Natural Gas Flows From Israel To Egypt Resume
Natural gas deliveries from Israel to Egypt have restarted, after several days of no imports at all due to war-related disruptions. Bloomberg cited unnamed sources in the know as saying the gas is coming from the Leviathan offshore field, following the end of a production outage at another field, Karish, supply from which is currently being used to ensure domestic demand in Israel. Egypt used to import some 800 million cubic feet of natural gas from Israel before the war began. Following the Hamas attacks in southern Israel and the Israeli response, however, imports dried up. The Israeli authorities ordered Chevron to shut down production at the Tamar field because of its proximity to fighting and told the supermajor to reroute production from the Leviathan field to Jordan. Chevron became operator of the Tamar and Leviathan gas fields when it acquired their original operator, Noble Energy. Tamar has reserves estimated at around 11 trillion cubic feet of gas and Leviathan has twice that, according to estimates cited by Energy Intelligence. Israeli exports from these fields to Egypt secured the country’s growing energy demand and left some for exports to Europe, from Egypt’s LNG plant. With the shutdown and the rerouting, however, Egypt was plunged in a crunch, with daily blackouts at a time of higher demand. Now that Israeli gas is flowing to Egypt once again, the blackouts may end but exports to Europe may not resume immediately. Egypt’s first order of business would be to secure domestic supply first. That should not be an immediate problem for Europe, however. Reuters recently reported that close to 30 LNG tankers are en route to the continent and the UK, due to arrive before the end of this month. Egypt, on the other hand, will resume exports of LNG when domestic demand subsides, according to Eni, which has extensive operations in the North African country.
Is This The Moment Of Truth For The EV Industry?
A casual glance at key trends in electric vehicle markets suggests that the much-hyped EV revolution is very much alive and well. In the U.S., EV sales are on track to surpass 1 million units by year-end, good for an impressive 50% year-over-year increase. This in turn translates to, for the second year in a row, EVs making up nearly 10% of all new cars sold in the country. China remains firmly in the driver’s seat with a third of all new vehicles sold this year being electric while global sales have grown 33%. But looking below the hood reveals a much murkier reality, and suggests that the halcyon era of rapid EV adoption could be drawing to a close. Experts are saying that the people who have so far held off buying an electric vehicle are likely price-sensitive shoppers, leery of making major adjustments to accommodate an entirely new technology including charging anxieties and home equipment installations. “EV adoption is looking to move into its next phase — requiring much more mass-market interest — and this larger cohort has to be sold on EVs since they aren’t as enthusiastic and willing as early adopters,” Jessica Caldwell, director of insights at Edmund, has said. Signs are legion that point to an increasingly beleaguered industry and suggest that electric vehicles could increasingly become a hard sell. Shares of iconic EV manufacturer Tesla Inc. (NASDAQ: TSLA) have been selling off after the company under-delivered in its latest quarterly report. Tesla reported Q3 Non-GAAP EPS of $0.66, missing the Wall Street consensus by $0.07 while revenue of $23.35B (+8.9% Y/Y) missed by $790M. The Austin-based company produced 430,488 vehicles and delivered 435,059 vehicles during the quarter, blaming the sequential decline in volumes on downtimes for factory upgrades. More alarmingly, Tesla’s margins have been shrinking at a very worrying clip: Operating margin clocked in at 7.6% of sales, a full 200 basis points lower from the previous quarter and incomparable to 17.2% a year ago. Total GAAP gross margin was 17.9% compared to 25.1% a year ago and 18.2% in the prior quarter. Tesla has cut prices on multiple occasions over the past year, leading to contracting margins. Falling ASPs are usually the result of increasing competition and waning pricing power. Tesla CFO Zachary Kirkhorn had earlier stated that FY23 automotive gross margin should remain above 20% with average selling prices in the high $40K range, something that is clearly not happening. Cost remains a major sticking point for buyers of electric vehicles: In August 2023, the average transaction price for a new car (of any powertrain) was $48,451, compared to $53,376 for EVs (for new cars). Luckily, the price of EVs has been declining in-line with falling battery prices. Further, this trend is likely to hold in the coming years as lithium prices continue falling from their recent all-time highs. Tesla can take small comfort in the fact that it’s in good company. General Motors (NYSE:GM) has pushed back production launches of several electric trucks and SUVs, including the Chevy Silverado, GMC Sierra Denali EV and Equinox EVs. Ford MotorCompany (NYSE:F) has put on hold the construction of a new $12 billion EV factory citing slower customer demand. Honda Motor Co. (NYSE:HMC) and GM have canceled their plan to jointly develop a slate of affordable EVs, saying the economics do not work. Volkswagen AG (OTCPK:VWAGY) has announced that it will stop making the ID.3 and Cupra’s Born, citing subsidies and competition from China. Hybrids Remain Popular Fossil fuel investors will no doubt be pleased to know that hybrids remain incredibly popular in this age of pure EVs, a full 25 years since Toyota Motor Corp. (NYSE:TM) launched the Prius. Nearly 3 million hybrid EVs were sold in 2022, good for nearly 30% of all EVs sold. Hybrids remain popular because they make considerable savings on gas and cut their carbon footprint without the attendant charging anxiety that comes with pure EVs. In a hybrid car, there is an ICE component and an electric motor, with battery-stored energy. However, a hybrid can’t be plugged in to charge. Instead, it is charged by the regenerative braking of the internal combustion engine. The extra power provided by the electric motor can potentially allow for a smaller engine, adding some environmental benefit. The battery can also power auxiliary loads and reduce engine idling when stopped, according to the Alternative Fuels Data Center.
Bharat Petroleum begins registration process in Cooch Behar for piped natural gas supply
The registration process for a connection to piped natural gas supply was introduced in Cooch Behar on Wednesday. Authorities of Bharat Petroleum Corporation Limited (BPCL) reached the residence of Rabindranath Ghosh, the chairman of Cooch Behar municipality, and got him to register his name for the facility, which, the authorities said, would be provided by March next year. The BPCL is carrying out an awareness campaign across the heritage town on the new facility. “It is a major development and residents of Cooch Behar town will benefit from it. There are indications that cost will be less if natural gas is supplied through pipelines instead of LPG cylinders…. We want the residents here to avail the benefit…,” said Ghosh. BPCL officials said that from this week, they would initiate the process of laying pipelines across the town. “In Cooch Behar, we will provide around 25,000 connections. So far, we have received 7,000 applications and by March next year, we would be in a position to supply gas to 1,000 households,” said B.C. Sikdar, the territory manager (I) of BPCL in Bengal.
BPCL and GAIL sign long-term gas supply deal
Indian oil and gas companies Bharat Petroleum Corporation Limited (BPCL) and Gas Authority of India Limited (GAIL) have signed a long-term gas supply agreement. Under the agreement, which is valued at Rs630bn ($7.56bn), BPCL will supply propane to GAIL’s petrochemical facility in Usar. BPCL will deliver 600ktpa of propane, a feedstock for petrochemicals, from its liquified petroleum gas import facility at Uran. As part of its efforts to meet the rising demand of the petrochemical Industry , BPCL is expanding its Uran liquefied natural gas facility to handle three million tons per annum (mtpa) of propane and butane imports from the current capacity of 1mtpa. With operations scheduled to begin in 2025, GAIL’s propane dehydrogenation (PDH)-polypropylene project in Usar is India’s first propane PDH facility. The PDH facility will have a nameplate capacity of 500ktpa, with propylene production integrated into a polypropylene plant of similar capacity.
India’s Petronet hopes diplomatic row with Qatar will not hurt gas talks
The CEO of India’s Petronet LNG said on Monday he hoped negotiations between India and Qatar to extend their long-term liquefied natural gas import deals beyond 2028 would not be harmed by a diplomatic row between the countries. The government in New Delhi said last week it was “deeply shocked” by a decision by a Qatar court to impose the death penalty on eight Indians arrested in the country last year, on charges that have not been made public. Petronet LNG CEO A. K. Singh said: “We are in business. It (the diplomatic row) will be handled at the highest level of the country… we hope this does not have any impact on business relations.” India’s top gas importer has until the end of this year to renew its long-term agreements with Qatar. Petronet at present buys 8.5 million metric tons per year (tpy) of LNG under its deals with Qatar, and is ‘actively engaged’ with the country for their renewal, Singh said at the company’s September quarter earnings press conference. It operates two LNG import terminals on the country’s west coast – a 17.5 million tpy plant at Dahej, and a 5 million tpy facility at Kochi. It is building a third LNG import plant, a 4 million tpy floating storage and regasification unit at Gopalpur in eastern Odisha state. Singh said expansion of the Dahej terminal by 5 million tpy is expected to be completed by end-March 2024.
Oil Prices Plunge 3% as Market Weighs Israeli Attack on Gaza
Oil prices plunged by 3% on Monday as market sentiment hedged its bets that Israel’s ground invasion of Gaza would not have global repercussions impacting oil and gas supplies. On Monday at 1:45 p.m. Brent crude was trading down 3.09% at $87.68 per barrel for a loss of $2.80 on the day. West Texas Intermediate (WTI) was trading down 3.66% at $82.41 per barrel, for a loss of $3.13 on the day. The plunge in prices comes as Israel on Monday intensified its ground invasion in the northern Gaza Strip, with the death toll for Palestinians rising to over 8,300, compared to the death toll among Israelis of 1,400, the majority of whom were killed in Hamas’ initial October 7 attack. Oil prices have continued to fall throughout the day, even as the World Bank warns that oil prices could enter “uncharted waters” if the Israel-Hamas conflict expands into the wider Middle East. The World Bank on Monday forecast oil prices to average $81 per barrel in 2024, assuming the Israel-Hamas conflict remained contained. Alternatively, the bank wanted that an expansion of this conflict to multiple fronts could lead to major supply disruption, sending prices as high as $157 per barrel. Global oil markets are now latching on to a scenario in which the conflict will have a limited impact on commodities markets. The general consensus is that the markets had already priced in the Israel ground incursion into Gaza on Friday, and by Monday, other macroeconomic concerns were taking over, including the Federal Reserve’s two-day meeting Wednesday on interest rate hikes. For now, analysts are widely expecting rate hike plans to remain unchanged in an atmosphere in which the U.S. economy is growing faster than expected, with 4.9% growth rate in Q3.
BPCL says no payments pending for Russian oil imports
Bharat Petroleum Corp (BPCL) has cleared all payments for Russian oil purchases, its head of finance Vetsa Ramakrishna Gupta told an analysts’ conference after the company’s September quarter earnings report. “As of today nothing is there beyond the due date,” Gupta said in response to a question about whether any payments to Russia were delayed. The Indian government has expressed discomfort over settling payment for Russian oil in Chinese yuan. Gupta also said that BPCL was processing Russian oil at the maximum “potential level” at its three plants, averaging about 30-40% of overall crude intake. BPCL operates a 240,000 barrel-per-day (bpd) refinery in Mumbai, western India; a 310,000-bpd refinery in Kochi, southern India; and a 156,000 bpd plant in central India.
Sri Lankan government renews Lanka IOC’s petroleum licence for 20 years
The Sri Lankan government has renewed the petroleum products licence granted to Lanka IOC, the local subsidiary of Indian Oil Corporation, for another 20 years, officials said on Monday. The licence originally issued in 2003 was to expire in January 2024. This will allow Lanka IOC to continue its retail operations on the debt-trapped island nation until January 22, 2044. The licence renewal letter was handed over by President Ranil Wickremesinghe to Dipak Das the Managing Director of LIOC late last week, Aseem Bhargav, the Chief Financial Officer of LIOC said in a statement. The government has renewed the petroleum products licence granted to Lanka IOC, the local subsidiary of Indian Oil Corporation, for another 20 years, the LIOC officials told PTI on Monday. “The licence enables LIOC to import, export, store, transport, distribute, sell and supply petrol diesel, heavy diesel, furnace oil, kerosene, Naphtha and other mineral petroleum including premium petrol and premium diesel.” The LIOC holds around 20 per cent of the market share in the auto fuel segment in Sri Lanka. When Sri Lanka plunged into an economic crisis with no forex to import petroleum products, the LIOC operation became crucial in the energy sector. It operates over 200 retail outlets throughout the island nation. Since the economic crisis came to bite Sri Lanka, it liberalised the energy sector. China’s Sinopec entered in August as the third player in the retail fuel trade while USA’s RM Parks and Australia’s United Petroleum are also due to commence operations soon. However, the main opposition party Samagi Jana Balawegaya (SJB) on Sunday expressed its strong opposition to the Government’s decision to extend Lanka IOC’s petroleum licence. Speaking at a press conference held at the opposition leader’s office in Colombo, SJB Deputy General Secretary Mujibur Rahman raised questions regarding the basis on which the licence renewal was granted by the Government. Rahman pointed out that IOC was unable to address the fuel shortages during Sri Lanka’s most severe crisis or provide better prices to the public.
Dhamra LNG terminal built entirely on promoter finance; no financial commitment from IOC, GAIL, say sources
Adani Group built an LNG import facility at Dhamra in Odisha entirely based on financial backing of promoters, with no financial undertaking or guarantees of public sector giants IOC and GAIL, who merely were tenants, sources said. Clarifying the group’s position, they said Indian Oil Corporation (IOC) and GAIL (India) Ltd have hired capacity on the newly built terminal at rates lower than a similar but older and depreciated facility at Dahej in Gujarat. This came in response to reported comments by Trinamool Congress MP Mahua Moitra, who is facing a Lok Sabha Ethics Committee examination over cash for query in Parliament, on Dhamra being built on financial backing and commitments to buy gas at a fixed price. The project cost of Dhamra LNG terminal is Rs 6,450 crore, the sources said responding to Moitra’s assertion that the terminal to import natural gas in its liquid form, called LNG, was built at a much higher cost than Rs 5,000 crore that IOC incurred in construction of a similar sized facility at Ennore in Tamil Nadu. Sources said no amount upfront or during the project either as cash or bank guarantee has been given by IOC and GAIL. The project is fully financed by equity and debt by shareholders of Dhamra LNG terminal, they said, rejecting the assertion that IOC and GAIL paid Rs 46,500 crore. IOC had in 2015 signed to use up to 60 per cent of the terminal’s 5 million tonnes a year capacity for importing gas for its refineries at Haldia in West Bengal and Paradip in Odisha. GAIL too had signed up for 1.5 million tonnes of the terminal’s regasification capacity. Sources asserted that its tariff and commercial terms of Dhamra LNG terminal (inclusive of port charges) was arrived at through competitive benchmarking. Petronet LNG (which is owned by IOC, GAIL, BPCL and ONGC) operates India’s largest LNG terminal at Dahej was used as benchmarking the tariff and commercial terms, they said. Dhamra tariff is 1.5 per cent lower (Rs 46.49 per ton or Rs 21 crore annually over 4.5 million tonnes of LNG capacity use) than Dahej LNG terminal charges and has better commercial terms as well. Moitra had, however, compared the tariff of Dhamra with Ennore, which was commissioned not so long back. This charge compares to Rs 57.38 per mmBtu regasification charges for Ennore LNG terminal, he had said. Originally, IOC and GAIL had on September 21, 2016, signed a ‘non-binding’ agreement to buy a 50 per cent stake in Adani Group’s Rs 5,500-crore Dhamra LNG project in Odisha. But that agreement expired on September 20, 2018, without being translated into a firm pact apparently because of differences over valuation. Sources said IOC and GAIL import LNG on their own and only pay tolling charges. Dhamra LNG will not buy and sell LNG during the operations of the facility. It only provides the service of LNG handling and dispatch, they said, rejecting the claim of a 20-year fixed payment by IOC and GAIL to Adani for gas. On a charge that businessman Darshan Hiranandani posed questions on Adani Group using Moitra’s parliamentary logins as his business was impacted because of IOC and GAIL committing to Dhamra, sources said Hiranandani’s H-Energy had obtained a NOC from the Kolkata Port Trust to set up a LNG terminal in Kukrahati in February 2020. Though this NOC is still valid, they have been unsuccessful in progressing the same. This terminal of H-Energy would cater to the same catchment area being serviced by Dhamra LNG, they said. H-Energy was also looking at IOC and GAIL to book capacity for their terminal. However, they were unable to justify a value proposition to IOC and GAIL that was better than what was being offered at Dhamra LNG terminal. This stymied their efforts to develop this facility, sources claimed. On IOC and GAIL not taking equity in Dhamra, they said the LNG terminal was able to offer commercially competitive terms to the users and given the pipeline tariff competitiveness of supplying nearby consumption centres, IOC and GAIL were confident of bringing LNG at the cheapest terms via Dhamra to their consumption centres. Hence, their strategic objective was met without injecting equity and they decided to progress on a capacity booking basis only. The strong credentials of the project developers and the significant amount of pre-investment undertaken by Adani gave further confidence to IOC and GAIL on project completion, they added.
American Oil Giants Boost Domestic Footprint As Geopolitical Tensions Mount
ExxonMobil and Chevron have just announced mega acquisition deals to buy U.S. firms, which will boost the footprint of the U.S. oil supermajors in their domestic upstream market and the hottest exploration success of the past few years, Guyana. Betting on expectations of sustained global oil and gas demand and the lower costs of supply through synergies with the targeted acquired companies, Exxon and Chevron are now looking to build stronger upstream portfolios closer to home after divesting assets in Western Europe, West Africa, and Russia in the past few years. Amid growing geopolitical uncertainties and flare-ups in other parts of the world, the U.S. supermajors are betting on higher domestic production and the huge reserves of Guyana—basically in America’s backyard in Latin America—to strengthen their portfolios with more advantaged resources and raise returns to investors. The End of an Era The age of the U.S. oil giants holding a variety of assets spread worldwide is over, analysts have told The Wall Street Journal. This month, Exxon announced a deal to buy Pioneer Natural Resources in an all-stock transaction valued at $59.5 billion. The implied total enterprise value of the transaction, including net debt, is around $64.5 billion. Less than two weeks later, Chevron said it would buy Hess Corporation in an all-stock transaction valued at $53 billion with a total enterprise value, including debt, at $60 billion. Through the deals, Exxon, which has pulled out of Russia, Cameroon, and Chad in recent years, will become the Permian’s top producer. Chevron, for its part, will add assets offshore Guyana and in the U.S. Bakken shale play, after ditching assets in the UK and Norway in recent years. By buying Hess, Chevron will become Exxon’s partner in Guyana’s vast discovered resources under development. Chevron will get 30% ownership in more than 11 billion barrels of oil equivalent discovered recoverable resource with high cash margins per barrel, strong production growth outlook, and potential exploration upside, the company said. Guyana is more politically stable than other parts of the world and closer to the United States—efficient for crude exports to America. In a sign of operations being disrupted by geopolitical turmoil, weeks before the announced acquisition of Hess, Chevron was ordered by Israel to shut down production at the offshore Tamar gas field following the Hamas attack. The Hess deal will also give Chevron 465,000 net acres of high-quality, long-duration inventory in the Bakken supported by the integrated assets of Hess Midstream, complementary U.S. Gulf of Mexico assets, and steady free cash flow from its Southeast Asia natural gas business. In the Bakken, Hess Corp’s net production was 190,000 barrels of oil equivalent per day (boepd) in the third quarter of 2023, compared with 166,000 boepd in the prior-year quarter, reflecting increased drilling and completion activity and higher NGL and natural gas volumes received under the percentage of proceeds contracts due to lower commodity prices. In the Permian, Exxon will become the biggest producer after the Pioneer deal. The combination with Pioneer “transforms ExxonMobil’s upstream portfolio by increasing lower-cost-of-supply production, as well as short-cycle capital flexibility,” Exxon said when announcing the deal. The company expects a cost of supply of less than $35 per barrel from Pioneer’s assets. “By 2027, short-cycle barrels will comprise more than 40% of the total upstream volumes, positioning the company to more quickly respond to demand changes and increase capture of price and volume upside.” Exxon’s CEO Darren Woods commented on CNBC after the deal was announced: “The real challenge that we have, I think, as a company and an industry is to make sure that we’re developing these resources in a very low cost to supply.” “Scott’s built that business with Pioneer, and the combination of the two of us will have even a stronger business with lower cost to supply. So, we’re basically indifferent to wherever those prices go, making sure that we can supply cost effectively whatever the market conditions are,” Woods said.