G7 countries pledge to stop Russia oil imports
The G7 club of wealthy nations committed Sunday to phasing out its dependency on Russian oil and issued a scathing statement accusing President Vladimir Putin of bringing “shame” on Russia with his invasion of Ukraine. The statement from the Group of Seven — France, Canada, Germany, Italy, Japan, Britain and the United States — did not specify exactly what commitments each country will make to move away from Russian energy. But it was an important development in the ongoing campaign to pressure Putin by crippling Russia’s economy, and underscores the unity of the international community against Moscow’s actions. We commit to phase out our dependency on Russian energy, including by phasing out or banning the import of Russian oil. We will ensure that we do so in a timely and orderly fashion, and in ways that provide time for the world to secure alternative supplies,” the joint statement said. his will hit hard at the main artery of Putin’s economy and deny him the revenue he needs to fund his war,” the White House said. The announcement came as the G7 held its third meeting of the year on Sunday via video conference, with Ukrainian President Volodymyr Zelenskyy participating.
Europe Sees Huge Hydrogen Opportunity In Asia
Hot on the tail of Europe, which has expanded its green hydrogen production over the last year, Asia is developing its hydrogen industry to become a major producer over the next decade. As several countries announce renewable energy strategies, green hydrogen, as well as hydrogen produced using carbon capture technologies, will play a major role. Green hydrogen demand is expected to increase dramatically as the world transitions away from fossil fuels to renewable alternatives. Hydrogen demand could reach anywhere between 150 to 500 million metric tonnes per year by 2050, depending on global climate ambitions, according to a PWC report. While green hydrogen is much more expensive to produce than grey hydrogen – derived from natural gas production – the push by governments around the world to curb carbon emissions by the end of the decade is already driving up demand for the green alternative. Companies are now racing to produce low-cost green hydrogen, using new technologies and techniques, in the hope that they can become more competitive. Last year, India announced a new green hydrogen strategy, although its technology for the production of green hydrogen is still in its infancy. Despite skepticism around the anticipated rapid growth of India’s green hydrogen industry, it has already developed its solar energy sector substantially over the last decade, showing what can be done with enough political will. India now has 50 GW installed solar capacity, adding a record 10 GW in 2021 alone. India expects to produce 5 million tonnes of the fuel by 2030, promoting the country as a green hydrogen hub. Several initiatives have been seen in recent months supporting this production goal, including an investment of $75 billion by India’s Reliance Industries in the green energy market, including green hydrogen. In addition, in April Greenko group and Belgium-based John Cockerill committed to the construction of a 2GW hydrogen electrolyzer gigafactory in India. This would be the biggest in the world outside of China. The Indian Oil Corporation also announced a partnership with two private firms for green hydrogen production. Now, European governments are eyeing Asia’s green hydrogen potential, as Germany announces an agreement for German-Indian hydrogen cooperation. This comes as part of the country’s plan for “hydrogen diplomacy” as it seeks to develop more friendly energy allies in the wake of Russian energy provision. Germany’s Minister of Economic and Climate Affairs Robert Habeck stated “As part of our energy partnership with India, we have agreed to work together in more depth on developing innovative solutions for sustainable green hydrogen production. An important milestone in reducing our dependence on fossil fuels.” With 7,500 kilometers of coastline and an abundance of sun, India is well-located to produce the renewable energy required to support green hydrogen production. Germany and India are now expected to create a task force, which will develop a road map for the development of the green hydrogen industry and how that will look for the two countries.
Work on piped natural gas network proceeding slowly
The piped natural gas (PNG) network has often been touted as being a potential gamechanger in India’s energy sector. Unfortunately, despite the initiative’s obvious benefits, the apathetic attitude of the stakeholders involved has resulted in its implementation lagging considerably behind schedule, at least in Hubballi-Dharwad. Thus far, IOAGPL has laid pipelines that cumulatively stretch to a length of 600km. With demand for PNG connection growing across Hubballi-Dharwad, there is a need to expedite work on the project. Deputy general manager for IOAGL Vinod Papal attributed the lag to lack of awareness among the people. “Not many people were aware if the facility. But more households will now be integrated in the network since more people are coming forward asking to be supplied natural gas through the piped network,” Papal said. The spike in price of petrol and diesel is pushing consumption of compressed natural gas, Papal said. “Autorickshaws need up to three kilos of CNG daily, while the figure is four kilos for taxis. Given the rising demand for CNG for motorised vehicles, the authorities have decided to increase the number of CNG pumping stations. As of now, there are five such stations across the twin cities, and there are plans to add seven more,” he said. Papal said that they were facing difficulties in obtaining permission from the civic authorities to dig the ground for laying pipes owing to lack of knowledge among the officials about the benefits of PNG. “Union minister Pralhad Joshi, former chief minister Jagadish Shettar and MLA Arvind Bellad have helped us get permission to dig up the roads. Thankfully, we do not have to dig up any more roads since we have met our target,” Papal said.
India buyers grab discounted Russia LNG shunned by rest of world
India’s liquefied natural gas importers are purchasing extra volumes from Russia at a discount as most other spot buyers shun the fuel. Companies including Gujarat State Petroleum Corp. and GAIL India Ltd. recently bought several LNG spot shipments from Russia at prices below prevailing market rates, according to traders with knowledge of the matter. They may purchase more as long as the Russian fuel remains cheaper than rival suppliers, the people said, who requested anonymity to discuss private details. GSPC, GAIL and India’s ministry of petroleum and natural gas didn’t respond to requests for comment. India gets almost three-quarters of its LNG under long-term contracts, but sweltering heat and ongoing blackouts are forcing the nation’s utilities to top up with spot shipments, which are trading at well above normal due to a global supply crunch. With demand for gas in the fertilizer sector also rising, some importers are snapping up the discounted Russian shipments. The Russian LNG shipments were purchased by Indian firms via recent spot tenders, as those cargoes were offered at lower prices than other suppliers, the people said. Outside of India, few LNG importers allow for suppliers to offer Russia-origin shipments in purchase tenders. The South Asian nation, which is also seeking deeper discounts on Russian oil, has emerged as a last resort for Russian fuels traded on the spot market and shunned by the world due to President Vladimir Putin’s invasion of Ukraine.
U.S. Shale Swings From Losses To Record Cash Flows
After years of plowing money into boosting production and thus depressing oil prices, the U.S. shale patch emerged from the pandemic-inflicted slump with unwavering capital discipline which, combined with $100+ oil, is paying off with record cash flows for American oil producers. The largest shale producers have left years of bleeding cash behind, focusing on returning capital to shareholders from the record cash flows they have been generating for several months now. As they report first-quarter figures these days, public companies vow continued disciplined spending and only modest production growth as “drill, baby, drill” is no longer shale’s primary goal. Investors, in turn, are rewarding the discipline—most of the 20 top-returning firms in the S&P 500 year to date are oil companies, including Occidental, Coterra Energy, Valero, Marathon Oil, APA, Halliburton, Devon Energy, Hess Corporation, Marathon Petroleum, ExxonMobil, ConocoPhillips, Chevron, Schlumberger, EOG Resources, and Pioneer Natural Resources. As a result of the highest oil prices since 2014 and capex discipline, the shale patch is on track for massive free cash flows of a combined $172 billion in 2022 alone, per Deloitte estimates cited by Bloomberg. By 2020, the shale industry had booked $300 billion in net negative cash flow in the 15 years since the first shale boom, Deloitte estimated back then. Unlike in the previous upcycles, U.S. producers are now directing a large part of the record cash flows to boost shareholder returns with higher dividends, special dividends, and share buybacks. U.S. producers do not plan to abandon the newly-found capital discipline and will grow production only modestly, the top executives at most public shale producers said during the Q1 earnings calls this week. Many firms acknowledged the supply chain, inflationary, and labor constraints that could result in slower American oil production growth than the increase the EIA and analysts expect. Producers are also wary of the Biden Administration’s calls for only a short-term ramp-up in production amid otherwise negative comments on the oil industry, which undermines the firms’ visibility and willingness to plan higher investments in the medium term. “To say bluntly, the administration’s comments are certainly causing a lot of uncertainty in the market, both in the terms of regulatory taxation, legislation, and negative rhetoric toward our industry. And that creates uncertainty in our owners’, our shareholders’ minds about what the future of this industry really is,” Diamondback Energy’s CEO Travis Stice said on the earnings call this week. Diamondback Energy will keep its current oil production levels of 220,000 net barrels of oil per day, Stice said. “While we believe that efficiently growing our production base is achievable over the long term, we do not feel that today is the appropriate time to begin spending dollars that would not equate to additional barrels into multiple quarters from now,” he added. Another producer, Devon Energy generated $1.3 billion of free cash flow for the first quarter, its highest-ever quarterly FCF. “With this increasing amount of free cash flow, our top priority is to accelerate the return of capital to shareholders,” CFO Jeff Ritenour said. Continental Resources “delivered a record quarter of adjusted earnings per share and exceptional free cash flow generation,” CFO John Hart said as the shale giant announced a fifth consecutive increase to quarterly dividend. Chesapeake Energy, which went through a bankruptcy during 2020, reported $532 million in adjusted free cash flow for Q1, its highest quarterly FCF ever, and launched a $1-billion share and warrant repurchase program. Pioneer Natural Resources, for its part, will be returning 88% of its first-quarter free cash flow of $2.3 billion to shareholders, while keeping disciplined oil growth of up to 5%, CEO Scott Sheffield said. It was Sheffield who said as early as in February: “Whether it’s $150 oil, $200 oil, or $100 oil, we’re not going to change our growth plans.” In Pioneer’s earnings call this week, Sheffield said that U.S. shale would likely grow less than the EIA and other analysts expect, which would put upward pressure on oil prices. “What’s happening now in regard to labor constraints, frack fleet constraints, inflation constraints – I just think it’s going to be tough to hit some of the numbers. It even makes me even more bullish about some of the oil price numbers that are out there,” Sheffield said, as carried by Reuters. Sheffield sees U.S. oil production growing by 500,000 bpd-600,000 bpd this year, compared to EIA and other estimates of 800,000 bpd-1 million bpd growth. Added to operational constraints and capital discipline is the industry’s frustration with the Biden Administration, which producers say has singled out oil firms to blame for the highest gasoline prices in eight years, while calling for a short-term jump in production. Democratic lawmakers even said last week they would propose legislation to allow state and federal agencies to “go after” oil companies. Senate Majority Leader Chuck Schumer compared oil firms to “vultures” booking record profits and using the COVID and Ukraine tragedies for market manipulation. “Talk about mixed messages. We can’t treat the oil and natural gas industry as a kind of light switch that is turned on or off to suit the political moment,” American Petroleum Institute (API) President and CEO Mike Sommers said this week. “It can be easy and fashionable to speak as if we hardly even need oil or natural gas anymore. But then disruptions occur, and once again everybody is staring down the truth. Now, suddenly, some policymakers want to flip the switch “on” again, but only for a short time. And as practical realities intrude, mostly what we hear from Washington is blame-shifting and excuses,” Sommers added.
Pincer grip of rising domestic cooking gas price
The steep hike in the price of domestic cooking gas has poured salt into the wounds of people already struggling to make ends because of the rising cost of living. After an overnight hike of Rs 50, the public sector oil marketing companies have priced a 14.2kg refill in Kolkata at Rs 1,026. For many, like Rita Singh, hikes such as these have meant a gruelling return to firewood as the medium of cooking. The 46-year-old domestic help lives with her husband and son in Narendrapur, on the southern fringes of Kolkata. She works at four houses in Patuli, earning around Rs 5,000 a month. Her husband paints houses but his income is not fixed. Two years ago, LPG was the sole cooking medium at her kitchen. Now, everything but rice is made on firewood. On most days, the meal includes rice, dal and/or a sabzi. “Even when I make fish or meat, I use firewood. This way, I try to spend three months with two cylinders. Otherwise, it is becoming impossible to survive,” said Singh. Cooking with wood entails a lot of time, smoke, incessant coughing and breathing problems. But it saves money. She often sources the wood from discarded furniture of employers. Singh summarised the pincer grip of rising costs. “Two years ago, my income was more and prices were comparatively lower. Now, the prices of everything have gone up. But the income has come down,” she said. Before the pandemic, she worked at “around 10 homes”. She earned almost double and was short of time. LPG was the best bet then. Back then, her husband would go to work at least 15 days a month. Now, the number has come down to barely eight. Now, Singh walks between home and the station, even under the burning sun, because she can save Rs 20 (Rs 10 two times a day). Several Kolkatans who have switched to firewood told Metro that the latest hike in prices of LPG only vindicated their stand and there was no question of going back. Shyamali Dutta, another domestic help living off Swinhoe Lane near Kasba, is one of them. Her monthly income is also Rs 5,000. Dutta’s husband, an electrician, was hit hard by the pandemic and was yet to get back to his normal working schedule. Dutta has been using wood and cow dung cakes as cooking fuel though she has an LPG connection. Even six months ago, she had been cooking rice on firewood and the sides with LPG. Now, firewood is almost the sole cooking medium. “Only tea and an occasional meal for the children is made with cooking gas. It is also used when we have guests and multiple dishes have to be cooked. That way, I can save one cylinder every month,” said Dutta. “Now, with another hike of Rs 50, the decision (not to use LPG) seems inevitable,” she said. In a family of nine with minimal income, Rs 1,000 a month is a substantial saving.
Reliance expects gas prices to rise again in Oct
Reliance Industries Ltd expects prices of natural gas in India to rise again in October as its gas exploration business reaps the rewards of a global surge in energy prices that have already pushed the rates to a record high. The conglomerate, controlled by billionaire Mukesh Ambani, expects the price cap for its KG-D6 gas sales to rise over the current USD 9.92 per million British thermal units, Sanjay Roy, senior vice-president for exploration and production, said in an investor call following the announcement of its quarterly earnings on Friday. The government sets gas prices every six months based on international rates. The price of gas from old or regulated fields was more than doubled to a record USD 6.1 per mmBtu from April 1 and that for difficult fields like those lying in deepsea to USD 9.92. per mmBtu. Rates are due for a revision in October. It is anticipated that the price of gas from old fields of state-owned Oil and Natural Gas Corporation (ONGC) will be hiked to about USD 9 per mmBtu and the cap for difficult fields will rise to double digits. ”In fact, we have also seen prices rise, as we know the gas markets are quite tight and prices have been elevated, and that effect we are seeing now in the revenues as well as improved EBITDA margins,” Roy said. ”Now, going forward, we expect ceiling prices to increase to USD 9.92 in the first half (of current fiscal that began on April 1) – that has been notified. And further, we expect increases going from there onwards in the second half of the year.” Reliance and its partner bp plc of UK produce about 18 million standard cubic meters per day of gas from two sets of new fields in the eastern offshore deepsea block KG-D6. Higher gas prices have helped the company’s EBITDA (pre-tax profit) from oil and gas exploration and production business to climb to a seven-year high. Revenue from the segment rose 3.5 times to Rs 74.92 billion in 2021-22 (April 2021 to March 2022) fiscal while EBITDA surged 21 fold to Rs 54.57 billion. Reliance-bp, who commissioned R-Cluster field in December 2020 and Satellite fields in April 2021, are targeting to start production from MJ field in the same block by the end of the year. After MJ starts, production is expected to reach 30 mmscmd in 2023.
Why are U.S. natural gas prices soaring?
U.S. natural gas prices are surging, with the benchmark futures contract rising to a 13-year high of $8.74 per million British thermal units, at a time when that fuel’s price tends to dip due to lack of demand in the spring. But analysts say a number of factors have combined to boost the cost of gas, which has risen about 90% since the beginning of March. Here is what is happening: WEATHER Simply put, it is hotter than normal in many parts of the United States. Power generators rely on gas to produce electricity, which is used by consumers and businesses to cool buildings. Weather in Houston, the biggest city in Texas, is expected to reach 100 degrees Fahrenheit (37.8 Celsius) over the weekend, or about 15 degrees F higher than normal for this time of year. Cooling demand in Northern California spiked earlier this week as well, and people responded by turning on air conditioners. Spot prices – the cost to buy gas in specific locations – spiked in several spots, including the Henry Hub benchmark in Louisiana as well as in California, Pennsylvania and Chicago. The gas market is getting caught up in the frenzy that has hit the oil, fuel and coal markets as countries scramble to make sure they have enough reliable energy in the wake of Russia’s invasion of Ukraine. Russia is the world’s biggest exporter of crude and fuel and is also the biggest exporter of natural gas. With fewer exports of Russian energy, countries in Europe and elsewhere are trying to secure supply. It is that factor that has boosted European benchmarks to several multiples of the U.S. price, as gas futures at the Dutch Title Transfer Facility (TTF) were at $33 on Thursday. The United States has helped by diverting cargoes of liquefied natural gas (LNG) to Europe, and many expect LNG demand to continue to surge as European nations shun Russia in the years to come. The United States has generally been isolated when it comes to the natural gas market. The nation produces roughly 97 billion cubic feet per day (bcfd) of natural gas, enough for domestic consumption and export of about 12 bcfd by way of LNG tankers. However, export demand is rising, and even though the United States cannot add capacity at a moment’s notice, expectations of a continued call on that demand are boosting the price of natural gas. The spring is the optimal moment for natural gas utilities to sock away gas in preparation for cold months which are two seasons away. But that hasn’t happened, in part due to rising overseas demand and worry about additional curtailment of global energy supply. As a result, there is less gas in storage right now than normal, with current storage at 1.567 trillion cubic feet, or about 16% below the five-year average for supply.
Indian petcoke producers raise domestic prices amid supply tightness: sources
Indian petcoke producers have increased their domestic prices for May amid tight supply and elevated global thermal coal prices due to countries struggling to replace Russian coal, market sources said May 4. India’s largest petcoke producer Reliance Industries Ltd., or RIL, increased its offer by Rupee 441/mt ($5.77/mt) from April, according to a note to traders seen by S&P Global Commodity Insights. RIL’s new petcoke offer for May is Rupee 22,257/mt. Chennai Petroleum Corporation Ltd., or CPCL, a subsidiary of state-run Indian Oil Corp., has revised its price for domestic petcoke to Rupee 22,070/mt for May, up Rupee 40/mt from April, according to a similar note to traders seen by S&P Global. RIL did not respond to queries, and Chennai Petroleum could not be reached for a comment. Mangalore Refinery and Petrochemicals Ltd., or MRPL, sharply increased its petcoke price by Rupee 4,140/mt to Rupee 20,640/mt for supply by road in May and to Rupee 20,340/mt for supply by railway rake. Bharat Petroleum Corporation Ltd., or BPCL, revised its petcoke price at Bina refinery up Rupee 5,505/mt to Rupee 23,156/mt and the price at its Kochi refinery by Rupee 5,583/mt to Rupee 21,259/mt, according to a note seen by S&P Global. MRPL could not be reached for a comment immediately, while BPCL confirmed the prices at its two refineries. A Nayara Energy company source said that the company has also raised its petcoke price by Rupee 434/mt to Rupee 22,262/mt for May. Traders said that domestic petcoke prices were still rising or were steady, despite a correction in international prices, as domestic producers had not increased the prices in March. “They [domestic petcoke producers] only revise prices on a monthly basis, and they could not increase the prices in March, so they feel they can keep prices at these levels due to current global conditions,” an India-based trader said. Traders pegged the price of India-delivered petcoke with 6.5% sulfur at $255-$260/mt CFR for the week ending May 6.
Businesses suffer as commercial LPG cylinder price touches Rs 2,450
The price of commercial LPG cylinders was raised by over Rs 100 at the start of this month, the latest escalation in fuel prices that have drained food businesses. Fast food centres across the city are feeling the heat. The price of a 19kg commercial cylinder now costs around Rs 2,450 in Kolkata. Based on purchase volume and timely payment, bulk procurers often get some discount from suppliers. Rajesh Chaurasia, who owns Iceberg, a popular fast-food centre in south Kolkata’s Golpark, needs one cylinder every day. He uses 17kg cylinders, which cost around Rs 1,800 each after the latest hike. His sales volume is around Rs 8,000 to 10,000 on a normal day. For Chaurasia, a hike of Rs 100 translates to an additional burden of Rs 3,000 per month. The amount would not have hurt him so much if it were an isolated jump. “From oil to vegetables to meat to packaging, the cost of everything has gone up. The margins are going down every day. It is becoming harder every day. I am able to survive because I don’t have to pay rent for my establishment,” said Chaurasia.