Vedanta invites bids for natural gas from its Rajasthan block
Vedanta has invited bids for natural gas from its Rajasthan block at a floor price of $9.57 per mmBtu. Vedanta plans to sell 3 million metric standard cubic meters a day (mmscmd) of gas in an auction slated for January 18, according to the e-auction document. The supply will be offered for a year beginning April 1 from Raageshwari gas terminal at Barmer, Rajasthan. The floor price will be one dollar above the domestic formula price, which is revised every six months and is currently at $8.57 per mmBtu. The sale price will be the lower of Platts LNG West Indiamarker or 15.25% of the average Brent price plus a premium that bidders would quote. At the current Brent price of $82 per barrel and zero premium, the sale price would be $12.5 per mmBtu. Vedanta enjoys pricing freedom for the gas it produces from its Rajasthan block. Most producing fields in the country don’t have pricing freedom and their gas is sold at the domestic formula price. Gas from difficult fields can be sold at market rates subject to a ceiling, which is currently at $12.46 per mmBtu.
Russia Is Prioritizing Gas Exploration In The East To Supply Asian Partners
Russia plans to ramp up geological prospecting and exploration of hydrocarbons – gas in particular – in the country’s east as it looks to increase supplies of gas to Asian partners, Russian Natural Resources and Environment Minister Alexander Kozlov has revealed in an interview. “We have set a priority for ourselves in geological prospecting and exploration and in aiding the search for mineral resources, particularly hydrocarbons, to be geographically closer to future consumers and transport infrastructure. For example, the Power of Siberia pipeline, gas from which goes to China. We have made the decision to carry out geological exploration throughout Yakutia and to do everything to [understand the production potential] in relation to hydrocarbons, particularly with gas, to be known. So that there’s not one, but more pipelines going in the eastern direction. Because this is guaranteed revenue for our country, guaranteed sales to a major partner,” Kozlov said. Last week, Russian President Vladimir Putin inaugurated the Kovykta natural gas field in eastern Siberia, located strategically to allow Russia to increase gas exports to China amid growing tensions between Moscow and the West. The inauguration is the culmination of efforts that began about a decade ago to develop new fields and build the Power of Siberia pipeline to deliver to the rapidly expanding market. “We are launching the unique Kovykta gas field, the largest in eastern Siberia. Its recoverable reserves are 1.8 trillion cubic meters of gas,” Putin said via video link during a televised ceremony. Currently, Russia lacks pipelines to transport gas from its Western Siberian and Arctic gas fields that serve China and Europe. The first Power of Siberia pipeline began to deliver gas from eastern Siberia to China at the end of 2019. It won’t be the last. Moscow has laid out plans to build a Power of Siberia 2 pipeline as Russia increasingly turns to the Middle Kingdom in the face of heavy western sanctions. China and India have become some of the biggest buyers of Russian oil and gas, with Bloomberg’s oil strategist Julian Lee revealing that Russia’s flagship Urals crude oil has been trading at a massive discount of more than per barrel $30, or about 40% to the international Brent crude oil.
Putin Bans Oil Sales To Countries That Comply With G7 Oil Price Cap
Having promised that it would reveal its response to the recently implemented by the G7 price cap on Russian oil exports, moments ago the Kremlin did not disappoint, and as the WSJ reports, Russian President Vladimir Putin banned the supply of Russian oil and oil products to countries that impose a price cap, allowing deliveries to those nations only on the basis of a special permission from the Kremlin leader. According to the decree, the retaliatory measures are scheduled to come into effect Feb. 1 and last through July 1, 2023. Russia’s actions are a response to what the decree described as unfriendly actions of the U.S., foreign states and international organizations that contradict international law, and are designed “to protect the national interests of the Russian Federation,” the decree said. The European Union and the U.K. earlier this month banned the import of seaborne Russian crude, while the Group of Seven nations put a ceiling on other sales by barring Western companies from insuring, financing or shipping Russian crude at above $60 a barrel. And now, Russia has flipped the story on its head, saying the not only will it not sell below $60, but it has banned the sale outright to all countries that engaged in this most glaring virtue-signaling exercise, one which paradoxically was not meant to punish Putin but to keep Russian oil flowing. While the price cap has not seen a major impact on pricing so far, that will likely change soon: As shown below, Urals oil is trading with a generous discount to spot Brent, and was last seen around $50. In other words, those nations buying Urals – mostly China and India – are not violating the G-7 pact… yet. However, once Urals follows Brent higher, and its price rises above $60/barrel that will change, and at that point it will be interesting to see how the G7 responds to the two fastest growing economies and two most populous nations openly defying the G7’s Russian oil price floor. The news, which was largely as expected, has not had an impact on the price of oil with WTI and Brent both trading at three week highs following news that China was ending zero-covid policies and reopening its economy. As for the US stepping in a providing emergency cover to nations who may be caught in the crossfire, sorry – Joe already drained a third of the SPR to get Democrats reelected.
China poised to remain LNG demand centre
China’s imports of LNG may gain momentum with the signing of new sales and purchase agreements (SPAs) due to start in 2023, alongside new infrastructure coming on line the same year. This is despite a tumultuous year for the country as it battled repeated Covid-19 resurgences, which capped demand for LNG. But some Covid-19 controls in the country are gradually being relaxed, raising hopes that downstream demand in China could soon rebound, although the full extent of this potential rebound is unclear, market participants said. China is expected to lose its crown to Japan as the top LNG importer in 2022. Japan’s LNG imports totalled 49.2 million ton between January-August 2022. In comparison, China imported 40.9 million ton and South Korea imported 29.9 million ton over the same period. China, previously the top importer, imported a total of 79.3 million ton in 2021 when it overtook Japan for the very first time, by 5 million ton. High and volatile prices have dampened Chinese demand for spot LNG, with the country turning to lower-priced pipeline gas imports and domestically produced gas instead, as well as alternatives such as coal, LPG and other fuels. Continued Covid-19-related lockdowns in China have also kept gas demand suppressed because of a slump in industrial demand. The number of tenders that China issued in 2022 has also dwindled. The country has issued less than five tenders so far in 2022, far fewer than India, which has issued an average of about four tenders each month up to November 2022. This is significant as India has similarly been hit with weaker gas demand as a result of high spot prices.
India plans $2 billion incentive for green hydrogen industry, says report
India is planning a $2 billion incentive programme for the green hydrogen industry, three sources told Reuters, in a bid to cut emissions and become a major export player in the field. The 180-billion-rupee ($2.2 billion) incentive aims to reduce the production cost of green hydrogen by a fifth over the next five years, said a senior government official and an industry manager working in renewable energy. It would do this in part by increasing the scale of the industry, they said. The current cost in India is 300 rupees to 400 rupees per kg, said the manager. The United States and the European Union have already approved incentives worth billions of dollars for green hydrogen projects. Hydrogen can be used as a fuel. It is made by splitting water with an electrical process, electrolysis. If the devices that do that, electrolysers, are powered by renewable energy, the product is called green hydrogen, a fuel free of greenhouse emissions. The Indian aid could be announced in the Feb. 1 budget for the fiscal year beginning April 1, said the government official. All sources declined to be named discussing a budget proposal. The ministries of renewable energy and finance did not respond to queries sent by Reuters. Indian companies such as Reliance Industries, Indian Oil, NTPC, Adani Enterprises, JSW Energy and Acme Solar have big plans on green hydrogen. Adani, led by the world’s third-richest person, Gautam Adani, said in June that it and France’s TotalEnergies would jointly create the “world’s largest green hydrogen ecosystem”. Green ammonia, too The Indian government expects industry to invest 8 trillion rupees in green hydrogen and its derivative green ammonia by 2030, said the industry manager and another government official. Green ammonia is made by combining nitrogen with hydrogen using renewable energy sources; it can be used by the fertiliser industry or as a fuel or convenient means of transporting hydrogen. The green hydrogen proposal is likely to be called “Strategic Intervention for Green Hydrogen Transition (SIGHT)” and will be split into 45 billion rupees for electrolyser manufacturing for five years and the 135 billion rupees for green hydrogen and green ammonia production for three years, the manager and second official said. The incentive for making green hydrogen is likely to be 50 rupees per kg for three years, they said. India aims to sell 70% of the production to countries such as South Korea, Japan and in the European Union, an industry official said, adding that derivatives, including green ammonia, had an equally strong demand. The government is estimating global demand for green hydrogen will exceed 100 million tonnes by 2030, from just under 75 million tonnes now, according to other industry sources. In February the government announced plans for India to make 5 million tonnes of green hydrogen annually by 2030, a figure that the first government official said could be doubled, depending on international demand. The government also plans for the country to achieve electrolyser manufacturing capacity of 15 gigawatts in phases by 2030. That would be almost 10 times current global capacity. U.S.-based Ohmium International has commissioned India’s first green-hydrogen factory in Bengaluru. Reliance Industries, Larsen & Toubro, Greenko and H2e Power last year announced plans to build gigawatt-scale factories. Indian oil refineries and fertiliser and steel plants annually use 5 million tonnes of hydrogen made from natural gas, called grey hydrogen. The process produces carbon dioxide. Higher gas prices have pushed the Indian grey hydrogen price to around 200 rupees per kg from 130 rupees a year ago.
WTI Oil Jumps Above $80 As China Scraps Covid Restrictions
The U.S. benchmark oil price rose on Monday evening and early on Tuesday to above $80 per barrel after China announced on Monday a major easing of its Covid travel quarantine rules and after Winter Storm Elliott knocked offline around 1.5 million bpd of refinery capacity in the U.S. Gulf Coast. As of early morning trade in Europe on Tuesday, WTI Crude was up by 0.80% at $80.19. The international benchmark, Brent Crude, was trading up by 0.85% on the day, at $84.63 per barrel. Oil prices received a major boost late on Monday and early Tuesday after China said that as of January 8 inbound travelers to China would no longer be subject to mandatory travel quarantine. China is seeing a surge in Covid cases after abandoning other parts of its so-called “zero Covid” policy that was in place for more than two and a half years. Despite the soaring number of infections and disruption to industries and supply chains, oil demand could be set for a major boost in the world’s top crude oil importer after the initial Covid waves, analysts say. Oil prices have reflected some of that optimism in recent days, although trade is very thin due to the holiday period. On Tuesday, oil was also supported by refinery closures in the United States due to the severe Winter Storm Elliott. The huge storm swept through Canada and the United States just ahead of the Christmas holiday weekend, bringing freezing temperatures, snow, and icy conditions. Power supply was interrupted in some areas, thousands of flights were canceled, and Christmas travel plans were disrupted. Hard-freeze warnings were issued for all the states along the U.S. Gulf Coast, where most of the U.S. refining capacity is located. As of Friday, December 23, as much as 1.5 million bpd of the Gulf Coast’s refining capacity was shut down due to the freezing temperatures, per Reuters estimates.
Japanese Buyers Of Russian LNG Face Insurance Uncertainty
Japan’s buyers of Russian LNG are currently assessing how changes to shipping insurance triggered by the ongoing war in Ukraine will affect supplies from the key Sakhalin-2 project in Russia’s Far East, Bloomberg has reported. Japanese insurance companies Tokio Marine Holdings Inc., Sompo Holdings Inc., and MS&AD Insurance Group Holdings Inc. will cease providing cover for marine hull war risks in Russian, Ukrainian, and Belarusian territorial waters from Jan. 1, 2023. Japan has warned that global competition for liquefied natural gas is set to intensify over the next three years due to an underinvestment in supply. A survey of Japanese companies conducted by the trade ministry and released on Monday found that long-term LNG contracts that start before 2026 are already sold out, which is worrying for LNG buyers because these types of contracts offer stable pricing and reliable supply for many years. The report notes that there is little new supply coming online before 2026, even from major exporters like the U.S. and Qatar. Meanwhile, Europe is desperately trying to replace Russian pipeline gas with LNG, further exacerbating the global shortage of fuel This is not the first time insurance-related problems have occurred as a result of Russia’s invasion of Ukraine. Turkey sparked an oil tanker traffic jam in early December when it started requiring ships hauling oil through the Bosphorus and the nearby Dardanelles strait to provide a letter from their insurer saying that cover will be provided for that specific vessel voyage and cargo. At one point, the change caused a traffic jam of 28 tankers. While Turkey and the insurance company eventually came to an agreement that solved the issue, prices were initially impacted due to uncertainty.
Japan Signs New LNG Deals To Diversify Natural Gas Supply
Japanese firms have signed new long-term agreements to buy LNG from the United States and Oman as Japan looks to cater for its energy security and further diversify its LNG sourcing options. INPEX Corporation, the major gas firm in Japan, announced on Monday a long-term Sales and Purchase Agreement with U.S. supplier Venture Global LNG for the purchase of one million tons per annum (1MTPA) of liquefied natural gas for 20 years. Under the agreement, INPEX Energy Trading Singapore Pte. Ltd. (IETS), a Singapore-based subsidiary of INPEX, will purchase 1 MTPA of LNG from CP2 LNG, Venture Global’s third project which is expected to commence construction in 2023. “This agreement will enable the INPEX Group to procure LNG from the United States on a long-term basis, expand its LNG supply capacity, and diversify its supply sources to further contribute to the stable supply of energy,” said Hiroshi Kato, Executive Officer and Senior Vice President of Global Energy Marketing at INPEX. In addition, Japanese companies, including Mitsui & Co, Itochu Corporation, and the largest power producer Jera, are set to sign deals with Oman to buy around 2 million tons annually from 2025 for 10 years, Japan’s public broadcaster NHK reported on Tuesday. Japan and all other large importers of LNG in Asia have been in intense competition with Europe this year to procure gas cargoes as the EU races to replace Russian pipeline supply while Russia has significantly restricted its gas exports to Europe. Japan is heavily dependent on imported energy for a lack of local resources. Amid the current crunch following the Russian invasion of Ukraine and the Western sanctions on Russia, Japan is giving nuclear power generation a second chance in a reversal of the stance Japanese leaders have had since the 2011 Fukushima disaster. Earlier this month, a panel of experts under the Japanese Ministry of Industry decided that Japan would allow the development of new nuclear reactors and allow available reactors to operate after the current limit of 60 years.
Gazprom Reports Record High Production At Kirinskoye Natural Gas Field
Gazprom’s Kirinskoye gas condensate field that was launched nine years ago on the Sakhalin shelf has set a new level of production this quarter, Gazprom Dobycha Shelf Yuzhno-Sakhalinsk General Director Valery Guryanov has revealed. “Summer and fall, while the weather and field operating conditions allowed, the company worked to continue infrastructure development and modification of the Kirinskoye field. This has already yielded significant results. We reached a record high for daily production in October, approaching figures of 9.3 million cubic meters of gas,” Guryanov said. That’s a big jump considering that the field only managed to produce 0.782 mcm in 2020 and 1.2 mcm in 2021. Kirinskoye is the first field in Russia where production is carried out from an underwater production complex. The planned production plateau is 5.5 billion cubic meters of gas per year. Last week, the leading Russian news agency TASS reported that Gazprom’s board had approved a record spending of 2.3 trillion rubles ($33.1 bln) for the coming year. “The Board of Directors approved the investment program and the budget of Gazprom for 2023. Investment program indicators did not check if compared to the version approved by the Executive Committee of Gazprom in November of this year. Funding of the investment program for 2023 will total 2.3 trillion rubles,” the company has said. Gazprom is the world’s largest natural gas producer with more than 18 trillion cubic feet in 2021. It is, however, going to be interesting to see how Gazprom will cope with the recently installed natural gas price cap. After initially hitting a dead-end amid deep divisions, EU ministers have finally reached an agreement to implement a gas price cap of €180/MWh, far lower than the €275/MWh trigger originally suggested by the European Commission. Under the current proposal, the EU price cap would not fall below €188/MWh, even in the event that the LNG reference price falls far lower. However, the EU gas price cap would move with the LNG reference price if it increased to higher levels, remaining €35/MWh above the LNG price. This system is designed to ensure the bloc can bid above market prices in order to attract gas supplies in tight markets.
Russia Willing To Resume Gas Supplies To Europe Via Yamal Pipeline
Russia has said it’s willing to resume natural gas supplies to Europe through the Yamal-Europe Pipeline. The Yamal-Europe Pipeline usually flows westward but has been mostly reversed after Poland turned away from buying from Russia in favor of drawing on stored gas in Germany. “The European market remains relevant, as the gas shortage persists, and we have every opportunity to resume supplies. For example, the Yamal-Europe Pipeline, which was stopped for political reasons, remains unused” TASS has cited Russian Deputy Prime Minister Alexander Novak as saying. Previously, state-owned gas producer Gazprom revealed that it expected to pump 43 million cubic meters of gas per day to Europe via Ukraine through Sudzha. Unfortunately, the pipeline blew up during planned maintenance work near the village of Kalinino, about 150 km (90 miles) west of the Volga city of Kazan. To put the size of the pipeline in context, its run rate is a tiny portion of the 155 billion cubic meters of natural gas that Europe imported from Russia in 2021. Europe has managed to stockpile huge volumes of natural gas for the winter season, so much so that prices have tumbled sharply in recent months. Whereas supplies of Russian pipeline gas – the bulk of Europe’s gas imports before the Ukraine war – are down to a trickle, Europe has been hungrily scooping up Russian LNG in the meantime. The Wall Street Journal has reported that the bloc’s imports of Russian liquefied natural gas jumped by 41% Y/Y. Novak has revealed that in the 11 months of 2022, Russian LNG exports to Europe increased to 19.4 bcm, with the figure expected to hit 21 bcm by year-end. “Russian LNG has been the dark horse of the sanctions regime,” Maria Shagina, research fellow at the London-based International Institute for Strategic Studies, told WSJ. Importers of Russian LNG to Europe have argued that the shipments are not covered by current EU sanctions and that buying LNG from Russia and other suppliers has helped keep European energy prices in check.