Oil Majors Are Succeeding In Securing More Gas From The Middle East
TotalEnergies, along with Italy’s Eni and the UK’s BP and Shell, have been at the vanguard of securing new oil and gas supplies for Europe to substitute for lost energy supplies from Russia since its invasion of Ukraine in February 2022. The focus of these efforts has been on liquefied natural gas (LNG), as it can be bought and transported quickly and does not require the time- and capital-intensive build out of infrastructure needed to move gas supplies through pipelines. In this sense, LNG was, and remains, the emergency energy of the new global oil market order, as analysed in my new book on the subject. The French oil and gas giant continues to secure such new supplies and to cement the presence of European energy firms in the Middle East, as evidenced again by two key developments in recent days. The first of these is a three-year US$1-1.2 billion LNG supply agreement, beginning this year, made with the Abu Dhabi National Oil Company (ADNOC). ADNOC Gas’s chief executive officer, Ahmed Alebri, accurately summed up the broader significance of the deal, saying that it represented part of a long-term strategic partnership with TotalEnergies. In these wider terms, the seven-emirate UAE (of which Abu Dhabi remains the key energy source), had been earmarked by the U.S. and its allies as a key future energy, economic, and political partner prior to the Russian invasion of Ukraine. This was evidenced by its being the first country to sign a ‘relationship normalisation’ deal with Israel on 13 August 2020. These deals were a key part of the U.S.’s response to the expansion of Chinese and Russian influence in the Middle East after Washington had unilaterally withdrawn from the Joint Comprehensive Plan of Action (JCPOA, or colloquially ‘the nuclear deal’) with Iran in May 2018, as also analysed in my new book. In the aftermath of this withdrawal, Israel had become increasingly sure that Iran was no longer ‘years’ away from being able to create a nuclear weapon but rather just ‘weeks’ away – around three weeks away, to be exact. Those around the then-U.S. President, Donald Trump knew that any escalation by Israel against Iran could be a catalyst for a broader conflict across the entire Middle East. This could eventually draw China and Russia into the conflict, in direct opposition to the U.S., and was a conflict scenario in war planning on all sides that almost inevitably led to global nuclear war. The U.S. intention for the UAE in the relationship normalisation deals plan was for it not just to act as a beacon for other Arab countries to sign such deals but also for it to be used for Washington’s new global oil market model for Middle Eastern countries allied to the West. Firstly, the U.S. would ensure massive investment into such countries by its big oil firms, which would require increased on-the-ground presence of U.S. personnel in them to safeguard the assets. Secondly, the oil and gas from such countries would find a very willing end-buyer for all their energy in India, which was to be used as the substitute big global oil and gas bid to China in this model. India perfectly fitted the requirements in this context, as also analysed in my new book on the new global oil market order. The country’s role as the U.S.’s counterpoint to China in the Asia-Pacific region, led by its economic development and the corollary growth in its demand for oil and gas, was further underlined by data released in the first quarter of 2021 by the International Energy Agency (IEA). This showed that India would make up the biggest share of energy demand growth – at 25 percent – over the next two decades, as it overtook the European Union as the world’s third-biggest energy consumer by 2030. Additionally, around the same time as the U.S. was pushing its new global oil market order strategy, a clash between China and India (on 15 June 2020) in the disputed territory of the Galwan Valley in the Himalayas reflected a much greater change in the core relationship between the two countries than the relatively small number of casualties might have implied. It marked a new push back strategy from India against China’s policy of seeking to increase its economic and military alliances from Asia through the Middle East and into Southern Europe, in line with its multi-layered multi-generational ‘One Belt, One Road’ (OBOR) power-grab project. It seemed to the U.S. that India was ready to pursue more aggressively its own ‘Neighbourhood First’ policy as an alternative to China’s OBOR initiative. The tie-up between Abu Dhabi and India was to provide a showcase for this new U.S. strategy to fightback against growing Chinese and Russian influence in the region. At the time, ADNOC’s chief executive officer, Sultan al-Jaber, stated that he looked forward to exploring partnerships with even more Indian companies across the energy giant’s hydrocarbon value chain. He added that he wanted this to include expanding the commercial scale and scope of India’s vitally-important strategic petroleum reserves (SPR) partnership. This was in line with the crucial position that ADNOC was given in being the only overseas company allowed at that stage to hold and store India’s SPR. Additionally positive for the U.S. plan was that India’s government at that stage approved a proposal that would allow ADNOC to export oil from the SPR if there was no domestic demand for it. These plans came screeching to a halt from the U.S. side when around Christmas 2021 intelligence officers discovered that China had been building its own secret military facility in and around the UAE port of Khalifa. Based on classified satellite imagery and human intelligence data, US officials stated that China has been working to establish ‘a military foothold in the UAE’. At almost exactly the same time, the U.S. also discovered that Saudi Arabia was manufacturing its own ballistic missiles, again with the help of China. In short, China was increasing
Harnesing 10% of coal bed methane reserves can cut India’s energy import bill by $2 billion: Experts
India can cut its energy imports bill by USD 2 billion if the nation harnesses 10 per cent of the coal bed methane reserves of 2,600 billion cubic meters, said experts. This assumes significance in view India’s coal production clocking record high during the last fiscal year and plans afoot to increase it further. The experts believe that the industry’s collective efforts in utilising Coal Bed Methane (CBM) can help the country save over USD 2 billion on imports bill in near future. India has an estimated Coal Bed Methane Reserve of 2600 billion cubic metres, they say. “India touched a record-high growth in coal production of more than 778.19 million tonne, posting record growth in coal production in the year 2022-23. “Plan is to increase the production to over one billion tonne by 2025-26. Therefore, we collectively must tap and utilise Coal Bed Methane which in turn would help reduce emissions and also boost India’s energy security. Even if the industry can tap about 10 per cent of the reserves we can save over $2 billion by cutting on oil imports,” Dr J.S Sharma, Head of International Centre for Climate and Sustainability Action Foundation (ICCSA), told PTI. Sharma said the savings would be more if we are able to tap more CBM reserves. Through ICSSA we have been making attempts in creating awareness about the potential of Methane and have conducted workshops for Oil & Gas, Agriculture & Lives to VK
Iran becomes world’s top oil pipeline developer: report
Based on the report, the Iranian Oil Ministry is also among the world’s top oil pipeline developers. According to new data from Global Energy Monitor, Africa, and West Asia are home to 49 percent of all oil transmission pipelines under construction globally at a cost of $25.3 billion. The 2023 annual survey of data in the Global Oil Infrastructure Tracker shows that these regions together are building 4,400 kilometers (km) of crude oil transmission pipelines at an estimated capital expenditure of $14.4 billion. An additional 10,800 km are proposed in these regions at an estimated cost of $59.8 billion. Globally, there are 9,100 km of oil transmission pipelines under construction and an additional 21,900 km of proposed pipelines. These pipelines in development are estimated to cost $131.9 billion in capital expenditure. The total 31,000 km of oil pipelines in development globally represents an increase of nearly 30 percent from this time last year. The leading five countries in terms of in-development pipelines (proposed and under construction) are Iran, the United States, India, Iraq, and Tanzania. The top five parent companies developing oil pipelines are state-owned enterprises and private companies, including Iran’s Oil Ministry, the China National Petroleum Corporation, Iraq’s Ministry of Oil, India’s Numaligarh Refinery Limited, and France’s TotalEnergies. The longest pipeline projects under construction are the 1,950-km Niger–Benin Oil Pipeline and the Paradip Numaligarh Crude Pipeline (PNCPL) in India, both slated to start operating in 2024. Canada is home to the third-largest pipeline project under construction, the 980-km Trans Mountain Expansion (TMX), expected to start in 2023 as an expansion to the existing Trans Mountain Oil Pipeline.
Mahanagar Gas Ltd. Signs MoU with Baidyanath LNG to scale up LNG Network
Mahanagar Gas Limited (MGL), one of the largest city gas distribution companies in India, and Baidyanath LNG signed a Memorandum of Understanding today to enable the development of LNG station network across various strategic locations. This is expected to fast-track the development of the supply side ecosystem, aiding long haul transport segment to switch to cleaner fuel. Commenting on the association, Ashu Shinghal, Managing Director, Mahanagar Gas Limited said, “We are pleased to enter into this arrangement with BLNG for development of LNG infrastructure across strategic locations. Both parties have their own set of skills and capabilities which can be harnessed to offer seamless solutions to the customers. MGL has always played a constructive role in the development of an environment which can facilitate faster adoption of cleaner fuel.
India’s Russia oil imports jumped tenfold in 2022, bank says
India’s imports of Russian oil rose tenfold last year, according to Indian state-controlled lender Bank of Baroda. The figures show Asia’s third largest economy saved around $5bn (£4bn) as it ramped up crude purchases from Moscow. It comes as Western countries have been cutting their imports of energy from Russia after its invasion of Ukraine. Russia has been selling energy at a discount to countries like China and India, which is the world’s third largest importer of oil. In 2021 Russian oil accounted for just 2% of India’s annual crude imports. That figure now stands at almost 20%, Bank of Baroda said. India’s purchases of oil from Russia during the last financial year, saved it around $89 per tonne of crude, the figures show. Despite pressure from the US and Europe, India has refused to adhere to Western sanctions on Russian imports. New Delhi has also not explicitly condemned Russia’s invasion of Ukraine. India has defended its oil purchases, saying that as a country reliant on energy imports and with millions living in poverty, it was not in a position to pay higher prices. Since the Ukraine war began, Europe had imported six times more energy from Russia than India, the country’s External Affairs Minister S. Jaishankar said in a TV interview last year. “Europe has managed to reduce its imports while doing it in a manner that is comfortable,” he said. Mr Jaishankar added: “If it is a matter of principle why did Europe not cut on the first day?” With no end in sight to the conflict, some analysts expect Russia to continue to offer cheap oil to Asia’s biggest energy importers. “We expect Russian crude intake to remain limited to these two countries [India and China], sustaining the steep discounts,” Vandana Hari, from energy analysis firm Vanda Insights told the BBC. India’s oil refiners will continue to maximise their profit margins for as long as they can, but will simply “go back to their usual crude diet” if the sanctions were to be lifted, she added.
Mubadala, others eye stake in I Squared’s India gas business
Mubadala Investment, sovereign wealth fund of the United Arab Emirates, and a couple of Japanese investors including Sumitomo are in the race to acquire a 30% stake in Indian natural gas distribution business of I Squared Capital. The deal is likely to value the business at $1 billion, multiple people aware of the development said. I Squared, a US private equity firm focused on infrastructure investments, is present in the city gas distribution business in India through Think Gas Distribution and AG&P Pratham. The former also operates over 80 CNG stations. “I Squared will merge Think Gas and AG&P city gas businesses and the investor will pick up stake in the merged entity through a mix of primary and secondary investment,” one of the sources said. The combined platform could fetch a valuation of upwards of $1 billion, the person said. “Talks are on with investors such as Mubadala and a couple of Japanese investors,” he added. Investment bank Barclays is advising I Squared for the stake sale, sources said. Mails sent to I Squared Capital, Mubadala and Sumitomo did not elicit any responses till press time on Thursday. Established by I Squared in 2018, Think Gas operates across 13 districts in India and supplies natural gas to domestic, commercial, industrial and automotive sectors. Headquartered in Delhi NCR, Think Gas serves over 30,000 customers daily, according to company website. AG&P has 12 long-term 25-year exclusive concessions in Rajasthan, Andhra Pradesh, Karnataka, Kerala and Tamil Nadu, while Think Gas has seven licences to operate across 13 districts across Punjab, Madhya Pradesh, Bihar, Uttar Pradesh and Himachal Pradesh. I Squared’s city gas distribution business is the largest such institution-owned platform in the country. Other major city gas distribution businesses include Adani Total Gas and Torrent Gas on the private side and PSU-backed players such as Mahanagar Gas and Indraprastha Gas. Last month, Mubadala picked up a significant stake in I Squared Capital-backed roads infrastructure investment trust (InvIT) Cube Highways for around $300 million. Mubadala’s other investments in India include Tata Power Renewables, Jio Platforms, and Reliance Retail. India’s natural gas demand is growing at a CAGR of 8% and the government is trying to increase access to gas to about 70% of the population by 2025.
Oil Prices Set For The Longest Weekly Losing Streak Since November 2021
Early on Friday, oil prices extended the losses of the previous two days as concerns about the Chinese and U.S. economies continue to weigh on market sentiment, dragging prices down and on track for a fourth consecutive weekly loss. As of early morning trade in Europe, the U.S. benchmark WTI Crude had slumped again to the $70 per barrel mark, and traded at $70.57, down by 0.42% on the day, and down from this week’s high of over $73 a barrel. Brent Crude, the international benchmark, was trading down by 0.53% at $74.62. Both benchmarks were on course to book another weekly loss, despite gains in the first two trading days of this week. A fourth consecutive week of losses would mark the longest weekly losing streak for oil since November 2021. Concerns about the U.S. economy, another build in U.S. inventories, and signs of a patchy economic recovery in China have weighed on the petroleum complex this week, overshadowing signals that the United States could begin buying crude soon to fill the Strategic Petroleum Reserve (SPR). The impasse on raising the U.S. debt ceiling and a subsequent looming debt default have also dragged down prices and sentiment in the oil market. Crude oil prices were also weighed down by the Energy Information Administration (EIA) reporting on Wednesday an inventory build of 3 million barrels for the week to May 5. Later on Wednesday, U.S. inflation data showed a decline in core consumer prices. But the still sticky inflation could mean that the Fed may not start cutting rates in the near term, analysts say. Concerns about oil demand in the near future outweighed signals from U.S. Energy Secretary Jennifer Granholm that the Administration could start repurchasing crude to fill the SPR once the June sale from the SPR is completed.
Low-Quality Crude Sees Mysterious Price Rally
Middle Eastern oil producers are raising the export prices for their lower-grade crudes, Bloomberg reported earlier this week. And European buyers have no choice but to pay up—because the alternative is Russian oil, and they can’t have that. It is a curious case, as noted in another Bloomberg report on the issue, since normally, the lower the crude grade, the lower the price. Light, sweet crudes like WTI or Arab Super Light fetch higher prices from refiners because they are easier to process into fuels. Heavier crudes and crudes with higher sulfur content—sour crudes—are normally cheaper because their refining is a more complicated affair. Yet the refining business doesn’t follow this unshakeable logic. Refineries are calibrated to operate with certain types of oil, and a lot of European refineries were calibrated to operate with Russian Urals—a medium sour grade. Energy Intelligence sounded the alarm as early as last year in an article that noted that European refineries had for decades processed Urals and would have a hard time replacing it with similar crudes. Global markets were amply supplied with light sweet crudes, the report pointed out, but the supply of medium sour ones was tighter. A year later, it still is, according to the Bloomberg reports. And producers are responding the way sellers always respond when demand for their product surges. Iraq has raised the price of its Basrah Medium for European buyers to the highest in a year. Saudi Arabia also raised the price of its Arab Light, which is in fact a medium sour crude. At the same time, in what would probably seem like a cruel move to Europeans, both Iraq and Saudi Arabia kept their prices unchanged for Asian buyers—who, to be fair, normally buy a lot more oil than European refiners, and now they’re also gobbling up Russian barrels, making it unwise for the Iraqis and the Saudis to raise prices to them. In addition to the replacement game that’s going on in international oil, there is also another factor: new refineries are coming on stream in the Middle East, so local consumption of various crudes is on the rise, leaving more limited volumes for export, as Bloomberg noted in a report that said the price changes in medium sour were taking traders by surprise. Some relief for European refiners came from the U.S., whose oil exports to Europe were set to reach a record in March at around 2 million barrels daily, but the fact is that U.S. oil production consists mostly of light, sweet crudes that can’t replace Urals at European refineries. They can’t replace heavy crudes for U.S. refineries, either, hence the United States’ continued dependence on imports of oil even after it became the world’s largest producer of the commodity. This means that the market of medium sour crude grades is set for an extended period of tight supply. Until some producers decide to boost output, but they have little motivation to do it, what with the EU’s and the UK’s plans for phasing out fossil fuel consumption. With such a context for future demand, producers are unlikely to invest in a production boost. This, in turn, means fuels will be more expensive for Europeans, and that would add fuel to already high inflation. A decline in benchmark oil prices would be a welcome respite but only a temporary one. Until refiners depend on imported sour crude from producer countries that make most of their money from their oil exports, they would be made to pay as much as the producers see fit. India and China, meanwhile, have access to discount Russian crude—all grades—and also cheap Middle Eastern crude, benefiting from both Europe’s questionable international policies and from internal competition in OPEC+. The EU might want to hurry up with replacing GDP with something else before the differences between its own GDP and China’s and India’s become too glaring.
Proposed India diesel ban offers limited GHG cuts
A proposed ban by 2027 on four-wheeler diesel vehicles in Indian cities with a population of over 1mn and in highly polluted towns could make limited contribution to cutting greenhouse gas (GHG) emissions. The ban, proposed in a report by the Energy Transition Advisory Committee (Etac) of the Indian oil ministry, will not contribute to cutting emissions significantly given the continuing fall in the share of diesel vehicles in India’s total vehicle sales. The report, whose recommendations the oil ministry are yet to accept it said on 10 May, also recommends several other measures to aid India’s 2070 net zero goal, including boosting the share of electric vehicles (EVs) in the total number of vehicles, as well as a progressive switch to gasoline and biodiesel blending in transport fuels. But the fall in emissions is unlikely to come mainly from switching four-wheeler vehicles to cleaner fuels. Four-wheeler full diesel vehicle sales have been on in falling trend since at least 2014. But sales of four-wheeler full gasoline vehicles almost doubled over the same period. The share of full diesel vehicles in total vehicle sales fell to under 11pc in the April 2022-March 2023 fiscal year from just over 14pc in 2014-15, data from government portal Vahan show. The drop in the share of full diesel vehicles in total four-wheeler sales accelerated after the government deregulated fuel prices in late 2014 and ended subsidies, likely because of a narrowing spread between retail gasoline and diesel prices. Retail gasoline prices were 96.72 rupees/litre in Delhi on 9 May compared with Rs89.62/l for diesel, a difference of Rs7.10/l. Gasoline prices were Rs72.26/l in Delhi on 1 April 2014 compared with Rs55.49/l for diesel, a spread of Rs16.77/l. India also launched a national vehicle scrapping policy in August 2021, aimed at phasing out unfit and polluting vehicles. The policy deregisters privately-owned cars older than 20 years and commercial vehicles older than 15 years. Indian carbon dioxide (CO2) emissions rose to 2.7bn t in 2019, the third-highest in the world, from 900mn t in 2000. But around 1.2bn t of emissions came from the power sector in 2019 compared with only 300mn t from the road. CO2 emissions are lower in diesel engines compared with gasoline-powered vehicles. But diesel engines emit more nitrous oxide and particulate matter, controlling which increases the cost of production and discouraging auto manufacturers.
Delhi HC dismisses govt appeal accusing Reliance of ‘fraud, unjust enrichment of over $1.729 billion’ for siphoning gas
In a set back to the government, the Delhi High Court on Tuesday dismissed its petition accusing Mukesh Ambani-led Reliance Industries (RIL) and its partners of committing an “insidious fraud” and “unjust enrichment of over $1.729 billion” by siphoning gas from deposits they had no right to exploit. Justice Anup Jairam Bhambhani while upholding the international arbitration award of July 24, 2018, that ruled in favour of RIL-led consortium that includes UK-based BP Plc and Niko Resources of Canada said “no interference” is called for. The government had sought setting aside of the arbitration award on the grounds that “the award strikes at the heart of the public policy and has given a premium to a contractor (RIL) that has amassed vast wealth by committing an insidious fraud as well as criminal offence …” “The unjust enrichment amassed by the contractor had already reached more than $1.729 billion today (at the time of filing petition), and is since increasing as the production of migrated gas is still continuing,” it had stated in its petition. Favouring RIL-led consortium in the so-called gas migration dispute case, the three-member tribunal headed by Singapore-based arbitrator Lawrence Boo in its 2:1 award in July 2018 had rejected the government’s contention. It said that the production sharing contract (PSC) doesn’t prohibit the contractor from producing gas—irrespective of its source—as long as the producing wells were located inside the contract area. It also had held that the consortium was not be liable to pay any amount to the government and had also directed the latter to pay $8.3 million as the cost of arbitration to the consortium. The government had raised a demand of $1.47 billion in 2014 upon RIL, the contractor of KG-DWN-98/3 block in the KG basin in the Bay of Bengal, for disgorgement of unjust enrichment made by draining and selling the gas that migrated from adjacent ONGC blocks – Godavari PML and KG-DWN-98/2, which share borders with the RIL’s block. It said that RIL was neither entitled to produce as per the PSC nor had any express permission from the government. In 2014, state-run ONGC approached the Delhi High Court, complaining that gas from its blocks was being produced by RIL. The two companies had appointed US-based consulting agency DeGolyer and MacNaughton (D&M), to examine the issue. D&M said development of the RIL block would be “capable of depleting (original gas in-place) on the Godavari PML block.”