Work on offshore breakwater at Dabhol LNG moves ahead
This 2.3 km long structure aims to reduce the action of the swell on the unloading vessels alongside. Concrete Layer Innovations (CLI) has been working with the contractor to assist with the manufacture, reuse and installation of the 9 and 12 m3 ACCROPODE™ I blocks that cover the armor of the structure. “The design of the structure implies a complete construction by maritime means on barges. The connection with the 500 m long existing breakwater is also one of the technical challenges,” Concrete Layer Innovations (CLI) said. The site is located at Anjanwel village, Dabhol port of Ratnagiri district of Maharashtra in India, about 340 km south of Mumbai.
India exported USD 6.65 billion oil products derived from Russian oil to sanctioning nations
Over one-third of India’s export of oil products to the G7-led coalition countries were derived from Russian crude, a European think-tank said, highlighting how the partners shunned buying Russian crude and imposed price caps but a loose policy on refined products allowed third countries to use Russian oil and legally export products to them. While there are no restrictions or sanctions on buying/using Russian crude oil and exporting fuels such as diesel derived from it, the Group of Seven (G7) rich nations, the European Union and Australia – called the price cap coalition countries – first set a crude price cap of USD 60 per barrel starting December 5, 2022, and later on products like diesel to keep the market supplied while limiting Moscow’s revenue. his was aimed at punishing Russia for its February 2022 invasion of Ukraine by depriving it of oil revenues while averting a surge in prices that could occur if Russian oil stopped flowing to global markets. “In the 13 months since the oil price cap took effect (in December 2022), over one-third of India’s exports of oil products to sanctioning countries was derived from Russian crude (EUR 6.16 billion or USD 6.65 billion),” the Finland-based Centre for Research on Energy and Clean Air (CREA) said in a report. “A huge proportion of these exports came from the Jamnagar refinery,” it said, alluding to the refinery operated by Reliance Industries Ltd in Gujarat. Jamnagar alone exported EUR 5.2 billion of oil products produced from Russian crude to the price cap coalition, it added. An email was sent to Reliance for comments to remain answered. “India imported Russian crude worth EUR 3.04 billion to create these products for sanctioning countries,” CREA said. The USA imported EUR 1.2 billion of oil products from India, which were estimated as being refined from Russian crude. “India imported EUR 733 million of Russian crude to create these products for the USA.” The price cap coalition countries imported a further EUR 469 million worth of oil products from the Vadinar refinery, it said, alluding to the refinery operated by Nayara Energy in Gujarat. “Russian energy giant Rosneft – who are on OFAC’s list of sanctioned entities – is its single largest shareholder with a 49.1 per cent share in the company.” The USA imported EUR 59 million of oil products from Vadinar starting from the introduction of the crude oil price cap until the end of December 2023. According to CREA’s estimate, 42 per cent of the refinery’s feedstock is Russian crude. While some Western nations have since February 2022 shunned buying Russian oil directly, they however import petroleum products from China, India and Turkey that have emerged as major buyers of Russian crude oil. Turkey’s port of Aliaga (the location of the STAR refinery and Tupras Aliaga Izmir refinery), was the second-highest exporting location of oil products made from Russian crude to the price cap coalition, it said. “EUR 8.5 billion (USD 9.18 billion) of price cap coalition countries’ imports of oil products between December 1, 2022 and December 2023 were made from Russian crude. These imports in 13 months are equivalent to 68 per cent of the EU’s annual commitment to aid Ukraine between 2024 and the end of 2027,” CREA said.
Russia’s disrupted oil trade crimps margins for Indian refiners
India’s state-run refiners are facing a shift in fortunes as once cheap Russian oil becomes more expensive and less accessible, squeezing profits for companies that had been benefiting from Moscow’s war in Ukraine. Attacks in the Red Sea have driven up freight rates, while tougher US sanctions have stranded some Russian cargoes destined for India, adding to costs. That may force some processors to buy more pricey barrels from suppliers in the Middle East, eroding profit margins even more, say traders and analysts. India has to import 88% of its crude needs and the nation took advantage of cheaper Russian oil following the war in Ukraine as others shunned Moscow’s barrels. But the trade, which has helped put the state-owned refiners on track for a rebound in net income this year, is under pressure. India has to import 88% of its crude needs and the nation took advantage of cheaper Russian oil following the war in Ukraine as others shunned Moscow’s barrels. But the trade, which has helped put the state-owned refiners on track for a rebound in net income this year, is under pressure. Gross refining margins for processors including Indian Oil Corp. dropped in the previous quarter due to higher freight rates, said Hardik Shah, director at credit ratings and analytics firm CareEdge Group. The company estimates lower margins for refiners so far this financial year, but they are still higher than pre-war levels. The state-run processors primarily sell fuel domestically and don’t get the benefit of higher prices overseas, unlike the export-focused private processors including Reliance Industries Ltd. — which also have more flexibility on buying and payments for Russian crude. Indian Oil, Bharat Petroleum Corp. and Hindustan Petroleum Corp. didn’t immediately respond to emails seeking comment on margins. CareEdge predicts overall margins should hold around $10 a barrel, as long as crude prices stay below $90, a level that global benchmark Brent hasn’t been above since October. Futures traded near $83 on Thursday. The attacks on shipping in the Red Sea by Houthi rebels have also spilled into global fuel trade. Arrivals of fuel from India to Europe averaged just 18,000 barrels a day in the first two weeks of February, a plunge of more than 90% compared with January’s average, according to Vortexa Ltd. The disruptions will likely lead to some impact for Reliance and and Nayara Energy Ltd., although they still have export options across Asia and Africa. Cheaper Russian oil has allowed India’s refiners to be more competitive than their peers in South Korea, Singapore and across the world. If India loses the Russian advantage on crude, whatever marginal refining edge it had will be gone, according to Mukesh Sahdev, the head of oil trading and downstream research at Rystad Energy.
India’s LNG Terminal Plans In Iraq Face Visa Hurdles
Plans to set up a liquified natural gas terminal in Iraq are yet to take off, as Iraq is yet to issue visas to officials from Indian oil and gas and EPC (engineering, procurement and construction) companies amid persistent security concerns in the country. A team of officials from state-run companies, including Indian Oil Corp (IOCL) and Engineers India Ltd (EIL), were to visit Iraq and weigh the prospects of an LNG terminal which would also operate as a gas liquefaction plant. “They are yet to issue visas. No significant movement has taken place from the Iraqi side as of now. Things will only move forward when our team visits the country,” said a person aware of the development, adding that there is no certainty on the timeline for the proposed visit sent to the union ministry of petroleum and natural gas, Iraq’s embassy in India, IOCL and EIL remained unanswered till press time has been about eight months since the project was proposed by Iraq in the last joint commission meeting (JCM) in New Delhi held during the visit of Iraq’s deputy prime minister for energy affairs and oil minister Hayan Abdul Ghani Abdul Zahra Al Sawad in June 2023. On 11 July 2023, Mint reported that a team from India would shortly visit the Gulf nation idea of the terminal was conceived to liquify some of the 50 million metric standard cubic metres per day (mmscmd) of gas currently flared by Iraq and transport it to India, where it would be converted back to LNG for use in city gas distribution (CGD) as well as power, fertilizer, and steel sectors. When natural gas is brought to the surface but cannot be processed soon enough, it is burned away, commonly called flaring. Flaring is done primarily when gas turns up as a by-product of crude oil extraction. “The project would be a win-win situation for both the countries. Iraq would be able to optimally utilize the gas it generally flares up and earn revenue and India has also been looking at newer sources of gas at cheaper prices,” said a second person looking at diversifying its LNG import sources to curb market volatility a gap of almost 10 years, the 18th India-Iraq joint commission meeting was held in New Delhi on 20 June, 2023. India had also reached out to Iraq at a government-to-government level as part of an outreach including the US, UAE, and Saudi Arabia for additional LNG cargoes at affordable prices Marketing and Trading Singapore, a former subsidiary of Russian gas giant Gazprom, had agreed to supply GAIL (India) Ltd 2.5 million tonnes of LNG every year for 20 years starting 2018-19. The supply began in June 2018 but remained disrupted for a year after the Russian invasion of Ukraine. This forced the Indian state-run company to buy expensive spot cargoes, prompting the government to look for newer LNG sources.
Shale Patch M&A Might Be Booming, But Refineries Are Left Behind
After a two-year hiatus, deal-making in the U.S. shale patch has hit high gear with the U.S. energy sector leveraging high stock prices to go on a $250 billion buying spree in 2023. Last quarter alone, U.S. oil majors Exxon Mobil Corp. (NYSE:XOM), Chevron Corp. (NYSE:CVX) and Occidental Petroleum (NYSE:OXY) struck deals worth a combined $125 billion to acquire low-cost oilfields with low breakeven oil price. And, activity is not slowing down in the current year. A couple of weeks ago, Midland, Tex.-based Diamondback Energy, Inc. (NASDAQ:FANG) agreed to buy Permian producer Endeavor Energy Resources in a cash and stock deal valued at $26 billion, an ambitious move for a company with a market cap of $32 billion. Unfortunately, a pivotal energy industry has been conspicuously missing in the M&A boom: U.S. refining. Virtually no refinery deals have closed ever since independent refiner Par Pacific completed its $310 million acquisition of Exxon Mobil’s Billings, Montana, plant in June last year. That price came in at the lower end of expectations with industry insiders estimating the oil major might get twice as much for the 63,000 barrels per day (bpd) plant. The refining sector is missing out despite the presence of plenty of willing sellers mainly due to widespread fears that the energy transition away from fossil fuels will leave many aging refineries as stranded assets. Distressed Industry Things are getting quite dire for the beleaguered industry. Shell Plc. (NYSE:SHEL) has been forced to close its 240,000-bpd Convent, Louisiana, refinery, after failing to find a buyer. Delta Airlines has so far had no takers for its 100-year old, 190,000-bpd Trainer, Pennsylvania, refinery despite placing it in the market six years ago. LyondellBasell Industries’ (NYSE:LYB) 260,000-bpd Houston refinery is scheduled to close in 2025 after two failed attempts to sell. To aggravate matters, these companies are really struggling with high costs of maintenance for their aging plants leading to increasing breakdowns. Last year, giant refiners Valero Energy Corp. (NYSE:VLO), Marathon Petroleum (NYSE:MPC), and Phillips 66 (NYSE:PSX) together had the equivalent of 280,000 bpd of capacity offline due to planned and unplanned outages, a more than 20% jump from 2019. According to company filings, Phillips 66 spent $786 million on maintenance in 2023 alone. Meanwhile, LyondellBasell estimates its plant requires at least $1 billion in upgrades to continue operations. Overall, the U.S. refining industry is in bad shape. The U.S. refines nearly one-fifth of global crude oil, accounting for 18.1 million barrels per day (bdp). The country’s refining capacity surged during the shale boom, peaking at 18.97 million bpd in early 2020. Unfortunately, over the last three years, the U.S. has lost six operable petroleum refineries, with refining capacity falling to 18.27 million bpd as of August 2023. A lot of the damage came during the pandemic with low fuel demand leading to multiple plant closures. Unfortunately, high maintenance costs as well as a government that is not too keen on fossil fuels have hampered recovery in the post-pandemic period. But the Biden administration is not solely to blame. After a brief surge of its fossil fuel sector following Russia’s invasion of Ukraine, the energy transition in Europe is back on track with falling demand posing a long-term risk to U.S. refineries. McKinsey estimates that as much as 41% of refining capacity in North America faces negative profit margins in 2040 thus discouraging new investments. But not everybody believes the refining industry is on its deathbed. The U.S. Energy Information Administration (EIA) has predicted that global demand for liquid fuels is set to increase by nearly 20 million bpd by 2050, from 101 million to more than 120 million bpd. The investing world appears to share that bullishness, with the refining sector’s favorite benchmark VanEck Oil Refiners ETF (NYSEARCA:CRAK) outperforming the broader fossil fuel market with a 12.4% return over the past 12 months compared with -2.6% return by the Energy Select Sector SPDR Fund (NYSEARCA:XLE). CRAK’s top 5 holdings are: Reliance Industries Ltd DR, Phillips 66, Marathon Petroleum, Valero Energy and ENEOS Holdings.
Russia’s Seaborne Crude Flows at Risk as India Shuns Key Grade
Russia’s seaborne crude shipments fell for a second week, with difficulties selling a key Pacific grade to India set to further snarl flows in the coming week. Moscow has been struggling to get its Sokol crude into India, the main market for the grade produced by the Sakhalin 1 project, with the Asian nation’s refiners wary of falling foul of US sanctions and complaining that the grade is too expensive relative to alternatives.
Russia’s crude oil delivery problems to India aren’t over yet
Nearly 15 million barrels of Russia’s Sokol crude — meant for delivery to India — are sitting on tankers idling off the coasts of Malaysia and South Korea. They show little sign of moving. Twelve tankers are anchored, holding the key Russian crude grade. Most haven’t moved far for more than a month, vessel tracking data compiled by Bloomberg show. The build-up started when ships carrying the crude to ports around the Indian coast came to a halt late last year and then turned back towards the South China Sea as December drew to a close. Since then, the stranded shipments have been added to at a rate of about two new cargoes a week. It looked like the situation was starting to ease earlier this month, with three cargoes heading back to the south Asian nation. While a fourth is now signaling its destination as the Indian east coast port of Visakhapatnam, most remain stuck. And more continue to arrive, with an average of one 700,000 barrels cargo loaded onto specialized shuttle tankers at the De Kastri export terminal every three to four days. Those shuttle ships are piling up off the South Korean port of Yeosu, where they normally offload their cargoes onto other vessels for onward shipment to India. The hold-up could soon start to curb the pace of exports, if the shuttle tankers aren’t freed up soon to take on fresh cargoes. The fleet of seven ships, the most recent of which were delivered to Russia’s Sovcomflot PJSC from South Korea’s Samsung Heavy Industries shortly after Moscow’s troops invaded Ukraine almost two years ago, were specifically designed for the job of hauling Sokol crude. Ice resistant, with a shallow draft and a bow-loading manifold that allows them to take on cargoes from the offshore terminal at De Kastri, they can’t be replaced with other ships. All seven of those ships are now holding cargoes. Four were anchored off Yeosu for at least a week, but three departed for Chinese ports over the weekend, as the need to free up the vessels becomes more acute. Three Sokol cargoes have already been delivered to ports in the north of China this month. That’s up from the normal level of one or two cargoes a month taken by the country’s refiners. Reopening India Indian sources have given different reasons for the disruption to supplies. Oil Minister Hardeep Singh Puri said in January that refiners reduced oil imports from Russia as discounts on cargoes weren’t attractive, dismissing the notion flows dropped because of payment-related challenges. That view has been echoed by refiners themselves, with a person familiar with the operations of one processor saying that it has no plans to purchase Sokol as there is a premium of $2-$3 barrel compared with Urals, which means it doesn’t make any commercial sense to buy. However, Puri subsequently said that enforcement of a price cap imposed on Russian oil exports by the Group of Seven nations, along with challenges with shipping, had hampered some deliveries of Sokol to India. With Sokol trading above $70 a barrel, shipments of the grade are being keenly tracked by the US Treasury, which has begun taking a tougher line on sales of Russian crude that breach the cap. Several, but not all, of the Sokol cargoes that turned away from India were carried on vessels that had either been named explicitly on US sanctions list, or were managed by SUN Ship Management D Ltd., a company owned by Sovcomflot that’s been sanctioned In the case of other cargoes, banks declined payment due to lack of clarity on ownership and the price exceeding the cap, according to market analytics firm Kpler and several Indian oil refinery officials. Recent deliveries of Sokol crude to India suggest that some of those difficulties have been overcome, at least for a handful of refiners. After Washington tightened sanctions, India’s banks have become much more cautious. They are demanding attestation from Indian refiners that the crude was purchased below the price cap and not carried on a sanctioned ship, according to a person with direct knowledge of the matter who asked not to be identified because of the sensitivity of the issue. Nayara Energy Ltd, part-owned by Russia’s Rosneft PJSC, received a cargo at its Vadinar import terminal on Feb. 6. Another was delivered on Feb. 15 to Hindustan Petroleum Corp Ltd’s refinery at Mumbai. The HCPL cargo was purchased through a trading company, rather than direct from the producer, according to a source familiar with the deal. A third tanker full of Sokol is now anchored off the port of Visakhapatnam, where HCPL also has a refinery and a fourth is heading to Sikka, the discharge location for Reliance Industries Ltd’s refinery. Sikka is adjacent to Vadinar and it’s not uncommon for ships to change their signals as they get closer. India is Sokol’s largest buyer and the grade accounts for about 10% of its total imports from Russia. Unless Sokol imports are normalized, India’s shipments from Russia are unlikely to hit the 2.1 million barrels a day reached last spring. There is still no clarity whether transferring cargoes onto unsanctioned tankers will unlock the Sokol trade to India. But one thing is clear, Indian refiners are in not rushing back yet.
Warm Winter Drags U.S. Natural Gas Prices to Three-Decade Low
One of the warmest winters on record in the United States has created a natural gas glut, dragging benchmark gas prices to their lowest levels in three decades and prompting producers, who were pumping at record rates, to scale back drilling activity. The front-month U.S. benchmark price at the Henry Hub settled on Friday at its lowest level since 1995 – except for a few days during peak pandemic in 2020. Record domestic natural gas production has also added to the glut, but now some of the major producers are hitting the brakes on drilling and completion activity and reducing rig numbers in response to unsustainably low natural gas prices. Despite the constant retirement of coal-fired power capacity, demand for natural gas for electricity and space heating has been lower this winter due to the warmer-than-normal temperatures, except for a cold snap in the middle of January. El Nino has been stronger than usual in the central and eastern Pacific this winter, leading to warmer temperatures across the United States, Reuters columnist John Kemp notes. As a result of warmer weather, withdrawals from underground gas storage have been lower than usual, leaving stocks at a higher-than-average level for this time of year. In the latest reporting week ending February 9, net withdrawals from storage totaled 49 Bcf, well below the five-year (2019–2023) average net withdrawals of 149 Bcf and last year’s net withdrawals of 117 Bcf during the same week, per EIA data. Working natural gas stocks totaled 2,535 Bcf, which is 16% more than the five-year average and 11% more than at this time last year. Total working gas in storage is also above the five-year historical range. The trend of low withdrawals has been present all winter, not just in early February. The average rate of withdrawals from storage has been 12% lower than the five-year average so far in the withdrawal season, November through March, per EIA’s estimates. If the rate of withdrawals from storage matches the five-year average of 10.9 Bcf/d for the remainder of the withdrawal season, the total inventory on March 31 would be 348 Bcf higher than the five-year average for that time of year, according to the EIA. The high storage levels suggest that weather could be a less important factor in driving up U.S. natural gas prices until the end of the winter and withdrawal season on March 31. Analysts and traders tell the Financial Times it would take a while for the glut to be flushed out of the market. “You’re starting to see the market really start to formulate an opinion that we need to be down here for a while to help solve this oversupply,” Charlie Macnamara, head of commodities at US Bank, told FT. Natural gas producers are already signaling they have taken steps to reduce activity and production rates in response to the glut and low prices. Antero Resources, for example, released one drilling rig in December 2023 and released one completion crew in February 2024 as a result of the low gas prices. The company is now down to a two-rig program from three rigs, and one completion crew. Comstock Resources, for its part, plans to reduce the number of operating drilling rigs it is running from seven to five. EQT Corporation, the largest U.S. natural gas producer, lowered earlier this year its production range guidance “as a response to the price environment we’re in and wanting to make sure there is flexibility,” CFO Jeremy Knop told the Q4 earnings call last week. “So EQT can respond and make sure that if price gives a signal for lower activity and in lower production, we stand ready to respond,” Knop said. “The market is asking for not only production curtailments, but also activity reductions.”
Mitsui OSK Lines: Steering India’s LNG supply
The $11-billion Japanese shipping major Mitsui OSK Lines (MOL) owns or operates over 800 vessels of all types, including oil and gas, dry bulk commodities, chemicals, and automobile freight carriers. Ajay Singh, a board member of the 140-year-old MOL, is based in Tokyo and responsible for the group’s businesses in the Indian subcontinent and West Asia, besides assisting with its energy transition and strategic transformation. He discusses with businessline the company’s LNG (liquefied natural gas) ship deal with Gas Authority of India Ltd (GAIL) and various issues related to Indian shipping. Edited excerpts from the interview: What is the nature of your LNG ship deal with GAIL? In December, MOL deployed its newly built LNG carrier to service GAIL’s transportation needs. Named GAIL Urja, its first laden voyage is from the US to India. It is our second LNG carrier for GAIL, and the 98th in our global fleet, which is the largest in the world. The first deployment for GAIL was GAIL Bhuvan in 2021. GAIL is also a shareholder in GAIL Bhuvan, and is among our top customers (or ‘charterers’) and partners. We are proud of our association with GAIL, as it is a leading LNG importer and trader globally. Both vessels were built at DSME (now acquired by Hanwha) shipyard in Korea and can each carry well over 170,000 cu m of LNG. What is the progress on the country’s LNG supply front? The LNG shipping business dedicated to India started in earnest with the import from Qatar by Petronet LNG at their Dahej terminal. MOL was part of this project, which continues as a joint venture with the Shipping Corporation of India and other companies. We have since been part of almost every LNG shipping project involving India. We are also investors in an upcoming LNG import terminal at Jafrabad, in Gujarat, where we helped build a floating storage and regasification (FSRU) ship, which we now operate. We are active participants in the growth of India’s gas industry, which is heavily reliant on imports. How is MOL helping increase India’s LNG supply? The role of shipping in LNG supply is evolving. It used to be mainly a matter of safe and time-bound shipping for uninterrupted supply. So ships were contracted on a long-term basis by the buyers or sellers, and operated on a so-called tram line basis between the same load and discharge ports for many years. The Petronet LNG shipping arrangement is one such model and remains key to maintaining energy security. Any change in the model now? Today, shipping has additionally become a key tool for LNG buyers and sellers in managing business risks and increasing profit. LNG sales and purchase contracts are more flexible; the LNG can be diverted to suit changes in demand and prices, and buyers and sellers have also become traders. They recognise that access to reliable shipping capacity is essential for this flexibility. So the vessels are called upon to operate across a wider set of ports. This makes safety management all the more important, and here our long experience is helpful. The LNG supply chain has little room for error, and there are financial penalties if the vessel does not arrive on time for cargo pick-up or delivery. How is the post-Covid scene? The world has been through major supply shocks due to the pandemic and [Russia-Ukraine and Israel-Hamas] war; there is uncertainty over cost and availability of future clean energy sources. LNG buyers have, at times, hesitated to contract for big volumes on a long-term basis; they have had to react at short notice to supply shocks or changing demand. Now it takes about three years to build a new LNG ship; it is capital-intensive at over $250 million per ship, and it takes years to recover the cost. So, matching shipping supply to changing customer demand is challenging. We continue to support India’s LNG supply through all these changes.
IREDA and PNB to co-finance green energy projects
Indian Renewable Energy Development Agency Limited (IREDA) and Punjab National Bank (PNB) have joined hands through the signing of a memorandum of understanding (MoU) aimed at advancing renewable energy initiatives across the nation. The agreement, signed at IREDA’s Registered Office in New Delhi on Monday, paves the way for joint efforts in co-lending and loan syndication for a diverse spectrum of Renewable Energy projects. IREDA’s General Manager Dr RC Sharma and PNB’s Chief General Manager Rajeeva signed the MoU in the presence of IREDA’s Chairman & Managing Director (CMD) Pradip Kumar Das PNB’s MD & CEO Atul Kumar Goel, IREDA’s Director (Finance) Dr Bijay Kumar Mohanty along with senior officials from both organisations.