Guyana Refuses To Sell Discounted Oil To India
One of the world’s growing hotspots for crude oil exploration has refused to sell discounted crude oil to India, Guyana’s Vice President Bharrat Jagdeo said this week. Guyana’s crude oil production has increased three-fold from a year ago, with the government of Guyana holding the rights to about 12.5% of the country’s vast oil riches. BP has a one-year contract to market those government-controlled barrels. India has lobbied Guyana for two years—well before Guyana’s oil boom took off, but the two have been unable to come to an agreement, Jagdeo said, adding that any crude oil sales from Guyana to India would “have to be on commercial terms, not a discounted terms.” ndia said it is interested in sourcing discounted crude oil to make up for the increased costs for shipping the crude oil to India. “Guyana crude is costly for us because of high freight. Instead of paying a high freight for their oil, we will prefer to buy oil from the Middle East and east and west Africa,” a person familiar with the Indian traders thinking said, according to Reuters. “Without concessions their crude doesn’t make commercial sense for us.” Despite Guyana’s unwillingness to offer India crude oil on the cheap, the oil-rich nation is eager to invite India to the auction table for its first competitive oil auction, which is scheduled to be held later this summer. In that auction, 14 offshore blocks will go up for bid. India has not said whether or not it will participate. Jagdeo confirmed, however, that although an oil deal has not been reached, it will continue to discuss with India other areas of cooperation, including in agriculture and health.
Four Scenarios That Could Send Oil Prices To $200
It was the talk of the town last year. Traders bet on oil hitting $200 by March this year. Hedge fund managers warned it could even reach $250 before 2022 was over. None of that happened, and in hindsight, it’s easy to see why: global oil markets have time and again proved they are a lot more resilient than traders give them credit for. But is oil at $200 still a possibility? It always is, under certain scenarios. #1 Major Ukraine escalation It was because of Russia’s invasion of Ukraine last year that people started talking about $200. Pierre Andurand went even further, warning that oil could rise to $250 because “I think we’re losing the Russian supply on the European side for ever.” It turned out that the European side is not losing Russian supply but is simply getting it through third countries now, so that’s saved the global economy from a major oil price-induced headache. Oil always finds a way. Yet a major escalation in the conflict, possibly through more direct NATO involvement, could send prices flying high. It’s not certain they would reach $200 even in an escalation scenario because it’s highly unlikely the market could bear this price for any length of time, but it’s not impossible. #2 More OPEC+ cuts As far as chances go, this scenario is less likely than the first one. To get prices to $200, OPEC+ would need to cut much deeper, but more importantly, the group would have to want it. It doesn’t. Because $200 is way too high a price, and it would sap demand. OPEC+ has suggested with its latest moves that its sweet price spot is around $80-90 per barrel, so it is trying to keep prices around that level. Production outages could push oil prices higher, as they invariably do, even when the outage is as small as 400,000 bpd, as we recently saw with the Kurdistan-Iraq export dispute. Yet outages do not move prices so radically as to take them from sub-$90 to $200, so this is an even less likely scenario. An attack on Saudi production facilities could do the trick if it’s very successful, but with the war in Yemen nearing its end after the Chinese-brokered thaw between Riyadh and Tehran, such an attack has become purely hypothetical. #3 Russia production cuts All the $200-per-barrel forecasts from last year had to do with Russian oil. Most forecasters who saw oil rising to $200 cited European and U.S. bans on Russian oil imports as the basis for their forecasts, and at the time, it did seem like a sound basis. Of course, those forecasts never considered the option that Russia would simply switch buyers and Europe and the U.S. would switch sellers, which is exactly what happened. Another thing few considered was Russia cutting oil production in retaliation for Western sanctions. It already has announced certain cuts, but those, some commentators say, are a result of Russia’s inability to pump as much as before rather than deliberate action. Whatever the case with those cuts, the simple fact is that Russia can reduce its production deliberately. And if it does, prices will jump. How high is anyone’s guess, and it would depend on the rate of cuts. As for how likely that is—not very. #4 Underinvestment comes to bite The scenarios outlined so far are more of a mental exercise than realistic scenarios. None of them are particularly likely, even though at least a couple seemed so likely they made traders buy $200 Brent options. Yet there is one more scenario that is a realistic one. It’s not as bombastic as a war, but that makes it all the more dangerous. It is the scenario where consistent underinvestment shrinks supply so much, that prices have nowhere to go but up. Saudi Arabia has been warning about it. U.S. shale producers have been warning about it. And the G7 just declared they would fight “unabated fossil fuels,” which essentially means discouraging more oil and gas production. Of course, that declaration is worth little more than the paper it was written on, and that is the world’s greatest hope that oil will not hit $200 anytime soon, if ever. If those governments get serious about what they call unabated fossil fuels, the world’s oil supply will be at risk. Analysts love to say that the cure for high oil prices is high prices, and they are correct. A very efficient way to control the price of a commodity is to let it rise so much it kills demand. But what happens if that commodity is as essential as oil? Not using oil takes people back through the ages to a simpler but a lot less abundant, wealthy time. Just ask a Kenyan farmer how he likes that. Luckily for all, even the consistent underinvestment in new oil and gas exploration may not be enough to take prices all the way to $200. Because the industry, with the help of technology, will always respond to demand by adjusting production. Underinvestment has made this harder but not impossible. And even the most ambitious G7 government is not ready to impose an outright ban on oil. That would be political and economic suicide.
Reliance Industries to commence deep-sea gas production from MJ field in current quarter
Reliance Industries Ltd is set to commence natural gas production from its deepest discovery in the KG-D6 block this quarter and is expected to cover for 15% of India’s gas demands. KG-D6 block is located off the coast of Andhra Pradesh and is India’s only deep-water block under production. According to an investor presentation after the March quarter earnings, the company reported that it produced an average of 20 million standard cubic meters per day during the January-March quarter.
Asia’s longest oil pipeline laid across B’putra to connect Majuli with Jorhat
The Indradhanush Gas Grid Limited (IGGL) has accomplished the Herculean task of laying Asia’s longest river crossing oil pipeline of bigger size (24-inch diameter and above), which is also the second longest in the world, connecting river island Majuli with Jorhat in upper Assam. The IGGL said the laying of the hydrocarbon pipeline beneath the mighty and aggressive Brahmaputra by horizontal directional drilling (HDD) method was completed on Friday. “With the completion of the Brahmaputra HDD, the IGGL has achieved more that 71% physical progress of the North East Gas Grid (NEGG) project and we will be able to complete the Guwahati-Numaligarh section of the NEGG by February 2024. I’m extremely proud of my team, which has worked tirelessly to achieve this milestone overcoming challenges of monsoon rain and floods in Assam. I am also thankful to the government of Assam, which has been extremely supportive in implementing this project,” Ajit Kumar Thakur, CEO of IGGL, said on Saturday.
India’s dependence on Russian oil soars to 30%
India’s dependence on Russian oil has increased to account for 30% of its imported total in March, according to a Nikkei analysis of shipping data. India, which had previously relied almost exclusively on the Middle East, imported more than 6 million tonnes of Russian oil last month. Western sanctions stemming from Moscow’s invasion of Ukraine have made oil from Russia relatively inexpensive, leading to the shift in procurement. Nikkei analyzed British market research company Refinitiv’s maritime transport data as of April 14 for crude oil, fuel oil and refined petroleum products. Figures reflect the amount transported by tankers from Russian ports to their destination by the end of March. The 30% dependence on Russian oil marked a new high for India since the Ukraine invasion. But the percentage is expected to increase further to 40% to 50% for April, including expected arrivals. In January 2022, Russia accounted for slightly under 2% of India’s imports. China imported over 4.7 million tonnes of Russian oil in March, second only to India. China’s dependence on Russia reached 10%. Russia’s benchmark Urals crude is currently hovering in the $62 range, 20% to 30% lower than the international benchmark North Sea Brent. As part of Western sanctions introduced in December, the Group of Seven major economies and the European Union set a ceiling of $60 per barrel for the trading price of Russian crude oil. If the oil is purchased at a price exceeding this ceiling, the sanctions restrict the necessary insurance policies for marine transportation. More than 90% of such insurance is provided by European companies. With the number of buyers of its crude oil decreasing, Russia has been forced to sell at a discount to India, China and other countries not participating in the sanctions. Russian exports of crude oil and petroleum products have returned to pre-invasion levels, according to an International Energy Agency report in April. India and China are offsetting the decrease in European imports. An analysis of the Refinitiv data shows that global imports of Russian oil in March totaled about 24.2 million tonnes, the highest since the Ukraine invasion. For India, which is under pressure to cope with high inflation, there are advantages to procuring oil at a discounted price. According to the IEA, oil accounted for 25% of India’s energy consumption in 2020, second only to coal at 44%. However, Russian oil takes as much as eight times longer to transport than Middle Eastern oil, making it difficult to respond flexibly to sudden increases in demand. Price increases also pose a risk. Although India and China have not joined the sanctions, they face the prospect of international criticism for continuing to buy Russian oil above the $60 ceiling.
Japan’s Mitsui Buys 92% Stake In Texas Natural Gas Field
Japan’s Mitsui has bought a 92% stake in a shale gas field in Texas, from which it eyes production of over 200 million cubic feet daily, Reuters has reported, citing the company. The size of the deal was not disclosed but the Japanese company said the acquisition was a “pragmatic solution” for the transition away from fossil fuels. Japan is one of the most heavily import-dependent nations in the world when it comes to energy, and natural gas is one of its biggest imports. Last year, the country regained the top spot of LNG importers globally, overtaking China after it imported 71.99 million cubic meters of the superchilled fuel, while China imported 63.44 million tons. According to Mitsui, one of Japan’s biggest natural gas traders, natural gas and LNG will have a major role to play in the energy transition and the company was set to “continue to contribute to stable energy supply … by further promoting our global natural gas and LNG businesses”. Last year, with fellow trader Itochu and JERA, Japan’s biggest power utility, Mitsui sealed a long-term LNG deal with Oman as part of that natural gas strategy. The Japanese company was also allowed by the Japanese government to retain its stake in the Sakhalin-2 project in Russia despite G7 sanctions on Moscow. The stake will ensure continued deliveries of LNG over the long term. Energy Intelligence reported earlier this year that Japanese commodity traders were on the lookout for longer-term LNG supply deals amid the heightened uncertainty on energy markets sparked by the war in Ukraine. Mitsui’s acquisition deal in Texas may well be one version of securing long-term gas supply. The company said the field has a connection to LNG export plants on the Gulf Coast as well as ammonia production facilities.
Russia’s Gas Giant To Set Up Middle East Unit
A regulatory disclosure revealed on Tuesday that Gazprom is setting up a unit in the Middle East, according to Reuters. Russia’s state-controlled gas company did not provide details, but those details could be a critical factor in determining influence in the Middle East—be that Russia’s or the United States’. The news comes after an exclusive report by Oilprice.com made shortly after the recent Iran/Saudi Arabia deal, who cited a Kremlin official who said, “By keeping the West out of energy deals in Iraq – and closer to the new Iran-Saudi axis – the end of Western hegemony in the Middle East will become the decisive chapter in the West’s final demise.” Russia—as well as China—has been looking to get a better toehold into the gas-rich Middle East, Simon Watkins explained earlier this month. Gazprom, headquartered in Moscow, has stakes in fields granted by Baghdad and Erbil in Iraq, and Russia holds an 80% working interest in five oil blocks in the KRG region, and it owns 60% in the KRG oil pipeline that runs to Turkey, which has been shuttered for weeks following an arbitration ruling against Turkey for oil shipping from KRG to Turkey without Baghdad’s consent from 2014 to 2018. In November, Iran signed a $40 billion gas cooperation deal with Gazprom, with Iran’s Deputy Foreign Minister for Economic Diplomacy, Mehdi Safari, disclosing that Iran hoped to import Russian gas and export its own gas to international markets to keep from having to pay to transfer Iranian gas from the south to the north. The European Union recently sanctioned a Dubai-based subsidiary of Russia’s state-owned shipping company, Sovcomflot, in an attempt to close sanctions loopholes that saw the Dubai company help Russia generate significant revenues from shipping energy products.
Oil Prices Continue To Fall As Demand Concerns Persist
Demand worries outweighed supply concerns this week to push down oil prices, reinforced by heightened expectations of more U.S. rate hikes that lifted the greenback. In morning trade in Asia oil was down for the third day out of the last four, despite the EIA reporting an inventory draw of 4.6 million barrels for the week to April 14, compared to a modest build in crude oil inventories for the previous week, at 600,000 barrels. For the week before that, however, the EIA had estimated a sizable draw of 3.7 million barrels. Instead of reacting to the draw, oil traders apparently were more concerned with other news or rather non-news: the Fed has indicated repeatedly that it is not done with rate hikes. It seems there are expectations for at least one more rate hike, to be announced next month before the Fed pauses with the inflation-control measure. “When the Fed’s commentary indicates further rate hikes, economic troubles look inevitable,” Priyanka Sachdeva, an analyst at brokerage Phillip Nova, told Bloomberg. “The only ray of hope here is China’s reemergence, which is expected to be significant enough to outweigh the dented demand from the West.” “WTI crude is back below the $80 level and it could continue drifting lower if the strong dollar trade resumes,” OANDA’s Edward Moya told Reuters. What’s more, the gloom and doom that oil traders appear to see for the U.S. economy has proven stronger than optimism about China, which earlier this week pushed prices higher for a while after it reported stronger-than-expected GDP growth data. Yet that wasn’t the full picture. “Though China reported better-than-expected GDP data, both industrial production and fixed asset investments fell short of consensus data, which did not help (in) boosting oil prices,” CMC Markets analyst Tina Teng told Reuters.
Centre seeks proposals to develop green hydrogen innovation hubs
The Centre has invited expressions of interest (EoI) for developing hydrogen valley innovation clusters (HVIC) in the country. The Department of Science and Technology’s guidelines define a hydrogen valley as a specific geographic region where hydrogen serves more than one end sector or application in mobility, industry, and energy. This includes all steps in the hydrogen value chain, from production, storage, and transport to distribution to various off-takers, as well as renewable electricity production from hydrogen. The government will provide up to ₹2.5 million in assistance for the preparation of detailed project reports (DPR) which must be completed within 45 days of the project’s allocation. EoIs will be evaluated in May, and funding for the recommended EoIs for DPR preparation will also occur in that month. The DPRs will be evaluated and shortlisted in July, with the project expected to start in October 2023 and finish by 2028.
BPCL to invest $ 5 billion in Bina refinery complex
India’s state-owned Bharat Petroleum Corp Ltd (BPCL) plans to invest rupee (Rs) 430bn-500bn ($5.2bn-6.1bn) to expand its Bina refinery and build a petrochemical complex at the site in the central Madhya Pradesh state. BPCL has received necessary approvals from the Madhya Pradesh state government for the project, the company said in a regulatory filing to the Bombay Stock Exchange (BSE) on 14 April. The planned petrochemical complex is expected to produce linear low density polyethylene (LLDPE), high density polyethylene (HDPE), polypropylene (PP), bitumen, benzene as well as gasoline, diesel and aviation turbine fuel, it said in its statement. The company expects to commission the project by the fiscal year ending March 2028, it added. In a June 2022 report to the Ministry of Environment, Forests and Climate Change, BPCL stated plans to expand the capacity of its Bina refinery by more than half to 12m tonnes/year from 7.8m tonnes/year, it said The planned petrochemical complex will have a cracker with a 1.2m tonne/year ethylene capacity; a 650,000 tonne/year LLDPE/HDPE swing plant; a 500,000 tonne/year HDPE unit; a 650,000 tonne/year polypropylene (PP) line; and a 50,000 tonne/year butene-1 unit, based to the report. ($1 = Rs82.12)