Essar Oil UK to build carbon capture facility
Essar Oil UK Limited has announced its plan to build a 360 million-pound major new carbon capture plant at its Stanlow refinery in line with its ambition to become a leading low-carbon refinery by 2030. Essar is investing over 1 billion pounds into a range of energy efficiency, fuel-switching, and carbon capture initiatives, designed to decarbonise its production processes significantly by 2030 and put Essar at the forefront of the UK’s shift to low-carbon energy. Essar’s energy transition strategy is based on five principles: running the core Stanlow refining processes as efficiently and safely as possible; decarbonising Stanlow’s operations; building a hydrogen future through the launch of Vertex Hydrogen (“Vertex”) and as a key part of the HyNet consortium; developing green fuels (including Sustainable Aviation Fuels); and establishing the UK’s largest biofuels storage facility through Stanlow Terminals Limited. Essar will achieve its decarbonisation targets through a combination of incremental (energy efficiency and operating improvements) and transformational projects, including the 360 million-pound carbon capture plant announced, but also as a result of the significant investments, Essar is making into hydrogen and biofuels. Kent plc has been awarded a pre-FEED engineering contract to develop the facility that will take the CO2 emitted from one of Europe’s largest full-Residue Fluidised Catalytic Cracking units, located at the Stanlow refinery.
ONGC retains 20% stake in Russia’s Sakhalin-1
Oil and Natural Gas Corporation (ONGC) has received approval from Russia to retain a 20 percent stake in the Sakhalin-1 oil and gas fields in the far east region of the country, said Rajarshi Gupta, Managing Director of ONGC Videsh. “We have received the approval and are back with a 20 percent stake in Russia’s Shakalin-1,” said Gupta. Last month, Russia had asked foreign shareholders in the project to apply for regaining their shares after Exxon Neftegaz, the Russian unit of Exxon Mobil Corp, declared force majeure on the project. The US giant, which had a 30 percent stake in Sakhalin-1, said it would not invest in the project to comply with sanctions imposed on Moscow. Russian President Vladimir Putin signed a decree to set up a new operator for the Sakhalin-1 oil and gas project. According to the decree, the Russian company would own the investors’ rights, including the operator’s rights of Exxon Neftegaz. ONGC’s overseas investment arm, ONGC Videsh has 20 percent shares in the project while Japan’s Sodeco consortium—which has also decided to retain its shares—has a 30 percent stake.
Reduction in price of crude oil: Rates of petrol, diesel likely to drop by Rs 14
Due to the fall in the price of crude oil, the rates of petrol and diesel in the country may drop by up to Rs 14, according to the various reports. Crude oil prices in the international market are at a low level since January. Meanwhile, amid dip in the price of crude oil in the international market, the Indian oil companies have kept the prices of petrol and diesel stable even on November 30, 2022. Today on the 190 consecutive day, there has been no change in the prices of petrol and diesel in the country. The price of crude oil in the international market has been stable for the last several days. At present, the price of WTI crude has come down to $ 78 per barrel and Brent crude is around $ 85 per barrel.
Why 2023 Is Likely To See Much Higher Oil Prices
Earlier this week, oil prices plunged to 2022 lows as energy markets panicked about demand amid COVID chaos in China that has resulted in an unexpected and extraordinary manifestation of street protests and even calls for Chinese President Xi Jinping to step down. The market’s response to this, according to Rystad Energy, was an overreaction. Rystad believes that China’s zero-COVID policy and its new wave of lockdowns to counter a surge in new cases will have only a minor impact on its short-term oil demand. Indeed, the market is sentimental and fickle these days, with volatility running at an all-time high. By Wednesday, oil prices were trending in the opposite direction with just as much zeal. Brent crude was up over 2.8%, to $85.37 per barrel, at 10:53 a.m. EST, and WTI was up 3.45% to $80.90 per barrel. Suddenly forgetting its China fears despite a worsening COVID situation there, the oil markets flip-flopped mid-week to refocus on the pending EU ban on seaborne Russian oil and a G7 price cap on Urals crude next week. Gains would have been even higher were it not for rumors of OPEC+ preparing for more output cuts. The oil markets are trading on the day’s news, and have been since earlier this year. Unable to grasp true fundamentals. Fundamentals are now a moving target thanks to Russia’s war on Ukraine, the renewed power to control the markets by OPEC+, an uncooperative American shale industry and China’s zero-COVID policy. Wall Street is in a state of disarray, and for commodities traders, it’s either boon or bust–on a day-to-day basis. The volatility would be far greater without OPEC, the expanded cartel suggests. In a new study published by KAPSARC (King Abdullah Petroleum Studies and Research Center), during the height of the COVID pandemic, OPEC reduced oil price volatility by 50% due to the management of its spare capacity. OPEC intervention, the report claims, boosted average oil prices during the pandemic from $18 to $54 per barrel. Now, this is serving as a justification for OPEC+’s recent decision to cut output at a time when Washington was gunning for a production increase to bring prices down. True to form, OPEC rumors likely succeeded mid-week in calming the reversal of losses in oil price once the market decided to drop its Monday fears coming out of China and refocus on Russian oil. So what about Wall Street? As the Wall Street Journal notes, Wall Street is overall bullish on oil, even if that is not necessarily reflecting current prices. It’s a case of “mind the gap”. There is a clear belief that oil prices will be much higher in 2023. Goldman Sachs forecast $110 oil for next year, but recognizes the uncertainty. On Tuesday, Goldman Sachs’ Jeff Currie, global head of commodities, said that recent downgrades to oil prices were because of the dollar and China. “First and foremost, it was the dollar. What is the definition of inflation? Too much money chasing … too few goods,” Currie told CNBC. And on China’s COVID situation, Currie said “it’s big”. “It’s worth more than the OPEC cut for the month of November, let’s put it in perspective. And then the third factor is Russia is just pushing barrels on the market right now before the December 5th deadline for the export ban.” JP Morgan now forecasts $90 oil for 2023, down from its earlier forecast of $98, “on the grounds that Russian production will fully normalize to pre-war levels by mid-2023”. Rystad Energy also thinks the recent oil price plunge based on Chinese demand is overblown. While it is true that in November, OPEC and the IEA both reduced their 2023 oil demand growth estimates because of what is happening in China, Rystad believes it will have far less impact than the market panic of Monday suggested. “Oil markets may be misjudging news of China’s lockdown,” said Claudio Galimberti, senior vice president at the Norway-based consultancy, as reported by Bloomberg. The latest curbs “appear to be mimicking previous ones, with nationwide road traffic only marginally affected while selected provinces undergoing comparatively severe lockdowns try to suppress Covid outbreaks”. While street protests continued in China and daily infection rates surged beyond 40,000 by Tuesday, the overall effect is not worth a 4% plunge in oil prices, as we saw on Monday. And Wall Street seems to view this as a mere “gap” and not a long-term situation that will keep oil prices from JP Morgan or Goldman Sachs’ $98-$110 ranges next year. Brent crude delivered in August next year has a 46% probability of settling more than $20 higher than its current price, WSJ notes. China could actually end up being the icing on the oil price cake. It’s like saving up for a surge. “The pent-up demand out of China is going to be enormous. “That could swing demand by at least a million barrels a day, and that could easily make the difference between an oil price forecast of $95 to $105 versus $120 to $130. Easily,” Amrita Sen, director of research for Energy Aspects, told WSJ.
Worst may be over for fertilizer, gas and LNG prices, say government sources
The government believes “the worst may be over” with respect to high fertiliser, gas and spot liquid natural gas (LNG) prices, government officials aware of the matter told CNBC-TV18. Fertiliser subsidy for FY24 may settle around Rs 1500 billion, if not lower, the officials said. Notably, fertiliser subsidy for FY23 was seen at Rs 2150 billion compared to the Rs 730 billion budget estimate. Notably, the Sensex and Nifty ended at record closing highs on November 28 led by oil and gas stocks. Except metals, all sectoral indices ended in the green with oil and gas stocks up 1.5 percent. Russia’s invasion of Ukraine in February has upended the fertiliser market. But India has managed to tide over the initial challenge. The country has nimbly tackled rising costs although the subsidy outgo remains a concern
Kirit Parikh Committee report on gas prices. What can be expected
The Kirit Parikh panel was set up this September to review the gas pricing formula for gas produced in the country with the aim to ensure a fair price even as global prices for gas remained high. Due to the pandemic and the more recent geopolitical crisis, natural gas prices have shot up in the past few months. Consumers and user industries are facing the brunt alike as they depend heavily on piped cooking gas, CNG for vehicles, and gas for production. The government-led Kirit Parikh panel, which was set up to review the gas pricing formula, is likely to recommend a complete liberalization of natural gas prices by January 1, 2026. The panel will submit its report on November 30, a CNBC-TV18 report stated. The Kirit Parikh panel was set up this September to review the gas pricing formula for gas produced in the country with the aim to ensure a fair price even as global prices for gas remained high. As per news reports, the draft recommendation will be tabled and finalised by the panel members on November 29. What to expect According to Petroleum Planning & Analysis Cell, prices in Delhi have risen 52 per cent in just over a year to Rs 53.59 per standard cubic metre (SCM) in October 2022 from Rs 35.11 per standard cubic metres (SCM) in September 2021. CNG prices have shot up 57.9 per cent during this period to Rs 78.61 per kg from Rs 49.76. The key expectations from the report are as follows: The committee is likely to recommend a price cap for Administered Pricing Mechanism (APM) gas, including for ONGC Ltd and Oil India Ltd. Gas from these legacy fields is sold to city gas distributors, who then raise the CNG rates and piped cooking gas prices. The panel is also expected to opt for two different pricing regimes. The panel may not comment on the gas pricing from difficult gas fields, like the Krishna Godavari block D6 (KG-D6) fields of Reliance Industries Ltd. As this would ensure that explorers, who are seeing a surge in the cost of services due to the spike in global energy rates, are not put at a disadvantage. The report may recommend an annual escalation of $0.5/mmbtu for the next few years. Gas pricing in India Gas pricing is revised twice a year and based on rough estimate from the weighted average prices of four global benchmarks: the US-based Henry Hub, Canada-based Alberta gas, the UK-based NBP, and Russian gas. The gas prices have seen a sudden surge between July 2021 and August 2022 globally. The Henry Hub price in the US has shot up 140 per cent between July 2021 and August 2022. The JKM Marker, which oversees the Northeast Asian spot price index for LNG, and is determined by S&P Global Platts, has registered an increase of almost 257 per cent. The UK’s NBP has seen a surge of 281 per cent. But in comparison, prices of CNG and PNG in India have only gone up 50 to 60 per cent as they were guarded against spot price fluctuations because of India’s long-term supply contracts. In India, prices of natural gas increased 40 per cent on October 1 as part of the government’s six-monthly review of prices.
Next Week Will Be Critical For Oil Markets
The next few days will be one of the most crucial for the oil market in weeks as several events and factors at the same time could determine the trend in prices by the end of this year and beyond. While the Chinese zero-Covid policy and protests against that policy weigh negatively on market sentiment, the OPEC+ meeting on December 4 and the beginning of the EU embargo on Russian seaborne crude oil imports on the next day are likely to shape the course of the prices. Uncertainty is high, which would stoke further volatility in prices. Oil slumped early on Monday to the lowest level in nearly a year – since December 2021, weighed down by risk aversion in commodity markets amid protests in China over the authorities’ strict Covid curbs policy. The recent price rout, with Brent plunging by 10% in one week, intensified speculation that OPEC+ members could consider another production cut when they meet on Sunday, December 4. On the following day, December 5, the EU ban on imports of Russian crude oil and the associated G7-EU price cap begins, with the exact price of the cap yet to be agreed on and announced. With so many uncertainties, oil prices are seesawing and jumping up or down on every rumor or report. The next week and the ones after that will likely see more of the same and prices could swing either way depending on the OPEC+ meeting, the EU ban and price cap on Russian oil and Russia’s reaction to it, and the developments in China, which, so far, is singlehandedly dragging down oil prices due to fears of weak demand in the world’s top crude oil importer at least in the short term. What Will OPEC+ Do? A violent move down in prices began on November 21 after The Wall Street Journal reported, citing OPEC delegates, that the members of the cartel had informally discussed whether there would be a need for more oil on the market in view of the EU embargo on Russian crude oil imports. The report was immediately denied by OPEC’s top producer Saudi Arabia and another influential member of the cartel, the United Arab Emirates (UAE). “United Arab Emirates denied that it is engaging in any discussion with other OPEC+ members to change the last agreement, which is valid until the end of 2023,” its Energy Minister Suhail al-Mazrouei said on November 21. “We remain committed to OPEC+ aim to balance the oil market and will support any decision to achieve that goal,” the minister added. A week later, as of November 29, speculation is mounting that OPEC+ could consider a cut at its December 4 meeting due to gloomier-than-expected oil demand outlook amid Chinese Covid curbs and protests and slowing economies elsewhere. Considering that oil prices slumped to the lowest level since December 2021 earlier this week, OPEC+ could indeed decide to defend an $80 floor under prices, but it will have a difficult task in predicting how the embargo on Russian crude will impact trade flows and prices. Still, speculation about a cut is gathering momentum. Early on Tuesday, oil prices rose by 2% as market participants weighed a possible new cut and were possibly buying the dip after the rout in recent days. Most traders and analysts polled by Bloomberg on Monday expect further OPEC+ cuts to its headline production target, on top of the 2 million barrels per day (bpd) reduction which began this month. Moreover, the structure of the oil futures market is showing signs of sluggish global oil demand and sufficient supply just ahead of the embargo on Russian oil. Weakening physical demand and plunging spot premiums for Middle Eastern crude could prompt OPEC+ to announce a fresh cut on Sunday. The alliance of OPEC and non-OPEC producers led by Russia regularly denies it’s defending a certain oil price, but it always says that it looks at the market fundamentals. And these days, the physical market is showing signs of weakness and even an oversupply in the short term, considering the contango in both WTI and Brent front-month to second-month futures. Iraq, OPEC’s second-largest producer, signaled this weekend that the OPEC+ meeting would focus on the current market conditions and balances. What Will G7-EU and Russia Do? Several hours after the OPEC+ meeting, the EU embargo and the price cap on Russian oil enter into force. There are so many uncertainties surrounding the measures that analysts cannot predict anything but further volatility in oil prices. The uncertainties range from the exact price of the cap – with the EU still at odds over this five days before the embargo kicks in – to how many vessels Russia would need to place its oil to willing buyers, where ship-to-ship transfers can occur for Baltic exports bound for Asia, how big the ‘dark fleet’ under the radar could be, and last but not least, whether Putin will go through with his promise to stop supplying oil to anyone joining the price cap. “All of these things are so significant to the oil markets that they could whip prices from one direction to the other very significantly,” Michael Haigh, Global Head of Commodities Research & Strategy Societe Generale, told The Wall Street Journal.
Disagreement Over Gas Price Cap Jeopardizes EU Energy Crisis Plan
The European Union’s energy crisis response plan is being challenged by the bloc’s members’ differing opinions on whether a price cap should be implemented on natural gas imports and, if yes, how exactly this implementation should look. While EU officials try to put on a brave face and send positive signals to the public only, the sheer number of EU members and their very different energy needs and priorities are factors significant enough to make the agreement on such an important issue difficult at best. Once you add to these two factors several members’ open criticism of the idea of a price cap for natural gas imports, the situation becomes even more complicated, with agreement harder to come by. “The discussion is extremely complicated because there are simply different views . . . [but] we want to work hard in the remaining days to reach an agreement,” said Jozef Sikela, Czechia’s energy minister, last week, as quoted by the Financial Times. EU members have been negotiating the crisis management package for months now, with agreement on the gas price cap no closer in sight than it was at the start of negotiations when 15 EU members asked for it. The European Commission has also spoken skeptically about the potential benefits of a gas price cap, but because of the number of EU members that wanted one, last week, the Commission tabled a proposal for a cap. From a certain perspective, it would have been better if it hadn’t. The proposal set the potential cap at 275 euros per megawatt-hour: a price the Commission said would need to be a fact for two weeks before the cap kicks in. It also combined this condition with another: gas prices in Europe should be 58 euros per MWh higher than the average price for LNG on the spot market for ten consecutive days within those two weeks. The backlash was immediate and came from all sides. Traders and exchanges said the proposal could cause severe and irreversible harm to EU energy markets because of its focus on front-month futures only. Excessively high margin calls on the OTC market, where traders would be forced to operate under the cap was one big concern. Additional costs for exchanges was another. Yet traders and exchange operators were not the only critics. Politicians from several EU members also declared their opposition to the cap as too high. Indeed, observers note that even when gas prices in Europe were at their highest this year, at over 300 euros per MWh, they never stayed at 275 euros per MWh for two whole weeks. The level that the Commission proposes, then, is considered unrealistically high to make the cap effective. Spain’s energy minister, Teresa Ribera, told the FT “countries will be killed” if they had to endure gas prices at that level for that long and called the Commission’s suggestion “a joke in bad taste.” So did Poland’s energy minister, Anna Moskwa. “The gas price cap which is in the document currently doesn’t satisfy any single country. It’s a kind of joke for us,” Moskwa said last week, as quoted by CNBC. One unnamed EU official called the cap proposal “a fake price cap.” EU energy ministers are meeting again on December 13 to try and reach some form of agreement on the cap and other measures. Judging by the latest signs, this will be far from an easy job in the absence of an alternative proposal for gas price management. What this means is that discussions will continue until members agree on a watered-down version of the original proposal, as tends to happen with most controversial proposals of the Commission. A watered-down version of a price cap would do little to enhance the EU’s energy security during its toughest winter in decades. Meanwhile, EU members need to be thinking about next winter already. For now, the gas supply is ensured thanks to stable Russian flows during the first half of the year, record-high U.S. LNG imports, and a longer-than-usual storage refilling season. Next year, however, the flow of Russian oil will be a lot weaker than it was this year, and there is no additional U.S. LNG supply readily available to fill in the gap. It could be argued that EU energy ministers should focus on that instead of a price cap that the Commission clearly does not want to implement, and neither do members such as Germany, Denmark, and the Netherlands. Yet the gas piece problem is much more immediate for most governments in Europe, hence its place in the spotlight. The problem is likely to remain in the spotlight for the observable future, whatever EU energy ministers manage to agree on in December—if they manage to agree on something. As the weather gets colder across Europe, it is vital for politicians to be seen to be doing something about energy prices. People are already getting angry with their electricity bills.
India to receive first LNG cargo from Indonesia
India will receive its first cargo from Indonesia’s Tangguh liquefied natural gas (LNG) plant at the Dahej terminal on Monday, according to a Refinitiv analyst and Refinitiv ship tracking data. The LNG cargo is being transported by the BW Helios tanker, said Olumide Ajayi, senior LNG analyst at Refinitiv. “The vessel which had been acting as a floating storage since it lifted the cargo in mid-September is currently on a term charter to British oil major BP and is due to arrive at state-owned Petronet’s Dahej terminal on November 28,” he said.
Moving LNG on wheels for small scale users
Industrial clusters located off the gas grid in parts of Gujarat, Western Madhya Pradesh and Northern Maharashtra are increasingly turning to clean fuel, thanks to the truck transport of the Liquified Natural Gas (LNG). Indian arm of the Shell Plc—Shell Energy India—has started rolling out small-scale LNG supplies through its truck-loading facility from Hazira LNG terminal in South Gujarat. This, according to officials, has helped industries in the off-grid locations to adopt cleaner energy fuels and reduce emissions. Launched in January 2021, the truck-loading facility is not new to India but was first for Shell’s Hazira facility which is surrounded by industrial clusters along the coast of Gujarat and also in the hinterland of Western Madhya Pradesh and parts of Maharashtra. There are quite a few in the 300 kms area. This include Ankleshwar-Bharuch chemicals, fertilisers and pharmaceutical cluster; textiles and engineering cluster near Surat and heavy engineering and equipment cluster at Vadodara. Currently, Shell despatches the trucks with LNG in cryogenic tankers to the remote areas within the radius of 300-500 kilometres from the Hazira facility, which is equipped with 5-million tonnes per annum LNG import terminal. The LNG terminal is connected to all the three major national gas pipelines effectively pushing gas to almost everywhere in the country. Speaking to businessline, Rahul Singh, VP India, Integrated Gas & RES, underlined a growing adoption by small players. He also highlighted that the smaller industrial customers that were off the grid were disconnected from access to LNG. They were not able to have access to LNG for their decarbonisation needs.