India shows interest in fifth oil and gas licencing round
TOP officials from the High Commission of India in Tanzania have met and held talks with Petroleum Upstream Regulatory Authority (PURA) leadership about auction of petroleum exploration blocks in Tanzania Mainland scheduled for later this year. According to a statement availed to the media yesterday, the talks took place on Tuesday at PURA offices in Dar es Salaam and attended by the Second Secretary to the High Commissioner (Commerce) Narender Kumar and Danstan Asanga, PURA acting director general alongside other officials from both sides. Speaking during the meeting, Kumar said that upon learning of the government’s plan to auction oil and gas blocks through the Ministry of Energy budget estimates speech for the year 2024/25, the Indian High Commission deemed it necessary to meet with the relevant authority to thoroughly understand the matter to enable it provide comprehensive information to companies and stakeholders in India. “We hope that companies from India will be interested in this information which is why we have decided to seek further details that can enable them make decisions to participate in the forthcoming bidding round and ultimately invest in oil and gas exploration and production activities in Tanzania,” he said. Providing details about the fifth licencing round, Asanga said that PURA, on behalf of the government, has continued with preparations for the event and that several activities have been completed, including preparation of model production sharing agreement which has been submitted to the Ministry of Energy for further action. Other activities include demarcation of the blocks to be auctioned after obtaining approval from the Ministry of Energy and preparation of petroleum data packages. Additionally, Asanga noted that a review of the Petroleum Act of 2015 was underway to identify sections requiring amendments and that PURA was participating in the review. Regarding the timing of the bidding process, Asanga said that the auctioning of blocks will take place shortly after the completion of preliminary preparations including the review of the Petroleum Act of 2015 and that the government plans to launch the fifth licencing round later this year. In addition to discussing the fifth licencing around, the High Commission of India in Tanzania and PURA also explored the possibility of establishing cooperation between oil and gas exploration and production regulatory authorities in the two countries. They also discussed the possibility of collaborating in capacity building programmes for personnel in the field of oil and natural gas through funding from the government of India.
Reliance faces many hurdles in getting crucial crude delivered as global market struggles
A dearth of heavy crude is forcing one of the world’s biggest buyers to go the extra mile to get the barrels it needs, offering another example of how sanctions and OPEC+ curbs are recasting the supply chain. Reliance Industries Ltd., India’s largest private refiner, purchased about 2 million barrels of Canada’s Access Western Blend crude from the recently expanded Trans Mountain pipeline, its first such cargo. And although that grade suits processors with sophisticated refineries such as Reliance, there were plenty of unusual logistical complexities that came with the deal. To get the shipment delivered, Reliance is first having to load it onto four smaller tankers from Burnaby port because of local depth restrictions, according to people with knowledge of the matter. The quartet of cargoes will then be transferred onto a single very large crude carrier, before that vessel makes the more-than-19,000-kilometer voyage to India via the Pacific, they said. An alternative, possible route via the Atlantic would be longer still. The complex journey reflects underlying changes in the global market that have combined to make supplies of dense and sulfurous crude harder to find. First, US sanctions against Venezuela have been reimposed, cutting that nation’s supplies of heavy crude. At the same time, OPEC+ cutbacks have crimped flows of similar grades, while Mexico, another supplier, is also exporting less. Rounding it off, more heavier barrels from the Middle East are getting used locally for power generation during the hot summer months.
ONGC, Oil India to get relief as Centre cuts windfall tax on crude oil
The Central government has cut the windfall tax on petroleum crude to Rs 5,700 ($68.34) per metric ton from Rs 8,400 with effect from Thursday, as part of its fortnightly revision that is calibrated with global prices This is the second fortnightly cut in windfall tax in a row after a Rs 8,400 per metric ton reduction from Rs 9,600 on May 1. Upstream oil exploration and production companies ONGC and Oil India Ltd will gain as they will have to pay a lower tax on their crude oil output. The tax has been scaled down as crude oil prices have declined in the international market and the earnings of oil producers have also come down. Prices of the benchmark Brent crude are currently hovering at a little over $82 per barrel. The government had on April 16 raised the windfall tax on petroleum crude to Rs 9,600 a metric ton from Rs 6,800 due to the sharp increase in oil prices at the time.
UAE and Oman Partner for Renewable Energy and Green Tech Projects
The Middle East is expanding its renewable energy and clean tech sectors at an accelerated pace, as several countries plan for economic diversification beyond oil and gas. While fossil fuels may continue to provide massive revenues for countries such as Saudi Arabia, the UAE, and Qatar, these Middle Eastern states are ensuring they hold a competitive position in the future of international energy through the development of major wind, solar, green hydrogen, and other renewable energy projects. Several countries in the Middle East have long depended on oil and gas for both energy security and to bring in revenues, which have allowed these states to become some of the richest in the world. As the world transitions towards green and many traditional oil and gas reserves are being depleted, several countries in the region are now pumping funds into renewable energy projects and clean technologies to ensure they do not fall behind. At the COP28 climate summit, held in the UAE, many regional leaders made ambitious climate pledges, with the Middle East and North Africa (MENA) expected to add 62 GW of renewable energy capacityover the next five years, according to the International Energy Agency (IEA). Solar energy will contribute more than 85 percent of this capacity growth, as countries across the region exploit their abundant sun. Saudi Arabia is expected to contribute a third of the MENA region’s renewable energy increase, alongside growth in the United Arab Emirates (UAE), Morocco, Oman, Egypt, Israel, and Jordan. Together, these countries will contribute around 90 percent of the region’s renewable energy capacity growth. Saudi Arabia’s green energy capacity increase relies heavily on the development of a massive new urban area at the northern tip of the Red Sea – Neom. The megaproject – which many international experts and scientists are skeptical about – is expected to span 26,500 km2 and be completed in 2039. The development of Neom is supported by $500 billion from Saudi Arabia’s Public Investment Fund. The Kingdom says it will be powered wholly by renewable energy, with no roads or cars. It is expected to accommodate nine million people and will be connected by high-speed rail and pedestrian links. The government plans to build a clean industrial hub called Oxagon within the development, where it will construct the “world’s largest green hydrogen facility”, at a cost of $8.4 billion. Saudi Arabia is aiming to achieve a power mix of 50 percent renewable energy by 2030. The UAE hopes to reach a renewable energy mix of 44 percent by 2030, supported by the rapid development of the country’s solar power, as home to three of the world’s largest solar plants. The UAE’s Noor Abu Dhabi solar park is expected to reduce the country’s carbon emissions by around one million metric tonnes annually, while the Rashid Al Maktoum Solar Park in Dubai is expected to produce enough solar energy to power 800,000 homes by the end of the decade. The UAE is also beginning to develop its wind energy industry, developing a 103.5-MW project to power 23,000 homes and reduce carbon emissions by 120,000 tonnes a year. It is the first country in the Middle East to operate a nuclear power facility, which is expected to contribute 25 percent of the country’s energy needs once fully operational. Meanwhile, the government is investing heavily in the development of its blue and green hydrogen industry in line with its National Hydrogen Strategy 2050. The UAE hopes to become one of the biggest producers of green hydrogen worldwide in the coming decades. In April, the UAE and Oman signed a $35-billion investment partnership for the development of renewable energy, green metals, railways, and digital infrastructure and technology. The two countries plan to boost economic cooperation through strategic investments. The largest investment agreement was for an industrial and energy megaproject valued at $31 billion, which will include renewable energy initiatives, including solar and wind projects, alongside green metals production facilities. Mohamed Hassan Alsuwaidi, the Minister of Investment of the UAE, explained, “The agreements represent a major milestone in our bilateral ties, as they pave the way for us to leverage our collective strength to realize our shared vision of advancement and prosperity.” Oman also aims to become a major green hydrogen producer, developing on its existing oil and gas expertise and using its abundant open land to develop solar and wind farms to provide the renewable energy required for the electrolysis process needed to produce green hydrogen. Andrea Zanon, the CEO of WeEmpower Capital, stated, “Oman boasts some of the world’s most suitable locations for solar and wind power generation, key ingredients for producing low-cost green hydrogen through electrolysis.” Zanon added, “This green hydrogen can then be transported through Oman’s existing 4,000km gas pipeline network, significantly reducing infrastructure costs compared to starting from scratch… Furthermore, Oman’s extensive experience in processing and exporting liquefied natural gas (LNG) and ammonia translates directly to efficiently managing green hydrogen and its derivatives.” Oman hopes to produce at least a million tonnes of green hydrogen annually by 2030, 3.75 million tonnes a year by 2040 and 8 million tonnes by 2050.
Citi Sees Oil Prices Falling to $70 Range in Q3 2024
Oil prices have pulled back sharply to a three-month low as a combination of demand concerns and easing geopolitical premium take a toll. Last week, the Energy Information Administration’s (EIA) reported that U.S. crude inventories declined by 1.362 million barrels, smaller than the Wall Street consensus at 1.430 million barrels. The smaller-than-expected fall came hot on the heels of a large 7.3M-barrel build in U.S. crude stocks in the previous week, the largest weekly increase since February. Meanwhile, the United Arab Emirates has raised production capacity, with Abu Dhabi National Oil Co. saying in its website it’s able to pump 4.85 million barrels a day, up from 4.65 million a day at the end of last year. Not surprisingly, part of Wall Street is turning more bearish on the oil price outlook, with Citi analysts cautioning against speculative buying and advising investors to capitalize on any rallies by selling. According to the analysts, the market’s perception of geopolitical risks in the Middle East has softened, with investor attention turning to looser fundamentals. “With crude oil prices now trading over $10/bbl off their highs, we could not rule out some speculative buying, but still believe the right strategy in this balance between geopolitical risks and loosening fundamentals is to sell any rally,” they explained. Citi has forecast that oil prices will average $86 per barrel in the second quarter, slightly higher than current Brent price at $83 per barrel, but fall to $74 per barrel in the third quarter. The energy sector is, however, still in good shape, with only Communication Services and Utilities outpacing its gains. Energy stocks have lost some momentum over the past month, with the Energy Select Sector SPDR Fund (NYSEARCA:XLE) down -3.6% over the past 30 days compared to a 1.2% gain by the S&P 500. Still, the sector is up 11.9% in the year-to-date compared to a 9.5% return by the broad-market benchmark. Traders are also not betting heavily against oil and gas stocks with just 2.65% of outstanding shares sold short. Short interest is, however, higher in the oilfield services sector with Schlumberger Limited (NYSE:SLB) the most-shorted energy stock with 7.26% of its shares sold short; Halliburton (NYSE:HAL) at 6.50% of shares float while Baker Hughes (NYSE:BKR)) has short interest at 5.74%. Demand Fears Overblown Commodity analysts at Standard Chartered have argued that the demand fears acting as headwinds on oil prices are overblown. StanChart has pointed out that oil prices are currently trading well below OPEC’s preferred level of at least $90 per barrel, meaning we are likely to see production cuts extended for at least another month when OPEC ministers meet in June. StanChart has conducted a highly unscientific straw poll of traders and that weak U.S. transportation fuel demand has become a primary concern. The EIA estimates that U.S. gasoline demand declined 4.4% Y/Y in April, a number that has triggered a rapid pivot by speculative funds towards the short side of the market. StanChart has, however, pointed out that there has been a systemic downwards bias in estimates of U.S. fuel demand, with actual gasoline demand exceeding estimates in 22 of the past 24 months, while distillate demand (mainly diesel) has been revised higher in all of the past 24 months. StanChart believes the latest EIA estimate for April gasoline demand is too low with actual demand likely to surprise to the upside. Meanwhile, the commodity analysts have pointed out that OPEC+ has room to increase output by over 1 mb/d in the third quarter without upsetting global oil balances, meaning global markets can comfortably absorb the UAE’s production increase of 200,000 barrels per day. Another bullish catalyst: India’s oil demand remains healthy. India’s oil demand in April averaged 5.295 mb/d, good for 6.3% Y/Y growth, data by the Government of India’s Petroleum Planning and Analysis Cell (PPAC) has revealed. Fuel demand growth was mixed, with gasoline demand jumping 14.1% Y/Y while diesel demand grew at a more sluggish 1.4% clip. StanChart has forecast that India’s oil demand will increase by 265 kb/d Y/Y in 2024, slower than April’s 313,000 Y/Y increase but significantly faster than the International Energy Agency’s (IEA’s) forecast of 180 kb/d growth.
India’s Diesel & Petrol Exports Decline 20% To USD 33 Bn In 2023-24
India’s exports of diesel and petrol witnessed a significant decline of 20 per cent year-on-year, amounting to USD 33 billion in the fiscal year 2023-24. This drop in export revenues can be attributed to the stabilisation of international fuel prices after the market disruptions caused by the Russia-Ukraine war in early 2022. Despite the decline in value, the combined export volumes of petrol and diesel remained relatively unchanged at 41.6 million metric tons during the same period, according to data from the oil ministry. Diesel, which accounts for the largest share of export revenues for Indian refiners, fetched USD 22 billion out of the total USD 48 billion earned from refined fuel exports in 2023-24. While the value of diesel exports fell by 24 per cent year-on-year, the export volumes decreased marginally by 1 per cent. On the other hand, petrol exports saw a 2.5 per cent increase in volume, but a 13 per cent decline in value, totalling USD 11 billion in 2023-24. Other refined products, including jet fuel, naphtha, and fuel oil, contributed the remaining USD 15 billion to India’s fuel export earnings. Reliance Industries and Rosneft-backed Nayara Energy, the two major private sector refiners in the country, are the primary exporters of diesel and petrol from India, catering to markets in Europe, Africa, and elsewhere. The stabilisation of global fuel prices in 2023-24, with petrol and diesel rates averaging 15-20 per cent lower than the previous year, led to a normalisation of earnings for Indian refiners after the record-high margins achieved during the 2022-23 fiscal year. Lower import costs for petroleum products, particularly liquefied petroleum gas (LPG), have provided relief to India’s import bill. The country’s LPG import bill decreased by 21 per cent to USD 10.5 billion in 2023-24, as India imports 60 per cent of its LPG consumption, primarily for cooking purposes. Overall, India’s refined products import bill shrank by 13 per cent year-on-year to USD 23 billion in 2023-24. Domestically, India’s fuel consumption continues to rise rapidly, driven by an expanding economy, increased vehicle sales, and growing access to fuel. The consumption of petrol increased by 6.4 per cent, diesel by 4.4 per cent, and LPG sales grew by 4 per cent in 2023-24, reflecting the country’s growing energy demands.
QatarEnergy and Nakilat shake hands on deal for 9 largest LNG vessels ever built
With a capacity of 271,000 cubic meters each, these nine QC-Max vessels constitute half of the 18 advanced QC-Max class LNG vessels that will be constructed at China’s Hudong-Zhonghua Shipyard, thanks to a $6 billion contract, which the Qatari heavyweight signed with China State Shipbuilding Corporation (CSSC). These vessels, which will adopt a dual-fuel low-speed engine propulsion system and the NO96 Super+ containment system, will come with a total length of 344 meters, a beam of 53.6 meters, a depth of 27.2 meters, and a designed draft of 12 meters. The deal with Nakilat was penned on May 8 by Saad Sherida Al-Kaabi, Qatar’s Minister of State for Energy Affairs, President and CEO of QatarEnergy, and Abdullah Al-Sulaiti, CEO of Nakilat, at QatarEnergy’s headquarters in Doha. The signing ceremony was attended by senior executives from QatarEnergy, QatarEnergy LNG, and Nakilat. Commenting on this occasion, Al-Kaabi noted: “We are very proud to have Qatar’s flagship LNG shipping and maritime champion join a list of world-class shipowners operating our state-of-the-art QC-Max LNG vessels – the largest ever built. There is no doubt that this is another testament to Nakilat’s significant capabilities.”
EU Proposes First Batch Of Sanctions On Russian LNG
Over the past two years, the U.S. and its Western allies have imposed a raft of sanctions on Russian energy commodities, including a $60-a-barrel cap on Russia’s seaborne exports of crude oil. Europe has, however, shied away from placing limitations on Russian gas, hardly surprising considering that the share of Russia’s pipeline gas in EU imports exceeded 40% before Russia invaded Ukraine. Since then, the continent has been largely successful in weaning itself off Russian energy, with gas imports from Russia falling dramatically. And, now Europe is getting ready to pull the trigger: Politico has reported that the European Commission has proposed sanctions on Russia’s LNG sector as part of Brussels’ 14th sanctions package against Russia. The proposed sanctions would prevent EU countries from re-exporting Russian LNG after receiving it and also ban EU involvement in upcoming LNG projects in Russia. However, the measures wouldn’t directly bar Russian LNG imports to the EU. Similar to previous sanctions, the import ban is intended to disrupt Putin’s ability to continue financing his war in Ukraine. Although Russian LNG accounted for just 5% of the bloc’s energy consumption in 2023, it still netted the Kremlin ~$8 billion in revenues. The proposal also suggests prohibiting the use of EU ports, finance and services to re-export Russian LNG, essentially meaning that Russia would have to overhaul its LNG export model. Currently, Russia supplies LNG to Asia through Europe, where Spain, Belgium and France are major hubs. “If they can’t transship in Europe, they might have to take their ice-class tankers on longer journeys,” Laura Page, a gas expert at the Kpler data analytics firm, has told Politico, adding that Russia “may not be able to get out as many loadings from Yamal because their vessels can’t get back as quickly.” Norway and the U.S. have replaced Russia as Europe’s biggest gas supplier: Last year, Norway supplied 87.8 bcm (billion cubic meters) of gas to Europe, good for 30.3% of total imports while the U.S. supplied 56.2 bcm, accounting for 19.4% of total. Natural Gas Rally Lately, natural gas has staged a big rally, with Henry Hub prices jumping from $1.61/MMBtu on 26th April to $2.40 on Monday before pulling back to trade at $2.19/MMBtu in Tuesday’s intraday session as markets increasingly price in more risk premium on the heated-up situation in the Middle East and Europe gets ready to ditch more Russian gas. Although ceasefire talks kicked off again in Egypt on Monday, Israel has started its ground offensive in Gaza’s southern city of Rafah with a deal far from certain. Israel has, however, assured the U.S. that its Rafah offensive will be limited and will be focused on blocking weapons and financial support from being smuggled into Gaza. Meanwhile, Australian LNG exports are expected to drop substantially with Chevron Corp’s (NYSE:CVX) Gorgon plant expected to remain offline for at least five weeks after the oil major discovered leaks. Long-suffering gas producers appear set to enjoy a rare boon if Europe weans itself off more Russian energy commodities. TotalEnergies (NYSE:TTE) CEO Patrick Pouyanne has predicted that natural gas and LNG prices will spike after EU sanctions Russian gas from the Yamal LNG project. “If the EU sanctions Yamal LNG, the price of LNG will go up quickly and globally our portfolio will benefit. It’s a positive if there were sanctions, not a negative, because the cash from Yamal is quite limited. European leaders understand that their security of supply today relies on LNG and they don’t want to see price rises again… what I understand is that they might have some ideas, but from 2027 on, not before,” Pouyanne told Reuters. TotalEnergies owns a 19.4% stake in private Russian LNG producer Novatek, owner of the Yamal LNG project in eastern Russia. Meanwhile, U.S. natural gas futures have climbed to their highest since January, driven by rising LNG feedgas demand, a decline in U.S. gas production, and a strong demand outlook thanks to hot weather forecasts for Texas. Gas flows to the seven big U.S. LNG export plants have so far hit 12.4B cf/day in the current month up from 11.9B cf/day in April. That said, it’s going to be interesting to see whether the natural gas price gains will hold with Europe having exited the winter withdrawal season with record amounts of natural gas in storage. The continent ended the season with more than 70 bcm of natural gas in its stores, the highest on record for this time of the year. The continent’s ongoing injection season was recently interrupted by more than a week of withdrawal due to a surprise cold spell; however, Standard Chartered has predicted that the reversal in trend will only delay the timing of when Europe’s gas stores fill up again by around three weeks.
LNG futures trading surges in April as India prepares for summer demand surge
In the wake of rising demand and geopolitical tensions, liquefied natural gas (LNG) futures traded volumes experienced a notable surge in April, marking robust activity in anticipation of the summer season. Amidst these dynamics, India, a significant player in the LNG market, continues to see an upward trajectory in its LNG imports, driven by various sectors including power, industry, and transportation. According to data from March 2024, India’s total LNG imports, including long-term and spot purchases, stood at 1.9 million metric tonnes (MMT), amounting to USD 1113 million. For the fiscal year 2023-24, India’s cumulative LNG imports reached 23.3 MMT, valued at USD 13266 million. Forecasts suggest a further 7-8 per cent increase in LNG imports in 2024, fuelled by burgeoning demand and ongoing infrastructure development initiatives.
Gautam Adani in talks with banks to borrow $600 million for gas unit
Billionaire Gautam Adani’s conglomerate is seeking an offshore loan of about $600 million to refinance existing debt, according to people familiar with the matter. The loan will be raised by Dhamra LNG Terminal Pvt., a unit of Adani Total Pvt., the people said, asking not be named because the details are private. The debt’s tenor could range from three to five years, with the pricing likely linked to the Secured Overnight Financing Rate, they said. The port-to-power group is discussing the planned transaction with lenders including Credit Agricole, DBS Bank Ltd., BNP Paribas, Mitsubishi UFJ Financial Group Inc., and Mizuho Bank Ltd., two of the people said. Adani is likely to conclude the borrowing in the next two months. Adani Group did not immediately respond to Bloomberg’s requests for comment. The conglomerate is regaining the confidence of investors since being targeted early last year by US short seller Hindenburg Research. In March, the group saw robust demand for its first public bond sale since the shortseller crisis. Adani Total is an equal venture between Adani and TotalEnergies. Prime Minister Narendra Modi’s government is trying to increase the country’s ability to import LNG to lift the share of natural gas in its energy mix to 15% by 2030 from about 7% now. The move is to help lower the dependence on dirtier fossil fuels, such as coal and oil.