U.S. Seizes Iranian Oil From Tanker
The United States recently confiscated a cargo of Iranian crude oil from a tanker at sea, according to a maritime security company, indicating that the seizure pre-dated Iran’s move to seize Chevron’s cargo of crude oil on Thursday off the coast of Oman. On Thursday, a Marshall Islands-flagged tanker carrying crude oil destined for Chevron was seized by the Iranian Navy, according to the U.S. Navy. According to Tehran, the tanker had been involved in a collision with an Iranian vessel in the Gulf of Oman, resulting in Iranian crewmember injuries, with several missing. Iran also said that the tanker ignored eight hours’ worth of radio calls following the collision. Iran said it was taking the Suezmax tanker back to Iran for investigation. The U.S. Navy, however, accused Iran of interfering with navigational rights in international waters, referring to the incident as a “threat to maritime security and the global economy.” On Friday, new information surfaced from maritime security company Ambrey, which alleged that Iran’s motive for seizing Chevron’s load of crude oil was in retaliation for the U.S. seizure that took place not even five days prior. “Both tankers were Suezmax-sized. Iran has previously responded tit-for-tat following seizures of Iranian oil cargo,” Ambrey said in a note to clients, according to the Jerusalem Post. Sources familiar with the matter said that the United States seized a Marshall Islands tanker Suez Rajan after obtaining a court order to do so. The tanker’s last known position was near southern Africa. This isn’t the first time the global energy markets have seen a spat between the United States and Iran over seized oil tankers. In 2019, the Iranian National Guard Corps seized a British oil tanker, the Stena Impera, for allegedly violating maritime law. In 2020, Iran seized a Liberian-flagged oil tanker in the Strait of Hormuz, although it let it go. The United States has also participated in the oil seizure squabble, seizing an Iranian oil cargo last May near Greece.
Next Year Will Be A Crucial Year For Suriname’s Emerging Oil Boom
A series of setbacks emerged during 2022 which derailed deeply impoverished Suriname’s nascent oil boom. The former Dutch colony of around 600,000 people, which shares the Guyana Suriname Basin with nearby Guyana, is believed to possess significant offshore petroleum potential. It is estimated that 1.4-million-acre offshore Block 58 where 50% partners Apache and TotalEnergies, which is the operator, have made five commercial discoveries, contains as much as 6.5 billion barrels of oil. If proven correct and successfully exploited, this will endow Suriname with a massive economic boom on the scale of that being enjoyed by Guyana where the economy grew by a stunning 62% during 2022. For these reasons, a fiscally challenged government in Paramaribo, which is facing an economic crisis and the threats of yet another sovereign debt default, views Suriname’s offshore oil potential as an economic silver bullet. It appears, however, that the former Dutch colony’s nascent oil boom is stalled. The final investment decision from Apache and TotalEnergies, which is the operator, regarding the billion-dollar development of Block 58 offshore Suriname was expected last year but has been delayed. TotalEnergies CEO Patrick Pouyanne explained during late-2022 that the energy supermajor was concerned by a lack of understanding of the reservoirs discovered and a mismatch between seismic data and drilling results. This has postponed the first oil from Block 58 to at least 2027, perhaps even later, when it had initially been expected by Paramaribo in two years. When it is considered that it will take an investment of somewhere between $6 billion and $10 billion to develop Block 58 and bring it to first oil TotalEnergies hesitance is understandable. This constituted a serious blow for deeply embattled President Chandrikapersad Santokhi who is facing political and economic crises in a nation which is one of the poorest in South America. Suriname’s 2022 gross domestic product per capita of $5,710 the third lowest on the continent before Bolivia with Venezuela in last place. The former Dutch colony was hit particularly hard by the 2020 COVID-19 pandemic which exposed the economic weaknesses created by Dési Bouterse who was in power from 2010 to 2020. During 2020, Suriname’s gross domestic production shrank by 16% which was the worst performance in South America after Venezuela. Since then, the economy has failed to recover with 2021 GDP falling almost 3% and then only expanding by a mere 1.3% during 2022 when other South American countries were enjoying robust growth. More alarming is that the economic crisis sparked by the pandemic saw Suriname default three times on its sovereign debt and the country is facing the prospect of yet another default. In an attempt to shore up Paramaribo’s shaky finances, President Santokhi secured a nearly $700 million financing program from the International Monetary Fund, which was awarded on the condition of the government implementing harsh economic reforms. Those included removing fuel and electricity subsidies as part of a homegrown economic plan to restore fiscal and economic stability. This has only worsened the plight of everyday people in the impoverished South American country where inflation spiraled to 58% during February 2023. The soaring cost of living sparked violent anti-government demonstrations during February 2023 with protestors storming Suriname’s parliament. These events are magnifying the crises facing President Santokhi’s administration and the urgency with which a solution must be found. Paramaribo had expected an offshore oil boom to resolve Suriname’s economic woes, but there are signs that the FID for Block 58 is still some way off. Even after TotalEnergies demurred on making the FID during 2022 there were government expectations that it would be made during 2023, which could have seen first oil from Block 58 delivered by as early as 2027. It now appears that the FID will be made during 2024 (Dutch) at the earliest, but it could be delayed further if drilling results and flow testing do not meet expectations. The FID was delayed in part due to a series of non-commercial oil discoveries and dry wells. The latest poor drilling result was at the Awari well which was completed in November 2022 and deemed non-commercial, plugged and abandoned. Since then, Apache announced the successful drilling and flow testing of the Sapakara South-2 appraisal well which found 118 feet of net oil pay in what was deemed to be a high quality reservoir. Flow test and pressure data indicates that there are more than 200 million barrels of oil in place adding substantial resources to any planned development. Those results according to Apache CEO John J. Christmann IV confirm the company’s pre-drill expectations as well as geologic, geophysical, and reservoir models. That comes on the back of the June 2022 announcement of successful flow testing of the Krabdagu Discovery Well and the Sapakara South-1 appraisal well during November 2021. Appraisal work is continuing on Block 58. The Krabdagu-2 appraisal was being drilled at the time of Apache’s February press release and will be followed by the Krabdagu-3 well which was scheduled to be spudded during February 2023. If Apache and TotalEnergies continue to experience the success reported during February 2023 then it is foreseeable that the FID for Block 58 will be made next year. Nonetheless, with it likely to take at least three years and potentially longer, to bring the block to first oil this could very well be too late for President Santokhi with a debt crisis and further civil unrest looming. Time is running out for Suriname to successfully exploit the considerable oil potential which lies offshore as the push to decarbonize the world economy gains momentum. This is amplified by the strict fiscal terms of Suriname’s oil production agreements and the impoverished country’s political instability.
Indian oil companies await $300-$400 million dividends from Russia amidst sanctions
Indian oil companies are yet to receive dividends worth $300 million to $400 million from Russia since the war broke out between Russia and Ukraine in February 2022, a senior petroleum ministry official said. Indian companies including ONGC, Oil India, BPCL and Indian Oil have stakes in Russian oil and gas projects for which they have not received dividends due to Western sanctions imposed on Moscow. The government is negotiating a way to resolve the issue, the official said. The issue in payments of dividend to Indian companies arises due to the unavailability of banking channels after Russia was removed from the SWIFT global payment system by the US. Since the US and the EU has imposed sanctions on Moscow, Russia has become the one of the largest crude oil suppliers to India. The share of Russian crude in India’s oil import has risen from 0.2 percent in January 2022 to over 30 percent in March 2023. This comes as Russia is diverting the supply of its crude oil to Asian countries, especially India and China, and providing it at a discounted price. For the month of March, Russia was the top supplier of crude oil to India providing 1.64 million barrels per day (bpd), surpassing traditional suppliers such as Saudi Arabia and Iraq.
Reliance-bp, Nayara price petrol, diesel at market rates
India’s private fuel retailers -Reliance-bp and Russia’s Rosneft-backed Nayara Energy — have begun pricing petrol and diesel at market rates for the first time in over a year after a fall in global oil prices cut losses, sources said. Reliance BP Mobility Ltd (RBML), a joint venture between Reliance Industries Limited and UK’s bp, Nayara Energy and Shell sold petrol and diesel at huge losses as they tried to match the below-cost frozen rates of dominant public sector retailers. The losses were despite pricing fuel at slightly higher rates than state-owned Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (BPCL). But a fall in international oil prices over the last six weeks has helped bring the PSU pump-matching retail rates at par with cost, three sources with direct knowledge of the matter said. Reliance BP Mobility Ltd (RBML), a joint venture between Reliance Industries Limited and UK’s bp, Nayara Energy and Shell sold petrol and diesel at huge losses as they tried to match the below-cost frozen rates of dominant public sector retailers. The losses were despite pricing fuel at slightly higher rates than state-owned Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (BPCL). But a fall in international oil prices over the last six weeks has helped bring the PSU pump-matching retail rates at par with cost, three sources with direct knowledge of the matter said.
Assam Gas, OIL ink pact for piped natural gas supply to Assam, Tripura
The Assam Gas Company Limited (AGCL) and Oil India Limited (OIL) on Saturday signed an agreement for a joint venture (JV) private limited company with the mandate to lay, build and operate city natural gas distribution networks in parts of Assam and Tripura to start with. The JV company, with the Assam government-owned AGCL having 51 per cent of share equity and OIL retaining the remaining 49 per cent, shall, apart from building local natural gas grids and providing piped natural gas to domestic and commercial establishments in Lakhimpur, Dhemaji, Darrang, Udalguri, Sonitpur and Biswanath Chariali and a few districts of Tripura for the time being, shall also set-up numerous compressed natural gas (CNG) stations. Speaking at the ceremonial signing programme held at Janata Bhawan here, Assam chief minister Himanta Biswa Sarmaexuded confidence that the agreement between AGCL and OIL would provide a thrust to the ongoing process of industrial development in the state for the past couple of years. The chief minister added the JV company, with an authorised share capital of Rs 5 billion and initial paid-up capital of Rs 1 billion, would prove to be a milestone in the strengthening of the state’s economy in the days to come. Sarma further expressed hope that the JV company would support the state’s endeavour to transition towards a greener fuel-based economy, in sync with the central government’s Northeast Hydrocarbon Vision 2030.
Indian crude basket likely to reflect imports from Russia
With Russia emerging as one of the top oil suppliers to India, the Indian crude basket price is likely to factor in the cheaper Russian imports going ahead. The Indian basket of crude oil broadly represents the cost of India’s oil imports, and it has so far not accounted the oil imported from Russia at discounted prices. The Indian basket of crude oil represents a derived basket comprising of sour grade (Oman and Dubai average), sweet grade (Brent Dated) of crude oil processed in Indian refined in the ratio of 75.62 : 24.38. As of April 27, the Indian crude oil basket stood at $78.45 per barrel, according to data from Petroleum Planning & Analysis Cell. “At some point of time the Indian basket will catch up. Indian basket in any case is a dynamic basket. Market is changing, and obviously the basket will change. The new reality for Russian oil accounting for a significant part of our import will have to be reflected in the Indian basket,” said an official in the know of the developments. Russia emerged as a major supplier to India for the first time in FY23 after it started giving oil at discounted rates amid the Ukraine war. Despite concerns raised by the west to India’s imports from Russia during the war, India has taken a strong stand and said that it looks at all options to achieve energy security. Russia was the largest exporter of crude oil to India by value in February in spite of the western price cap of $60 per barrel, according to data from the union ministry of commerce and industry.
Russia’s oil discounts narrow for Indian ports
Urals crude oil differentials for May-loading cargoes for delivery to Indian ports narrowed amid rising competition for discounted barrels in Asia, according to three traders. Meanwhile, Reuters calculations show FOB prices for the grade fell below the Western price cap of $60 per barrel on weaker Brent prices, which are set for a fourth straight monthly fall. Urals discounts narrowed to $10-$12 a barrel to dated Brent on a delivered ex-ship (DES) basis in Indian ports, from minus $13 a barrel for April loading cargoes, according to the three traders. Shipping costs from Baltic ports to India stood at around $7.8 million, another trader said. “May-loading parcels were offered around dated Brent minus $12 a barrel or minus $11 a barrel to Dubai,” a source with an Indian refiner which is a regular buyer of Russian oil told Reuters. Two other Indian refiners said the discount to Brent is about $10/barrel. Russia’s largest oil producer Rosneft and India’s top refiner Indian Oil Corp agreed to use the Asia-focused Dubai oil price benchmark in their latest deal. The Urals price on a free on board (FOB) basis in Baltic ports, allowing about $2 per barrel of additional transport costs, has fallen below $60 per barrel for cargoes loading in May, Reuters calculations show. Lower freight rates, narrowing discounts versus global benchmarks and Brent prices above $85 per barrel nudged the daily price of Urals above the cap earlier in April. China’s increased purchases of April-loading Urals and imports of the grade loading from Russia’s Baltic and Black Sea ports this month may hit an 11-month high, supporting prices, traders said and Refinitiv Eikon data showed.
Russian oil is still powering Europe’s cars with help of India
Russian oil is still powering Europe — just with the help of India. Back in December, the European Union barred almost any seaborne crude oil imports from Russia. It extended the prohibition to refined fuels two months later. However, the rules didn’t prevent countries like India from snapping up cheap Russian crude, turning it into fuels like diesel, and shipping it back to Europe at a markup. The Asian country is on track to become Europe’s largest supplier of refined fuels this month while simultaneously buying record amounts of Russian crude, according to data compiled by Bloomberg from analytics firm Kpler. “Russian oil is finding its way back into Europe despite all the sanctioning and India ramping up fuel exports to the west is a good example of it,” said Viktor Katona, lead crude analyst at the firm. “With India taking in so much Russian barrels, it’s inevitable.” The development is double-edged for the EU. On the one hand, the bloc needs alternative sources of diesel now that it has cut off direct flows from Russia, previously its top supplier. However, it ultimately boosts demand for Moscow’s barrels, and means extra freight costs. It also means more competition for Europe’s oil refiners who can’t access cheap Russian crude. Europe’s refined fuel imports from India are set to surge above 360,000 barrels a day, edging just ahead of those of Saudi Arabia, Kpler’s data show. Russian crude oil arrivals to India are expected to surpass 2 million barrels a day in April, representing almost 44% of the nation’s overall oil imports, according to Kpler data. More than half of Russia’s seaborne oil shipments were to the European Union and Group of Seven nations before the bloc began to cut purchases in response to the nation’s invasion of Ukraine in early 2022.
Germany Doubles Down On LNG Fearing Another Gas Pipeline Attack
Germany looks to install one or two floating LNG import terminals at its largest island, Rügen in the Baltic Sea, as officials do not rule out further attacks on energy and gas pipeline infrastructure, sources with knowledge of the plans told Bloomberg on Thursday. Germany cannot rule out another attack on a pipeline carrying natural gas after the mysterious sabotage on the Nord Stream pipelines last autumn, according to Chancellor Olaf Scholz, Bloomberg’s sources say. Until the middle of 2022, Germany received most of its gas from Russia via Nord Stream 1 before Russia axed deliveries in early September, claiming an inability to repair gas turbines because of the Western sanctions. The sabotage on Nord Stream 1 and Nord Stream 2 occurred at the end of the same month. After the Russian gas supply stopped, Norway is now Germany’s top natural gas supplier, and supplies are coming via pipelines. Concerned about a potential new attack on pipeline infrastructure, German officials are now looking to have floating LNG import terminals at the Mukran port on the Rügen island by 2024, according to Bloomberg’s sources. Faced with the prospect of no Russian gas, Germany rushed to install floating storage and regasification units (FSRUs) last year. Europe’s biggest economy plans to have as much as 70.7 million tons per year of LNG import capacity by 2030, which will make it the fourth-largest LNG import capacity holder in the world. Germany plans to have a total of 10 FSRUs, some of which will be removed and replaced by onshore regasification facilities once they are built. The rush to have LNG import terminals as soon as possible will make Germany the fourth largest import capacity holder behind the major Asian LNG buyers South Korea, China, and Japan. Germany may end up using less LNG import capacity than it has planned to roll out this decade, but better safe than sorry, the chief executive of the top German utility, RWE, said last month in an interview with German business magazines Der Stern and Capital.
The Brent Oil Benchmark Is About To Change Forever
West Texas Intermediate Midland crude is about to be added to the Brent benchmark contract this June. This would be the first time a non-North Sea crude has been added to the benchmark basket. And it will change the oil market forever. First, however, why is WTI being added to the Brent basket? It’s really simple. There has been more U.S. crude oil going into Europe since Russia’s invasion of Ukraine. At the same time, the output of the grades making up the Brent basket has been falling consistently, and so has trade in these grades. “We’re really basing the world’s biggest and most important oil benchmark off a very small pool of market activity,” James Gooder, Argus vice president, told Reuters. The latter cites data from its Refinitiv service as showing the production of Brent, Ekofisk, Troll, Forties, and Oseberg—the original basket members—had fallen to less than 700,000 bpd from some 850,000 bpd in late 2020. At the same time, the amount of WTI crude that is arriving in Europe daily has increased massively, hitting 1.25 million bpd last month, making it a perfect candidate for the international benchmark basket, according to S&P Global, which is making the addition. “WTI Midland is the best candidate for this because it already has a fairly similar refining slate to most of the North Sea grades,” S&P Global’s director for crude and fuel oil markets told Reuters. It is more than that, however. According to some analysts, WTI will not just become another member of the Brent crude basket. It will come to dominate it, and this means that U.S. political, economic, and industry developments would come to have a much bigger effect on Brent crude prices than before. “Bottom line for Brent is that it will be much more influenced by U.S. fundamentals such as Strategic Petroleum Reserve releases and Permian production,” Rebecca Babin, senior energy trader at IBC Private Wealth US, told Reuters. Permian oil production will be particularly relevant when WTI is added to the Brent crude basket. That’s because “The vast majority of U.S. crude exports originate from Texas ports, and most of the crude shipped out originates from the Permian basin, which has been the growth engine for U.S. oil production,” according to Aaron Brady, a VP of energy oil market services at S&P Global, who spoke to the Houston Chronicle. Some industry observers have pointed to uncertainty about the production growth prospects of the shale patch, which currently provides most of U.S. oil output. According to one of them, Saxo Bank’s commodity chief Ole Hansen, the addition of WTI to the Brent crude basket will not have much of an impact on prices. Yet despite this uncertainty, shale production continues to grow, albeit more slowly and modestly than during the peak boom years. “The Permian Basin still has thousands of premium well locations remaining, and is expected to continue growing this decade,” S&P Global’s Brady told the Chronicle. So, the addition of West Texas Intermediate to the Brent crude basket may seem like an eccentric move, but it actually makes perfect sense. The U.S. oil is being sold in Europe in ever-growing volumes while the output of previous Brent crude basket members is falling. Middle Eastern oil has its own benchmark, and OPEC has its own basket. It seems the addition was only a matter of time. With the addition of WTI to the basket, Brent’s price may fall: the price of dated Brent is based on the price of the cheapest grade in the basket, and WTI has always traded at a discount to Brent. And that’s good news for consumers.