Europe’s Gas Prices Surge 13% As Russia Reduces Nord Stream Flow
Russia’s Gazprom said on Tuesday that it would limit natural gas supply via the Nord Stream pipeline to Germany by 40 percent compared to planned flows because of a delay in equipment repairs, sending European gas prices surging by 13 percent. Gazprom said today on its Telegram channel that Siemens had delayed the return of gas compressor units from repair, and technical issues prevented it from sending the planned volumes of natural gas to the biggest gas link to Europe. Only three compressor units can currently be used to ship gas westwards from the Portovaya compressor station in the Baltic Sea, Gazprom says. Gas supplies to the Nord Stream gas pipeline can currently be provided in the amount of up to 100 million cubic meters per day, compared with a planned volume of 167 million cubic meters per day, the Russian gas giant said. The lower supply of gas via Nord Stream to the biggest European economy, Germany, sent Europe’s gas prices surging by double digits on Tuesday, with the gas price at the Dutch TTF hub, the benchmark gas price for Europe, up by 13 percent and the UK gas prices rising by 11 percent around noon in Europe. Russian gas deliveries to Europe—not counting the countries already cut off from Russian gas—have already been down after Ukraine stopped last month flows from Russia to Europe at the Sokhranivka point due to “the interference of the occupying forces in the technical processes.” Sokhranivka is one of the two transit points of Russian gas via Ukraine to Europe, and thus supply was cut off for a third of the gas transiting Ukraine onto Europe. Separately, Nord Stream, which bypasses Ukraine, is expected to undergo planned regular maintenance for two weeks in July, when there will be no flows to Germany, Klaus Mueller, the president of Germany’s network regulator Bundesnetzagentur said on Monday.
Saudi Arabia Bets Big On Blue Hydrogen
While the world begins to build the infrastructure of a future hydrogen economy, the economics of global trade in carbon-free hydrogen are becoming more clear. Among countries expected to find significant opportunities in that future market is Saudi Arabia. According to a recent report from a notable Riyadh-based research institute, green hydrogen produced from electrolysis could begin to ship to the Port of Rotterdam in 2030 at prices quite competitive with European hydrogen, depending partly upon the shipping method used. The researchers also see significant potential for hydrogen in KSA’s domestic industry. Hydrogen and hydrogen-based fuels could replace gray hydrogen, strengthening Saudi export potential in a range of products as more costs are imposed on carbon emissions worldwide. They see great potential for both blue (with carbon capture) and green (with renewable energy) hydrogen, with technology and production costs gradually falling for both types. Their outlook for blue is more positive than that of some recent analyses, which foresees green hydrogen beating blue on price in many regions of the world by 2030. But Saudi Arabia’s apparent advantages in producing low-cost hydrogen of both types may allow it to develop each for the long term. Therefore the researchers advocate a balanced approach, anticipating regional specialization within the country. Realistic assumptions The report, “The Economics and Resource Potential of Hydrogen Production in Saudi Arabia” by the King Abdullah Petroleum Studies and Research Center (KAPSARC), was issued in March. The KAPSARC researchers look at realistic cost scenarios based on realistic assumptions about the price of natural gas in Saudi Arabia, and the cost of electricity from renewable sources. The anticipated costs and capacity factors of electrolysis systems are also carefully considered. Saudi Arabia is already a large consumer of hydrogen for its refinery and chemicals industries; primarily ‘gray’ hydrogen produced with high carbon emissions. It is by far the cheapest way to produce the gas at about $0.90/kg. But costs of blue and especially green hydrogen are expected to decline substantially in the next few years. Blue hydrogen gains an advantage from Saudi Arabia’s huge production of natural gas and its closed market for it. KSA neither exports nor imports natural gas and maintains a low price, currently at $1.25/MMBtu. At this price, the cost of producing blue hydrogen could fall from the current $1.34/kg to $1.13/kg by 2030. This assumes ongoing cost reductions in carbon capture & storage (CCS) methods as these scale up. The cost of green hydrogen is highly dependent on the cost of electricity from renewable sources and electrolysis. It is $2.16/kg today based on an electricity price of $18.3/MWh (an average of auction prices for new solar projects in Saudi Arabia). The researchers see that this cost could fall to $1.48/kg by 2030, if renewable energy costs fall to $13/MWh. The cost of green hydrogen production in KSA could fall further to $1/kg by 2050. Reaching the vaunted $1/kg target assumes electrolyser capital costs drop to $400 per kilowatt, with renewable energy costs falling below $10/MWh, both realistic scenarios. The researchers see an enormous advantage in KSA’s ability to achieve high capacity factors in its production of renewable electricity. They assert that capacity factors can reach 60% in the production of renewable power in Saudi Arabia; that it is possible with a PV-Wind hybrid system. In fact, large areas of the country, especially in the western region, are favorable for diurnal (day and night) solar and wind energy production. This greatly surpasses, for example, wind power in Europe with capacity factors of approximately 35%. With this advantage, however, a carbon price in some form will still need to be imposed in Saudi Arabia. The report says that green hydrogen will be competitive with grey hydrogen by 2030, at the current domestic natural gas price of $1.25/MMBtu and a carbon price of about $65 per tonne. Expediting exports Assuming a green hydrogen production cost of $1.48/kg by 2030, the delivered cost of hydrogen from Saudi Arabia’s western region to the Port of Rotterdam via the Suez Canal can be quite competitive. To estimate it, the researchers also make assumptions about conversion to carrier, shipping and dehydrogenation costs. They think liquid hydrogen can arrive at Rotterdam in 2030 with a delivery cost averaging between about $3.50/kg and $4.50/kg. This compares favorably to the expected cost of green hydrogen production in Europe, which according to recent research will be between $3/kg and $5/kg in 2030. While it appears that Saudi hydrogen exports to Europe can be competitively priced, much will depend on the type of carrier used. Methods for the sea transport of liquid hydrogen, or in the form of a liquid organic hydrogen carrier (LOHC), are still in development. Ammonia is a proven carrier of hydrogen energy, but it requires cracking the ammonia back to hydrogen (dehydrogenation) if pure hydrogen is needed. This adds an additional cost ranging from $1/kg to $2/kg according to recent research. To avoid this potential cost, the KAPSARC researchers suggest that Saudi producers look for opportunities to trade ammonia for direct use, whether blue or green. Markets may be found by substituting for gray ammonia in the production of fertilizers. New applications, such as blue ammonia for power generation in Japan, may also open opportunities for export. They also advocate for de-carbonizing domestic industries, such as ammonia and methanol plants, by switching them to low-cost blue or green hydrogen. This conversion could extend to other domestic industries, such as steel, cement and aluminum. The researchers also see potential in the transport sector, with new fuel cell applications and sustainable jet fuel. This strategy could lower the country’s carbon footprint while also opening new opportunities for the production of carbon-neutral products for export. Low-carbon hydrogen would lower the carbon content of many industries’ finished products, thereby better positioning them for international markets as carbon policies become more stringent worldwide. Regions green and blue Saudi Arabia’s vast territory suggests that regional specialization for hydrogen production is feasible. The KAPSARC report sees two general regions where
Sri Lanka PM says he’s open to Russian oil
Sri Lanka may be compelled to buy more oil from Russia as the island nation hunts desperately for fuel amid an unprecedented economic crisis, the newly appointed prime minister said. Prime Minister Ranil Wickremesinghe said he would first look to other sources, but would be open to buying more crude from Moscow. Western nations largely have cut off energy imports from Russia in line with sanctions over its war on Ukraine. In a wide-ranging interview with The Associated Press on Saturday, Wickremesinghe also indicated he would be willing to accept more financial help from China, despite his country’s mounting debt. And while he acknowledged that Sri Lanka’s current predicament is of “its own making”, he said the war in Ukraine is making it even worse — and that dire food shortages could continue until 2024. He said Russia had also offered wheat to Sri Lanka. lanka’s finance minister, spoke to the AP in his office in the capital, Colombo, one day shy of a month after he took over for a sixth time as prime minister. Appointed by President Gotabaya Rajapaksa to resolve an economic crisis that has nearly emptied the country’s foreign exchange reserves, Wickremesinghe was sworn in after days of violent protests last month forced his predecessor, Rajapaksa’s brother Mahinda Rajapaksa, to step down and seek safety from angry crowds at a naval base.
India decides not to impose ADDs on LDPE imports from four origins
India has decided not to impose anti-dumping duties (ADDs) on low density polyethylene (LDPE) imports from Saudi Arabia, Thailand, Singapore and the US. “The central government, after considering the final findings of the designated authority, has decided not to accept the recommendations to impose anti-dumping duty on the import of LDPE,” the Department of Revenue under the Ministry of Finance stated on 6 June. India was initially planning to impose ADDs ranging from $17.05/tonne to $216.76/tonne on LDPE imports from the four countries. An investigation into LDPE dumping from the four countries and two others was started in October 2020 following a complaint from India’s Chemicals and Petrochemicals Manufacturers Association (CPMA). In April 2022, a decision was made to terminate the probe on the UAE and Qatar. Conglomerate Reliance Industries Ltd (RIL) is the sole producer of LDPE in India.
India has saved over ₹410 billion forex by use of 10% ethanol-blended petrol: Govt
The country has been able to save over ₹410 billion in foreign exchange through the use of 10% ethanol-blended petrol, said Ashwini Kumar Choubey, the Union minister of state for environment, forest and climate change, on Wednesday. “India recently achieved 10% ethanol blending target five months in advance, saving over ₹410 billion worth of fuel imports for the nation,” said Choubey while addressing an online event of auto industry body SIAM on sustainable mobility. The initiative has led to sizable benefits for farmers, he added. “Our next target is to achieve 20% ethanol blending and it is projected to be completed by 2025-26,” Choubey noted. He said ethanol blending is a great step toward reducing the country’s fuel imports and carbon emissions. Choubey’s thoughts were echoed by Sunil Kumar, the ministry of petroleum and natural gas joint secretary (refinery), who added that he is confident 20% ethanol blending in gasoline would be achieved by 2025-26. “We aim to achieve these plans uniformly across the country in the targeted years. With the efforts made by the government the existing installed ethanol distilleries have reached around 7 billion litres and likely to reach more than 12 billion litres for 20% blending by 2025-26,” he noted. Maruti Suzuki India CTO CV Raman said the target of 20% ethanol blending by 2025 would lead to a reduction in oil imports while incentivising farmers and reducing emissions. India’s ethanol blending goals India has achieved the target of supplying 10% ethanol-blended petrol five months ahead of schedule in June and is aiming to double the blend by 2025-26 in order to cut oil import dependence and address environmental issues. The original target for doping 10% ethanol, extracted from sugarcane and other agri commodities, in petrol was November 2023. The government had earlier informed that ethanol blending has reduced greenhouse gas (GHG) emissions of 2.7 million tonnes and has also led to the expeditious payment of over ₹406 billion to farmers. While earlier fuel-grade ethanol was produced only from sugarcane, since 2018, alternate routes such as sugarcane juice, sugar and sugar syrup, heavy molasses, damaged foodgrains unfit for human consumption, surplus rice and maize, were opened up. As the availability of ethanol increases, the equivalent amount of crude (used for petrol production) import is reduced.
Air Products Awarded Long-Term Hydrogen and Nitrogen Supply Agreement for Indian Oil Corporation
Air Products, a world leader in industrial gases and large-scale project development, execution and operation, today announced the signing of a long-term supply agreement with Indian Oil Corporation Limited (IOCL), India’s flagship national oil company. Air Products will build, own and operate (BOO) a new industrial gases complex supplying hydrogen, nitrogen and steam to IOCL’s Barauni Refinery in Bihar, India. The new industrial gas complex will aid IOCL’s capacity expansion from six to nine million tonnes per annum producing Euro-VI or BS-VI compliant gasoline and diesel at its Barauni complex. The industrial gas complex will include the latest generation multi-feed hydrogen production facility supplying 70,000 normal cubic meters per hour (Nm3/hr) of hydrogen as well as steam, and a high-efficiency air separation unit producing 4,000 Nm3/hr of nitrogen. Air Products expects the new industrial gas complex for IOCL to come onstream in 2024. Air Products’ chief operating officer Dr. Samir J. Serhan said, “We are honored to work with IOCL, the largest petroleum refining company and largest Public Sector Undertaking in India. As one of the fastest growing economies in the world, our latest strategic investment in India will provide an efficient combination of industrial gas production technologies, enabling IOCL to meet ever-increasing transportation fuel demand. We look forward to reliably supplying IOCL’s industrial gas needs for decades to come.” Juan Gonzalez, vice president, Large Project Business Development, Air Products Middle East, Egypt, Turkey and India, said, “We are proud to work with IOCL as they look to significantly expand their operations at Barauni. We look forward to bringing our global expertise, experience and world-class engineering capabilities to this project.”
Indian Crude Basket Price Soars To $118.06 Per Barrel
Price of Indian basket crude soared to $118.06 per barrel as on June 7 at an exchange rate of (Rs/$) of ₹ 77.72 according to data released by Petroleum Planning and Analysis Cell (PPAC). At the same time, the average price of Indian basket crude oil in June (till Tuesday), rose to $117.01 per barrel, the PPAC data showed. The surge in average Indian basket crude price is significant as in May 2022, the average price was 109.51 per barrel. Despite crude oil prices surging, fuel prices in the country have been on a freeze since May 22, 2022 and oil marketing companies have been indicating to the Government about under-recoveries. Though refiners have been regularly buying Russian crude at discounted prices and analysts have said that this may to an extent, help cover their losses, the rising crude prices are gradually putting pressure on their margins.
Russia has no extra oil to sign deals with two Indian buyers
Russia’s Rosneft is holding back on signing new crude oil deals with two Indian state refiners, three sources with knowledge of the matter said, as it has committed sales to other customers. Indian refiners have been snapping up cheap Russian oil, shunned by western companies and countries since sanctions were imposed against Moscow for its invasion of Ukraine on Feb. 24, which Russia calls a “special military operation”. A lack of new term supply deals with Rosneft may push Indian refiners to turn to the spot market for more expensive oil. It also indicates that Russia has managed to keep exporting its oil despite increasing pressure from Western sanctions to choke Moscow’s revenue. Drawn to the discounts offered, three Indian state refiners – Indian Oil Corp, Bharat Petroleum Corp and Hindustan Petroleum – opened negotiations with Rosneft earlier this year for six-month supply deals. So far only IOC, the country’s top refiner, has signed a deal with Rosneft, which will see it buy 6 million barrels of Russian oil every month, with an option to buy 3 million barrels more. The other two refiners’ requests have since been turned down by the Russian producer, the sources said. “Rosneft is non-committal in signing a contract with HPCL and BPCL. They are saying they don’t have volumes,” said one of the sources. Rosneft, IOC, HPCL and BPCL did not respond to Reuters’s requests for comment. Russia is ramping up oil exports from its major eastern port of Kozmino by about a fifth to meet surging demand from Asian buyers and offset the impact of European Union sanctions. Trade sources said Rosneft is pushing barrels into the markets through trading firms such as Everest Energy, Coral Energy, Bellatrix and Sunrise. Bellatrix and Sunrise were not available for comment, while Coral and Everest did not respond to a Reuters email seeking comment. According to the shipping data cited by two traders in the Urals market, all four trading firms acted as suppliers of crude oil purchased from Rosneft to India. China has also boosted its purchases from Russia. Rosneft has awarded 900,000 tonnes (6.66 million barrels) of ESPO Blend crude oil loading in June to Unipec, the trading arm of Asia’s top refiner Sinopec Corp, according to four traders. Indian sources said Russian oil is no longer available at deep discounts and they get fewer offers for sale on a Delivered At Port (DAP) basis, an international commercial term in which the seller pays for insurance and freight and ownership is transferred to the buyer only after the cargo is discharged. “Earlier the companies were offering good discounts but that is not available now. Offers have been reduced and discounts are not as good as before, as insurance and freight rates have gone up,” another source said. The European Union, which along with Britain and the United States dominate the international marine market, last week announced an immediate ban on new insurance contracts for ships carrying Russian oil, and gave a six-month grace period for existing contracts. The lack of shipping insurance coverage has hit IOC’s purchases of Russian oil under a contract it signed with Rosneft last year, sources said. The contract gives IOC an option to buy 2 million tonnes of oil from Rosneft on a free on board (FOB) basis, which requires the buyer to charter ships and pay for insurance to load the cargoes from Russia.
The Biggest Reshuffle Of Oil Flows Since The 1970s
The biggest reshuffle of oil trade flows since the Arab oil embargo of the 1970s is underway—and things may never return to normal. The Russian invasion of Ukraine and the sanctions on Russian oil exports are changing global oil trade routes. Over the past nearly five decades, oil flowed more or less freely from any supplier to any customer in the world, except for sanctions on Iran and Venezuela in recent years. This free energy trade is now over, after the Russian aggression and the Western sanctions that followed, plus Europe’s irreversible decision to cut off its dependence on Russian energy at any cost. A New Cold War In The Oil Market A new Iron Curtain is now upending oil flows as Europe turns to the U.S., the Middle East, and Africa (and basically everyone that’s not Russia) for oil supply. The EU adopted last week a sanctions package to stop importing Russian seaborne crude oil within six months and Russian oil products within eight months. In a much farther-reaching measure in the sanctions package, the EU also bans EU operators from insuring and financing the shipment of Russian oil to third countries after a six-month wind-down period. The UK is also set to join the insurance ban after the UK and the European Union have reportedly agreed to jointly shut off Russia’s access to oil cargo insurance. The UK is home to an insurers’ club that covers 95% of the global oil shipment insurance market. This move is expected to make Russian oil shipments to countries willing to take its oil, mostly in Asia, more difficult to arrange in terms of liability coverage, and could prompt buyers in India and China to ask for even steeper discounts of the Russian crude to Dated Brent. The flagship Urals grade from Russia is selling at a more than $30 discount to Brent these days. Trade Routes Shift By the end of this year, Europe expects to have effectively banned 90% of all its imports of Russian oil before the war. The embargo and the self-sanctioning are already upending global oil tanker traffic. Instead of traveling two or three weeks from Russia’s Baltic ports to Hamburg or Rotterdam, tankers carrying Russian oil now travel two or three months to reach India and China. For oil going to Europe, crude from the Middle East will now travel longer distances to European ports compared to the shorter routes to India and China. hese changes in oil flows will result in higher insurance, shipping, and financing costs for cargoes, Zoltan Pozsar, Global Head of Short-Term Interest Rate Strategy at Credit Suisse and a former U.S. Treasury Department official, told The Wall Street Journal. More expensive energy trade—due to the end of the free trade that was based solely on market signals of supply, demand, and prices—could put commodities at the center of the next global economic crisis, Pozsar told the Journal. Winners and Losers Sure, Russia is increasingly using ship-to-ship transfers to load crude from smaller tankers onto supertankers. It is also expected to backchannel part of its crude shipments the way Iran has been doing since the U.S. sanctions on its oil exports were re-imposed in 2018. Still, Asia will not be able to absorb all the Russian oil that was previously going to Europe, which was Russia’s number-one oil customer before the war. India, which has traditionally bought oil mostly from the Middle East, is boosting Russian oil purchases, taking advantage of the cheap Russian crude. Middle Eastern producers, for their part, are expected to supply more oil to Europe, as will African producers and the United States. India and China are Russia’s chance to continue selling its oil. Although Russia publicly expresses confidence that it will have “new markets” for its energy, analysts doubt all the oil that would have gone to Europe could end up with buyers in Asia, also because of liability coverage issues and the changing oil trade routes which extend the period of crude traveling from seller to refiner. For Europe, the choice of oil supply is now political, and it will be willing to pay a premium to procure non-Russian oil. This will tighten supply options and continue to support elevated oil prices for months to come. Commenting on the EU’s embargo on Russian seaborne oil imports, Fitch Ratings said last week: “This ban will have a significant impact on global oil trade flows, with about 30% of EU’s imports needing replacement from other regions, including the Middle East (Saudi Arabia and the UAE have sustained production spare capacity of about 2MMbpd and 1MMbpd, respectively), Africa and the US.” “However, we believe that redirecting of all Russian oil and products volumes may not be possible due to infrastructural limitations, buyers’ self-restrictions and logistical complications, such as potential restrictions on providing insurance for cargos carrying Russian oil. As a result, we estimate that about 2MMbpd-3MMbpd of Russia’s oil exports, or about a quarter of the country’s oil production, may disappear from the global market by end-2022,” Fitch noted. In this new world order for oil trade flows, there are two key issues that the market and policymakers in the United States and Europe will be looking at in the near term. These are whether the world has enough spare capacity to replace EU’s Russian imports, and how willing the holders of spare capacity—Saudi Arabia and the UAE—will be to tap into that capacity. Per OPEC+’s deal, Saudi Arabia’s target production for July is 10.833 million bpd, but the Kingdom has very rarely tested a sustained production of 11 million bpd despite claiming a capacity of 12 million bpd.
Essar Oil crosses 0.8 mmscmd mark in coal bed methane production
Essar Oil and Gas Exploration and Production Ltd (EOGEPL) on Tuesday said it has crossed the 0.8 million standard cubic meters per day (mmscmd) mark of coal bed methane production and is inching towards the benchmark of 1.0 mmscmd post commissioning of the Urja Ganga Pipeline. The company said it is committed to contributing to India’s vision of becoming a “Gas Based Economy” in the next decade, by ramping up its CBM gas production. “The importance of domestic gas in the energy basket for a developing country like India is extremely crucial considering the uptrend in gas demand, price and rising import bills,” EOGEPL CEO and Director Pankaj Kalra said. “The unavoidable delay in the GAIL Urja Ganga trunk line caused numerous challenges for us. However, steady efforts and technological applications to ramp up gas production to double the production and cross 0.8 mmscmd has brought us back on track,” he said. EOGEPL said its next milestone remains 1.0 mmscmd of CBM production. The future ramp-up will be an integration of re-fracturing and revival of wells, alongside fresh technological applications, many of which will boast of its first time application in CBM in India, the company said. EOGEPL is engaged in Raniganj East CBM Block in West Bengal. As of now, EOGEPL operates around 350 wells in the block and since May 2021.