Gujarat emerges as India’s ‘petro capital’: Officials
With the world’s largest grassroot oil refinery in Jamnagar and OPaL petrochemical complex at Dahej in Bharuch district, Gujarat is now recognised as the ‘petro capital’ of India, officials said. Reliance Industries Ltd’s (RIL) Jamnagar refinery is the largest and most complex single-site refinery in the world with 1.4 million barrels per day (MMBPD) crude processing capacity, they said. As per the official website of RIL, the Jamnagar refinery complex houses some of the world’s largest units, such as the fluidised catalytic cracker, coker, alkylation, paraxylene, polypropylene, refinery off-gas cracker and petcoke gasification plant… Gujarat Chief Minister Bhupendra Patel recently threw light on the impact of the state’s petrochemical sector. “Industrial development is an important means to realise the resolve of Prime Minister Narendra Modi.
Petronet LNG to set up LNG terminal on east coast of India
Indian LNG importer Petronet LNG Limited (PLL) has signed binding transaction documents with Gopalpur Ports to set up its maiden LNG terminal on the east coast of India. According to Petronet LNG’s social media update, sub-concession agreement, sub-lease deed, and port service agreement with Gopalpur Ports were signed on December 27, 2023. Under these agreements, the Indian company seeks to set up a floating storage and regasification unit (FSRU) based LNG terminal with a capacity of approximately 4 million metric tons per annum (mmtpa) in Phase 1, with provision for converting to 5 mmtpa land-based terminal at Gopalpur Port in Odisha. “Petronet LNG is in the process of setting up its maiden LNG terminal on the east coast of India at Gopalpur, District- Ganjam, Odisha which would bring augmentation in overall regasification capacity in the country thereby contributing towards a gas-based economy,” the company said. The Indian company has also established and operates Dahej and Kochi LNG terminals. Dahej LNG terminal currently has a capacity of 17.5 mmtpa and is under expansion to 22.5 mmtpa in two phases. The terminal has six LNG storage tanks and other vaporization facilities and meets around 40% of the total gas demand of the country. Kochi LNG terminal is Petronet’s second terminal with 5 mmtpa nameplate capacity. It was established to cater to the gas requirement of Southern India. Earlier this year, Adani Total Private Limited (ATPL), a 50:50 joint venture between Adani and TotalEnergies, commissioned Dhamra LNG terminal, which is India’s seventh LNG import and regasification terminal and the first on the eastern seaboard.
India’s LNG imports set for 7%-8% boost in 2024 on hopes of softer prices
India’s LNG imports in 2024 are expected to get a boost if prices stay pressured, with year-on-year inflows likely to grow up to 7%-8%, driven by higher demand in the power, industrial and transportation sectors while infrastructure spending also strengthens in a year due for national elections. “India’s LNG imports will continue to increase, with an expected 8% year-on-year growth in 2024,” Ayush Agarwal, an LNG analyst at S&P Global Commodity Insights, said. “While the fertilizer sector will remain the largest consumer of LNG, the power and industrial sectors could contribute to an increase in imports if spot prices average close to 2023 levels,” Agarwal said. The Platts JKM, the benchmark price reflecting spot LNG delivered to Northeast Asia, averaged $13.801/mt from Jan. 3 to Dec. 22 this year while the Platts West India Marker averaged $13.167/MMBtu during the same period in 2023, according to data from S&P Global. India currently has about 25 GW of gas-based power capacity installed. This translates to about 30 million-35 million mt/year of LNG demand, an LNG industry source based in Singapore said. A few gas-based power units ran on domestic gas because of high LNG prices in recent years. That should change in 2024 because of the LNG price weakness, he added. Over January-October, regasified LNG consumption by the power sector jumped 128% on the year, hitting 7.4 MMcm/d, while India’s peak demand grew 12.5% on the year during the same period to reach 243 GW, said Akshay Modi, a senior analyst covering South Asian natural gas, LNG and hydrogen at S&P Global. “With the Platts JKM expected to fall below $10/MMBtu in 2024 summers, peak demand touching new highs and gas supporting renewables intermittency, we expect higher regasified LNG consumption for power sector to continue in 2024,” Modi said. Demand spurts on low prices India’s LNG consumption was set to jump if prices dropped below the $10/MMBtu mark, industry sources said. The recent fall in prices has already sparked increased spot buying although some Indian buyers were exhibiting an appetite to consume LNG when JKM prices were relatively elevated, in the range of $15-$16/MMBtu. Among recent market activity, Gujarat State Petroleum Corp. has bought a January-delivery cargo at $11.10-$11.20/MMBtu for delivery to Mundra. In December, Indian Oil purchased a cargo at $11.20-$11.30/MMBtu for delivery to Ennore and GAIL bought a cargo at $11.40-$11.50/MMBtu for delivery to Dabhol in January. Sources are also expecting higher utilization at the LNG terminals. “Next year, we expect Dabhol terminal to be operational through the monsoon period as well … Dhamra will also be more utilized because of obligations to bring cargoes for GAIL, IOC,” one of the sources said. After the commissioning of HPCL’s Chhara and GAIL’s Ratnagiri breakwater facility, the regasification capacity will likely rise to 52.5 million mt/year, S&P Global’s Modi said, adding that IOC’s Ennore-Tuticorin pipeline is also targeted for commission in 2024. The country’s northeast gas grid commissioning plan has been granted an extension by the Petroleum & Natural Gas Regulatory Board until 2025. However, its progress will be crucial for the development of a gas-based economy in the region, Modi added. Meanwhile, from mid-December 2023, Administered Pricing Mechanism, or APM, gas supplies to the transport and residential sector have been reduced to about 75% of demand compared to 88% earlier, Modi said, noting that the APM supply cut might see more city-gas entities tying up mid- to long-term offtake contracts. The additional APM deficit for transport and domestic sector is around 3 MMcm/d and some of the volumes will likely be tied up by CGD’s in the expected upcoming ONGC auction in 2024, while the remaining will be catered through regasified LNG supplies, Modi added.
What’s In Store for Energy Markets in 2024?
The year that is drawing to a close was a turbulent one, and not only for the oil industry. 2023 served up a reality check to the drivers of the energy transition, too—wind, solar, and electric vehicles. Next year will not be much different, it seems, judging by trends that we witnessed this year that are bound to accelerate in 2024. Among these are a balanced oil market, more gas supply, a slowdown in solar growth, and an increased focus on nuclear energy. #1 A balanced oil market It appears that many oil analysts expect the 2024 oil market to be well supplied because of ample non-OPEC production. Slowing demand will also contribute, notably in China, where post-pandemic economic recovery is, according to these analysts, beginning to lose steam. This year, the growth in non-OPEC supply was led by the United States, but for next year, the Energy Information Administration is predicting a significant slowdown in growth. Not all agree, however: some expect the latest shale boom to continue, essentially forcing OPEC to keep its output cuts in place. Because the above environment would mean lower prices for longer, some have predicted that Saudi Arabia may start a price war to regain market share and higher prices. The method: flooding the market with oil to tank prices and hurt higher-cost U.S. producers. #2 Lower gas investments The last two years saw a race to secure as much future LNG supply as possible as quickly as possible. Following this, it would only be natural that a slowdown in demand occurs, as noted by Wood Mackenzie’s head of gas and LNG consulting, Kristy Kramer. Kramer pointed out that 2022 and 2023 saw commitments for over 65 million tons of LNG signed by end consumers and suppliers as evidence of both robust demand and an indication of a slowdown in investments. Others see demand for gas continuing to grow globally and driving more favorable energy policies as a result. Gas is the obvious and most accessible alternative to coal, and this coal-to-gas transition will continue next year, although challenges will remain. These will be in the form of stricter emissions regulations and insufficient transport infrastructure, notably in the United States. #3 A nuclear renaissance Advocates of the energy transition are not big fans of nuclear power for the most part. They argue nuclear is non-renewable and dangerous, citing the only two major nuclear disasters in the history of the technology and the fact that nuclear waste is of the hazardous sort. Nuclear experts have countered these arguments with the fact that nuclear power is emission-free and that the industry actually has a pretty impressive track record when it comes to accidents and handling waste, especially in modern times as the technology continues to improve. The latest edition of the COP climate summit indicated that the tide is turning for nuclear as attendees admitted the transition would be much harder—if possible at all—without the baseload electricity supply that only nuclear can provide at an affordable cost among the emission-free generation sources. For wind and solar to be able to provide 24/7 supply, huge batteries would be necessary and battery costs are not in Affordable land yet. #4 A solar slowdown The solar slowdown already began this year in Europe and the United States. The reason for the decline in demand for new installations, in Europe specifically, appears to mostly have to do with market saturation, as observed by one of the biggest inverter suppliers to the EU. Higher raw material costs are also a problem for the industry, which has had trouble fattening its profit margins for a while now as it lives up to its own slogan that solar power is cheap. High costs are perhaps the biggest problem for U.S. solar developers due to tariffs on Asia imports aimed at Chinese PV tech. Globally, the slowdown, as forecast by Wood Mackenzie’s head of global solar, will be the result of natural trend developments, in this case an S curve. According to Michelle Davis, the annual average growth rate for the next four years in solar will be no growth at all: zero. Also, Davis has predicted a few years of declines in capacity additions. #5 The transition vs security debate Last year demonstrated the importance of energy security and temporarily replaced the transition as the number-one priority for a substantial part of the developed world, namely the European Union. Following this development, a sort of unofficial debate has emerged about the balance between transition and security, and how to strike a balance between them. Chances are the debate will continue next year as well, even though security appears to trump transition consideration where it matters. The clearest demonstration of this came recently, when China and India refused to sign a COP28 pledge to triple renewable energy capacity by 2030, opting instead for energy security from hydrocarbons. There was also Germany, which, after closing its last nuclear power plants, had to boost its coal consumption to produce enough electricity. In addition to all these trends, geopolitics will remain a strong factor in global energy, and not only oil and gas, as seen from the latest transport disruptions in the Red Sea that affected all sorts of goods moving from Asia to Europe, including, in all likelihood, solar power equipment. Geopolitics is losing its exclusive tie to oil and gas, and spreading as a critical supply security factor across transition technologies, too.
Russia, Iran Officially Ditch U.S. Dollar for Trade
Russia and Iran have finalized an agreement to trade in their local currencies instead of the U.S dollar, Iran’s state media has reported. Both countries are subject to U.S. sanctions. “Banks and economic actors can now use infrastructures including non-SWIFT interbank systems to deal in local currencies,” Iran’s state media has declared. Moscow has lately been cozying up to Tehran, with Iran revealing in November it will provide Russia with Su-35 fighter jets, Mi-28 attack helicopters and Yak-130 pilot training aircraft. The global de-dollarization drive has been going on for years with BRIC countries and the so-called pariah states trying to ditch the American dollar in favor of other currencies. Back in 2019, Putin declared that time was ripe to review the dollar’s role in trade. At that time, Russia and China considered switching to the euro, the world’s second most dominant currency, as an acceptable stalemate, with the ultimate goal being to use their own currencies. Earlier in the current year, Russia paid dividends from the Sakhalin 1 and 2 oil projects in Chinese yuan instead of the dollar. Last year, Russia was cut off from the US dollar-dominated global payments systems following sweeping sanctions off the Ukraine war. Russia has declared it will no longer accept the American currency as payment for its energy commodities but will instead switch to Chinese and Emirati currencies. However, global de-dollarization efforts have borne little fruit with the vast majority of cross-border transactions involving BRICS members continuing to be invoiced in dollars. Indeed, exchanging BRICS members’ local currencies with each other and with other emerging market currencies frequently requires using the dollar as an intermediary. Further, a large share of public and private debt in these economies is dollar denominated. The relative stability of the dollar compared to many local currencies makes it more attractive as a medium of payment in cross-border trade. The dollar’s widespread use in these cases has become self-reinforcing, thus preserving its dominant global role and impeding efforts to de-dollarize.
New U.S. Oil Field Developments Are A Sign Of Things To Come For Saudi Arabia
Events often have a way of highlighting the circular nature of time rather than its linearity. An extraordinarily notable recent example of this was this year’s incursion into Israel of Hamas on Yom Kippur, just as happened on Yom Kippur 50 years earlier when an Arab coalition did the same. In the same way that the recent incursion resulted in the ongoing Irael-Hamas War, so the events of 1973 led to the Yom Kippur War. So far, due to the exceptional efforts of U.S. Secretary of State, Antony Blinken, and his team, the Israel-Hamas War has not widened into a war that could have disastrous consequences for the oil price, but it may yet do so. In 1973, though, the Yom Kippur War led directly to an embargo by OPEC members – plus Egypt, Syria, and Tunisia – on oil exports to the U.S., the U.K., Japan, Canada, and the Netherlands in response to their collective supplying of arms, intelligence resources, and logistical support to Israel during the War. By the end of the embargo in March 1974, the price of oil had risen around 267 percent, from about US$3 per barrel (pb) to over US$11 pb. This, in turn, stoked the fire of a global economic slowdown, especially felt in the net oil importing countries of the West. However, from a long-term perspective, even more important than any of this was the way it changed U.S. policy towards Saudi Arabia and OPEC from that point. Judging from recent announcements from the U.S., the current Israel-Hamas War may have prompted the final phase of that policy made back in 1974. At the end of the embargo in 1974, some branded it a failure, as it had not resulted in Israel giving back all the territory it had gained in the Yom Kippur War. However, in a broader sense, a wider war had been won by Saudi, OPEC, and other Arab states in shifting the balance of power in the global oil market from the big consumers of oil (mainly in the West at that time) to the big producers of oil (mainly in the Middle East at that point). This shift was accurately summed up by the slick, clever and urbane then-Saudi Minister of Oil and Mineral Reserves, Sheikh Ahmed Zaki Yamani, who was widely credited with formulating the embargo strategy. Crucially for what followed in terms of U.S. policy, one titanic figure in Washington agreed with Yamani’s view, and this was the late Henry Kissinger. A extremely influential geopolitical strategist who served as U.S. National Security Advisor from January 1969 to November 1975, Secretary of State from September 1973 to January 1977, and senior adviser to many U.S. presidents after that, Kissinger came to three key conclusions based on that 1973/74 Oil Crisis, analysed in full in my new book on the new global oil market order. The first was that the U.S. could never truly trust Saudi Arabia again, as it had broken the underlying ethos of the foundation stone agreement between the two countries made back on 14 February 1945 between the then-US President, Franklin D Roosevelt, and the then-Saudi King, Abdulaziz bin Abdul Rahman Al Saud, as also detailed in the book. This deal had run smoothly from that point to the onset of the 1973/74 Oil Crisis, and it was simply that the U.S. would receive all the oil supplies it needed for as long as Saudi Arabia had oil in place and, in return for this, the U.S. would guarantee the security both of Saudi Arabia and its ruling House of Saud. Saudi Arabia had clearly broken this covenant in leading the embargo on oil supplies against the U.S. Kissinger’s second conclusion was that the U.S. needed to expedite its efforts to become self-sufficient in energy resources as soon as possible, with a focus in the shorter term on oil supplies. He did not have any clear idea at that time when that self-sufficiency might come, as the shale oil and gas revolution was not even in the significant development stage at that point. Third, Kissinger concluded that the best course of action for the U.S. to keep obtaining all the oil and gas it needed to retain its top global economic and political position was to ensure that the Middle Eastern countries did not band together again in the future against the U.S. The optimal way for the U.S. to ensure this, he successfully argued, was to use the ‘divide and rule’ principle between the region’s major oil and gas producers, which in turn was a variant of the ‘triangular diplomacy’ he had advocated and used to great effect in the U.S.’s dealings with Russia and China at that time. In short, this involved playing one side off against the other by leveraging whatever fault lines ran through the target countries at any given time, be they economic, political, or religious, or any combination thereof. There are multiple major examples of this policy at work analysed in my new book, but two of the most significant were leveraging the religious schism between Shia and Sunni Islam (as exemplified respectively by Iran and Saudi Arabia), and the undermining of resurgent ideas of pan-Arabism. In the case of the former, notable examples have included the U.S. invasion of Iraq in 2003, and its unilateral withdrawal from the ‘nuclear deal’ with Iran in 2018. In the latter’s case, notable examples include the U.S. sponsorship of the Egypt-Israel Peace Treaty, after which Egyptian President Anwar Sadat was assassinated, and the Arab–Israeli relationship normalisation deals. From 1974 to the 2014, this U.S. strategy was broadly successful in ensuring no re-occurrence of meaningful collective actions against it by Saudi Arabia and OPEC. However, by early 2014, it had become obvious to the Saudis that the U.S. had found a way that might ensure its energy independence in the future, as it had long wanted.
Swan Energy announces pre-payment of Rs 3 billion debt for its FSRU Project
Swan Energy Ltd on Tuesday said that TOPL, subsidiary of the company, has pre-paid Rs 3.00 billion, out of its internal accruals, to its consortium of senior lenders of Floating Storage and Degasification Unit (FSRU) Project. “TOPL has also created the required Debt Service Retention Account (DSRA) of ~Rs 950 million,” it said in a regulatory filing. The FSRU vessel was commissioned in February 2023, which represents India’s first new build FSRU initiative, embodying Swan Energy’s leadership in ushering transformative developments in the LNG sector. “The partial debt prepayment is a significant milestone achievement and demonstrates a strong financial position,” the company said. Swan Energy holds a 32.12 per cent stake in the Jafarabad unit.
IOCL green H2 tender in legal mess, gets one bid
The tender to set up the first green hydrogen plant of state-run oil refiner and marketer Indian Oil Corp. Ltd (IOCL) received one bid till the 29 November deadline, people aware of the development said. The bid came from GH4India Pvt. Ltd, which is IOCL’s own joint venture (JV) with infrastructure and engineering major Larsen & Toubro (L&T) and renewable energy company ReNew, the people said on the condition of anonymity. The JV, in which all three companies have equal stakes, was formed this year in August. Meanwhile, an industry body of green hydrogen firms has approached the Delhi high court, alleging bias towards IOCL’s JV in the tender clauses. “Around 50 players had participated in the pre-bid consultation. However, only one player submitted the bid due to the right of first refusal clause,” said another person aware of the development. According to the people cited above, the right of first refusal clause (Clause 19 of the tender) gives IOCL preferential right to purchase excess green hydrogen generated at the green hydrogen generation unit (GHGU). In case IOCL does not confirm the purchase within 60 days, the operator can offer the gas to third-party customers. However, the price offered to them cannot be lower than what was offered to IOCL. Other terms and conditions offered, too, must be less favourable than those offered to IOCL. “The parties would have to agree that IOCL shall be entitled to exercise its right of refusal every time the quantity of the green hydrogen generated at the GHGU increases on account of capacity augmentation or technological upgradation, modification or restructuring,” said one of the people earlier.
Clock ticking on India’s crude oil reserves, petroleum ministry gives time of 15 year
India’s crude oil reserves will last another 15 years in the absence of new finds, the petroleum ministry has informed a parliamentary panel. “The E&P (exploration and production) companies under all regimes have reported 447.57 million tonnes (mt) of 2P Reserves (Proved + Probable) as of April 1, 2022. At the current annual production level, the reserves will last for about 15 years provided no new reserves are accreted,” the oil ministry said. The calculations did not consider reserves that are recoverable technically nor did it take into account future discoveries. “Thus, oil reserves are likely to last longer from the current estimate,” the ministry has qualified. India consumes about 5.5-5.6 million barrels per day, with the share of imports about 4.6 million barrels per day, which is about 10 per cent of the overall oil trade in the world. The import of crude by oil PSUs jumped to 141.2mt in 2022-23 from 120.5mt in 2021-22. As per the International Energy Agency’s World Energy Outlook 2022, the energy demand of the country is expected to grow at about 3 per cent per annum till 2040, compared with the global growth rate of 1 per cent. Asian premium Most of the foreign national oil companies declare the selling price of crude oil for different grades. They declare it either as a flat price or as a premium or discount to the marker crude oil. The ministry informed the panel that over and above the official selling price, an extra cost called the Asian premium is levied on the purchase of oil. The levy is on account of lower transportation costs due to the proximity of India to West Asia from where the country imports a big share of its crude oil requirement. This, however, impacts the gross refining margins of the companies. The panel report said: “The official selling price (OSP) decided by the national oil companies (NOCs) in the West Asia needs better transparency. The oil PSUs along with other oil importing companies should try to impress upon the NOCs to fix OSPs based on certain formulae.” “The price of crude oil has no relation with the production cost, etc. Since the commodity is a natural resource endowed upon some countries the pricing should be reasonable to ensure energy access at affordable prices to citizens across the world.” Since the oil-producing countries to a large extent are acting in a concerted way, the price of crude oil is largely producer-determined rather than market-driven. “The committee would recommend the ministry to coordinate with other oil importing countries and approach multilateral institutions to bring reforms in the pricing of crude oil to availability at a reasonable price to the global community,” the report added
Oil Prices Steady Before Holiday
Crude oil prices were trading slightly down on Friday afternoon, just hours before the weekend and the Christmas holiday, reasonably unaffected by Angola’s decision to quit OPEC. The price of a barrel of WTI was trading at $74.03, $0.07 down on the day, or a 0.09% dip. Last year, the Friday before Christmas saw WTI trading higher than today, at $79.56 per barrel. Since that time last year, WTI has exchanged hands between $67 and almost $92 per barrel. Brent crude was trading at $79.23 per barrel on Friday, a $0.16 drop or a 0.20% decrease. That’s down from about $84 per barrel around last Christmas. Over the past week, WTI has risen from just under $72. Gasoline prices in the United States have also risen over the last week. The current price for a gallon of regular-grade gasoline in the United States is now averaging $3.129 per gallon, according to the latest AAA data. That compares to $3.087 per gallon a week ago. Last year at this time, gasoline prices averaged $3.101 per gallon, just 2.8 cents below today’s average prices. This week saw the first weekly increase in gasoline prices since September. What doesn’t appear to be affecting oil or gasoline prices is Angola’s decision to quit the OPEC group. Angola and Nigeria were given lower crude oil production quotas as part of the OPEC+ agreement this summer, after the two producers had underperformed and failed to pump to their quotas for years due to a lack of investment in new fields and maturing older oilfields. The two members disagreed with the ruling, which delayed the latest OPEC meeting. The issue was unresolved as of the latest meeting, and Angola earlier this week decided to part ways with OPEC. Oil prices initially fell, but had steadied out by Friday.