As India becomes top importer of Russian oil, US says not planning sanctions
The United States does not currently have sanctions in place against Russian energy exports to other countries, Pakistan newspaper Dawn reported citing a US State Department official. The report comes as Russia became India’s top oil supplier in October, and Pakistan is seeking energy supplies from Russia at a discount. “The United States does not currently have sanctions in place against Russian energy exports to other countries,” a US State Department spokesperson, who has been unnamed, told Dawn. The spokesperson said that the decision to ban Russian energy imports has been left to the individual countries, hoping that they would take an appropriate decision based on their own circumstances. “We continue to coordinate with allies and partners, including India and European allies and partners, to mitigate the impact of (President Vladimir) Putin’s war of aggression against Ukraine on global energy markets,” the spokesperson added.
India’s October fuel demand rises 3.4% year-on-year
India’s fuel consumption, a proxy for oil demand, rose 3.4% year-on-year in October to 18.37 million tonnes, data from the Petroleum Planning and Analysis Cell (PPAC) of the Oil Ministry showed on Monday. Sales of gasoline, or petrol, were 8.8% at 2.99 million tonnes. Cooking gas or liquefied petroleum gas (LPG) sales decreased 3.3% to 2.40 million tonnes, while naphtha sales fell 24% to 0.96 million tonnes. Sales of bitumen, used for making roads, were 11.5% lower, while fuel oil use edged up 0.9% in October.
Why Europe’s Energy Crisis Is A Disaster For Emerging Economies
The surge in natural gas demand from Europe has led to a surge in prices that has devastated emerging economies in other parts of the world and this devastation could drag on for years, Bloomberg reports. “Energy security concerns in Europe are driving energy poverty in the emerging world,” Saul Kavonic, Credit Suisse energy analyst, told Bloomberg. “Europe is sucking gas away from other countries whatever the cost.” The fact is that European countries can afford to pay a premium for natural gas while poorer nations such as Pakistan or Bangladesh don’t have the money to afford such a premium. Pakistan, by the way, is already suffering blackouts for most of the day and there is little chance of that changing anytime soon because of exorbitant LNG prices. “Suppliers don’t need to focus on securing their LNG to low affordability markets,” Wood Mackenzie analyst Raghav Mathur told Bloomberg. What’s more, the spot market is so lucrative at the moment that producers can breach their long-term contracts and afford to pay the penalties with money made on that market. The situation is unlikely to change in the observable future. On the contrary, Europe is building LNG import terminals, meaning the current level of demand might extend over a longer period of time despite the EU’s bold emission-cutting ambitions. And this means emerging economies’ energy supply troubles may well extend over a longer period of time as well as they are forced to compete for the limited supply of LNG with some of the wealthiest economies in the world. Russia, meanwhile, is only too happy to step in and supply LNG to Pakistan, which is only too happy to take it. As the Pakistani ambassador to Russia told TASS news agency recently, “If the rich countries take away all the LNG, what is going to happen to us?”
The U.S. Believes India Will Benefit From A Price Cap On Russian Oil
The United States hopes that India could see the benefits of a price cap on Russian oil, U.S. Treasury Secretary Janet Yellen told news outlet PTI in an exclusive interview ahead of her trip to India at the end of this week. Secretary Yellen’s visit to India on November 11 could be crucial to the U.S. and G7 efforts to persuade the world’s third-largest crude oil importer to join the coalition of countries applying the price cap on Russian oil. “Our objective is to hold down the price that Russia receives for its oil and keep that oil trading. The gainers from this will be particularly those countries that do buy cheap Russian oil, and our hope would be that India would take advantage of this price cap, though its firms are bargaining with Russia,” Secretary Yellen told PTI. “If they (India) want to use Western financial services like insurance, the price cap would apply to their purchases. But even if they use other financial services, we believe the price cap will give them leverage to negotiate good discounts from world markets,” she added. Earlier this year, the G7 group of the most industrialized nations agreed to finalize and implement a price cap on Russian oil, aiming to reduce Vladimir Putin’s oil revenues for his war chest. The G7, the EU, and the UK will ban as of December 5 maritime transportation services for Russian oil unless the products are purchased at or below a certain price cap. Yet, many analysts and experts doubt that the price cap would serve its dual purpose of cutting revenues for Putin while keeping Russian oil flowing. One reason is that top importers China and India haven’t signed onto the price cap, and another is that Putin could simply make good on his promise to halt all energy supply—including crude, fuels, natural gas, and coal—to the countries that sign up to cap the price of Russian oil.
Ukrainians Face Weeks Of Emergency Energy Shutdowns
Russian attacks on Ukraine’s energy infrastructure will leave Ukraine under emergency shutdowns for up to five weeks, with President Volodymyr Zelensky warning that more attacks may follow and the mayor of Kyiv urging residents to prepare for temporary evacuation if water and power supplies are cut off. The director of Ukraine’s Energy Research Center, Oleksandr Kharchenko said on Monday that the country’s energy companies need two to five weeks to restore stability to Ukraine’s energy system in the aftermath of Russian attacks on infrastructure. That timeframe is only relevant if there are no further Russian attacks on energy facilities. More than 4.5 million consumers are already without power, Euractiv cited Zelensky as saying, while3 Kharchenko points out that enough electricity is being produced but damage to transportation routes is undermining distribution. On Monday, Ukraine faced a projected shortfall of 32% in power supply, according to Euractiv, citing energy provider YASNO. Ukrainians are being called upon now to conserve energy to the maximum. On Sunday, Zelensky warned of the potential for more attacks, noting that Russia is “concentrating forces and means for a possible repetition of mass attacks on our infrastructure. First of all, energy.” Also on Sunday, Kyiv Mayor Vitali Klitschko raised alarms about potential losses of power and water in the capital city, urging residents to be prepared to evacuate. “If you have extended family or friends outside Kyiv, where there is autonomous water supply, an oven, heating, please keep in mind the possibility of staying there for a certain amount of time,” Klitschko said. Putin’s aim, Klitschko said, was “for us to die, to freeze, or to make us flee our land so that he can have it”. In the south, Russia is clearly continuing with its energy infrastructure attacks, with the Kherson regional governor noting that Moscow’s forces had now destroyed some 1.5 kilometers of power lines in the region, severing supply to the city of Beryslav. Russian news agencies have also accused Ukrainian forces of damaging the Nova Kakhovka dam in Russian-occupied territory near Kherson. That claim has not been independently verified.
Airlines set to benefit from new ATF pricing mechanism
New mechanism will be more transparent and cushion airlines from price fluctuations, say industry players. India has introduced a new pricing mechanism for ATF (jet fuel) beginning Q3 FY23 (October – December period). The new price mechanism – which replaces the Import Parity Price based system – will be benchmarked on the MOPAG or Mean of Platts Arab Gulf and could bring in more parity between global crude price and jet fuel price in India. Those in the know say, the new pricing mechanism will be “more transparent” and cushion airlines from ATF price fluctuations. MOPAG pricing refers to paying the same price that is paid in Dubai for ATF. The mechanism could see 10 -15 per cent reduction in price say some industry sources, while others say it’s too early to comment. The decision to use MOPAG as a benchmark was taken after a meeting of the airlines top brass, oil marketing companies (OMCs), the Ministry of Petroleum and Natural Gas and the Civil Aviation Ministry. “Indian airlines are also expected to benefit from the new pricing mechanism of aviation turbine fuel (ATF) in India, with oil marketing companies (OMCs) and airlines planning to set MOPAG as the global benchmark,” Motilal Oswal said in a recent report. IndiGo’s CFO, Gaurav Negi, during an analysts call had said, “The way the pricing of ATF is being done is undergoing a change as we speak.“ IndiGo, the country’s largest carrier, saw fuel costs rise over 214 per cent y-o-y in Q2 FY23 (July – Sept) to ₹62.58 billion against ₹19.89 billion in Q2 FY22.
Another Country Burdens Oil And Gas Companies With Windfall Taxes
The Czech Republic is the latest country to levy windfall taxes on energy companies to scrape together funds to continue subsidizing high energy costs, Bloomberg reported on Friday. Czech lawmakers approved Finance Minister Zbynek Stanjura’s proposal for a 60% windfall tax on the country’s main energy companies. The windfall tax, which government leaders have referred to as a “surcharge” is set to span the next three years, and looks to strip oil and gas from a healthy portion of its extraordinary profits thanks to recent hikes in oil and gas prices. Stanjura protested that he “took no joy” in levying the windfall tax—just the latest in a series of similar taxes assessed in other countries. “If circumstances allow, I will be the first to propose abolishing it,” the Finance Minister said on Friday. Those circumstances would likely be oil and gas prices—and oil and gas company profits—coming down. For the oil companies, it is a lose-lose scenario. If oil and gas prices fall, the tax may be relaxed or even removed—but their profits will fall in lockstep with price movements. If oil and gas prices stay high, the government will strip 60% of its profits from it. Unipetrol, The Czech unit of Polish refinery PKN, said the new tax would be painful, dampening investor appetite and drying up funds it needs for upgrades. Energy utility Energeticky a Prumyslovy Holding, or EPH, told media on Friday that it will move its commodities trading business to another country to skirt the new tax. The tax should send an extra $3.5 billion into government coffers next year, according to Finance Ministry calculations provided by Bloomberg, which will be used to soften the blow of the cost of living crisis by subsidizing electricity and natural gas bills.
COP27: A year on from Glasgow meet, world burning more dirty fuel than ever
A year on from the Glasgow climate pact, the world is burning more fossil fuels than ever By Mathieu Blondeel, University of Warwick Coventry (UK), Nov 5 (The Conversation) The burning of fossil fuels caused 86% of all CO2 emissions during the past ten years. Despite being the primary culprits of global heating, coal, oil and gas were barely mentioned in the official texts of previous UN climate change summits. That all changed at COP26 in November 2021, where the Glasgow climate pact was signed. The agreement contained the first ever acknowledgement of the role of fossil fuels in causing climate change. It also urged nations to phase out measures which subsidise the extraction or consumption of fossil fuels and to phase-down coal power. With COP27 beginning in Sharm El Sheikh in Egypt, it’s time for a progress update. Unfortunately, it’s not good news. The ongoing energy crisis and the short-term responses to it by governments around the world have made it more difficult to meet the pact’s goals of ending the dominance of fossil fuels. The global energy crisis The current predicament is probably the first of its kind in which prices for all fossil fuels have soared simultaneously. This has hiked electricity prices in turn. Europe has had to rapidly adjust to Russia using its gas exports as a weapon since its invasion of Ukraine. As the Kremlin cut pipeline gas supplies, European countries rushed onto the global market for liquified natural gas (LNG) and increased imports from traditional partners such as Norway and Algeria. This has raised natural gas prices to dizzying heights and created a global scramble for gas in which Europe can outbid developing economies for essential LNG shipments, pushing countries like Pakistan and Bangladesh deeper into crisis. To keep the lights on, some of these developing economies are resorting to the most polluting of all fossil fuels: coal. The International Energy Agency (IEA) expects that in 2022, global coal consumption will match its all-time high of 2013. In the EU, demand for coal (primarily from the electricity sector) is expected to rise by 6.5%. If current demand trends continue, global coal consumption will only be 8.7% lower in 2030 than what it was in 2021. To reach net zero emissions by 2050, this should be 32% lower. The Organisation of Petroleum Exporting Countries and its allies (OPEC+), most notably Russia, recently decided to slash oil production by 2 million barrels a day in a bid to hike oil prices. Although OPEC+ justifies its decision by saying that it is anticipating a global recession that could herald a replay of the oil price crashes of 2008, 2014 and 2020, the EU and US have slammed the move as politically-motivated. To bring down high fossil fuel prices, governments globally are resorting to the very subsidies they agreed to phase out. These subsidies cut fuel costs for consumers by fixing the price at petrol pumps, for example. After a noticeable dip in 2020, fossil fuel subsidies expanded in 2021. The energy crisis has prompted another sharp increase according to IEA estimate for 2022. In the past, developing economies were criticised for using these fiscal tools, not least for subsidising fossil fuel burning. Any such criticism rings particularly hollow now as rich countries race to do the same thing.
India-Saudi relations expand beyond hydrocarbon economy
India and Saudi Arabia are seeking to expand their cooperation beyond the parochial hydrocarbon economy into diverse areas such as renewable energy, investments, technology, agriculture, etc. The relationship is undergoing a paradigm shift, and both countries need to cooperate strategically to realise their potential in the evolving global order. The upcoming India visit by Saudi Crown Prince Mohammad bin Salman (de facto ruler of the Kingdom) on 14 November, en route to the G20 summit in Indonesia, is significant. It is his second visit since 2019, which reflects on the growing bonhomie among the countries and congruence of interests across regional and global issues. The relations have been historically amicable but were largely limited to crude oil and gas imports by India, and to Hajj pilgrimage by Indian Muslims. Saudi Arabia is home to approximately a 2.5 million strong Indian community, making it the largest expatriate community in the Kingdom that contributes towards human resource needs of the oil rich country. The historic visit of King Abdullah to India in January 2006 was a watershed moment that resulted in the signing of the “Delhi Declaration”, imparting a fresh momentum to the bilateral relationship. The reciprocal visit by Dr Manmohan Singh to Saudi Arabia in 2010, and the Riyadh Declaration signed during the visit, elevated the bilateral relationship to a “strategic partnership”. More recently, the visit by Crown Prince Mohammad bin Salman to India in February 2019 further took forward this momentum. During his visit, the Kingdom announced an investment of US$100 billion in India in areas such as energy, refining, petrochemicals, infrastructure, agriculture and manufacturing. Saudi Arabia is also investing in the IT industry, and India can help the Kingdom expand and strengthen its “IT footprint”. This is an opportune time that India moves beyond providing low skilled workers to a more high skilled and qualified talent pool to Saudi Arabia to move up the value chain. The Saudi Aramco and UAE’s ADNOC are jointly participating in the development of US $44 billion “West Coast Refinery & Petrochemicals Project Limited” in Maharashtra. Saudi Arabia also joined the International Solar Alliance (ISA), a group of “solar resource-rich countries” initiated by India to promote solar energy. In addition, Saudi companies like Alfanar and Aljomaih have invested in India’s Wind and Solar Energy projects. Furthermore, both countries are collaboratively exploring Hydrogen Energy as a future source of energy, thereby ushering in the new era of energy diplomacy. As of March 2021, Saudi Investments in India amounted to US$3.13 billion. Major Saudi investment groups include SABIC, ZAMIL, E-holidays, and Al Batterjee Group. Additionally, Soft Bank’s Vision Fund has invested in Indian start-ups such as Delhivery, FirstCry, Grofers, Ola, OYO, Paytm and PolicyBazaar. This reflects a growing potential for greater funding opportunities for our future unicorns. In June 2020, Saudi Arabia’s Public Investment Fund (PIF) announced a US$1.49 billion (2.32% stake) investment in Reliance Industries’ Jio platforms, and in November 2020, PIF announced another investment of US$1.3 billion (2.04% stake) in Reliance Retail Ventures Limited. India needs cheap oil as it imports 85% of its oil requirement and Saudi Arabia plays an important role in India’s energy security. On the trade front, Saudi Arabia is India’s fourth largest trade partner (after the US, China and the UAE) and a major source of energy as India imports around 18% of its crude oil requirement and 22% of its LPG requirement from the Kingdom. Saudi’s major imports from India include engineering goods, rice, petroleum products, automotive and machinery,
Work on TAPI Pipeline to Begin Soon: Mullah Baradar
The first deputy of the Prime Minister, Mullah Abdul Ghani Baradar, said that the practical work on TAPI (Turkmenistan, Afghanistan, Pakistan, India) will begin soon. Baradar said that there have been some challenges in the acquisition of land, but efforts are underway to resolve the challenges. “There are some problems with the acquisition of land because some of the people don’t want to give up their lands. The efforts are underway. Whenever we take possession of the land, we will start work,” The acting minister of the Minister of Mines and Petroleum, Shuhabuddin Delawar, said that the talks on the price of gas and its quantity have been conducted but the exact time for the start of the project has not been determined. “The issue of gas for Herat’s districts, particularly the industrial park, have been discussed. The price of gas has been discussed and positive steps have been taken,” he said. The Ministry of Foreign Affairs said that efforts are underway to begin the TAPI pipeline project as soon as possible. “We hope their (Turkmenistan team) come here for assessment soon. The Islamic Emirate is ready regarding the implementation of the plan,” said Shafay Azam, head of the department of economic relations of MoFA. This comes as the Pakistani media reported that Islamabad has received a strategic commitment from Turkmenistan for the construction of the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline. “Only Turkmenistan has offered Pakistan a strategic commitment for the construction of TAPI, and it is also engaged with Afghanistan which will increase funds beyond their annual budget,” Minister of State for Energy Musaddiq Malik said as quoted by the Business Recorder. “The start of TAPI pipeline project is politically and economically important for the people and the country. Particularly, it is important for the industries relying on gas—and it also could benefit the production of energy,” said Sakhi Ahmad Paiman, deputy head of the Afghanistan Chamber of Industry and Mines (ACIM). The TAPI project crosses through Herat, Farah, Nimroz, Helmand and Kandahar to Pakistan and India. “If Pakistan has really understood that the TAPI pipeline project will not only benefit Turkmenistan and India but it will also be effective for Afghanistan and Pakistan, I think the TAPI pipeline will be extended because Pakistan is the only country among these four countries which make hurdles, in fact,” said Sayed Masoud, an economist. The pipeline will span 1,814 km with 735 km of it crossing through Afghanistan.