India Could Become a Key Player in the $500-Billion Green Hydrogen Market
India could become a key market player in the global green hydrogen industry, which is set to create $500 billion in economic opportunities, consulting firm Alvarez & Marsal said in a new report this week. India could be at the forefront of green hydrogen development, thanks to its competitiveness in producing clean energy — abundant renewable energy resources, manufacturing competitiveness, and low cost of capital, according to the consultancy. Countries rich in renewable energy resources like solar and wind are well-placed to take advantage of the green hydrogen opportunity, says Alvarez & Marsal. These countries include India, Egypt, Chile, Argentina, Saudi Arabia, the United Arab Emirates (UAE), the Chinese mainland, Australia, and the United States. “The UAE, India, and Saudi Arabia seem well placed in global green hydrogen competitiveness and therefore could partake a significant share of global trade,” Alvarez & Marsal analysts wrote in the report. On the other hand, the EU, Japan, and South Korea could be the early adopters of hydrogen on the demand side with imports around 2030, according to the consultancy. While heavy industry and governments pin their hopes on hydrogen for faster decarbonization, and power-generating companies and oil and gas majors look to diversify into low-carbon hydrogen production, costs are still high for green hydrogen production and hold back massive deployment of projects, analysts say. Forecasters, including the International Energy Agency (IEA)—a staunch supporter of all things green – acknowledge that costs need to be slashed significantly if clean hydrogen is to play a major role in the energy transition. Green hydrogen—currently costing 3 euros to 8 euros per kg in some regions—is more expensive than ‘grey’ hydrogen, produced from natural gas, PwC said in an analysis last year. “Low-emission hydrogen production can grow massively by 2030 but cost challenges are hampering deployment,” the IEA said in its Global Hydrogen Review 2023 report in September 2023.
India looks elsewhere for oil as US sanctions crimp Russia trade
Tightening enforcement of US sanctions is denting India’s oil trade with Russia, forcing processors to consider other supplies, according to refinery executives familiar with the matter. Russia is still the dominant supplier to India, but there are signs refiners are buying more from elsewhere. Overall imports from Saudi Arabia are 22% higher this month than January, with the biggest private refiner — Reliance Industries Ltd. — taking its highest volume since May 2020, according to Kpler. India’s refiners are keen to take more Russian oil, but there would need to be US approval for buying to ramp up again, the executives said, asking not to be identified because the information is private. Russian oil is now only $2-$4 a barrel cheaper than other supplies and double-digit discounts are unlikely to return due to competition for barrels from China, the executives said. The discount blew out to more than $30 after the war. India’s imports of Russian oil surged after the war as refiners took advantage of cheaper barrels that other buyers shunned. At its peak last year, crude from the OPEC+ producer accounted for almost half of the nation’s purchases, but fresh US sanctions has recently stranded some cargoes. Moscow is also seeking payment in yuan due to increased scrutiny by some banks over using dirhams to settle the trade in the past few months, said a refinery executive and a government official.
Displace Indian coal power with Canadian natural gas: report
Canada is a founding member of the Powering Past Coal Alliance – a consortium of national and subnational governments committed to addressing climate change by phasing out coal power. Conspicuously absent from the alliance is India, which has signaled plans to double coal production to 1.5 billion tonnes tonnes by 2030 in order to add 88 gigawatts (GW) of new thermal power from coal by 2032, according to the National Bank of Canada. The amount of greenhouse gases that would produce would wipe out any emissions reductions Canada is able to achieve through its climate change policies many times over, National Bank of Canada says in a new report, which urges investors and policymakers to promote the use of Canadian natural gas, through LNG exports, to replace coal in thermal power generation in places like India. According to the Intergovernmental Panel on Climate Change (IPCC), GHG emissions can be reduced by 50 per cent when combined cycle natural gas power plants replace thermal power from coal. So while increased production of natural gas and LNG in Canada would contribute to an increase in Canada’s own GHGs, it could dramatically decrease GHGs outside of Canada, if it displaces coal power. “Emissions are global, they are not bound by geographical boundaries, as such, we propose to reorient the conversation with a global tilt,” the report says. “Continued efforts in constraining certain sectors of the economy could be futile in ‘deleveraging’ the global environmental balance sheet as a direct result of other countries increasing their absolute share by orders of magnitude more. “ The report is aimed at investors and policymakers, said report author Baltej Sidhu, ESG research analyst for National Bank of Canada.
Qatar to Build New LNG Project as US Stalls on Export Push
Qatar plans to expand exports of liquefied natural gas amid rising demand and a pause on growth projects in the US, a key rival supplier. The nation, which vies with the US and Australia as the biggest shipper of the fuel, will develop a new 16 million tons a year project before the end of this decade, lifting annual production capacity to 142 million tons by 2030, the country’s Energy Minister Saad Al-Kaabi said Sunday.
Tankers: The Next Growth Cycle Can Be Fueled By India
The tanker market could be headed for a significant leg of growth in the coming years, as a result of India’s gradual emergence, as a major player in the global economy, which in turn is fueling its oil and refining needs. In its latest weekly report, shipbroker Gibson said that “whilst there is significant debate as to the strength of long-term oil demand growth, there is little debate as to where much of that growth will come from; India. The world’s most populous country sits far behind China in terms of its oil demand per capita, underscoring how much potential remains. Indeed, the country is set to be the largest single source of demand growth between now and 2030. Prime Minister Narendra Modi recently announced a plan to raise domestic refining capacity to 9mbd by 2030; however, for this goal to be achieved, significant new investment will be required”. According to Gibson, “currently, the country is home to 5.8mbd of refining capacity and is planning to add another 1.1mbd by 2028. No new refineries have come online since Indian Oil Corp’s (IOC) 300kbd Paradip refinery in 2016. The greenfield Hindustan Petroleum Corporation’s (HPCL) 180kbd Rajasthan refinery is due to start operations in January 2025, whilst Chennai Petroleum Corp (CPCL) is also building a 180kbd refinery at Nagapattinam in the South East of the country, with completion expected sometime around 2028. The remainder of the 1.1mbd expected to come online by 2028 will be delivered through debottlenecking and expansions at existing facilities”.
Oil regulator for opening ATF pipelines at airports
Oil regulator PNGRB has proposed supplying jet fuel or ATF in all existing and future airports through pipelines that can be accessed by any supplier to bring in competition and cut fuel costs. Currently, ATF is transported by road and rail network and only a limited number of airports are linked with pipelines. Even where pipelines are there, they are not on an open access basis which means only the company that has laid it can supply jet fuel to airlines. The Petroleum and Natural Gas Regulatory Board (PNGRB) has invited comments from the public and various stakeholders including oil marketing companies (OMCs), airport operators, and airline operators for the development of aviation turbine fuel (ATF) pipelines connecting various greenfield and brownfield existing and upcoming airports in India. “Pipelines are the cheapest mode of transport of liquid fuels with road transport being quite costly. And looking at the high share of ATF price in airline costs, provision of the pipeline could bring down the cost of air travel,” the regulator said in a notice inviting comments. While the fuel market is open in the airport premises, in the absence of a common carrier pipeline the objective of this open market cannot be achieved. “There are a few other ATF pipelines which are being operated by the OMCs, which also need to be declared as common/contract carriers,” the regulator said. “This move will enable other OMCs to utilize these pipelines for transporting their products, fostering competitiveness within the industry”. Further, to ensure security of supply there may be desirability of more than one pipeline supply to major airports. Additionally, existing pipelines need to be declared as common carriers especially due to the historical domination of government-owned ATF marketing companies so as to allow private marketers get access, it said. This will cater to the rising fuel demand of the aviation sector. Domestic air passenger traffic rose by compounded annual growth rate of 8.9 per cent between 2012-13 and 2022-23. International passenger traffic grew by a slower 3.1 per cent over the same period. During fiscal year 2022-23 (April 2022 to March 2023), India saw a 47.1 per cent surge in ATF consumption, correlating with heightened air traffic. The previous year was marred by the pandemic that shut businesses. Transporting ATF by any other means than pipeline, results in logistical inefficiencies, increased expenses, and disruptions in the supply chain, PNGRB said. “The absence of an ATF pipeline exacerbates these issues, hindering the sector’s competitiveness and sustainability,” PNGRB said it is seeking comments from stakeholders to gather insights for the effective development of ATF pipelines across the aviation infrastructure in the country. It asked stakeholders to identify key airports requiring ATF pipeline connectivity, assess potential demand over the next 30 years, identify ATF supply sources, evaluate potential routes for pipeline construction and assess the need for single or multiple common/contract carrier ATF pipelines to ensure redundancy and operational reliability. “The views and suggestions received will help PNGRB in initiating suo moto bidding processes or assisting entities in identifying potential projects,” the notice said.
Woodside Energy Expects a 50% Increase in LNG Demand by 2034
Woodside Energy expects demand for liquefied natural gas to increase by 50% over the next ten years driven by Asia, Bloomberg has reported, citing chief executive Meg O’Neill. “We’re seeing signs of that demand growth in emerging Asia,” O’Neill told the publication. “There’ll be points in time where we’ll see a fair amount of new supply arriving, but the demand growth is really likely to absorb that over the course of the coming years,” she added. In her comments, O’Neill echoes the forecast of fellow LNG major Shell, which earlier this month said it expected demand for the superchilled fuel to gain 50% by 2040, again citing strong demand from the emerging nations of Asia. Despite the fact that demand for natural gas has peaked in some regions, Shell expects global demand to peak after 2040. This view on demand peak is more than 10 years further out in time compared to the most recent estimates by the International Energy Agency. The IEA sees demand for all hydrocarbons peaking before 2040. Woodside, like Shell, is quite upbeat in its gas demand projections, saying gas will be needed to back up intermittent wind and solar over the long term. Germany recently provided proof for that: the Scholz government is building four new gas-powered plants for that reason, with the total price tag at $17 billion. The plants will be hydrogen-ready in case hydrogen becomes a viable alternative for gas in power generation. With a view to this strong demand, Woodside continues to expand its gas operations and recently made an attempt to add an acquisition to its growth efforts. The company was in talks with local heavyweight Santos but the two failed to reach a deal that would be satisfactory to both. Had they ended successfully, the deal would have created an LNG giant in the Asia Pacific.
Red Sea Crisis and OPEC+ Cuts Support Oil Prices
Brent Crude prices have held above $80 per barrel for most of February, with signs pointing to a tightening in the physical market as OPEC+ production cuts continue and the rerouting of cargoes away from the Red Sea and the Suez Canal drags on. European refiners are looking for Atlantic Basin cargoes as arrivals from the Middle East are being delayed by at least two weeks with the longer route via the Cape of Good Hope that tankers have to make to reach the Mediterranean and Norwest Europe. As a result, prices for North Sea and West African crude grades have increased this month, supporting Brent Crude prices above $80 a barrel and deepening the backwardation in the futures curve. Backwardation typically occurs at times of market deficit, and in it, prices for front-month contracts are higher than the ones further out in time. The deeper backwardation curve suggests the market is tightening, analysts say, noting that the supplies may be tighter than market sentiment and price action imply. Lower production and exports this quarter from the OPEC+ producers, led by the biggest exporters from the Middle East, are also supporting oil prices in the months when global oil consumption is typically lower. OPEC+ producers can’t feel bad about that—oil prices are holding above $80 a barrel this month, defying earlier analyst projections of weak prices and oversupply on the market at the start of 2024. The tighter market is not all OPEC’s work, though. Disruptions to Red Sea/Suez Canal traffic have played a major role in the run-up of prices of Atlantic Basin crudes and higher refining margins so far this year. The average margins for refining diesel and gasoline in Europe jumped to their highest levels in months in January, to $34.30 and $11.60 per barrel, respectively, according to estimates by Reuters. Moreover, longer voyages for crude oil from the Middle East have raised Europe’s demand for crude oil from closer destinations, resulting in higher prices for the Nigerian grades, with the top African OPEC producer now selling its crude cargoes faster, according to traders. “While global crude balances are getting longer (seasonally) in February and March, increased levels of Red Sea shipping diversions are keeping the market tight – as more oil is put on ships, leaving less available on land,” analysts at consultancy FGE wrote in a note on Friday. The rerouting of crude cargoes around the Cape of Good Hope has picked up so far this month, with the volume of diversions reaching a fresh peak of 1.6 million barrels per day (bpd) in the first week of February, according to FGE. “The bulk of the diversions remain focused on westbound flows of Middle Eastern crude destined for Europe. Indeed, out of eight cargoes of Iraqi crude bound for Europe loaded in the first 10 days of February, six have been diverted away from the Red Sea via the Cape of Good Hope,” said FGE analysts. Europe’s crude oil imports from Iraq slumped at the beginning of this year, “definitely aggravated by the Red Sea transit risks, which caused most tankers carrying Iraqi crude to Europe to sail via the Cape of Good Hope (COGH) as opposed to the Suez Canal,” Armen Azizian, Senior Oil Risk Analyst at Vortexa, wrote in an analysis last week. On the other hand, India’s imports of Iraqi crude hit an estimated 1.15 million bpd in January, the highest level observed since April 2022, according to Vortexa data. India is close to one of its top oil suppliers, Iraq, while the world’s third-largest crude importer is also looking to replace lost Russian oil due to payment issues with the stricter enforcement of the sanctions against Moscow. U.S. benchmark oil prices are also supported by higher demand for American crude in Europe due to the Red Sea disruption to flows. The arbitrage for U.S. crude to Europe improved in late January-early February, as the MEH/Brent differential remained wide while transatlantic freight was reduced, FGE said. But with the higher European buying of U.S. crude, the arbitrage has started to close up in recent days, suggesting that the current strength in WTI futures structure could be short-lived, FGE analysts reckon.
Russia bans gasoline exports for 6 months from March 1
Russia on Tuesday announced a six-month ban on gasoline exports from March 1 to compensate for rising demand from consumers and farmers and to allow for planned maintenance of refineries. The ban, first reported by RBC, was confirmed by a spokeswoman for Deputy Prime Minister Alexander Novak. Russia previously imposed a similar ban between September and November last year in order to tackle high domestic prices and shortages. Only four ex-Soviet states – Belarus, Kazakhstan, Armenia and Kyrgyzstan – were exempt. This time, the ban will not extend to member states of the Eurasian Economic Union, Mongolia, Uzbekistan and two Russian-backed breakaway regions of Georgia – South Ossetia and Abkhazia.
The Oil Market Is Tightening to 2016 Levels
Last week, the International Energy Agency reported that global oil demand growth is losing momentum, with demand growth clocking in at 1.4 mb/d in January, down from 2.8 mb/d in 3Q23 to 1.8 mb/d in 4Q23. According to the IEA, the expansive post-pandemic demand growth phase has largely run its course. Thankfully, falling supply is expected to counter slowing demand growth with non-OPEC supply by the U.S., Brazil, Guyana, and Canada expected to come in at 1.6 mb/d this year compared to 2.4 mb/d in 2023. The best part for oil bulls, however, is that oil markets are tightening, which could help sustain the ongoing oil price rally. The IEA has revealed that global observed oil stocks plummeted by about 60 mb in January, with on-land inventories falling to their lowest level since 2016. In contrast, December global stocks rose by 21.6 mb thanks to a surge in oil on water (+60.7 mb) more than offsetting draws in on-land inventories (-39 mb). Brent crude has rallied 7.9% so far in the month of February to trade at $83.42 per barrel while WTI crude has gained 9.9% to trade at $79.43 per barrel. Whether or not the markets will continue tightening will largely depend on whether OPEC+ can maintain discipline and unwind its production cuts gradually. Estimates by various energy agencies of changes in the call on OPEC; i.e. the level of OPEC crude oil output that would keep inventories constant given changes in non-OPEC supply, oil demand, and OPEC non-crude liquids supply are quite varied at this point. With the exception of the IEA, estimates of the call on OPEC have generally trended upwards, implying an improvement in overall market fundamentals. These figures represent how much OPEC could increase output from Q2 onwards without global inventories increasing The lowest estimates are those of the Energy Information Administration (EIA) at 0.6 million barrels per day (mb/d) and the IEA at 0.7 mb/d, while the highest estimates are by Standard Chartered at 1.8 mb/d and the OPEC Secretariat at 2.7 mb/d. Brent Could Approach $100 Previously, commodity analysts at Standard Chartered have argued that oil fundamentals are in better shape than oil prices suggest, adding that the market is heavily discounting geopolitical risks. StanChart has noted a sharp improvement in oil balances in the current year compared to 2022 According to StanChart, the small global oil surplus we are currently witnessing is due to seasonal weakness in the month of January, noting that the surplus is much smaller than the 20-year average. StanChart has revealed that there’s been a January inventory draw in only three years since 2004, with the first month of the year averaging a build of 1.2 million barrels per day (mb/d). Last year, the month of January recorded a mega-surplus to the tune of 3.4 mb/d; the third largest surplus in any month over the past two decades. StanChart puts this year’s January surplus at just 0.3 mb/d. StanChart says Brent price is supposed to hit at least $90 per barrel to truly reflect market fundamentals. StanChart has predicted that Brent will average $92 a barrel in the first quarter, good for a 19% jump from Dec. 31. The analysts have forecast that Brent will hit $98 per barrel in the third quarter; $109 in 2025 and $128 in 2026 before pulling back to $115 in 2027. ICE Brent futures gained $5/bbl during January, marking their first monthly gain since September. J.P. Morgan is another oil bull, and says the oil market outlook “continues to project a tightening market with prices rising from here by another $10 by May.” JPM’s forecast assumes that OPEC+ leaders will unwind 400K bbl/day of cuts from April but has not assigned a risk premium from the Middle East turmoil. JPM says crude shipments on a 30-day moving average basis are down 1.3M bbl/day from the October peak. The U.S. Energy Information Administration (EIA) is much less optimistic, and has projected Brent to average $82.42 in 2024 and $79.48 in 2025 while WTI will average $77.68 a barrel for 2024 and $74.98 in 2025.