ONGC Videsh keen on Sri Lankan oil and gas blocks
Oil and Natural Gas Corp is interested in the exploration of oil and gas blocks in Sri Lanka, a company executive said on Wednesday. The company was awaiting an announcement of the oil and gas ‘roadmap’ of the island nation, Rajarshi Gupta, managing director of ONGC Videsh, told reporters at an industry event. ONGC Videsh is an overseas investment arm of state-run ONGC. ONGC Videsh is open to having deals through government-to-government negotiations as well as through competitive bidding depending on Sri Lanka’s yet-to-be-announced exploration policy, Gupta said.
Qatar Signs 27-Year Gas Supply Deal With France’s Total
Qatar has agreed to supply France’s TotalEnergies with natural gas for 27 years, its state energy company announced on Wednesday Qatar will supply 3.5 million tonnes of gas a year under the deal, QatarEnergy said, following two agreements with Total last year for a share of the Gulf state’s huge north field gas expansion project. “These two new agreements we have signed with our partner TotalEnergies, demonstrate our continued commitment to the European markets in general, and to the French market in particular, thus contributing to France’s energy security,” Qatari Energy Minister Saad Al-Kaabi said. Total signed a $1.5 billion deal with QatarEnergy in September last year giving it a 9.3 percent stake in Qatar’s north field South project, the second phase of the field’s expansion. In June 2022, the French energy giant became the first partner in the first phase of the expansion, north field east, investing more than $2 billion for a 6.25 percent total share.
Tellurian Asks For Three-Year Extension To Complete Its Driftwood LNG Facility
Tellurian has applied for a three-year construction permit extension with the Federal Energy Regulatory Authority to complete the construction of the Driftwood LNG facility. The Driftwood LNG plant, currently under construction, would be one of the biggest in the world, with a capacity of up to 27.6 million tons of liquefied natural gas annually. The price tag of the project is $25 billion at the moment. The reason for the extension request is that construction appears to be moving forward more slowly than expected. Tellurian said it would only receive key equipment for the first phase of the plant in 2027 and further equipment for the second phase of development in 2029, which would push the launch date for the facility to 2029 as well. In all, Driftwood LNG will comprise five liquefaction trains, with the first phase of development to add 11 million tons of LNG annually to the U.S. total. Earlier this month, Tellurian’s president and chief executive told Petroleum Economist that first production was scheduled for 2027. “Driftwood LNG is under construction and we are comfortable with the FERC processes and procedures,” a spokesperson for the company said, as quoted by Reuters. Currently, LNG export facilities in the United States have a combined operating capacity under real-world operating conditions of 11.4 billion cubic feet daily, the EIA said in its Annual Energy Outlook 2023 earlier this year. There is an additional 7.3 billion cubic feet daily of capacity under construction, while a further 18.3 billion cu ft of possible LNG export capacity has received full regulatory approval from the U.S. Department of Energy and the Federal Energy Regulatory Commission but has not yet received a final investment decision. In the short term, U.S. LNG exports are also expected to increase, from 10.59 billion cubic feet daily last year, when Freeport LNG was shut down after June 2022, to 12.07 billion cubic feet daily this year, and to 12.73 billion cubic feet daily in 2024, per the Energy Information Administration.
China Saved $10 Billion By Buying Cheap Oil From Sanctioned Exporters
China is likely to have saved $10 billion on crude oil imports so far this year as it has imported record volumes of cheaper oil from Russia, Iran, and Venezuela—all three under U.S. and Western sanctions, a Reuters analysis showed on Wednesday. As international benchmark prices rose from July due to tightening supply, China has managed to save billions of U.S. dollars from its crude oil import bill, taking advantage of cheaper crude cargoes from the three oil exporters under sanctions. China imported a record-high volume of 2.765 million barrels per day (bpd) of crude from Russia, Iran, and Venezuela between January and September, per the Reuters analysis of data by vessel flow trackers Kpler and Vortexa. If China had bought those volumes from non-sanctioned oil exporters, it would have paid $10 billion more on its crude imports, according to Reuters’ calculations. Those imports are estimated to have accounted for 25% of overall Chinese crude oil purchases in the first nine months of 2023. Russia, Iran, and Venezuela made up around 21% of China’s crude oil imports in the same period of 2022, and just 12% in the same months of 2020, according to the Reuters analysis. Despite higher oil prices in recent months and narrower discounts of Russian crudes to international benchmarks, Russia remains the single largest crude oil supplier to China. During the first half of 2023, Chinese imports of Russian crude oil averaged 2.13 million bpd, which helped Russia oust its OPEC+ partner Saudi Arabia from the top spot as the single biggest supplier to the world’s top crude importer so far this year, per Financial Times estimates based on Chinese customs data. China has also boosted imports of crude from Iran, amid increased competition with India for cheap Russian oil and a more lenient U.S. sanction enforcement on Iranian oil trade so far this year.
U.S. Treasury: G7 Price Cap Has Significantly Reduced Russia’s Oil Income
The U.S.-led price cap on Russian oil exports has “significantly” cut revenues from oil sales for Russia, U.S. Treasury Secretary Janet Yellen said on Wednesday. The G7 price cap on Russian oil has “significantly reduced Russian revenue over the last 10 months while promoting stable energy markets,” Reuters quoted Yellen as saying at a news conference during the International Monetary Fund (IMF) and World Bank meetings in Morocco. The price cap of $60 per barrel of Russian crude oil set by the G7 and the EU says that Russian crude shipments to third countries can use Western insurance and financing if cargoes are sold at or below the $60-a-barrel ceiling. The measure took effect at the end of 2022 when the EU imposed an embargo on imports of Russian crude oil. “We must continue to impose severe and increasing costs on Russia and continue efforts to ensure Russia pays for the damage it has caused,” Yellen said today. The U.S. Treasury Secretary also said that the U.S. government had not in any way relaxed sanctions on Iran’s oil exports, Bloomberg’s energy and commodities columnist Javier Blas reported. Analysts have attributed the recent surge in Iranian oil production and exports – especially increased shipments to China – to weaker enforcement of the U.S. sanctions. If the Hamas-Israel war escalates and Israel is to blame Iran for either direct or indirect involvement in this weekend’s attack by Hamas on Israel, the enforcement of the U.S. sanctions against Iranian oil trade could be tightened, according to analysts. “The softer approach from the US is likely due to concern over rising energy prices. However, it would be difficult to see the US maintaining this stance if Iran is connected to these attacks, whether directly or indirectly,” Warren Patterson, Head of Commodities Strategy at ING, said earlier this week.
India To Lead Global Oil Demand Growth As Population, Economy Booms: OPEC
India is going to lead the growth in global oil demand over the period from 2022 to 2045, as a rising working age population, high economic growth, an expanding middle class and rapid urbanisation drive up thirst for the fossil fuel. The country will add 6.6 million barrels per day to oil demand over the forecast period, the Organization of the Petroleum Exporting Countries said in its latest World Oil Outlook. According to the forecast, by 2045, the country’s oil demand will hit 11.7 million barrels per day. This means a 3.6% growth per annum over the next 23 years—the highest among OECD and non-OECD regions. India’s current oil consumption stands at 5.1 million barrels per day, for which it relies on imports to meet 85% of the demand. It is the world’s third largest consumer of oil, behind the U.S. and China. “With an average GDP growth of 6.1% p.a. over the projection period, India is set to remain the fastest-growing major developing country. China and India alone are set to account for more than a third of the global economy in 2045,” the report said. While the Organisation for Economic Co-operation and Development region will see a 1.1% fall in demand and thereby a reduced share of oil in its energy mix, the non-OECD region is forecasted to have a 1.7% growth rate. The fall in share of oil demand in OECD countries can be attributed to a massive push to decarbonise the energy mix in the developed world. At the same time, energy hungry developing countries will continue to burn fossil fuels to run their growth engines even as they invest in cleaner sources of energy. India will add 6.6 million barrels per day to oil demand over the forecast period. The global working age population (aged between 15–64) is set to increase globally by 826 million over the forecasted period, of which India’s share will stand at 156 million. India’s urbanisation rate is expected to be 50% by 2045 from 36% in 2022.
India wants Saudi Aramco to develop strategic petroleum reserve as ties strengthen
India wants Saudi Arabia’s Aramco to participate in its planned 6.5 million metric tons (MMT) strategic petroleum reserve (SPR) programme as the South Asian nation wants to strengthen ties with its key oil supplier, according to a document seen by Reuters. The two nations have been talking about Aramco’s participation in the SPR programme for years. The talks, however, gained traction after Crown Prince Mohammed Bin Salman’s meeting with Prime Minister Narendra Modi last month. “Under Phase II Strategic Petroleum Reserves Programme construction of two new commercial-cum-strategic petroleum reserves of 6.5 MMT have been approved,” the Indian government said in an internal document, adding that “Saudi Arabia’s Aramco can be invited to participate in the Phase II.” Aramco declined to comment, while the Saudi government did not respond to emails seeking comment. India’s prime ministers office, oil ministry and finance ministry did not respond either. In 2021, India overhauled its SPR policy allowing commercial sale of the crude to boost private participation in the building of new storage facilities, mirroring a model adopted by countries such as Japan and South Korea. India, the world’s third-biggest oil importer and consumer, imports over 80% of its oil needs and has built strategic storage at three locations in southern India to store over 5 million tons of oil to protect against supply disruption. Abu Dhabi National Oil Co (ADNOC) has leased 750,000 tons of oil storage in the 1.5 million ton SPR in the southern city of Mangaluru. India has conducted two road shows for the second phase of its SPR programme that received interest from companies including Trafigura, British Petroleum, Petrochina, Hyundai, Gulf Energy, Glencore and Shell, a government statement said. Regarding a potential deal between India and Saudi Aramco, KPMG Partner Anish De commented: “Getting the investment there will align the economic and political interest. There is good economic and political reasons for the two countries to do it.” During the visit by the crown prince to India, Saudi Arabia announced plans for an investment facilitation office in India’s Gujarat International Finance Tec-City, a tax-neutral financial service centre. India is also scouting for land to build a 1.2 million metric tonnes per year refinery and petrochemical project in western India with participation of Saudi Aramco and ADNOC. The two governments will form a task force to remove hurdles like land acquisition, which has delayed the project, which was conceived in 2018. Saudi Arabia has committed $50 billion investment for the project.
India’s Sept diesel flows to Europe reach all-time peak, Oct volumes slowing
India’s September-loading diesel exports to Europe hit an unprecedented high as traders cashed in on arbitrage profits to the West, although the likelihood of such volumes continuing through October was unlikely, traders and analysts said. Exports also got a boost from a seasonal lull in domestic demand, an India-based trading source said. “This trade flow was mainly attributed to the opened arbitrage for India-origin cargoes to head West, with traders potentially preparing for the loss of Russian diesel barrels to Turkey as well due to the export ban,” said Vortexa’s head of APAC analysis, Serena Huang. Russia banned diesel exports on Sept. 21 to stabilise domestic market fundamentals, though this was partially lifted from Oct. 6. The surge in India-origin diesel to Europe will help the continent build commercial stockpiles ahead of the winter heating season, easing supply shortage worries and limiting overall price gains. The westward pull for cargoes, in turn, will support Asian refining cracks, or margins, mitigating a modest supply glut in the region. Exports from India to Europe totalled between 280,000 barrels and 303,000 barrels per day (bpd) in September, accounting for half of India’s total diesel exports for the month, shiptracking data from Vortexa, Kpler and LSEG showed. Exports to Singapore, by contrast, fell by around 73% month-on-month in September, as it was more profitable for sellers to ship cargoes west. The east-west arbitrage, typically measured using the exchange of futures for swaps (EFS) price differential – a spread between ICE gasoil futures and Asia’s prompt month gasoil swaps – averaged $76 a ton daily in the second half of September, LSEG data showed. A drop in India’s windfall export tax during much of September also encouraged refiners to sell their cargoes outside home, one Singapore-based trading source said. This is in addition to the rising cash premiums for India-origin exports, with deals for September cargoes at premiums of around $4 a barrel compared with August premiums at $2 to $3, a second Singapore-based trading source added. “However, the arbitrage spreads have narrowed in the past week, so the flows will slow in October,” Vortexa’s Huang said. The EFS spreads have narrowed by almost $20 a ton from a week earlier, LSEG data showed. October volumes bound for Europe from India thus far are around a quarter of September levels at 75,000 barrels per day, Kpler shiptracking data showed. Exports from India for October are likely to remain thin due to several factors including ongoing refinery turnarounds and peak Diwali festive season demand, LSEG analysts said. At least three Indian refiners plan to take their crude units and some corresponding downstream units offline in the fourth quarter of the year for maintenance, Reuters records showed.
Biofuels alliance to propel global market to $200 billion: Hardeep Singh Puri
Union minister for petroleum and natural gas Hardeep Singh Puri said the global biofuel market is set to jump from its current value of $92 billion to $200 billion, with the launch of the biofuels alliance. Speaking at the inaugural session of the 26th Energy Technology Meet here on Monday, Puri emphasized, “However, this is not the end of the story. The real story on biofuels has just started.” Puri’s address was a testament to India’s swift progress in adopting green and clean energy. “The nation achieved its 10 percent biofuel blending target for November 2022, five months in advance. The subsequent goal of 20 percent blending for 2030 has been preponed to 2025,” he added. Navigating the triad of challenges in energy – availability, affordability, and sustainability – Puri remarked, “We didn’t allow our sustainability challenge to hold us back. In fact, we’re constantly accelerating our efforts.” He further highlighted the nation’s proactive measures in adapting to newer blends. “Initially, the 20 percent blend was a self-imposed cap, influenced by automobile manufacturers’ concerns. However, with the current availability of 20 percent blended fuel and rigorous establishment of biogas and ethanol plants, we’re witnessing a paradigm shift,” he said. Citing the recently launched Green Hydrogen Bus by India Oil, the minister accentuated, “Our technological mindset is evolving. We’re not just limited to electric cars; flexi-fuel vehicles are the next frontier.”
OPEC+ Stands Firm As Global Oil Demand Teeters
Last week, OPEC+ decided to keep current oil production cuts in effect until the end of the year. The announcement was anything but surprising, and yet crude oil prices fell substantially, sparking suggestions that the OPEC+ cuts may already be activating what many call the cure for high oil prices, which is even higher prices. But there is a possibility that oil has higher to go still before it begins affecting demand. The question, as always, is just how high. The answer: perhaps a bit higher. India’s oil minister this week warned about unintended consequences from the OPEC+ cuts, saying it was the right of the OPEC+ producers to decide how much oil they would pump, but they should not be “unmindful of the consequences.” “And it can become a self-fulfilling prophecy, that the demand will drop because people don’t have the capacity to sustain it,” Hardeep Singh Puri added. According to Bloomberg’s Julian Lee, demand destruction is already underway. In the United States, gasoline consumption this driving season was 600,000 bpd below the average for 2019, the last pre-pandemic year with what is assumed to be normal demand. In addition, the latest EIA inventory report showed a substantial build in gasoline inventories, reinforcing a perception of lukewarm demand for fuels. Unsurprisingly, that build was one of the factors that weighed on prices this week. Yet while demand may weaken in the U.S., it is rising in other parts of the world. China, India, and Brazil, Lee notes, are all witnessing rising oil demand. Only, according to him, this growth needs to be stronger to offset the declines in demand elsewhere. This, however, would depend on the causes of demand destruction. And when we talk about U.S. demand, it was not prices that destroyed demand—oil was well below $90 per barrel during summer driving season. It could have been inflation, which remains elevated despite consistently high consumer spending. It could have been just one of those years. Meanwhile, oil demand in China is “booming”. “China’s demand for oil has been supported by record internal mobility, as indicated by robust congestion and domestic flight data,” Goldman Sachs commodity analysts recently said, noting the country’s booming demand for copper, driven by the low-carbon energy industries. India’s oil demand is also quite robust, despite the government’s concerns about prices, prompted by the fact that the country relies on imports for over 80% of its oil consumption. Despite his warnings about prices, India’s oil minister this week said the country “will manage” even if oil tops $100 per barrel. This seems to be where most observers see oil heading anyway. The latest to join the $100-per-barrel club was Norway’s Equinor, whose chief economist predicted that “I wouldn’t exclude that we can have prices reaching $100 a barrel,” but added that “that wouldn’t be because OPEC would like it to reach there. I don’t think they are aiming for that price.” Indeed, Eirik Waerness made an excellent point that others have made in recent days, too. OPEC+ as a whole or Saudi Arabia and Russia are not interested in watching oil prices soar sky-high. They are aware of the nature of the cure for high oil prices. So, as before, what they are doing is a fine balancing act that can keep prices high enough for producers but without killing demand, at least not too much of it. This is the key issue at stake: can the global economy keep chugging along even as oil rises close to $100 or even above it, or will there be a fallout that would, ultimately, destroy a lot more demand for oil? For now, it seems the economy keeps chugging along, accompanied by persistent concerns about interest rates, recession, and consumer spending. Meanwhile, forecasts of peak oil demand continue to come in, the latest from Rystad Energy. The Norwegian energy consultancy served a surprise this week by forecasting that oil prices are about to drop sharply thanks to ample supply and a peak in oil demand growth. This forecast goes counter to observations made by Equinor’s chief economist, who noted that tight production capacity globally was part of the reason why oil may soon top $100 per barrel. It also goes counter to what OPEC has been warning about for years now: underinvestment in new production that would ultimately compromise the global supply situation. For now, it appears the market is reasonably well supplied despite the Saudi and Russian cuts. But the balance appears to be delicate, with a deficit around the corner, according to most analysts. Once that is official, it will become clear just how elastic oil demand has become in the past couple of years or, alternatively, how inelastic it continues to be. And that might settle the debate about peak oil demand, at least for a little while.