ONGC to invest Rs 2000 billion to meet net zero emission target
State-owned Oil and Natural Gas Corporation (ONGC) will invest about Rs 2000 billion in setting up renewable energy sites and green hydrogen plants and cutting gas flaring to zero to achieve its 2038 net-zero carbon emission goal. The company, which produces about two-thirds of India’s crude oil and about 58 per cent of natural gas, on Tuesday released a 200-page document, detailing its path to achieving net zero emissions. It listed clean energy project seven as it looks to boost its hydrocarbon output to meet the country’s energy needs. ONGC will invest Rs 970 billion by 2030 in setting up 5 gigawatts of renewable energy capacity, green hydrogen, biogas, pump storage plant and offshore wind project, according to the document. Another Rs 655 billion will be invested by 2035, mostly in a green hydrogen or green ammonia plant, and the remaining Rs 380 billion by 2038, primarily in setting up 1 GW of offshore wind projects These projects will help the firm offset 9 million tonnes of carbon emissions it is directly (Scope-1 emissions) or indirectly (Scope-2 emissions) responsible for. ONGC said it will invest Rs 50 billion to cut gas flaring to zero by 2030 through technological intervention. The firm released into the atmosphere 554 million cubic metres of methane in 2021-22 (base year), mostly because it was an incidental by-product of oil or the quantity was not economical enough to pipe it to consumers.
India-Russia to push long-term arrangement for crude supplies at annual summit
New Delhi and Moscow during PM Narendra Modi’s visit (July 8-9) will push for a long-term arrangement for crude supplies from Russia to India in the backdrop of rising Russian oil exports. The need for a long-term arrangement enabling smooth supply of Russian crude to India at discounted rates has been under discussion between the two sides. “We are a longstanding partner of Russian federation. We have had discussion with the Russians on long-term deals,” Oil Minister Hardeep Puri had said after being reappointed in the same portfolio under Modi 3.0. “I am confident that both our private and public sector players will sign long-term deals with countries where they see benefit in doing so,” Puri had said, when asked if Indian state-run companies are looking at signing such deals with Russia
Will OPEC+ Ever Rein In Its Non-Compliant Members?
OPEC and the OPEC+ group have had reasons to be happy this week as Brent oil prices topped $87 per barrel. But the most recent rise in oil is no thanks to the OPEC+ members that have continuously failed to comply with their production cuts. The price rally was the result of signs of strong demand and concerns about supply during the hurricane season. The overproduction at some OPEC+ members – most notably Iraq, Kazakhstan, and Russia – continues to be an issue for the alliance, which has tentative plans to start easing part of the voluntary cuts in the fourth quarter of this year, market conditions permitting. OPEC’s top producer and de facto leader, Saudi Arabia, seeks to lead by example and continues to stick to its pledge to pump 9 million barrels per day (bpd) of crude. But other OPEC+ producers, including OPEC’s second-largest, Iraq, haven’t complied with the current cuts despite continuously pledging they would show better discipline going forward. OPEC has given the cheaters until September 2025 to compensate for their overproduction in recent months. There haven’t been any signs that Iraq and Kazakhstan have managed to reduce their respective output down to their assigned quotas, let alone compensating for previous overproduction. The lack of compliance at some OPEC+ members signals that the years-long struggle of the group to rein in the cheaters isn’t over yet. It also sends a bearish signal to the oil market – some of the production cuts are only on paper because several producers are failing to cut output as much as they have agreed under the OPEC+ deal. Currently, the main culprits are OPEC’s number-two producer Iraq and non-OPEC producer Kazakhstan. And this is not the first time have failed to comply. In the 2020-2021 period, Iraq and Kazakhstan were pumping above their quotas, and they failed miserably in compensating for their overproduction a year after OPEC+ launched a compensation mechanism similar to the one it has now. The backlog of additional cuts that Iraq and Kazakhstan had to make in 2021 increased at that time, more than a year after the compensation plans were adopted, according to internal OPEC+ documents obtained by Bloomberg. This year, compensation plans have been prepared again for Iraq and Kazakhstan. Between January and March 2024 alone, Iraq’s cumulative overproduction stood at 602,000 barrels per day (bpd) and Kazakhstan had accumulated 389,000 bpd in overproduction, per OPEC’s estimates. At the June OPEC+ meeting, producers were given time until September 2025 to compensate for previous overproduction. Judging from the most recent production data from OPEC and from Reuters and Bloomberg surveys, neither Iraq nor Kazakhstan has managed to reduce production to the promised levels. The monthly Reuters survey showed this week that OPEC’s oil production rose in June for a second month in a row, due to higher output from Nigeria and Iran. The biggest decline in output came from Iraq, which reduced production by 50,000 bpd, but OPEC’s second-largest producer continued to exceed its OPEC+ quota in June. Iraq, which has failed to stick to its 4-million-bpd cap on production, pumped 4.195 million bpd in May—down by 7,000 bpd from April, but nearly 200,000 bpd above its target, per OPEC’s secondary sources in its latest monthly report. The Bloomberg survey of OPEC output in June showed that Iraq cut production by 30,000 bpd, but was still around 250,000 bpd above its quota. This is before factoring in the compensation cuts. Kazakhstan, for its part, raised its oil production in June, exceeding its quota, Reuters calculations based on data from sources showed this week. Kazakhstan produced 1.538 million bpd of crude last month, up from May, and about 70,000 bpd above its OPEC+ cap of 1.468 million bpd, according to Reuters calculations of output data. Kazakhstan’s Energy Ministry said in June that independent sources approved by OPEC+ found that the country had exceeded its quota under the deal by 45,000 bpd in May. “Kazakhstan will address this overproduction and will fully comply in June, including complying with additional voluntary cuts,” the ministry said last month. Russia also vowed to reach its oil production quota in June after exceeding its target output under the OPEC+ deal in May, its energy ministry said last month. While OPEC+ has started to publicly announce overproduction levels of individual members, it’s not certain that it could get cheaters that haven’t complied with the cuts for years to begin sticking to their quotas. Continued overproduction could blunt the impact of the group’s cuts on the oil market.
CNG Vehicle Registrations In Mumbai Rise 37% In A Year, Surpass Pre-Covid Levels
There has been a 37% rise in annual registrations of Compressed Natural Gas (CNG) vehicles in Mumbai, with numbers jumping from 22,305 vehicles in 2022-23 to 30,548 in 2023-24. Moreover, for the fisrt time ever, the state, too, boasts of having an annual registration of over 0.2 million CNG vehicles, reveals latest statistics procured by Sunday Mumbai Mirror. Across Maharashtra, the growth in registrations has been 32% during last financial year. Public policy (transportation) analyst Paresh Rawal said, “CNG is a non-renewable source of energy, but comparatively much cleaner than petroleum products. The rise in sales of vehicles can be attributed to various reasons. One is, easily accessible infrastructure of CNG refuelling stations in the city and on highways. Another reason is that company-fitted CNG tanks in newer car models occupy much less boot space and provide a petrol-equivalent thrust to the car. All these reasons, along with better mileage performance, has made CNG cars favorite again. Also, in case of emergency, the option of switching over to petrol/diesel gives it an edge over electric vehicles.”
Qatar continues to drive Middle East’s international LNG trade flow: IGU
Qatar continues to drive the Middle East’s international LNG trade flow, Asia in particular, according to the International Gas Union. In its latest report, IGU noted that the LNG trade flow between the Middle East and Asia accounted for 43.29mn tonnes in 2023, driven by Qatar LNG supplies to China, India and Pakistan. In 2023, global LNG trade flows remained concentrated within Asia Pacific, with Asia Pacific-to-Asia Pacific trade flows having the highest absolute value (95mn tonnes). The third largest trade flow was from the Middle East to Asia at 43.29mn tonnes last year, as compared to 41.25mn tons in 2022, which was a 4.93% or 2.03mn tonnes increase. Major contributors to this trade flow include Qatar to China (16.75mn tonnes), Qatar to India (10.92mn tonnes), and Qatar to Pakistan (6.32mn tonnes).The biggest contributors to the net increase were Qatar to China (+0.70mn tonnes), UAE to China (+0.56mn tonnes), and Qatar to India (+0.37mn tonnes). In 2023, inter-regional trade continued to be dominated by long-term imports, with 61.1% of net imports on the long-term, 3.8% on the short-term and 35.2% on spot. Asia and Asia Pacific remained heavy on long-term imports, with 68.9% and 69.5% of net imports on the long-term, whereas net imports on spot were only 28.2% and 27.2%, respectively. This is consistent with purchase patterns of major players in Asia and Asia Pacific that have historically preferred long-term contracts, with spot purchases being more opportunistic depending on prevalent prices and short-term demand. Europe has mostly purchased on the spot market, corresponding to about 48.4% of net imports, with only 46.4% on long-term. This is consistent with European purchase patterns as spot cargoes were required to make up for an abrupt loss in Russian pipeline flow. Latin America purchases most of its cargoes in preparation for winter in the Southern Hemisphere, of which 65.5% of net imports are on the spot market, while long-term purchases are at 34.5%.According to IGU, intra-Asia Pacific flows were made up primarily of flows coming from Australia, which contributed to 54.75mn tonnes. The most dominant intra-Asia Pacific trade flow was Australia-to-Japan (27.61mn tonnes), then followed by Australia-to-South Korea (10.74mn tonnes) and Malaysia-to-Japan (10.43mn tonnes). Intra-Asia Pacific trade flows declined by 2.1mn tonnes from 2022 to 2023. There were several notable increases from Australia to Thailand (+1.32mn tonnes), intra-Indonesia flows (+0.88mn tonnes), Malaysia to South Korea (+0.69mn tonnes). However, contributing to a slight net decrease was Australia to Japan (-3.11mn tonnes), Malaysia to Japan (-1.58mn tonnes) and Australia to South Korea (-1.08mn tonnes). The second largest trade flow between two regions was from North America to Europe at 56.63mn tonnes . The biggest drivers of this trade flow were from the US to the UK (8.81mn tonnes), the US to Spain (5.32mn tonnes) and the US to Germany (4.14mn tonnes). This trade flow remained almost constant year on year, mainly driven by the US to Netherlands (+4.95mn tonnes), the US to Germany (+4.14mn tonnes), and the US to Italy (+1.62mn tonnes). There were also decreases along this trade route, particularly the US to Spain (-3.12mn tonnes), the US to France (-1.14mn tonnes), and the US to Turkiye (-1.13mn tonnes).
Aramco, ADNOC reportedly weighing bids for Australia’s Santos, but analysts sceptical
Saudi Aramco and Abu Dhabi National Oil Company (ADNOC) have been separately considering bids for Santos, Bloomberg News reported, sending shares of the Australian gas producer up 6.5% on Thursday. Both Saudi Aramco and ADNOC have been conducting preliminary evaluations of Santos as a possible acquisition target, the report said, citing sources who declined to be named as the information was private. The sources said Santos could attract interest from other potential buyers, according to the report. Deliberations are on, and the suitors have not decided whether to proceed with any proposals, it added. “Santos does not comment on media speculation,” a company spokesperson said. Saudi Aramco did not immediately respond to Reuters’ request for comment, while ADNOC declined to comment.
Why U.S. Oil and Gas Production Is Slowing Down
Slowing drilling activity in the U.S. shale patch is capping oil production growth while natural gas output is down from year-ago levels amid above-average inventories and unsustainably low prices earlier this year. Oil and gas prices have dropped since the highs from the summer of 2022 when they spiked following the Russian invasion of Ukraine. The decline in U.S. benchmark oil and gas prices over the past nearly two years has reduced – with a lag – drilling activity in the shale patch. America’s oil and gas production hit record highs at the end of 2023 and continues to be close to all-time highs, but growth has slowed down in oil output while gas production has started to fall after a mild 2023/2024 winter boosted inventories to above-average levels and sunk Henry Hub gas prices to $1.80 per million British thermal units (MMBtu) in February 2024, compared to $9 / MMBtu in August 2022. Oil Output Growth Slowing Crude oil production from the Lower 48 basins, which exclude the federal offshore Gulf of Mexico, increased by 500,000 barrels per day (bpd) in April 2024 from the same month in 2023. But in April last year, the annual growth in the Lower 48 output stood at 900,000 bpd, per EIA data cited by Reuters market analyst John Kemp. The number of oil rigs currently stands at 479—down by 66 compared to this time last year, according to the latest Baker Hughes data. Despite the decline in the number of oil rigs, U.S. oil production has grown compared to year-ago levels, mostly thanks to efficiency gains, analysts say. Amid the ongoing consolidation in the American oil and gas industry, producers have become bigger and are focusing on shareholder returns. They wouldn’t be inclined to respond to every price spike with a major boost in drilling that ultimately floods the market with oil and depresses prices. The big companies are looking to become bigger by adding premier assets of the takeover targets to their portfolios. And the key driver of the industry now is returning more to shareholders and preparing for inventory stacked up for years of production ahead, without the need to grow organically by investing too much cash flow into the drilling of new locations and wells. In the second quarter of the year, oil production was essentially unchanged from the first quarter, amid a modest rise in the overall business activity index, according to oil and gas executives responding to the latest Dallas Fed Energy Survey. “WTI (West Texas Intermediate) crude and Henry Hub natural gas pricing directly affects our business as we are operating existing wells and providing cash flow to investors,” an executive at an exploration and production (E&P) firm said in comments to the survey. Another E&P executive added, “The last few years of mergers and acquisitions have decreased activity in the oil patch. The majors are not going to exhaust reserves to raise domestic production until supply and demand curves meet their goals.” “They do not have to participate in treadmill drilling to keep incomes at a pace to develop reserves and pay back loans.” So, growth in shale production is set to slow down. Lower 48 oil production growth exceeded expectations in 2023, adding 900,000 bpd of supply last year, but Wood Mackenzie expects Lower 48 oil production to grow by just 270,000 bpd in 2024 and another 330,000 bpd in 2025. Last year, big efficiency gains allowed operators to meet or exceed expectations for wells turned in line, which helped boost production with significantly fewer rigs, according to WoodMac’s principal analyst Nathan Nemeth. “However, efficiency gains and associated well cost savings are not translating into more drilling activity like we’ve seen in the past. Instead, E&Ps have reiterated plans to return cash to shareholders,” Nemeth noted. Natural Gas Output Declines While U.S. oil production continues to rise, albeit at a slower pace, natural gas output has dropped from December 2023 highs, and production has turned lower compared to year-ago levels. Dry natural gas production was 101.7 billion cubic feet per day (bcf/d) in April 2024, down from 102.7 bcf/d in April 2023, the lowest for 16 months. Major natural gas producers curtailed some output in the spring in response to the price slump earlier this year, which saw prices tumble to a three-decade low. In its latest Short-Term Energy Outlook, the EIA expects U.S. marketed natural gas production to drop by 1% this year, led by a 9% decline in the Haynesville region and 4% decline in the Appalachia region as some producers have limited development and production due to low natural gas prices. The current refill season has seen lower injections into storage so far, due to rising demand for gas-powered electricity in the summer heat waves. However, gas inventories are above average for this time of year, and working natural gas stocks for the week ending June 26 were 21% higher than the five-year average and 11% higher than last year at this time, per EIA data. The EIA expects storage inventories to end the summer injection season on October 31 at 6% above the five-year average. “If U.S. natural gas production is lower than our forecast and consumption in the electric power sector to meet air-conditioning demand increases more than we expect, natural gas prices could be higher than forecast,” the administration said.
Blue Energy Motors Spearheading India’s LNG Revolution in Long-Haul Trucking
India’s ambitious environmental goals have ignited a vital discussion: is Liquified Natural Gas (LNG) the pivotal transition fuel? In an exclusive interaction with Anirudh Bhuwalka, CEO of Blue Energy Motors, Rajesh Rajgor explores the company’s pioneering efforts in bringing LNG trucks to India. Bhuwalka emphasizes collaborations with industry giants like the IVECO Group and stresses LNG’s significant effects on emissions, efficiency, and cost. Through proactive maintenance and strategic partnerships, Blue Energy Motors strives to spearhead India’s shift towards cleaner transportation energy solutions. India is rapidly expanding its LNG fueling infrastructure, planning to establish 1,000 stations along major highways and industrial areas to promote cleaner transportation fuels, led by the Ministry of Petroleum and Natural Gas (MoPNG) and major oil companies like IOCL, BPCL, and HPCL. This initiative aims to support the transition from diesel to LNG for heavy-duty vehicles, particularly long-haul trucks, aligning with India’s strategy to enhance energy security and sustainability in its transportation sector. India aims to reduce its carbon intensity by 45% by the end of the decade and achieve zero emissions by 2070. Bhuwalka highlights the pressing need to address pollution levels, stating, “India has around 4 million medium and heavy-duty vehicles, which contribute significantly to pollution. Although commercial vehicles constitute only about 4% of the vehicles on the road, they are responsible for 40% of automotive pollution. Within this 40%, heavy-duty vehicles account for 65% of the emissions. This underscores the urgency of tackling emissions from the transportation sector.” Moreover, Bhuwalka stresses the urgency of decarbonizing the trucking industry, stating, “The numbers are staggering,” and warning that “With India’s economy poised for further growth, this pollution is set to double in the next decade.” He emphasizes the need for immediate action to prevent worsening air quality and congestion in cities. Turning to potential solutions, Bhuwalka highlights the merits of LNG as a transition fuel, asserting, “While LNG may not be as clean as electric or hydrogen options, it offers immediate benefits,” and citing their experience with LNG trucks showing “a 30% reduction in carbon footprint compared to diesel.”
Need to unbundle natural gas marketing and transportation, says Indian Gas Exchange CEO
India needs an independent system operator to ensure fair access to full capacity of natural gas pipelines for all market players, says Indian Gas Exchange (IGX) CEO Rajesh Kumar Mediratta. In an interview with Sanjeev Choudhary, Mediratta called for splitting of gas companies engaged in both marketing and transportation to end the advantage bundled entities enjoy over standalone marketers. Edited excerpts: What are some of the measures the government can take to develop domestic natgas market? If we want to develop our natural gas market, we need to bring best practices with a level playing. Bundled and unbundled marketers should have equal access to information and the same imbalance or ship-or-pay charge mechanism. The absence of transparent and non-discriminatory access to gas grid impedes competition and, ultimately, stifles the growth of the gas market. The solution is to split bundled entities into two – one to look after marketing function and other for transportation. Until then, the two functions should work at an arm’s length, with tough ring-fencing regulations. Do we need an independent system operator? We need an independent system operator to ensure fair access to the full capacity of pipelines for all market players. The scheduling, nomination, imbalance management for all pipeline capacity may be done on a non-discriminate and neutral basis. This will help boost participants’ confidence in the gas market and encourage customers to shift to gas. How crucial is it to bring gas under goods and services tax (GST)? The gas trading market is currently fragmented due to the route-based and counterparty-dependent pipeline tariff collection and different state taxes. To address this, it is essential to rationalise the system to a counterparty-independent and route-agnostic mechanism, such as the ‘entry-exit’ or one common tariff. The government should consider bringing natural gas into the ambit of GST.
India’s LNG imports set to slump as monsoon hits power demand
India’s booming liquefied natural gas imports are likely to slow as cooler weather due to monsoon rains crimps electricity demand and increases in hydropower crowd out expensive gas-fired generators. “Electricity demand won’t be as high as it was in May and June, which is the prime driver of higher LNG imports,” said Ayush Agarwal, LNG analyst at S&P Global Commodity Insights. India bought some 2.6 million tons of the fuel last month, its highest since October 2020, according to Kpler data. That came on the back of affordable spot prices in the range of $11-$12 per million British thermal units, and as gas-based power plants cranked up generation to meet high demand. The shipments were driven by an emergency order to operate gas-fired plants, most of which typically remain under-utilized due to their high generation costs. That resulted in a 63% increase in output from the units during the three months through June. However, as the interim ruling came to an end on June 30, LNG imports are likely to see a decline for the remainder of the year, Agarwal said.