Four Unexplored Indian Basins May Hold More Oil Than The Permian
Four largely unexplored sedimentary basins in India could hold up to 22 billion barrels of oil, S&P Global Commodity Insights has reported. In effect, lesser-known Category II and III basins, namely Mahanadi, Andaman Sea, Bengal, and Kerala-Konkan contain more oil than the Permian Basin, which has already produced 14 billion barrels of its 34 billion recoverable oil reserves. Rahul Chauhan, an upstream analyst at Commodity Insights, has emphasized the potential of India’s unexplored Oil & Gas sector, “ONGC and Oil India hold acreages in the Andaman waters under the Open Acreage Licensing Program (OALP) and have planned a few significant projects. However, India still awaits the entry of an international oil company with deepwater and ultra-deepwater exploration expertise to participate in current and upcoming OALP bidding rounds and explore these frontier regions,” he has declared. Currently, only 10% of India’s 3.36 million sq km wide sedimentary basin is under exploration. India boasts significant discoveries in the Krishna-Godavari, Barmer, and Assam basins, but exploration in other areas have been slower to develop. Of India’s 3.14 million square kilometers of sedimentary basins, 1.3 million sq km are in deep waters. India had its first foray into deepwater exploration in the Bay of Bengal earlier this year in the Krishna-Godavari Basin, courtesy of India’s state run Oil and Natural Gas Corporation (ONGC). ONGC said it was planning to spend over $10 billion developing multiple deepwater projects in its KG-DWN-98/2 block in that basin. Petroleum Minister Hardeep Singh Puri says that this 10% figure will jump to 16% in 2024 following the award of blocks under the Open Acreage Licensing Policy (OALP) rounds. So far, OALP has resulted in the award of 144 blocks covering about 244,007 sq km. Under OALP, India allows upstream exploration companies to carve out areas for oil and gas exploration and put in an expression of interest for any area throughout the year. The interests are accumulated thrice a year following which they are put on auction. According to Puri, India’s Exploration and Production (E&P) activities in the oil and gas sector offer investment opportunities worth $100 billion by 2030.
Indian oil PSU’s have global presence with net investments of $40.6 billion, across 21 countries, says Hardeep Puri
These Indian PSUs have established a significant presence globally, with a total of 45 assets spread across 21 countries. They have a cumulative investment of about US$ 40.6 billion, said Puri. This substantial investment highlights India’s strategic efforts to secure energy resources and ensure energy security by diversifying its sources and establishing a global footprint. The Minister said, “By assessing performance and exploring new opportunities, we can ensure sustainable growth and energy security for India under the leadership of PM Narendra Modi Ji”. ONGC Videsh Ltd (OVL), the overseas arm of Oil and Natural Gas Corporation (ONGC), is a key player in this domain, with investments in various oil and gas assets worldwide. Indian Oil Corporation Ltd (IOCL) has also been active in expanding its international presence, securing crucial energy supplies and collaborating on refining and petrochemical projects. Similarly, Oil India Ltd (OIL) and Bharat PetroResources Ltd (BPRL) has invested in exploration and production assets overseas, contributing to India’s energy security. GAIL, known for its role in natural gas processing and distribution, has been involved in international projects, securing LNG contracts and participating in pipeline projects. Prize Petroleum Corporation Ltd (PPCL), a wholly-owned subsidiary of HPCL, focuses on upstream exploration and production activities. The International Cooperation Division of the Ministry of Petroleum and Natural Gas facilitates Indian oil and gas Public Sector Undertakings (PSUs) to aggressively pursue opportunities for acquiring quality oil and gas assets overseas. The division also encourages the companies to diversify oil and gas sources to maintain a balanced portfolio.
Seasonal Demand and Production Cuts Drive Oil Rally
Oil bulls have a narrow window for bullish bets as driving season and weather disruptions create a prime opportunity for a market rally. With the driving season in full swing and weather-related production disruptions upon us, now may be the best chance for a market rally this year. It is a pivotal moment for bulls, with the tide expected to change after this quarter when the driving season ends. Despite its presumption that global oil demand growth is on a long-term downward trend, even the International Energy Agency (IEA), often criticized for its anti-fossil fuel leanings, estimates that global crude oil inventories will draw down at an average rate of 800,000 barrels per day (bpd) between June and September—the height of driving season. This, despite Q2 global oil demand growth slowing to its weakest in more than a year. Of course, that’s merely a prediction. But the reality paints a similar picture. In the last three weeks alone, U.S. crude oil inventories have drawn down by more than 20 million barrels, according to the Energy Information Administration’s (EIA) Weekly Petroleum Status Report. And while U.S. production is at its highest levels ever at 13.3 million bpd according to weekly EIA estimates, that was prior to storms that we know interrupted activities in some parts of the country. Globally, the production scenario is more bullish. OPEC+ has extended its oil production cuts into next year, and Russia just this week said it would cut production even more than its OPEC+ quota dictated because it has pumped above its quota for months. It plans to cut additional production in the warm seasons of this year and next. But Russia will not be curbing additional production beyond its quota in the colder months due to technical issues related to the geology of its oilfields and climate—not to mention it simply requires more oil for domestic use in the colder seasons. A Shift to Strength The second quarter was weak for crude prices as the market worried about weak demand. Now, however, a new narrative is taking shape—one that speaks of a forecasted deficit. According to EIA’s 4-Week Average U.S. Product Supplied—a proxy for demand—20.9 million barrels of petroleum were consumed in the week ending July 5. This is the highest level since last September. The latest data, issued this week on Wednesday, estimates that weekly petroleum product supplied fell back to 20.488 million bpd. Although those are high levels, they are seasonal, and this bullish reality is expected to shift after driving season, with the IEA expecting global crude oil inventories to level out as oil demand growth generated from China slows. China, China, China Two things have been happening in China. First, China has been reducing crude oil imports. Crude oil imports averaged 11.05 million bpd in the first half of the year—a figure that is 2.9% shy of the first half last year, highlighting the weak oil market in China. In June, China’s refiners had 15.67 million bpd of oil for processing—11.30 million bpd from imports, and 4.37 million bpd from domestic production. China’s refineries have seen a slowdown as well, only processing 14.19 million bpd on average in June. This mismatch in refining vs. imports has created a surplus of crude oil in the country, leading to the second thing: China has likely been stockpiling crude oil for the better part of this year. If the world’s largest oil importer is building inventory, only a strong recovery in economic growth in that importer will turn the tide. Of course, this hasn’t stopped OPEC from forecasting robust oil demand growth in China. In 2024, OPEC still sees China’s oil demand growth rising by 760,000 bpd—and this is a figure that OPEC just revised up for its July report. The IEA, as one would expect, had a different view, with its demand growth estimates for China coming in at 500,000 bpd for the full year 2024. Self-Fulfilling Prophecy Traders and banks have a different view, and that’s one of strong consumption. Increased demand for gasoline and diesel due to the driving season has already boosted global oil prices by drawing down crude oil inventories in the world’s most transparent oil market—the United States. That bullish outlook is often a self-fulfilling prophecy when it comes to market pricing. Brent crude is currently trading above $85 per barrel—a nearly $10 hike from the beginning of the year. As driving season in the world’s largest oil consumer comes to a close, one would expect inventories to begin building in the United States as well, and traders may anticipate the shift from bullish to bearish. And when it comes to market speculators, just the anticipation can make it so, even if inventories fail to build.
India ups LNG imports in June
The country imported about 2.64 billion cubic meters, or about 2 million metric tonnes of LNG, in June via long-term contracts and spot purchases, a rise of 11.4 percent compared to the same month in 2023, PPAC said. In May this year LNG imports dropped compared to the previous year, while in April this year LNG imports rose year-on-year. In March LNG imports dropped slightly following a year-on-year rise in January and February, PPAC’s data previously showed. During April-June, India took some 7.79 bcm of LNG, or about 5.9 million metric tonnes, up by 0.6 percent compared to the same period last year, according to PPAC. India paid $1.1 billion for June LNG imports, up compared to $1 billion in June last year, and the country paid $3.2 billion in the April-June period, down from $3.4 billion in the same period last year, PPAC said. As per India’s natural gas production, it reached about 2.99 bcm in June, a rise of 2.9 percent compared to the corresponding month of the previous year. Natural gas production of 9.05 bcm in April-June was up by 5.7 percent compared to the same period in 2023. At the moment, India imports LNG via seven facilities with a combined capacity of about 47.7 million tonnes. These include Petronet LNG’s Dahej and Kochi terminals, Shell’s Hazira terminal, and the Dabhol LNG, Ennore LNG, Mundra LNG, and Dhamra LNG terminal. The Chhara LNG import terminal in Gujarat should also receive its commissioning cargo later this year after it failed to unload the cargo from the 2015-built 159,800-cbm, Maran Gas Mystras. India’s Hindustan Petroleum, a unit of state-owned ONGC, aims to launch its delayed Chhara LNG import terminal by October this year, according to its management. During April-May this year, the 17.5 mtpa Dahej terminal operated at 107.2 percent capacity, while the 5.2 mtpa Hazira terminal operated at 38.3 percent capacity, PPAC said. The 5 mtpa Dhamra LNG terminal operated at 25 percent capacity, the 5 mtpa Dabhol LNG terminal operated at 73.8 percent capacity, the 5 mtpa Kochi LNG terminal operated at 20.6 percent capacity, and the 5 mtpa Ennore LNG terminal operated at 25.8 percent capacity, it said. In May, Petronet said it expects a 15 percent rise in the country’s imports of LNG during this financial year. The company’s executives said during the company’s earnings call that Petronet expects India’s LNG imports to rise to 27 millions tonnes in the fiscal year 2025/2026 which ends in March next year.