India does not follow any ideology while procuring crude oil, says HS Puri
Emphasising that India does not follow any ideology while procuring crude oil, Minister of Petroleum & Natural Gas HS Puri said the government’s “moral commitment” is to the common man by ensuring affordability, availability and sustainability. “Look, the bottom line is we will buy from whomever we have to at the cheapest possible price. There is no ideology. There is no emotion. The only moral commitment we have is to our consumers,” Puri told businessline when asked about declining crude oil imports from Russia, India’s largest supplier of seaborne crude. Citing instances, the Oil Minister pointed out that when he was a Joint Secretary on the Americas desk, many years ago, India did not import any energy from the US, but now it is buying about $20 billion worth of energy products. On import from Russia Asked about India’s decision to begin importing crude oil from Russia in 2022, Puri said: “When the crisis took place, I happened to be the Petroleum & Natural Gas Minister. It was clear to us then, and even more clear to us now, that we had to adopt a practical approach to the entire issue of energy sourcing.” Practicality becomes even more necessary when the Indian economy is firing on all six cylinders. Because consumption of energy is not a reasonable, but a definitive indicator of whether the economy is doing well or not. If energy consumption slides, one can be reasonably sure that the economy has problems, he added. “Turbulence in global markets is not a new phenomenon. I have studied that period from 1973, when the world first got what is called either an oil shock or a news shock related to oil. To understand what happens every 7-8 years, I was very pleased to see spikes and uncertainties have taken place earlier and they’ve had a major impact on the price as available to the consumer,” he explained. Elaborating on the energy crisis that engulfed the world on account of the Russia-Ukraine conflict, the Minister said there are some countries, which produce a lot of oil. They don’t consume very much because they have a small population base. There are large other countries who consume a lot of oil. Some of those consumers are both producers and consumers and some are just consumers. “We find ourselves in a very interesting situation. Whilst all our targets say that we will become self-sufficient by a particular date, and I’ve no doubt that we will, in the interim we find ourselves dependent on imports of crude oil up to an extent of 80-85 per cent. Equally, on gas we find ourselves dependent on 55 per cent or so.,” Puri pointed out. He further said “What have we done? A, we have diversified the sources of our supply. This has not happened now, it has happened over a period of time, and I want to give credit to everyone. From 27 sources we know import from 39 sources we support from hither to unimaginable sources.” Highlighting that affordability is “always relative”, the Minister said: “I’ll give you a ballpark figure, gas prices globally went up at 303 per cent, but we were able to sustain (with) a marginal increase of 60 per cent or something. Petrol and diesel all over the world shot up in the last two years, (but) our prices have come down on petrol by 5 per cent. Our diesel prices came down by 0.28 per cent. Increases elsewhere have been 40 per cent, 50 per cent including in the G20 countries.” India has to face the trilemma of availability, affordability and sustainability, he said adding “I think the Modi government has done an outstanding job on being able to ensure all three. Availability means at no stage in my two years plus have I come across a situation where there’s a serious shortage of supplies anywhere. One particular day some pipeline somewhere something happens, but it’s corrected in a few hours. But not the kind of situation some of the other countries are facing where for the love of money you cannot access energy. Some cases in our immediate neighbourhood in South Asia. So, availability is not an issue.”
Asia Oil & Gas Latest: Refining ‘Crying Out’ for Investment
The outlook for oil prices and Chinese demand, the longevity of OPEC+ supply curbs, and rising flows of Iranian crude are among the key topics at Asia’s biggest gathering of the industry’s traders and executives, which entered its second day in Singapore. Attendees at APPEC by S&P Global Commodity Insights will also have an opportunity to reflect on Russia’s war in Ukraine, and the transition away from fossil fuels in the transport sector. Meanwhile, the Gastech 2023 conference also kicked off in the city-state on Tuesday. Global crude and fuel markets are tight, with refineries running as hard as they can to capitalize on high margins, Alex Grant, senior vice president for crude, products and liquids at Equinor ASA, said at APPEC. Equinor has no plans to reroute its Johan Sverdrup stream from Europe, but “if it comes to a point where Europe needs it less, and Asia is saying they need more by virtue of the prices they’re offering, we will then make plans to move quite quickly,” he said. 50 Million Tons of LNG Diverted to Europe Vitol Group Chief Executive Officer Russell Hardy said 50 million tons of liquefied natural gas will be diverted to Europe in 2023, meaning demand in Asia is still far from recovering to 2021 levels. LNG spot prices will be at $13-$15 per million British thermal units this winter, which is still relatively expensive compared to coal, he said at Gastech. “Europe is going to pay for that gas,” he added. Shell Says Calcasieu Pass Delay ‘Not Credible’ It’s “not credible” for Venture Global LNG Inc. to operate its Calcasieu Pass liquefied natural gas export plant in the US for over a year above nameplate capacity and not start commercial operations, Steve Hill, an executive vice-president at Shell Plc, said at Gastech. “If contracts are seen as options, then buyers simply won’t sign them,” he said. Venture Global hasn’t supplied cargoes to foundation buyers, Hill added. BPCL Can Pay for Russian Crude in Dirhams India’s Bharat Petroleum Corp. has flexibility in making payments for Russian crude in currencies other than US dollars, including dirhams, should prices fluctuate, Manoj Heda, the company’s executive director of international trade, said on the sidelines of APPEC by S&P Global Commodity Insights. Russian crude prices have risen alongside oil benchmarks like Brent, although Heda didn’t elaborate on exact levels. Most of the payments for imports of Russian oil are still done in US dollars, he said.
Asian LNG market faces price volatility risks, warns Wood Mackenzie VP
Mangesh Dilip Patankar, Vice President, APAC Gas and LNG Consulting at Wood Mackenzie, has cautioned that the Asian liquefied natural gas (LNG) market is delicately balanced, and any disruptions in supply or increases in demand could lead to significant price fluctuations. Patankar made these remarks during the Gastech 2023 conference in Singapore, highlighting the uncertainty in the LNG market, which has impacted pricing and contract terms and created a gap between buyer and seller expectations. Many LNG buyers in Asia are facing the challenge of ensuring a secure supply of LNG while keeping procurement costs competitive and contract terms flexible. Simultaneously, LNG sale and purchase agreements (SPAs) are evolving as LNG trading grows. According to Wood Mackenzie Lens, Australia and Qatar are expected to be the largest LNG suppliers to Asia from 2023 to 2030, accounting for nearly 60 per cent of the total LNG delivered to Asia during this period. Asia’s LNG interest Patankar believes that the LNG market, which has cooled off from its peak in the previous year, is now attracting interest from emerging buyers in Asia. However, he advises that these buyers must understand the complex fundamentals of LNG and monitor its price volatility closely.
Oil on the boil: Why global crude oil prices are rising sharply
Crude oil prices have been rising sharply across the globe, and it has raised fresh concerns about the impact it will have on the world economy, especially as many nations continue to grapple with high inflation. On Monday, crude oil prices rose further as markets expect major producers to further tighten supplies. Another reason why crude oil prices gained was due to growing hopes that the US Federal Reserve would leave interest rates unchanged to avoid dampening the US economy. Brent Crude November futures were up 3 cents at $88.58 a barrel at around 8 am, while US West Texas Intermediate crude (WTI) October futures rose 9 cents to $85.64 a barrel. Supply tightening by OPEC+ Sugandha Sachdeva, executive vice president and chief strategist at Acme Investment Advisors told news agency Reuters that crude oil prices have been primarily driven by the anticipation of additional supply cuts from major oil-producing nations. “Crude oil prices have been primarily driven by the anticipation of additional supply cuts from major oil-producing nations, Russia and Saudi Arabia,” said Sachdeva. He, however, noted that the steady increase in US oil production could limit further significant gains in price. It was on Thursday last week that Russian Deputy Prime Minister Alexander Novak confirmed that the country had agreed with partners in the Organization of the Petroleum Exporting Countries (OPEC) on the parameters for continued export cuts. It is likely that OPEC+ will make an announcement on the planned cuts this week. Russia had said earlier that it would cut exports by 3,00,000 barrels per day (bpd) in September, following a 5,00,000 bpd cut in August. Meanwhile, Saudi Arabia is also expected to cut exports by 1 million bpd in October. Impact of China, US economic data Another factor that has led to a rise in crude oil prices is related to China and US economic data. China’s manufacturing sector showed a surprising expansion in August, according to Caixin’s manufacturing PMI survey data. This unexpected growth has sparked fresh optimism about the economic well-being of the world’s biggest oil importer. In the United States, Friday’s employment data surpassed expectations, revealing a gain of 187,000 jobs last month in the nonfarm sector. This broader slowdown in the U.S. labor market, marked by a deceleration in job growth, has diminished the likelihood of imminent interest rate hikes by the Federal Reserve, according to analysts. Impact of rising oil prices Rising global crude oil prices have widespread economic implications, impacting inflation, consumer spending, business costs, energy bills, global trade, government budgets, investment markets, and geopolitical stability. As oil prices surge, consumers face higher fuel and energy costs, potentially leading to increased inflation and reduced discretionary spending.
Why energy giants like Reliance, Adani, Indian Oil are betting big on the humble biogas
India is known to be the pioneer of biogas and in an interesting development this green fuel is seeing renewed interest from major India Inc players in the energy sector, according to an ET report. The inception of biogas dates back to 1897 when British civil engineer Charles James initiated the first biogas plant during his work on the drainage of the Homeless Leper Asylum in Matunga, Bombay. Since then, biogas has been a steadfast source of energy for Indian households, community facilities, and dairy farms. The Indian Biogas Association projects the installation of 5,000 biogas plants by 2030, with an estimated investment of Rs 1750 billion in the sector. India Inc. is now showing a keen interest in the humble biogas. Reliance Industries, a prominent energy conglomerate, has unveiled plans to establish 100 compressed biogas (CBG) plants, signaling a shift towards greener energy sources. Adani Total Gas, part of the Adani Group, intends to set up five CBG plants within the next five years, with further expansion on the horizon. Furthermore, Thermax, based in Pune, has collaborated with EverEnviro Resource Management to launch Thermax Bioenergy Solutions, aiming to set up bio-CNG projects. Industry insiders reveal that EverEnviro is poised to invest nearly Rs 100 billion in this sector over the coming years. Their wholly owned subsidiary, Green Growth Equity Fund (GGEF), has ambitious plans to establish 14 CBG plants across the nation. Notably, oil marketing giants are not lagging behind in this sustainable energy transition. Indian Oil Corporation, Hindustan Petroleum Corporation (HPCL), and Bharat Petroleum Corporation (BPCL) have issued numerous letters of intent for the establishment of compressed biogas (CBG) plants. CBG, a greener fuel derived from waste and biomass sources, has properties similar to compressed natural gas (CNG) and serves a variety of purposes, including automotive, industrial, and commercial applications.
Oman sees 13.5% jump in production of refineries, petroleum industries
The production of refineries and petroleum industries in the Sultanate of Oman increased by 13.5 percent at the end of July 2023, according to a new report. The preliminary statistics issued by the National Centre for Statistics and Information (NCSI indicate that the production of standard grade petrol (M-91) by Omani refineries at the end of July 2023 rose by 31.2 percent to 1.22 million barrels, compared to the same period in 2022. Exports of M-95 fuel decreased by 84.9 percent while exports of gas oil (diesel) amounted to about 11.95 million barrels, an increase of 26.9 percent. The exports of aviation fuel rose by 71.6 percent 4.42 million barrels while exports of liquefied petroleum gas (LPG) amounted to 369,800 barrels. Paraxylene exports reached 311,400 metric tonnes, gasoline 97,500 metric tonnes and polypropylene exports increased by 26.5 percent to 147,000 metric tonnes. NCSI statistics indicate that the production of standard grade petrol increased by 27.1 percent to reach 9.61 million barrels at the end of July 2023 while its total sales amounted to 8.29 million barrels. The production of M95 fuel was estimated at 7.20 million barrels while its sales decreased to 6.90 million barrels. Diesel gas oil production increased by 9 percent to reach 19.86 million barrels, with its sales reaching 8.11 million barrels. Aviation fuel production also increased by 64.6 percent to reach 6.85 million barrels while its sales reached 2.53 million barrels. The liquefied petroleum gas (LPG) production rose by 41.4 percent to reach 4.91 million barrels. With regard to petrochemicals, gasoline production increased by 260.1 percent to 93,500 metric tonnes, paraxylene 305,400 metric tonnes and polypropylene production rose by 14.4 percent to 156,700 metric tonNES
Natural Gas Stands To Win As Offshore Wind Takes A Hit
While the total number of offshore wind projects, both existing and projected, continues to surge, the sector now grapples with typical economic and financial challenges. In recent weeks, offshore wind companies have sounded alarms about escalating product costs, manufacturing expenses, and price volatility, all of which are poised to significantly impact their ongoing and future endeavors. A striking financial upset in recent days came from the Scandinavian offshore wind behemoth, Orsted, which witnessed its stock market value plummet by over 25%, attributed to elevated global cost estimates and potential financial liability issues in the USA. In filings submitted to the New York state regulatory authority, other prominent offshore wind developers, such as Norway’s energy major Equinor and British oil major BP, have officially requested a staggering 54% increase in the price of electricity generated at three planned offshore wind farms. These projects, known as Empire Wind 1, Empire Wind 2, and Beacon Wind, located off the coast of New York, collectively boast a capacity of 3.3GW (3300MW). According to a filing by the New York State Energy Research and Development Authority (NYSERDA), the implementation of Empire/Beacon’s request would result in an average 54% price hike across their portfolio. Specifically, the strike price for Empire Wind 1 is expected to rise from $118.38 per megawatt-hour (MWh) to $159.64/MWh, Empire Wind 2 from $107.50/MWh to $177.84/MWh, and Beacon Wind to a projected $190.82/MWh, compared to its previous rate of $118.00/MWh. Both European developers candidly attribute these increases to “runaway inflation, global supply chain disruptions, and skyrocketing interest rates driven by the COVID-19 pandemic, the Russia-Ukraine conflict, and the accelerating pace of the energy transition.” Let’s zoom in on Orsted, a favorite among ESG (Environmental, Social, and Governance) investors. The Danish company disclosed on August 29th that it would need to book 16 billion Danish crown impairment (equivalent to $2.3 billion) to its U.S. portfolio, resulting in a sharp decline in its share value. Equinor and BP, thus far, have not reported similar impairments. During an earnings call on August 30th, Orsted officials outlined a total impairment of approximately $2 billion. These developments and filings are expected to exert a substantial adverse impact on current and future offshore wind projects in the United States. Rising financing costs (interest rates) and product expenses (turbines and components) are poised to remain persistent challenges. Key industry players have voiced the opinion that while U.S. offshore wind remains a long-term attractive investment, it requires additional government support, primarily through tax incentives or renewable energy credit subsidies. While tax benefits and credits can be favorable tools, the primary concern in the global sector revolves around increased limitations and adverse effects on the supply chain. Analysts have primarily focused on financials and regulatory hurdles, yet the offshore wind sector faces supply chain disruptions far larger than anticipated. The main driver of these cost increases is the sector’s current success and heightened attention, which has overwhelmed supply chains ill-equipped for such demand or lacking adequate investments. As noted by the international consultancy giant Wood Mackenzie, global wind turbine order intake in the first half of 2023 surged by 12% year-on-year, reaching an impressive volume of 69.5GW. Most new clients and projects are originating outside of China, demonstrating a year-on-year order demand increase exceeding 47%, totaling more than 25GW. While China remains the largest market with 44GW, North America and Europe are witnessing significant demand and order projections. With global wind turbine orders reaching $25.3 billion in the second quarter of 2023 and $40.5 billion in the first half of the year, the market appears to be approaching a potential breaking point. The increased demand in the United States, driven by the Infrastructure Investment and Jobs Act, has not been matched by sufficient investments in metals, minerals, manufacturing, and installation capabilities. While onshore wind, still the dominant market, boasts relatively straightforward installation, offshore wind, especially floating platforms, is sensitive to supply chain disruptions. A lack of offshore installation vessels and the infrastructure to construct and transport them are causing mounting project delays. As offshore wind orders continue to surge, posting a 26% year-on-year order increase in the first half of 2023, reaching a record-breaking 12GW, the capacity for offshore orders in the second quarter of 2023 surged by 48% year-on-year. Despite these challenges, some positive news emerges, as several major new projects have been announced. Leading wind turbine manufacturers, such as Spanish-German Siemens Gamesa Renewable Energy (SGRE) and its Chinese rival Goldwind, are poised for record-setting order levels. Nevertheless, global offshore wind is sailing into what appears to be a perfect storm. In July, the Swedish renewable energy group Vattenfall made headlines when it decided to halt the development of a major offshore wind project in the UK. Vattenfall cited increased costs and supply chain issues as the primary reasons. Similar to the USA, higher interest rates and inflationary pressures are impacting future projects. Concurrently, the guaranteed electricity prices for produced power are perceived as insufficient to ensure profitability. Major players like Orsted and others have already cautioned the UK government that investor and operator interest in offshore wind is waning due to significantly higher costs and existing caps on electricity prices. This issue is not unique to the USA but is also increasingly affecting Europe. As indicated by Vattenfall in July, the costs for its Norfolk Boreas offshore wind project increased by 50% in 2023, significantly exceeding agreed-upon inflation-linked fixed electricity prices. As mentioned earlier, supply chains are encountering substantial difficulties. The success story of offshore wind, built on the principle of “bigger is better,” is now facing new challenges. The growing demand for larger wind turbines, potentially reaching capacities of 20-25MW, not only places immense pressure on global turbine manufacturers but also necessitates longer blades. These developments are currently hindered by a shortage of installation vessels, harbor infrastructure, and investor confidence. The latter group harbors concerns about the long-term viability of their investments as the offshore wind boom begins to slow. A fierce competition is underway to increase
LNG Market Grows More Mature, But Supply Risks Remain
European gas prices spiked earlier this month as workers at three LNG facilities in Australia threatened industrial action. Strikes were avoided at one of the facilities, but the danger remained for the other two, keeping a floor under gas prices. But over the past year, attempts have been made to put a sort of a ceiling on gas prices in Europe—and more specifically, LNG prices. The effort is beginning to pay off. Until last year, the global LNG market featured long-term contracts indexed to crude oil futures prices, and spot deals. After Russia invaded Ukraine, the EU started shooting sanctions, and pipeline gas flows began to shrink, LNG suddenly became extremely important for Europe. And that prompted a race to lower the pricing risks associated with the state of the LNG market at the time. That race resulted in the launch of the Northwest European LNG futures contract based on the S&P Global NWM, or Northwest Marker. The LNG market matured fast. Traders in an extremely volatile market could hedge European LNG cargos. They could also no longer care so much about pipeline gas and its price when trading LNG. The reason, once again, was the market disruption caused by the Ukraine conflict, chief among them the decimation of gas flows from Russia, especially after the sabotage of the Nord Stream pipeline. A mature market is a lower-risk market, and this is what has been happening to the LNG market over the past year and a half. This, however, has not really reduced the extent of volatility in that market, as evidenced by the effect that news of the potential strikes at Australia’s top three LNG facilities had on LNG prices, especially in Europe. Hedging is important in trade, but when there is a danger of a supply shortage, all bets are off. And there was a danger of a supply shortage equal to a tenth of total global supply—this is how much the North West Shelf, Gorgon, and Wheatstone produce together. Ultimately, supply and demand continue to trump any other factors traders might use to reduce risks inherent in commodity markets. No doubt, it is good to have a liquid market, and now, thanks to the rise of the Dutch benchmark TTF at the expense of the UK’s National Balancing Point, LNG traders have such a liquid market. Trade is more active than ever and easier than ever, even intercontinental trade with Asia. At the same time, however, prices, whatever benchmark they are based on, remain supersensitive to the threat of potential outages. The good news is that perhaps a repeat of last year’s price spikes may be less likely this year or in the future because of the maturing LNG market. On the other hand, tight supply, in case of a cold Northern Hemisphere winter, could push prices significantly higher during peak demand season. The good news, for now, is that Europe’s gas storage is fuller than usual for this time of the year. Thanks to leftover volumes from last year, which were bought at record prices, and it made no sense to resell them at a huge loss, the continent’s storage is now 92.5% full. This could provide a comfortable buffer in case of an outage, especially if the outage does not last very long. Even with this buffer, however, Europe will continue to be a major rival for Asia in LNG cargos as it has been forced to reduce its reliance on pipeline gas. Demand from Asia is already picking up ahead of the winter season. This season will probably be the first big trial for the new, more mature, global LNG market.
OPEC’s Crude Oil Production Rose Slightly In August: Survey
Crude oil production from the OPEC alliance actually climbed in August by 40,000 bpd, according to a new survey published by Bloomberg on Friday. Saudi Arabia’s output may have fallen in August by 170,000 bpd, according to the survey, but Nigeria and Iran’s production increased, largely offsetting Saudi Arabia’s cuts. Overall, the group produced 27.82 million barrels per day in August, the survey said. Analysts largely expect Saudi Arabia to extend its 1 million bpd supply cut into October, even though crude oil prices rose to 2023 highs on Friday, with WTI reaching $85 per barrel. Saudi Arabia’s extra cut began in July. Saudi Arabia produced 8.98 million bpd in August, according to the survey, while Iran boosted production to more than 3 million bpd, and Nigeria’s reached 1.34 million bpd—an increase of 80,000 bpd according to Bloomberg’s survey data, which is based on ship-tracking data, information from officials, and estimates from firms like Kpler and Rystad. Russia said earlier this week that it had reached another deal with OPEC regarding crude oil supply volumes, promising to provide details of the deal next week. Earlier this week, a Reuters survey had estimated that OPEC’s total production rose in August by 220,000 bpd over July figures—the first rise since February. According to that survey, OPEC’s production reached 27.56 million bpd in August. Production for the 10 members that are part of the supply cut agreements fell by 10,000 bpd in August, the Reuters survey said. The OPEC+ group is set to hold a meeting on October 4, although a full ministerial meeting isn’t scheduled until late in November. The production increase for August comes as a group of 37 economists raised their 2023 oil price forecasts for the first time in four months on the notion that the OPEC+ cuts would offset weak economic growth in China.
After solar alliance, India makes case for biofuels grouping to support energy transition: PM Modi
India’s proposal for a global alliance on biofuels among members of the Group of 20 major economies will help accelerate sustainable biofuels deployment in support of the global energy transition, Prime Minister Narendra Modi has said. The biofuels alliance, which the world’s third biggest oil consumer wants to push during its G20 presidency, mirrors the International Solar Alliance (ISA) piloted by New Delhi and Paris in 2015 to bring clean and affordable solar energy within the reach of all. “Such (biofuel) alliances are aimed at creating options for developing countries to advance their energy transitions,” the Prime Minister told PTI in an exclusive interview late last week. “Biofuels are also important from the perspective of a circular economy. Markets, trade, technology, and policy – all aspects of international cooperation are crucial in creating such opportunities,” he said. Biofuel is a renewable source of energy which is derived from biomass. India, which imports over 85 per cent of its crude oil needs, is gradually building capacity to produce fuel from items including crop stubble, plant waste, and municipal solid waste. “Such alternatives can enhance energy security, create opportunities for domestic industry, and create green jobs – all crucial elements in ensuring a transition that leaves no one behind,” Modi said. While India is on schedule to double the mixing of ethanol extracted from sugarcane and agriculture waste to 20 per cent with petrol by 2025, dozens of compressed biogas (CBG) plants are being set up. The alliance is aimed at facilitating cooperation and intensifying the use of sustainable biofuels, including in the transportation sector. Its focus primarily is on strengthening markets, facilitating global biofuels trade, development of concrete policy lesson-sharing, and provision of technical support for national biofuels programs worldwide.