Growth in U.S. Oil and Gas Output Slows Down
Oil and gas production in the United States hit record highs at the end of 2023 but has since trended lower, and the growth in output has slowed year-over-year. U.S. companies have slowed production growth rates as oil prices stabilized at lower levels last year compared to the 2022 highs, and U.S. natural gas prices saw a slump to multi-decade lows early this year. This year’s increase in shale and overall U.S. crude production will be much lower than in the past two years, analysts and forecasters say. The decline in oil and gas prices compared to the spikes seen in 2022, the ongoing merger wave in the U.S. shale industry, and the focus on shareholder returns—instead of production growth—have all combined to drag output growth lower in recent months. The total number of active drilling rigs for oil and gas in the United States saw no change in the last week of May, according to data from Baker Hughes. The total rig count stayed the same at 600, compared to 696 rigs this same time last year. Meanwhile, U.S. crude oil production stayed the same for the eleventh week in a row at an average of 13.1 million barrels per day (bpd) for the week ending May 24—down by 200,000 bpd from the all-time high of 13.3 million bpd. Moreover, Primary Vision’s Frac Spread Count, an estimate of the number of crews completing wells that are unfinished, fell by 6 in the week ending May 24, to 257. As a result, growth from the Lower 48 basins was no more than 500,000 bpd in March 2024 from the same month last year, per EIA data cited by Reuters columnist John Kemp. This compares to yearly growth of up to 1 million bpd in the second half of 2023. In other words, U.S. oil production is growing, but at a much slower pace than in 2022 and 2023. Amid the ongoing consolidation in the American oil and gas industry, producers have become bigger and are focusing on shareholder returns. They wouldn’t be inclined to respond to every price spike with a major boost in drilling that ultimately floods the market with oil and depresses prices. As the U.S. industry matured and balance sheets and market valuations strengthened after the record-high earnings of 2022, a wave of consolidation began towards the end of 2023. The big companies are looking to become bigger by adding premier assets of the takeover targets to their portfolios. And the key driver of the industry now is returning more to shareholders and preparing for inventory stacked up for years of production ahead without the need to grow organically by investing too much cash flow into the drilling of new locations and wells. U.S. natural gas production is also off the recent record highs as major producers have curtailed some output in the spring in response to the natural gas price slump earlier this year, which saw prices tumble to a three-decade low. America’s oil production growth may be slowing, but it will still be leading global supply growth from non-OPEC+ producers, according to OPEC’s latest estimates. This year, liquids supply growth from non-OPEC+ is expected at 1.2 million bpd, pushed up by rising output in the U.S., Canada, Brazil, and Norway, OPEC said in its latest Monthly Oil Market Report in May.
Petrol touches ₹100/litre in some cities, here’s why it’s so costly
Fuel prices are on the rise again. On Tuesday, petrol cost Rs89.29 a litre in Delhi, while diesel cost Rs79.70 a litre. In some parts of India, for example in Rajasthan and Madhya Pradesh, petrol even crossed the Rs100 mark for the first time. Part of the reason is recovering crude oil prices, even as central and state taxes remain a pain point. These taxes were raised last year as the pandemic dried up other revenue sources for the government. The elevated taxes kept fuel prices up in India even though crude oil prices had crashed and stayed low for much of 2020. The current petrol price break-up in Delhi shows 60% of what you pay at the gas station goes as excise duty and value-added tax. Just about 40% is the price of crude oil. When the Congress-led government was in power between 2004 and 2014, the crude component was around 51% on average, and taxes and other charges comprised 49%. During the Narendra Modi government’s tenure, the share of taxes in the retail price has climbed up from 45% in late 2014 to an average of over 67% in the two months of 2021 so far. Since February 2020, petrol has become costlier by over Rs17.50 a litre, and diesel by nearly Rs16 a litre. This also means the Centre’s revenues got a reprieve in the pandemic-hit year just from fuel taxes.
India’s end-use energy consumption to grow by 90% by 2050: Rosneft CEO
Oil giant, Rosneft’s CEO, Igor Sechin, stressed that Asian countries, Russia’s trading partners, will account for the highest growth in oil demand with India, accounting for the highest growth rate, by the middle of the century. In his keynote speech at the 27th St Petersburg International Economic Forum (SPIEF), Sechin emphasised that over the next five years, India is projected to continue its strong economic momentum, and become one of the top three largest economies in the world, with a GDP of $5 trillion, and by 2050, will overtake the US, in terms of the size of the economy. He added that India’s end-use energy consumption is set to grow by 90 per cent by 2050, – one of the fastest growth rates in the world, Rosneft said. India’s economy has made significant strides in recent years. Since 2010, energy demand has grown by 45 per cent, making the country, the third largest energy consumer in the world, he pointed out. Recently, Rosneft signed a term contract with Indian Oil Corporation(IoCL), to increase oil supplies, and diversify India’s oil grades. The Agreement took place during Igor Sechin’s, recent visit to India. Indian companies ONGC Videsh, Oil India, Indian Oil Corporation, and Bharat Petroresources, have been owners of 49.9 per cent of Rosneft’s subsidiary, JSC Vankorneft, since 2016. Rosneft’s CEO projected that developing countries will be the main drivers of oil consumption in the coming decades. By 2030, demand growth in this group of countries is expected to account for 95 per cent of global consumption growth in aggregate. The highest growth in oil demand is expected in Asian countries, which are Russia’s main trading partners. Little impact of production cuts Sechin said that OPEC+ agreement, seems to have little impact on the oil market, as observed by the stockpiling of reserves by both Western, and Middle Eastern companies, potentially anticipating significant market changes. These “phantom barrels”, could offset the effects of voluntary production cuts by major OPEC members, evidenced by market quotations declining, after recent ministerial decisions, he added. Moreover, the looming uncertainty surrounding the upcoming US presidential elections, where public sentiment is influenced, among other things, by fluctuations in gasoline prices, implies a heightened level of market volatility. The possibility of regulatory changes within the industry, contingent upon election outcomes, underscores emerging risks, prompting major players to explore alternative strategies. Energy transition Sechin criticised the prioritisation of anthropogenic factors in climate change discourse, and argued against the effectiveness of energy transition initiatives in addressing environmental concerns. Despite considering hydrogen as a promising clean fuel, he pointed out the current limitations in production technology, logistics, and market readiness. Highlighting that even as renewable energy accounts for less than 5 per cent of global energy production, and EVs only make up around 3 per cent, the consumption of oil, gas, and coal has continued to rise. Lack of profitability in green energyinitiatives is leading to divestment from the traditional energy sector, exacerbating the challenge of transitioning to sustainable energy sources, Sechin argued.
India Accelerates Green Hydrogen Initiative
India took a crucial step towards the demand creation of green hydrogen and its derivatives in the country on Saturday. The Solar Energy Corporation of India (SECI) issued a Request for Selection (RfS) to select green ammonia producers for manufacturing green ammonia in India through cost-based competitive bidding, according to the Ministry of New and Renewable Energy. This initiative falls under Mode 2A of the Strategic Interventions for Green Hydrogen Transition (SIGHT) Programme, part of the National Green Hydrogen Mission, which is implemented by the Ministry of New & Renewable Energy. The bidding process, covering a total available capacity of 0.539 million Metric Tonnes (MT) per annum of green ammonia, will be conducted through e-bidding followed by e-reverse auction. The produced green ammonia will be supplied to fertiliser companies. Earlier, the Ministry had issued Scheme Guidelines for implementing Component II of the SIGHT Programme, specifically focusing on incentivizing the procurement of green ammonia production (under Mode 2A) of the National Green Hydrogen Mission. The Solar Energy Corporation of India has been selected as the implementing agency for this Scheme. Within the broader SIGHT Programme ambit, the Ministry has already allocated 0.412 million metric tonnes (MT) per annum of green hydrogen production capacity and 1.5 GW per annum of electrolyzer manufacturing capacity. The National Green Hydrogen Mission, inaugurated on January 4, 2023, with an outlay of Rs. 197.44 billion until FY 2029-30, is poised to contribute significantly to India’s endeavour to achieve self-reliance (Aatmanirbhar) through clean energy initiatives. It serves as a beacon for the global clean energy transition. This mission holds the promise of substantial decarbonisation of the economy, curbing dependence on fossil fuel imports, and positioning India as a frontrunner in both technology and market aspects of Green Hydrogen. The initiative by the ministry lays the groundwork for a greener, more sustainable future, in alignment with India’s commitment to combat climate change and foster inclusive growth.