USD 300 million of Indian oil firms stuck in Russia
As much as USD 300 million (about Rs 25 billion) of dividend income belonging to Indian oil firms is stuck in Russia due to tough Western sanctions following Moscow’s invasion of Ukraine, a top official said on Thursday Indian state oil firms have invested USD 5.46 billion in buying stakes in four different assets in Russia. These include a 49.9 per cent stake in the Vankorneft oil and gas field and another 29.9 per cent in the TAAS-Yuryakh Neftegazodobycha fields. They get dividends on profits made by the operating consortium from selling oil and gas produced from the fields. “We had been regularly getting our dividend income from the projects, and they are lying in bank accounts in Russia,” Oil India Ltd chairman and managing director Ranjit Rath told reporters here. Soon after Russia’s invasion of Ukraine in February last year, several major Russian banks were banned from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) financial transaction processing system, constricting Moscow’s ability to access the global payments system. Also, the Russian government has put restrictions on the repatriation of dollars from that country to check volatility in foreign exchange rates. The USD 300 million dividend income pertains to the consortium of OIL, Indian Oil Corporation (IOC) and Bharat PetroResources Ltd. ONGC Videsh Ltd, which also has a stake in the same projects, would have a similar dividend income. This dividend is lying with the Commercial Indo Bank LLC (CIBL), which was a joint venture of the State Bank of India and Canara Bank. Canara Bank in March sold its 40 per cent stake in CIBL to SBI.
India takes lead in clean energy investment: IEA
India is emerging as a global leader in clean energy investment, surpassing spending on fossil fuels, as the country accelerates its transition towards sustainable energy solutions, according to a report released by the International Energy Agency (IEA) on Thursday. Of the projected $2.8 trillion global energy investment for 2023, more than $1.7 trillion is expected to be allocated to clean technologies, including renewables, electric vehicles, nuclear power, grids, storage, low-emission fuels, efficiency improvements, and heat pumps. In contrast, investments in coal, gas, and oil are estimated to amount to slightly over $1 trillion. India’s robust clean energy industry is experiencing remarkable growth, with solar investments taking centre stage. The IEA report emphasizes that solar power is poised to overtake investments in oil production for the first time, underscoring India’s commitment to renewable energy sources. Highlighting India’s achievement in clean energy, IEA executive director Fatih Birol said, “Clean energy is moving fast – faster than many people realise. This is clear in the investment trends, where clean technologies are pulling away from fossil fuels. One shining example is investment in solar, which is set to overtake the amount of investment going into oil production for the first time.” India’s clean energy drive is fuelled by a combination of factors. Strong economic growth, coupled with concerns about energy security in the face of global energy crises, has propelled the country towards cleaner alternatives. Furthermore, India’s proactive policy support, including favourable regulations and incentives, has played a pivotal role in attracting significant investments. The country’s clean energy momentum extends beyond solar power. India has witnessed a substantial surge in electric vehicle (EV) adoption, with sales projected to increase by a third this year following impressive growth in 2022. Additionally, India’s commitment to electrified end-uses is evident in the double-digit annual growth of global heat pump sales since 2021. While India leads the way in clean energy investment, the IEA report highlights the need for global efforts to ensure equitable and widespread clean energy transitions. The majority of the increase in clean energy investments is coming from advanced economies and China, raising concerns about potential divisions in global energy dynamics if other regions do not accelerate their clean energy adoption. Addressing the investment gap, Birol stressed the importance of international collaboration, stating, “Much more needs to be done by the international community, especially to drive investment in lower-income economies, where the private sector has been reluctant to venture.”
India to be green hydrogen hub by 2040: Hardeep Singh Puri
India will become a major green hydrogen hub in all aspects – production, consumption and exports – by 2040, petroleum and natural gas minister Hardeep Singh Puri on Wednesday said at a CII event. “By 2040, India will be a major green hydrogen hub with demand, production, and consumption all in India, including major exporting of green ammonia and others. I am very bullish on these next 15 years,” the oil minister said. The government, in its Budget for FY24, announced Rs 197 billion under production linked incentive (PLI) scheme to promote green hydrogen. “The PLI amount is just a catalyst. There is no dearth of resources. Money is coming in green hydrogen. India will be in the forefront of advancements in green hydrogen and not a follower,” he said. Considering the energy requirement of a growing India, he said that while the exploration and production (E&P) activities will go up exponentially, increased affordability and spending power will make green transition even faster. Puri called on the industry people attending the two-day annual event of the Confederation of Indian Industry (CII) to make their investment decisions based on the forecast that 25% of the global demand in the next 20 years till 2045 will come from India. “This growth will take place, transition to green energy will take place and that is the real story which is unfolding,” he said, adding that while global increase in demand per capita is 1%, growth in India is thrice that much.
Oil Prices Stuck Between Debt Ceiling Uncertainty And More OPEC+ Cuts
Crude oil prices began to trade on Thursday with little change from Wednesday’s close as opposing forces kept them stable. On the one hand, fear of a U.S. debt default is driving bearish sentiment and the respective trade behavior, which is pressuring prices. On the other hand, the Saudi Energy Minister suggested earlier this week OPEC+ might cut more output unless short sellers behave, and that lent oil some upward pressure. “Speculators, like in any market they are there to stay, I keep advising them that they will be ouching, they did ouch in April, I don’t have to show my cards I’m not a poker player… but I would just tell them watch out,” Abdulaziz bin Salman said, as quoted by Reuters. Reuters again noted in a separate report that OPEC+ would now more or less have to announce another production cut at its next meeting, lest it’s seen as making empty threats. In addition to these, the Energy Information Administration reported a massive estimated drawdown in U.S. crude oil inventories plus higher gasoline production and a draw in gasoline inventories, suggesting healthy demand. As a result of all this, Brent crude was trading below $78 per barrel at the time of writing, down slightly from Wednesday’s close, and West Texas Intermediate was trading at just under $74 per barrel, also recording a slight decline from Wednesday’s closing price. “A cautious lid on the risk environment brought by the U.S. debt ceiling uncertainty has also put oil prices on some wait-and-see in the Asia session,” IG analyst Yeap Jun Rong told Reuters. “The outlook for the oil market appears poor for now: macroeconomic drivers like the US debt-deal negotiations and tighter US monetary policy are weighing,” Sean Lim, an oil and gas analyst with Malaysian RHB Investment Bank, told Bloomberg.
Why Total and Africa Oil quit Kenya’s oil project
Two joint partners in Kenya’s quest for oil in Turkana have quit the project, exerting new pressure on the main operator Tullow Oil, which has been unable to take the exercise off the ground after the British oil explorer ran out of cash. Africa Oil says it abandoned the Kenya project, opting to concentrate in regions with high petroleum potential while Total withdrew barely months after it said it was considering other options to monetise its stake. The duo owned a 25 percent stake apiece in blocks 10BB, 13T and 10BA in the South Lokichar Basin, and their exit leaves the cash-strapped Tullow Oil to solely continue with the venture. The twin exits have left Tullow with full ownership of the three blocks at a time when concerns over its viability are mounting. “We have taken the decision to exit our Kenya concessions as our strategy has shifted to focus on production and high potential exploration opportunities, including our Orange Basin portfolio where we are now appraising the exciting Venus discovery, offshore Namibia,” said Africa Oil President and chief executive Keith Hill on Tuesday. TotalEnergies had at the end of last year indicated plans to dispose of its stake, as doubts lingered on Kenya’s ambition to join the league of oil exporting nations. “In Kenya, TotalEnergies holds interests in onshore permits (10BA, 10BB and 13T). On Blocks 10BB and 13T, TotalEnergies is studying the different options to monetise the oil discoveries made,” the firm said in a trading update last December. The two developments are the closest that major stakeholders in Kenya’s oil project have come to question the volume of the country’s oil reserves, which Tullow and Africa Oil discovered in 2012.
Ukraine crisis: Who is buying Russian oil and gas?
India’s oil purchases from Russia have risen sharply, despite efforts by Ukraine and its allies to persuade countries around the world to distance themselves from Russia. Indian Prime Minister Narendra Modi met Ukrainian President Volodymyr Zelensky at the recent G7 summit in Japan, but there was little detail of what was discussed. Western nations have cut Russian oil imports, and want to limit the amount of revenue Moscow earns from selling oil elsewhere. How much Russian oil is going to Asia? India’s imports of Russian oil rose from a very low base at the start of 2022, increasing significantly throughout that year. Russian oil now accounts for nearly 20% of India’s annual crude imports, up from just 2% in 2021, according to Indian state-controlled lender Bank of Baroda. India’s purchases of seaborne crude from Russia have surpassed those by China. But China also gets nearly 800,000 barrels per day via a pipeline from Russia (in addition to imports by sea), although this is currently believed to be at or near full capacity. India started buying up Urals crude selling at a discount after the invasion of Ukraine last February. But in recent months, its oil refiners have also shown increasing interest in Russia’s ESPO blend (East-Siberia Pacific Ocean). China’s seaborne imports of Russian oil did increase in 2022, but then fell back before increasing again in the latter part of the year and early this year. Other countries have also taken advantage of discounted Russian crude. Turkey has bought significantly more, and so has Bulgaria, which has an exemption from the EU ban on Russian oil to allow it to continue to import it by sea. Pakistan has also struck a deal with Russia to purchase discounted oil. But these do not match the quantities imported by India and China. Cheaper oil is driving the flow to Asia Following its invasion of Ukraine, Russia had fewer buyers, as some foreign governments and companies decided to shun its energy exports. At one point last year, Russian Urals crude was more than $30 a barrel cheaper than Brent crude (the global benchmark).
Oil Ministry working on proposal to merge MRPL with HPCL
The oil ministry is drawing up a proposal to merge Mangalore Refinery and Petrochemicals Ltd (MRPL) into Hindustan Petroleum Corp Ltd (HPCL), the two listed subsidiaries of Oil and Natural Gas Corp (ONGC), according to people familiar with the matter. The idea of the MRPL-HPCL merger had been floated soon after ONGC acquired HPCL from the government five years ago but made little progress. The ministry is now pushing for the merger, which is likely to be a share-swap deal, said the people cited above. HPCL will likely issue fresh shares to MRPL shareholders as part of the merger and there will be no cash outgo, they said. HPCL and ONGC are the promoters of MRPL. ONGC holds 71.63% in MRPL, followed by HPCL at 16.96%, with the public holding 11.42%. The transaction will significantly increase ONGC’s stake in HPCL from the current 54.9%, reducing the free float. The oil ministry is likely to seek cabinet’s nod for the HPCL-MRPL merger proposal. The oil ministry, ONGC, HPCL and MRPL declined to comment. The HPCL-MRPL merger may have to wait until next year, a person said, arguing that the regulation requires a gap of at least two years between two mergers that a company undertakes. MRPL concluded the merger of its subsidiary OMPL with itself last year. The merger plan, aimed at consolidating most of the ONGC group’s downstream assets under HPCL, will also likely bring some tax gains. HPCL, which has a vast retail network, sells much more fuel than it produces at its refineries. After the merger, it will have in-house access to MRPL’s products. MRPL doesn’t have much of a domestic sales network and sells a substantial proportion of its products to retailers outside Karnataka, attracting central sales tax (CST). A merger can help cut CST outgo for MRPL, people said. A merger may be cause for concern among MRPL employees as they could be transferred to other refineries of HPCL, said a person familiar with the situation. Soon after ONGC’s Rs 37,000 crore acquisition of HPCL, the oil ministry had advised the former to undertake a three-way merger of HPCL, MRPL and OMPL to consolidate the group’s downstream assets. But with HPCL refusing to recognise ONGC as its promoter for a year, the relationship between the two companies had soured. ONGC resisted the idea of transferring MRPL’s control to HPCL and went ahead with the merger between OMPL and MRPL. Top executives at ONGC and HPCL have changed in the past year and the two companies are now more open to the idea of the merger, said the people cited previously.
Adani Total Gas challenges PNGRB’s authorisation orders for Faridabad-1 GA
Adani Total Gas Limited has filed an appeal with the Appellate Tribunal for Electricity (APTEL) against the ‘impugned’ orders issued by the Petroleum and Natural Gas Regulatory Board (PNGRB) on April 25 and April 26, the company said in a regulatory filing on Tuesday. These orders pertain to the authorisation for the Noida, Faridabad, and Gurugram Geographical Areas (GAs), the company said in a regulatory filing on Tuesday. On April 26, PNGRB allowed IGL to supply gas to one part of the area, while for the remaining area, Adani Total was appointed as the supplier. The company said it has challenged the PNGRB’s decision to award or grant authorisation for the ‘Faridabad-1’ area within the Faridabad District GA. However, it has accepted the authorisation for the Faridabad 2 GA, without any prejudice. “In this regard, we would like to inform that the Company has filed an Appeal against the Impugned Orders dated 25th April 2023 and 26th April 2023 of PNGRB before Hon’ble Appellate Tribunal for Electricity (APTEL), in so far as they relate to the PNGRB’s decision(s) of awarding/granting authorisation for ‘Faridabad-1’ area of Faridabad District GA. The Company has accepted the authorisation of Faridabad 2, without prejudice,” the company said.
OVL gets extension for five projects
ONGC Videsh, the overseas arm of Oil and Natural Gas Corporation, has received an extension for five projects in Myanmar, Bangladesh, Vietnam, South Sudan and Columbia, which would give the firm more time to explore and boost its growth plans, according to people familiar with the matter. Some of the projects for which ONGC Videsh has received an extension have already started production. An extension means an increased probability of making new discoveries in the exploration acreages. ONGC Videsh has stakes in 32 oil and gas projects in 15 countries. In some cases, it is the operator leading the exploration and production efforts for all stakeholders. In Colombia’s CPO-5 block, which ONGC Videsh operates, production has picked up and is expected to soon touch 25,000 barrels per day, a person familiar with the matter said. Similarly, production at its projects in South Sudan has recovered to a large extent after a devastating flood last year. ONGC Videsh has been present in Myanmar, Bangladesh, Vietnam, South Sudan and Columbia for years. In some projects, it has made discoveries and also put them into production while in others, it is looking for a commercially viable find. The massive Mozambique gas project in which ONGC as well as a few other Indian state-run firms are invested has yet to take off due to the security situation in that country. ONGC Videsh has been looking to invest in new oil and gas projects in West Asia, Africa and South America but would prefer fields that are already producing or may do so in the near term. The company doesn’t want to be left with stranded assets when the demand sharply shifts away from fossil fuel to other sources of energy and so is seeking to lower its risks by investing in projects with near-term monetisation opportunities and by partnering with global companies in projects.
Can Turkmenistan Become An Important Gas Supplier For Europe?
In recent months, traditionally isolationist Turkmenistan has begun to make efforts to open up more to the outside world. As a result, intense competition has ensued among key actors, including Russia, China and the United States, for access to Turkmenistan’s transportation routes and energy resources (see EDM, May 11). One consequence of Ashgabat’s opening has been the revival of interest in establishing the Trans-Caspian Pipeline (TCP) to transport Turkmenistani energy to Europe. In late December 2022, Turkish President Recep Tayyip Erdogan announced Ankara’s intentions to begin work on transporting Turkmenistani natural gas to Western markets. At a trilateral summit between Turkey, Turkmenistan and Azerbaijan, all sides agreed to cooperate on developing the necessary infrastructure for supplying Turkmenistan’s gas to Europe, including the development of the proposed TCP with an estimated cost around $5 billion, a proposed length of 300 kilometers and an annual capacity of 30 billion cubic meters (Daily Sabah, December 14, 2022). The pipeline would run from Turkmenbashi to Baku along the bottom of the Caspian Sea and connect to the Southern Gas Corridor (SGC), allowing Turkmenistani gas to flow into Europe (Aktualinfo.org, April 27, 2022). The TCP has been postponed for a number of years due to various problems; nevertheless, its construction could be significant in bringing energy balance to the region. It is no coincidence that Turkish Foreign Minister Mevlüt Çavu?o?lu and US Assistant Secretary of State for South and Central Asian Affairs Donald Lu have expressed optimism about Turkmenistan’s prospects for supplying gas to Europe in recent months (Trend.az, March 16). Previously, at a conference in the United Arab Emirates, Turkmenistani officials had mentioned their country’s plans to build a pipeline through Azerbaijan to Europe. Turkmenistan has also shown an interest in the TCP by participating in various ministerial meetings of the SGC Advisory Council (Minenergy.gov.az, February 29, 2020). The convention on determining the legal status of the Caspian Sea, signed at the fifth summit of the Caspian states in Kazakhstan on August 12, 2018, allows for the construction of underwater gas pipelines by mutual agreement of the states through whose waters the pipeline would run (Azatlyk Radiosy, August 16, 2018). As a result, Turkmenistan and Azerbaijan can proceed with the TCP initiative on their own without any third-party involvement. The signing of a memorandum of understanding between Azerbaijan and Turkmenistan on the joint exploration, development and exploitation of hydrocarbons in the Caspian Sea’s Dostluk Field in 2021 has increased the chances of this pipeline coming to fruition. In truth, the EU has been working for decades to build the TCP as the final piece of the SGC to transport natural gas from the Caspian to Europe. Importantly, the pipeline would bypass Russia and transport Turkmenistani gas without Russian control. The project was even included in a recent list of projects of common interest for the European Commission, underlining its strategic importance (Turkmenportal.com, January 1, 2021). However, the EU’s desire to expand cooperation with Central Asia, particularly through the TCP, is facing severe challenges. European countries are not willing to enter into long-term contracts for gas supplies due to their goal of stopping gas imports altogether in 10 to 15 years (Lenta.ru, November 21, 2022). For over 20 years, finding primary investors for this project has been difficult. Even so, the EU and US have declared their willingness to help attract investment. As a result, US-based company Trans Caspian Resources has shown an interest in funding the project (Sputnik, December 23, 2022). As expectations are high for the potential transit fees that could be gleaned from this project, Azerbaijan, Georgia, and Turkey are actively working toward the realization of the TCP. Additionally, Azerbaijan and the EU have made proposals to Turkmenistan regarding the transportation of its natural gas. However, Baku has declared that, as the TCP is based on Turkmenistan’s resources, Ashgabat should take the lead in making key decisions regarding further development (Newscentralasia.net, November 28, 2022). Nevertheless, Azerbaijani President Ilham Aliyev announced, in November 2022, Baku’s intentions to broaden cooperation with Ashgabat on various energy projects, including within the framework of the Middle Corridor. Another recent impetus for the TCP’s construction is the discussion to create a gas hub in Turkey from where energy resources will be supplied to European markets in greater quantities. Ankara understands the potential benefits of becoming a major transit country, with the goal of attracting natural gas from additional sources, including from Turkmenistan, and acting as an intermediary for deliveries to Western markets (Daily Sabah, December 14, 2022). Until now, Moscow had monopolized the gas transit routes from Turkmenistan, which it had obtained during the Soviet era, to cheaply re-export gas supplies to Europe and impede any efforts to construct alternative routes that might circumvent Russia (Mitsui.com, January 31, 2020). As the EU is now pushing more fervently for the implementation of the TCP project, Russian Foreign Minister Sergei Lavrov has openly criticized this move, suggesting that the issue should be solved among the Caspian littoral states only. Moreover, Iran opposes the project for alleged environmental reasons and has alternatively offered Turkmenistan the use of Iranian infrastructure, neglecting to mention that its poorly developed pipeline network cannot handle large volumes of gas (Radio Free Europe/Radio Liberty, August 15, 2019). At the same time, Turkmenistan significantly relies on Russia for its security. Yet, due to the instability brought on by Russia’s re-invasion of Ukraine in February 2022, which caused Turkmenistan to turn to China as one of its only export destination, Ashgabat realizes the need to diversify its energy partners (Aktualinfo.org, April 27, 2022). Thus, the TCP presents a crucial means by which Turkmenistan could achieve this diversification. Additionally, as of late, Russia has become China’s primary fuel provider, which makes opening westward ever-more attractive to Turkmenistan. Turkmenistan views the TCP project as an exceptional chance to develop its domestic energy industry. As such, it is no surprise that Batyr Amanov, chairman of the Turkmengaz State Concern, highlighted the importance of the SGC in diversifying energy supplies for the