Russia Discovers Massive Oil and Gas Reserves in British Antarctic Territory
Russia has found huge oil and gas reserves in British Antarctic territory, potentially leading to drilling in the protected region. The reserves uncovered contain around 511bn barrels worth of oil, equating to around 10 times the North Sea’s output over the last 50 years. The discovery, per Russian research ships, was revealed in evidence submitted to the Commons Environment Audit Committee last week. The committee was assessing questions regarding oil and gas research on ships owned by the Kremlin’s Rosgeo, the largest geological exploration company in Russia. Antarctica is currently protected by the 1959 Antarctic Treaty, which prohibits all oil developments in the area. It was set up to ensure the region was used “exclusively for peaceful purposes” and would “not become the scene or object of international discord.” The committee heard from minister David Rutley, who assured MPs Russia was conducting scientific research in the region. “Russia has recently reaffirmed its commitment to the key elements of the treaty,” he said. But Klaus Dodds, a professor of geopolitics at Royal Holloway University, argued the Antarctic policy environment was “arguably at its most challenging since the late 1980s and early 1990s.” Russia’s invasion of Ukraine has created “widespread concern that a worsening relationship with the country will spark strategic competition and make it even more explicit in Antarctica.” He believes Russian activity in the region equated to hunting for oil and gas as opposed to scientific research. “Russia’s activities need to be understood as a decision to undermine the norms associated with seismic survey research, and ultimately a precursor for forthcoming resource extraction,” Dodds said in comments reported by the Telegraph. The Antarctic Treaty is the largest of Britain’s 14 overseas territories but it has faced competition claims from Argentina and Chile in the past. The Foreign, Commonwealth and Development Office said: “Russia has repeatedly assured the Antarctic Treaty Consultative Meeting that these activities are for scientific purposes.”
Saudis Fear Overheating Economy Could Slow Diversification from Oil
The world’s largest crude oil exporter, Saudi Arabia, is looking to prevent its economy from overheating and driving inflation higher as it aims to boost growth in its non-oil sector. Allowing more time to implement the massive investment projects under the Vision 2030 plan to diversify the oil-dependent economy could be a wise move, Saudi Finance Minister Mohammed Al-Jadaan said this week. “If you don’t allow your economy to catch up with your projects, basically what will happen is you’ll import a lot more,” the minister said at the Qatar Economic Forum in Doha on Tuesday, as carried by Bloomberg. The Kingdom has to be careful not to reach the point where the economy will hit the limits of its capacity to meet demand from the government and individuals, Al-Jadaan said. This point, commonly referred to as an overheated economy, leads to high inflation and leakage. In economics, one example of leakage is higher volumes of imported goods because they transfer income earned in one country to another country. If Saudi Arabia doesn’t allow its economy to catch up with its billions-dollar-priced huge investment projects, it may end up lacking the manufacturing and other capacity to support its plans, Al-Jadaan noted. “So giving it more time is actually wise,” he said at the Qatar Economic Forum, Powered by Bloomberg. “It’s not actually the funding that is the constraint,” the minister added. “It’s actually the economic leakage.” Some Vision 2030 Projects Could Be Delayed Saudi Arabia has started to admit in recent months that it would prioritize some projects that are part of Crown Prince Mohammed bin Salman’s Vision 2030 plan while possibly delaying others. At the end of last year, Saudi Arabia acknowledged for the first time that some of the projects of its Vision 2030 plan to diversify its economy away from oil are being delayed to avoid pressures on the economy. The Kingdom needs more time to “build factories, build even sufficient human resources,” minister Al-Jadaan said in December. “The delay or rather the extension of some projects will serve the economy,” he told Bloomberg at the time. “There are strategies that have been postponed and there are strategies that will be financed after 2030,” Al-Jadaan told Bloomberg without specifying which projects are being delayed. The Crown Prince “might be finally ready to have some tough conversations” about which projects could be accelerated and which can wait to be developed, a source familiar with the thinking of Saudi Arabia’s sovereign wealth fund, the Public Investment Fund, told the Financial Times this month. Conservative Oil Income Forecasts Despite possible discussions about recalibrating the timing of the expensive projects, Saudi Arabia remains optimistic that it could pull off the Vision 2030 plan to have its non-oil economy grow with tourism and technology. The Kingdom has seen its non-oil sector grow steadily in recent years, with more income from non-oil activities, Al-Jadaan said at the forum in Qatar this week. This increased income for the state, coupled with a conservative forecast about revenues from oil, would help Saudi Arabia with the plans for funding the many futuristic projects of Vision 2030, he added. “We are very conservative in our projections and therefore our plans on how the oil revenue will cover that expenditure,” the minister noted. The non-oil sector and government activities grew in the first quarter of 2024, but a 10.6% decline in oil activities – as the Saudis are limiting oil production at 9 million barrels per day (bpd) – dragged down the Kingdom’s GDP by 1.8% compared to the same period of 2023, Saudi Arabia’s General Authority for Statistics said earlier this month. This decrease was primarily driven by a 10.6% decline in oil activities. At the same time, non-oil activities increased by 2.8%, and government activities grew by 2.0% on an annual basis in Q1 2024. The seasonally adjusted real GDP rose by 1.3% in the first quarter this year compared to the fourth quarter of 2023, driven by a 2.4% increase in oil activities, along with 0.5% growth in non-oil activities. Revenues for the state from the oil sector went up by 2% year-on-year in the first quarter, while non-oil revenues increased at a faster pace, 9%, to drive an overall 4% rise in total budget revenues, official data showed in early May. Saudi Arabia, however, booked a budget deficit in Q1 2024, due to rising expenditures which outpaced government revenues. Separately, inflation in the Kingdom is holding steady and below global levels, potentially giving assurances to Saudi Arabia’s officials and financiers that the economy is not nearing the point of tipping into overdrive. The annual inflation rate in Saudi Arabia was 1.6% in April 2024, the same as the annual inflation rate in March. The Consumer Price Index (CPI) inched up by 0.3% in April compared to March 2024. Saudi officials have finally started to acknowledge that some expensive futuristic projects may have to wait longer for development, to avoid roiling the economy of the world’s top crude oil exporter, which could have an impact on the global oil market and economy.
India shows interest in fifth oil and gas licencing round
TOP officials from the High Commission of India in Tanzania have met and held talks with Petroleum Upstream Regulatory Authority (PURA) leadership about auction of petroleum exploration blocks in Tanzania Mainland scheduled for later this year. According to a statement availed to the media yesterday, the talks took place on Tuesday at PURA offices in Dar es Salaam and attended by the Second Secretary to the High Commissioner (Commerce) Narender Kumar and Danstan Asanga, PURA acting director general alongside other officials from both sides. Speaking during the meeting, Kumar said that upon learning of the government’s plan to auction oil and gas blocks through the Ministry of Energy budget estimates speech for the year 2024/25, the Indian High Commission deemed it necessary to meet with the relevant authority to thoroughly understand the matter to enable it provide comprehensive information to companies and stakeholders in India. “We hope that companies from India will be interested in this information which is why we have decided to seek further details that can enable them make decisions to participate in the forthcoming bidding round and ultimately invest in oil and gas exploration and production activities in Tanzania,” he said. Providing details about the fifth licencing round, Asanga said that PURA, on behalf of the government, has continued with preparations for the event and that several activities have been completed, including preparation of model production sharing agreement which has been submitted to the Ministry of Energy for further action. Other activities include demarcation of the blocks to be auctioned after obtaining approval from the Ministry of Energy and preparation of petroleum data packages. Additionally, Asanga noted that a review of the Petroleum Act of 2015 was underway to identify sections requiring amendments and that PURA was participating in the review. Regarding the timing of the bidding process, Asanga said that the auctioning of blocks will take place shortly after the completion of preliminary preparations including the review of the Petroleum Act of 2015 and that the government plans to launch the fifth licencing round later this year. In addition to discussing the fifth licencing around, the High Commission of India in Tanzania and PURA also explored the possibility of establishing cooperation between oil and gas exploration and production regulatory authorities in the two countries. They also discussed the possibility of collaborating in capacity building programmes for personnel in the field of oil and natural gas through funding from the government of India.
Reliance faces many hurdles in getting crucial crude delivered as global market struggles
A dearth of heavy crude is forcing one of the world’s biggest buyers to go the extra mile to get the barrels it needs, offering another example of how sanctions and OPEC+ curbs are recasting the supply chain. Reliance Industries Ltd., India’s largest private refiner, purchased about 2 million barrels of Canada’s Access Western Blend crude from the recently expanded Trans Mountain pipeline, its first such cargo. And although that grade suits processors with sophisticated refineries such as Reliance, there were plenty of unusual logistical complexities that came with the deal. To get the shipment delivered, Reliance is first having to load it onto four smaller tankers from Burnaby port because of local depth restrictions, according to people with knowledge of the matter. The quartet of cargoes will then be transferred onto a single very large crude carrier, before that vessel makes the more-than-19,000-kilometer voyage to India via the Pacific, they said. An alternative, possible route via the Atlantic would be longer still. The complex journey reflects underlying changes in the global market that have combined to make supplies of dense and sulfurous crude harder to find. First, US sanctions against Venezuela have been reimposed, cutting that nation’s supplies of heavy crude. At the same time, OPEC+ cutbacks have crimped flows of similar grades, while Mexico, another supplier, is also exporting less. Rounding it off, more heavier barrels from the Middle East are getting used locally for power generation during the hot summer months.
ONGC, Oil India to get relief as Centre cuts windfall tax on crude oil
The Central government has cut the windfall tax on petroleum crude to Rs 5,700 ($68.34) per metric ton from Rs 8,400 with effect from Thursday, as part of its fortnightly revision that is calibrated with global prices This is the second fortnightly cut in windfall tax in a row after a Rs 8,400 per metric ton reduction from Rs 9,600 on May 1. Upstream oil exploration and production companies ONGC and Oil India Ltd will gain as they will have to pay a lower tax on their crude oil output. The tax has been scaled down as crude oil prices have declined in the international market and the earnings of oil producers have also come down. Prices of the benchmark Brent crude are currently hovering at a little over $82 per barrel. The government had on April 16 raised the windfall tax on petroleum crude to Rs 9,600 a metric ton from Rs 6,800 due to the sharp increase in oil prices at the time.