Oil Plunges Over 2% on Rumor Saudis Ready To Increase Output
Brent crude and the U.S. benchmark shed well over 2% on Thursday on mainstream media rumors that Saudi Arabia is planning to unleash more oil on the market, with the Kingdom willing to give up its $100-per-barrel price target. According to a Financial Times report earlier in the day citing unnamed sources, Saudi Arabia is willing to reduce its $100 price target to pump more oil, and OPEC+ is preparing to increase output collectively in December. At 10:41 a.m. ET on Thursday, Brent crude was trading down 2.10% at $71.92, for a loss of $1.54 on the day. The U.S. benchmark West Texas Intermediate (WTI) was trading down 2.27% at $68.11, for a loss of $1.58 per barrel on the day. Russian Deputy Prime Minister Alexander Novak said earlier on Thursday that OPEC+ was not discussing any proposals for changes to the expanded cartel’s output cuts. OPEC+ was originally expected to begin unwinding part of its 2.2 million bpd of oil output cuts beginning in October this year. That has since been delayed due to the oil price crash in late August and early September. OPEC+ delayed the start of the unwinding of the cuts by two months until December 2024. The cartel’s monthly report for September saw a reduced demand growth outlook, which has put heavy downward pressure on oil prices. The monthly report has turned bulls into bears, with traders now appearing to view the market as its most bearish since 2011. Foregoing its $100-per-barrel price target will mean that Saudi Arabia will have to accept low oil prices in order to regain market share. Saudi Arabia has been pumping some 9 million barrels per day (bpd) of crude for over a year, without veering from its target–a move that has cost it market share not only from non-OPEC+ producers but also from within the cartel itself.
India’s $100 Billion Oil Exploration Opportunity
Two weeks ago, we reported that a long exploration effort has led to the reportedly massive discovery of oil and gas reserves in Pakistan’s territorial waters, a cache so large that it is said it could change the economic trajectory of the beleaguered country. Although Pakistan’s hydrocarbon resources are yet to be quantified, some estimates suggest that this discovery constitutes the fourth-largest oil and gas reserves in the world. However, the oil majors appear unimpressed: in July, the country’s Petroleum Minister, Musadik Malik, told a parliamentary committee that no international companies were interested in offshore oil and gas exploration in Pakistan,and those in the country largely had the exit door in view. It comes down to security, and risk versus reward with Malik explaining to the committee that the cost of security is a major deal-breaker because “in areas where companies search for oil and gas, they have to spend a significant amount to maintain security for their employees and assets.” Thankfully for Pakistan’s neighbor, India has no such baggage. India’s oil Minister Hardeep Singh Puri has called for oil majors to step up oil and gas exploration in the country to help cut India’s reliance on imports and make affordable fuel sustainable. “E&P offers investment opportunities worth USD 100 billion by 2030,” he told a conference at Urja Varta. Currently, only 10% of India’s 3.36 million sq km wide sedimentary basin is under exploration. However, the country is richly endowed with fossil fuels: back in July, S&P Global Commodity Insights revealed that four largely unexplored sedimentary basins in India could hold up to 22 billion barrels of oil. 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. Big Oil Kicks Off India Exploration India boasts significant discoveries in the Krishna-Godavari, Barmer, and Assam basins, but exploration in other areas has 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. Meanwhile, state-owned upstream company Oil India Ltd is looking to start exploration activities in Nagaland “We have a total of 30 blocks under the OALP. We have already drilled all wells under the awarded OALP blocks, except in Nagaland. We are pursuing the ministry and they have set up a high power committee involving OIL, ONGC, government officials, to discuss the issue with the Government of Nagaland and resume exploration,” the official said. Unlike Pakistan, India is likely to have little trouble attracting the oil and gas majors. Indeed, British energy giant BP Plc (NYSE:BP) is holding a board meeting in India this week, as it hunts for more opportunities in the country. BP has forged a joint venture with Indian multinational conglomerate Reliance Industries to operate 1,900 fuel retail stations across India and produces oil and gas from a deepwater block in the Krishna-Godavari basin. The JV has teamed up with ONGC to bid for exploration rights for an offshore block in India. National oil companies (NOCs) account for 58% of global reserves and 56% of production. However, International Oil Companies (IOCs) also play a major role in the energy sector by contributing to the general economic and social development of the host country. Indeed, IOCs are obliged through Production Sharing Agreement to pay royalty fees to the host country. Analysts have predicted that India is set to become the key driver of global oil demand growth, overtaking China. “China’s role as a global oil demand growth engine is fading fast,” Emma Richards, senior analyst at London-based Fitch Solutions Ltd, told The Times of India. According to the analyst, over the next decade, China’s share of emerging market oil demand growth will decline from nearly 50% to just 15% while India’s share will double to 24%. A rapidly growing population, which has likely surpassed China’s, is expected to be the main driver of consumption trends in India. Meanwhile, the country’s transition from traditional gasoline and diesel-fueled transport is expected to lag other regions, in sharp contrast to China’s skyrocketing adoption of electric vehicles and clean energy in general. “India was always going to exceed China in a matter of time in terms of being the global demand growth driver, mainly due to demographic factors like population growth,” Parsley Ong, the head of Asia energy and chemicals research at JPMorgan Chase & Co. in Hong Kong, has told Bloomberg.
Inox India and the LNG Boom
A few months ago, Hertz, a rental giant, was in news for dumping its EV fleet in favour of gas cars. The reason? The hidden costs of EV ownership. The move led to some correction in Tesla and another EV maker Polestar. Back in India, while the EV penetration is unfolding in two and three wheelers, lack of infra and cost related reasons have led to slow adoption in 4 wheelers and heavy-duty vehicles. As the future of electrification is being discussed amid subsidy related developments, a new fuel trend is about to emerge. For its long-haul trucks and heavy-duty vehicles, India is planning to use LNG. The target is to have a third of the fleet run on LNG instead of diesel in five to seven years. With this move, India plans to target pollution and cut dependence on diesel and increase the share of natural gas from 6% to 15% in the energy mix. Is this just another target or a real opportunity? Well, other countries give some confidence. While China has a fleet of over 800,000 LNG trucks on its roads, the number in the US and Europe is estimated to be 15,000. In comparison, India is still taking baby steps, with hardly 500 such trucks on the road. To be sure, at present, this is a bit of chicken and egg situation. A large-scale adoption needs infrastructure of LNG filling stations which is lacking. For LNG filling stations to be viable, there needs to be an LNG based fleet that can justify that investment (which isn’t there yet). To start with, the government is setting up first 50 LNG fuel stations along the Golden Quadrilateral. By 2030, the plan is to develop 1,000 such stations. This side of the supply chain will be catered by companies in the oil and gas sector – IOCL, BPCL, HPCL, GAIL, Petronet LNG, Gujarat Gas and their joint ventures/ subsidiaries.
India Looks to Balance Short-Term Energy Needs with Long-Term Vision
India’s growing energy needs are a complex puzzle, with pieces shaped by global politics, economic realities, and a pressing need for cleaner solutions. It’s a balancing act, with the country walking a tightrope between ensuring a reliable and affordable energy supply and pursuing a sustainable future. In a world where energy security is paramount, India isn’t shying away from securing the best deals, even if it meansturning to discounted Russian crude amidst Western sanctions. Yet, India’s energy story is about more than just securing the cheapest barrels, says Micheal Kern in Oilprice.com There’s a parallel narrative of ambition and aspiration, with the country setting bold renewable energy targets and envisioning a future where clean energy plays a leading role. It’s a delicate dance, juggling the immediate needs of a developing nation with the long-term vision of a sustainable and green future And global energy giants like BP aren’t just watching from the sidelines. They’re actively participating in this unfolding narrative. The company’s recent high-profile board meeting in India and its expanding collaborations across the energy spectrum – from traditional oil and gas exploration to investments in renewable energy and electric mobility – signal a clear intent: BP sees India as a crucial player in the global energy arena and is eager to contribute to its evolving story. This is about more than tapping into a lucrative market. BP’s approach in India reflects a broader understanding of the country’s complex energy landscape. It recognizes that India’s energy choices will have global repercussions and that collaboration and innovation are key to navigating this complex landscape. Of course, it’s not all smooth sailing. Some challenges BP and other international players will encounter are navigating regulatory hurdles, addressing infrastructure gaps, and adapting to shifting geopolitical dynamics. But the potential rewards are immense. India’s growing energy demand and commitment to a greener future presents a unique opportunity for companies willing to invest in the long term. India’s energy transformation is a story of balancing competing priorities – energy security, affordability, and sustainability. While the country’s reliance on cheaper Russian crude underscores its pragmatic approach to energy security, its commitment to a green transition remains unwavering. Global energy majors like BP are recognizing this dynamic landscape and aligning their strategies to contribute to India’s energy future. As India continues its journey towards a cleaner and more secure energy mix, the collaboration between international players and domestic stakeholders will be crucial. While challenges persist, the opportunities for growth and innovation in India’s energy market are immense, making it a focal point for the global energy industry in the years to come.