to expand 6.5 per cent this fiscal year. Growth in India’s manufacturing sector slowed marginally in April but remained robust thanks to strong demand, prompting firms to ramp up purchases of raw materials at a near-record pace, a business survey showed last week.