Russia’s Oil Revenues Plunged By 48% In February
Russian tax revenue from crude oil and petroleum products plummeted by 48% in February from a year earlier due to the much lower price of Russia’s flagship crude grade after the EU banned imports of Russian oil, according to Bloomberg estimates based on official Russian data. Total tax revenues from oil and natural gas dipped by 46% year over year to $6.9 billion (521 billion Russian rubles) in February, per data from the Russian Finance Ministry published on Friday. Russia’s revenues from crude oil and oil products alone crumbled by 48% annually to $4.8 billion (361 billion rubles), according to Bloomberg’s calculations. Oil accounted for more than two-thirds of Russia’s energy tax revenue in February. Russian natural gas revenues also plummeted last month compared to February 2022, when Russia invaded Ukraine. Natural gas revenues slumped by 42% as Russia cut off gas supplies to a number of EU customers after the invasion. The plunge in the price of the flagship Russian crude grade, Urals, was the key reason for the lower revenues for the country for both January and February this year. Russia’s budget was $23.3 billion (1.76 trillion rubles) into deficit in January, compared to a surplus for January 2022, as state revenues from oil and gas plunged by 46.4% due to the low price of Urals and lower natural gas exports, the Russian Finance Ministry said last month. Russia’s budget revenues from oil and gas plunged in January by 46% compared to the same month last year due to the sanctions on Russian oil exports, which led to a slump in the price of Russia’s flagship crude grade. The average price of the Urals blend stood at $49.52 per barrel in January and February 2023, compared to $88.89 per barrel for the same months last year, the Russian Finance Ministry said earlier this week. The price of Urals averaged $49.56 a barrel in February 2023, or 1.86 times lower than the average price in February 2022 – $92.15 per barrel.
Each country to make own decision: US official on India buying Russian oil
The United States has said that “each country is going to make its own decision” when asked about India’s ties with Russia and purchase of oil from Russia. US Department of State Principal Deputy Spokesperson Vedant Patel said in an exclusive interview with ANI that, “Our understanding is that of course each country is going to make their own decisions. But the one thing that we’ve been clear about on Russia and specifically Russian energy sales is…why we’ve been such a big advocate for the oil price cap. Because what the price cap does is that it keeps oil and energy flowing onto the market and making sure that supply meets demands. But it also ensures that Russia doesn’t get a windfall of profits to fund its war machine. We’ve never intended for anybody to try and keep energy off of the market.” Asked about India’s stance on recent international events including the Ukraine conflict, Vedant Patel said that New Delhi has taken on an incredible role and they have an “ambitious agenda” for their G20 Presidency. He further said that Prime Minister Narendra Modi and External Affairs Minister S Jaishankar have been clear that “this is not the time of war” and a resolution needs to be made based on the United Nations charter. I think India has taken on an incredibly important role. You have to remember that one of the key things about this year 2023 is that India has the G20 Presidency and they have a very ambitious agenda for their G20 Presidency, one that the United States is ready to partner with them on. And as it relates to Ukraine, you have seen Prime Minister Modi and External Affairs Minister Jaishankar be very clear about how this is not the time for war and that a resolution needs to come one that is consistent with the UN charter. These are all values that we share also,” Patel said. During his meeting with Russian President Vladimir Putin in Samarkand last year, PM Narendra Modi said, “today’s era is not of war.” Since the beginning of the war between Russia and Ukraine in February last year, India has insisted on resolving the dispute through dialogue and diplomacy.
India’s oil buy from Russia surges, now more than one-third of total imports
India’s imports of crude oil from Russia soared to a record 1.6 million barrels per day in February and is now higher than combined imports from traditional suppliers Iraq and Saudi Arabia. Russia continued to be the single largest supplier of crude oil, which is converted into petrol and diesel at refineries, for a fifth straight month by supplying more than one-third of all oil India imported, according to energy cargo tracker Vortexa. Refiners continue to snap up plentiful Russian cargoes available at a discount to other grades. From a market share of less than 1 per cent in India’s import basket before the start of the Russia-Ukraine conflict in February 2022, Russia’s share of India’s imports rose to 1.62 million barrels per day in February, taking a 35 per cent share. India, the world’s third-largest crude importer after China and the United States, has been snapping Russian oil that was available at a discount after some in the West shunned it as a means of punishing Moscow for its invasion of Ukraine. The rise in Russian imports have been at the expense of Saudi Arabia and United States. Oil import from Saudi fell 16 per cent month-on-month and that from the US declined 38 per cent. According to Vortexa, Russia now accounts for more than the combined oil bought from Iraq and Saudi Arabia — India’s mainstay oil suppliers for decades.
India raises crude oil windfall tax, cuts diesel export tax
India raised its windfall tax on crude oil marginally while cutting the tax on exports of diesel, according to a government notification on Saturday. The windfall tax on crude was raised to 4,400 rupees ($53.87) per tonne from 4,350 rupees, effective immediately 4, while the tax on diesel export was cut to 0.5 rupees per litre from 1.5 rupees a litre. The government said it scrapped a windfall tax of 1.5 rupees a litre on aviation turbine fuel. The government imposed the taxes on crude and export of petroleum products in July to raise additional revenue from a sudden rise in profits of oil companies as global crude prices surged on Russia’s invasion of Ukraine, aiming to partly meet higher food and fertiliser subsidies. The tax is revised every fortnight, based on the international crude oil prices. The government expects to raise nearly 250 billion rupees ($3.1 billion) from the tax in the financial year through this month, and about 3.20 trillion rupees from factory gate duties on petroleum products. Industrial chambers including Federation of Indian Chambers of Commerce and Industry and some oil companies have asked the government to scrap the windfall profit tax on local crude oil producers, saying it was hitting investments in the sector.
Putin’s Energy Gamble Backfires As Germany Secures Long-Term Gas Supplies
Germany’s reliance on cheap and plentiful supplies of Russian gas was one of three key factors that led President Vladimir Putin to believe that Russia could invade Ukraine and get away with it. A second factor was the Russian president’s belief that the NATO security alliance would use the same ‘Macbeth Response’ (‘full of sound and fury, signifying nothing’) to Russia’s invasion of Ukraine as it did to Russia’s invasion of Georgia in 2008 and to Russia’s invasion of Crimea in 2014. A third factor was that Putin thought that Russia would be in control of Ukraine within three days of the invasion of 24 February 2022 due to its cutting-edge military capabilities and the broadly welcoming embrace of Ukraine’s inhabitants. As it became clear that he had grossly miscalculated factors two and three, Putin still held on to the belief that Germany’s resolve, and in turn Europe’s and NATO’s, to not allow Russia to get away with its Ukraine adventure might crumble – he still partly does, according to sources in the European Union’s (EU) energy security apparatus exclusively spoken to by OilPrice.com. However, given a slew of new gas supply deals into Germany secured for the long-term, Putin’s hope looks increasingly ill-founded. There was every reason for Putin to be optimistic that Germany would do little to deter Russia from occupying Ukraine even as late as the day before the invasion. In broad terms, Germany’s economic might, which made it the de facto leader of the European Union of 27 member states, had been established on two foundation stones. The first was the replacement on 1 January 1999 of the mighty deutschmark with the feeble euro, which immediately made Germany’s exports much more competitive and led to the export-fuelled economic growth explosion of the following years. The second was the import of as much cheap gas from Russia as Germany needed to power the manufacturing boom that fuelled this export explosion. By the beginning of 2022, Germany was reliant on Russian gas for around 30-40 percent of its own commercial and domestic gas needs, depending on the time of year, and for about 30 percent of its total oil imports as well. This dependence had been planned by Germany to increase, with the completion in September 2021 of the Nord Stream 2 gas pipeline running from Russia to Germany. Additionally encouraging for Putin was that Germany, along with Putin’s other perceived weak link in Europe – France – had also been instrumental in formulating the ‘Minsk 2’ agreement in February 2015. This agreement, among other contiguous policies aimed at appeasing Putin, enshrined the idea of autonomy for the Russian separatist-held regions of Donetsk and Luhansk within the Ukraine constitution. Germany had also been the most vociferous opponent to the U.S. in its reimposition of sanctions on Iran after Washington’s unilateral withdrawal from the Joint Comprehensive Plan of Action (colloquially, ‘the nuclear deal’) in May 2018. Germany’s then-Foreign Minister, Sigmar Gabriel, had warned: ‘We also have to tell the Americans that their behaviour on the Iran issue will drive us Europeans into a common position with Russia and China against the USA.’ Shortly after that, Germany was a key mover in the EU’s introduction of a special purpose vehicle – the ‘Instrument in Support of Trade Exchanges’ – that would act as a clearing house for payments made between Iran and EU companies. If Russia had been able to effect such a victory within a week in Ukraine, or had even managed just to secure the capital, Kiev, within that timeframe, then it is highly likely that events would have run the same course as they had in Russia’s effective invasion of Crimea in 2014. However, within the first week of the invasion, it had become clear that not only was there no support by Ukrainians for the Russian presence in their country but also that the Russian military of 2022 was not of the calibre that had been expected. It appeared to many that the endemic corruption that had grown into the fabric of the new Russia since the dissolution of the USSR in 1991 had also made rotten its fighting machine. In essence, the Russian forces that had been designated to take Kiev quickly had broken down along the key road that would have led them into the capital, stranded by poor quality machinery, dismal logistical planning, and a paralysed command structure. It was obvious to Europe that if Russia had invaded one of the NATO countries – with their air capabilities – then this entire invasion convoy, stretching for over 40 miles, would have been destroyed within two or three hours. It was also obvious to the West that if Ukraine could hold the Russians off with the limited resources it had, then this might be an excellent opportunity to engage Putin in a proxy conflict, albeit delicately done, given Russia’s usable nuclear threat. The U.S. knew at that point that it was essential to organise new gas supplies into Europe as a whole and into Germany in particular as soon as possible, otherwise this moment of realisation in Europe of Russia’s frailty would be lost a catalysing moment of geopolitical change across the continent. Immediately, moves were made to move more U.S. liquefied natural gas (LNG) to Europe but, in tandem with this, the U.S. brought pressure to bear on other leading global suppliers of LNG (which can be supplied much quicker and easier than pipelined gas) to make supplies available to Germany. A very early example of this was Qatar, which in May 2022 signed a declaration of intent on energy cooperation with Germany aimed at becoming its key supplier of LNG. These plans would run in parallel with, but were likely to be finished significantly sooner than, the plans for Qatar to also make available to Germany sizeable supplies of LNG from the Golden Pass terminal on the Gulf Coast of Texas. The U.S.’s ExxonMobil holds a 30 percent stake in the
Banish those thoughts of LPG subsidy ending in the near term
In the Union Budget for 2023-24, finance minister Nirmala Sitharaman has kept the budget estimate (BE) for petroleum subsidy – primarily subsidy on liquefied petroleum gas (LPG) for household consumption – for 2023-24 at a mere Rs 22.57 billion. The subsidy on the purchase of a product is a financial assistance given by the state to persons who cannot afford to pay the market-based or cost-plus price. Subsidy on LPG is the excess of its cost of supply over the price paid by the beneficiary. The cost of supply is refinery-gate price, freight, marketing costs, marketing margin, dealers’ commission and taxes and duties. At present, 96 million poor households who have been provided free gas connection under the Pradhan Mantri Ujjwala Yojana (PMUY) during the last eight years or so are eligible to receive subsidy at the rate of Rs 200 per cylinder (14.2 kg) for 12 fills. The three major oil marketing PSUs – Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL) – deliver the LPG cylinder to eligible beneficiaries at full cost-based price and follow it up by depositing subsidy in their account and claim reimbursement from the government of India (GoI). Small Outlay With the subsidy at Rs 200 per cylinder, the annual outgo on 12 fills in a year per beneficiary comes to Rs 2,400. For 96 million PMUY beneficiaries, the subsidy requirement will be Rs 230/40 billion. It may well be, the fills taken by the beneficiary are less; for instance, beneficiaries took four fills on an average during 2021-22. Even on this basis, the subsidy requirement would be Rs 76.80 billion annually. Against this, the Budget for 2023-24 has provided only Rs 22.57 billion. In June 2020, the LPG subsidy was stopped. That was due to the fortuitous circumstance of a steep decline in international prices (due to the COVID-19 pandemic) leading to a fall in price to Rs 600 a cylinder even on a cost-plus basis; hence subsidy support wasn’t required. The expenditure of Rs 360 billion under this head during 2020-21 was used largely to clear past dues of oil PSUs and provide free gas connections under PMUY. (Source: Moneycontrol) Congress promises LPG below Rs 500 March 3, 2023: Rahul Gandhi on Wednesday said the Narendra Modi government had slashed subsidies for essential items like cooking gas — whose price has been raised again — but had handed over precious national assets to his friends. The Congress announced that it would provide LPG cylinders for less than Rs 500 if it came to power at the Centre. On a day the government raised the price of domestic cooking gas cylinders by Rs 50 and commercial cylinders by Rs 350, Rahul tweeted in Hindi: “Price of an LPG cylinder in 2014 during Congress rule was Rs 410 and the subsidy given was Rs 827. Under the BJP in 2023 the price is Rs 1,103 and the subsidy given is 0. In Congress Kaal, the subsidy gave relief to the people, while in Mitr Kaal people’s pockets are being picked and the nation’s assets have been handed to the ‘friend’ as a gift.” Congress president Mallikarjun Kharge also attacked the Modi government for the crushing pre-Holi blow to the poor and asked for how long this firman (edict) of loot would continue. Party spokesperson Gourav Vallabh said: “The Congress governments in Himachal Pradesh and Rajasthan have started providing LPG cylinders for Rs 500. We will replicate this scheme at the national level. The cooking gas cylinder will not cost more than Rs 500 if the Congress comes to power in 2024.” Alleging that Modi’s governance doctrine rested on crony capitalism, Vallabh said: “Milk price increased by Rs 8 a litre in 2022. Atta costs 40 per cent more in one year, vegetables are already out of reach of the poor. Clothes and other edible items are also costlier. Unemployment is at its peak…. If you ask uncomfortable questions, the Enforcement Directorate, CBI, income tax department and the police will chase you.” Vallabh pointed to the latest GDP growth rate of 4.4 per cent and said: “No growth, no jobs, essential items are being unaffordable, but we are told it is Amrit Kaal and have to thank Modi ji for this.” Vallabh said the government had confessed that the GDP growth had slowed because manufacturing had registered negative growth and private consumption had decreased. He said private consumption was down because people didn’t have money in hand.
India’s NSE to launch WTI crude, natural gas futures
India’s National Stock Exchange (NSE) is set to launch rupee-denominated Nymex WTI crude oil and Henry Hub natural gas futures contracts in its commodity derivatives segment, it said on 1 March. The exchange has received approval from the Securities and Exchange Board of India and will announce the date of the launch soon, it added. NSE had earlier signed a data licensing agreement with US-based exchange CME, allowing the bourse to list, trade, and settle rupee-denominated Nymex WTI crude oil and Henry Hub natural gas derivative contracts on its platform. The specification of the products are likely to be released with the launch. These contracts are designed to provide market participants with a more efficient way to manage their price risk, the NSE said. The contracts are set to expand the bourse’s product offerings in the energy basket as it already has futures contracts for Brent crude oil, copper, gold, silver, and degummed soy oil. But India’s Multi Commodity Exchange is the leading platform for oil, natural gas, bullion and metals trades, having the highest volumes. The National Commodity and Derivatives Exchange, on the other hand, has the leading market share in agricultural commodity trades in the country. NSE is the largest stock exchange in India in terms of daily turnover for equity shares.
Russia Is Intent On Defending Its Oil Market Share In India
Russia has become the single biggest crude supplier to India over the past year as the world’s third-largest oil importer snaps up discounted Russian oil banned in the West. Russia has been redirecting most of its crude oil exports to China and India since the EU and the G7 announced plans to embargo seaborne oil imports from Russia and set a price cap on the crude if it is to be shipped to third countries using Western tankers and insurers. China’s reopening is set to lead to a jump in oil demand in the world’s top crude oil importer, where Russia has always competed with its OPEC+ ally Saudi Arabia. But Moscow isn’t giving up the Indian market, either, where it has turned from a negligible supplier a year ago to the single biggest oil supplier now. China and India aren’t abiding by the G7 price cap-they seek opportunistic purchases of cheap crude. The West believes that the price cap is benefiting the two large Asian oil importers with bargaining power to negotiate steep discounts from Russia, with traders covering shipping costs. The U.S. and the EU consider the increased leverage of China and India in driving a hard bargain for Russian oil as a success of the price cap policy. In February, India’s imports from Russia continued to rise-to an estimated 1.85 million bpd, close to the potential maximum of 2 million bpd, according to Kpler data cited by Bloomberg. Russia is intent on keeping the Indian market because it is more lucrative, gives sellers more control, and the shipping times from Russia’s Western ports are shorter than to China, Viktor Katona, lead crude analyst at Kpler, told Bloomberg. Before the Russian invasion of Ukraine, India was a small marginal buyer of Russian crude oil. After Western buyers started shunning crude from Russia, India became a top destination for Russian oil exports alongside China. Even after the G7 price cap took effect in early December, India continued to buy large volumes of discounted Russian crude and started importing some of Russia’s Arctic crude oil varieties for the first time, taking advantage of cheap Russian cargoes to meet robust demand. India’s fuel consumption is expected to rise by 4.7% in the next fiscal year between April 2023 and March 2024, government estimates showed last month. India will buy the oil it consumes from “wherever we have to” if the economics are beneficial for the country, Indian Oil Minister Hardeep Singh Puri told CNBC last month. “Today we feel confident that we’ll be able to use our market to source from wherever we have to, from wherever we get beneficial terms,” the minister said. The U.S. has said it would not sanction India for buying Russian crude. In fact, India’s imports of cheap Russian oil fit the West’s goal to punish Putin by reducing his oil revenues – a key budget revenue stream – and at the same time keep Russian oil flowing to prevent price spikes. “Our experts assess that India right now is enjoying the discount of about USD 15 a barrel in the price that it is paying for its imports of Russian crude,” U.S. Assistant Secretary of State for Energy Resources, Geoffrey Pyatt, told PTI in an interview while on a visit to India last month. “So by acting in its own interest, by driving a hard bargain to get the lowest price possible, India is furthering the policy of our G7 coalition, our G7 plus partners in seeking to reduce Russian revenues.” Also in February, Philipp Ackermann, Germany’s Ambassador to India, told local news outlet ANI, “I have made it clear time and again that India buying oil from Russia is none of our business basically that’s something that the Indian government decides and if you get it at a very low price, you know I cannot blame India for buying it.”
Canada’s Oil And Gas Industry Expects Upstream Investment To Surge This Year
The Canadian oil and gas industry could see investments topping pre-pandemic levels at some C$40 billion, or $29.36 billion, the Canadian Association of Petroleum Producers said. The sum also represents an 11% increase over 2022 investment levels, equal to C$4 billion. “The year 2023 may be one of the most pivotal moments in time for Canada’s oil and natural gas industry. With an emerging liquefied natural gas export industry, the expected completion of the Trans Mountain pipeline expansion, and billions of dollars in emissions reduction investments waiting to be unlocked, Canada is positioned to play a much larger role in providing responsibly produced energy resources to the world,” CAPP president and chief executive Lisa Baiton said. Canada’s oil and gas industry has been plagued by problems such as excessive red tape and the tightening government grip around emissions from oil and gas production. Yet demand for both oil and gas globally has helped it tackle these and, as suggested by the expected investment, will cause the industry to grow. Alberta, Canada’s top oil-producing province, recently announced plans to expand its reach into new markets by building what it calls economic corridors to the coasts of Canada and Alaska as a way of circumventing regulatory restrictions on new pipelines. Meanwhile, the country’s largest natural gas producer, Tourmaline Oil Corp., is sending its natural gas to the U.S. Gulf Coast, where it gets liquefied and sent to international markets. That’s because there are still zero LNG facilities in Canada and the only one that authorities have approved is currently under construction. The government, meanwhile, has signaled it does not share CAPP’s belief that Canada has a future as an LNG exporter. According to CAPP, the industry is also investing in emission reduction, not without a solid push from the federal government. Last year, Canadian oil and gas producers spent C$1.4 billion on research and development in that area and by 2025 the annual investment is seen rising to over C$2 billion.
State Department Says India Is Buying Russian Crude Below Price Cap
India is buying Russian crude oil at a deep discount to a price cap set by the G7 and the European Union, State Department officials told U.S. media this week. The topic of Russian oil imports is under constant discussion between Washington and New Delhi, the officials said, according to Bloomberg, but for now the former is happy that the latter is buying Russian crude at below $60 per barrel. Russia became India’s largest single supplier of crude oil last year as the Western sanction barrage against Moscow prompted the latter to find new markets. Ever since the G7 and the EU decided to try and squeeze Russian oil exports in a bid to reduce revenues India and China have become the biggest buyers of discounted Russian crude. The two heavily import-dependent countries aren’t abiding by the G7 price cap—they seek opportunistic purchases of cheap crude. The West believes that the price cap is benefiting the two large Asian oil importers with bargaining power to negotiate steep discounts from Russia, with traders covering shipping costs. The U.S. and the EU consider the increased leverage of China and India in driving a hard bargain for Russian oil as a success of the price cap policy. However, recent research has suggested that Russia is actually selling its crude at prices above the cap set by the G7 and the EU. Bloomberg reported last month that in the first month after the embargo, Russian oil sold abroad for an average of $74 per barrel, according to calculations made by academics from the Institute of International Finance, Columbia University, and the University of California. India’s imports of Russian crude hit a record in January, at 1.4 million bpd, only to break it next month, when imports rose to 1.85 million bpd, according to tanker tracking data.