World’s highest capacity featured oil and gas rig handed over to ONGC
Megha Engineering and Infrastructure Ltd, which had secured an order to supply 47 oil rigs from Oil and Natural Gas Corporation (ONGC) worth Rs 6000 crores, has handed over one more rig to ONGC in Bhimavaram, Andhra Pradesh. This is a state-of-the-art indigenous oil rig with the latest and best in class features in the world. This 2,000-HP rig can give a performance equal to a 3,000-HP traditional rig. This indigenous rig is being operated successfully, and it can drill up to 6,000 metres (6 km) deep into the earth. Business Today TV visited the oil rig in Bhimavaram, Andhra Pradesh. These rigs are built with full automation in order to reduce the down time on account of safety & maintenance. These rigs are of the first of their kind to induct into the ONGC drilling fleet. MEIL will be manufacturing and supplying all the rigs to the ONGC assets in Assam (Sibsagar, Jorahat), Andhra Pradesh (Rajahmundry), Gujarat (Ahmedabad, Ankaleshwar, Mehasana and Cambay), Tripura (Agartala) and Tamil Nadu (Karaikal). K. Satya Narayana, Technical Head, Rigs Project, MEIL, said, “As the Covid-19 is in endemic stage, we have expedited the manufacturing of rigs and their deliveries as promised. The company is playing a vital role in the energy sector, both upstream and downstream. These state-of-the-art oil rigs will have the world’s best and most advanced hydraulic technology features. As the energy prices soar, the advanced rigs are very crucial for Indian energy sector to drill the oil and gas wells faster and increase the oil and gas production for domestic use. MEIL is the first private player in India in manufacturing highly efficient oil drilling rigs with indigenous technology under the “Make in India” and “Atmanirbhar Bharat” initiatives.”
Saudi Arabia Reaffirms Commitment To Russia Despite War In Ukraine
Saudi Arabia’s Crown Prince Mohammed bin Salman (MbS) reiterated last week his country’s “commitment to the ‘OPEC+’ agreement” – working alongside the agreement’s other key partner, Russia – despite the ongoing Russian invasion of Ukraine. MbS sought to couch this extraordinary re-assertion of his country’s alliance with Russia in terms of the “the kingdom’s keenness on the stability and balance of oil markets”. However, this idea was quickly undermined by the announcement of that the ongoing modest rise of 400,000 barrels per day (bpd) in collective output seen over the past few months will continue, despite the economic damage being done to many developed economies by current high oil and gas prices. In reality, what MbS’s comment underlined was the broad-based strategic political and economic shift seen by Saudi Arabia since the end of the 2014-2016 Oil Price War, away from the U.S.’s sphere of influence and towards that of China and Russia. The catalyst for this seismic shift in geopolitical alliances was the failure of the 2014-2016 Oil Price War, which was launched with the specific intention by Saudi Arabia to destroy – or at least severely disable for as many years as possible – the U.S.’s then-nascent shale oil sector, as analysed in depth in my new book on the global oil markets. It was obvious to the Saudis at that point – and indeed to the U.S. – that the unchecked build-out of lower fixed cost oil in increasingly large volumes would mean the gradual but extreme diminution of Saudi Arabia’s power in the world and as a key player in the Middle East, given that its only true basis of power is its oil supplies. It would also mean that the U.S. would be less inclined to support Saudi on any and all matters, regardless of how broadly unpalatable they might be. In short, the Saudis had no real choice but to try to take on the US’s shale sector, and it did, and it lost and it – and every one of its OPEC brothers – paid a terrible economic price, exacerbated by the 2020 Oil Price War. The immediate aftermath of the 2014-2016 Oil Price War was not only that Saudi had devastated its own economy and those of other OPEC member states for years to come but, more importantly from a geopolitical perspective, that it had lost its credibility as the de facto leader of OPEC and that OPEC had lost its credibility as the indomitable force in global oil markets. This meant that OPEC’s pronouncements on future oil supply and demand levels – and therefore, on pricing – had lost much of their potency to move markets in and of themselves, and that their joint production deals were diminished in effectiveness. At the end of 2016, then, and fully cognisant of the enormous economic and geopolitical possibilities that were available to it by becoming a core participant in the crude oil supply/demand/pricing matrix, Russia agreed to support the OPEC production cut deal in what was to be called from then-on ‘OPEC+’, albeit in its own uniquely self-serving and ruthless fashion, as has subsequently transpired, and as is also examined in full in my new book on the global oil markets. Since then, Russia has used its position as the most important player in the OPEC+ alliance to do what it does best: cause pockets of chaos into which it can project its own solutions and thus extend its power. In the case of the Middle East more broadly, this cornerstone strategy has been employed in virtually all of the Shia crescent countries – albeit most obviously recently in Iran, Iraq, and Syria – but it has also been systematically whittling away at the foundation stones of the longstanding U.S.-Saudi alliance. As also highlighted in my latest book, the basis for this relationship had been agreed at a meeting on 14 February 1945 between the then-U.S. President Franklin D. Roosevelt and the Saudi King at the time, Abdulaziz. The deal was this: the U.S. would receive all of the oil supplies it needed for as long as Saudi had oil in place, in return for which the U.S. would guarantee the security both of the ruling House of Saud and, by extension, of Saudi Arabia. By the end of the 2014-2016 Oil Price War, though, the agreement had been changed to reflect the growing U.S. impatience with Saudi’s attempts to hamper the development of its shale oil sector. The U.S. said that it would still safeguard the security of Saudi Arabia and its ruling family but added that caveat that this would only continue provided that Saudi Arabia did not attempt to interfere with the growth and prosperity of the U.S. shale oil sector. For Saudi Arabia, given the U.S.’s burgeoning shale oil sector, this was the equivalent of someone being glued on a track in a train tunnel and being forced to watch as the train relentlessly speeds towards them. Following the disastrous 2014-2016 Oil Price War, then, October 2017 saw Russia’s President, Vladimir Putin, invited Saudi Arabia’s King, Salman bin Abdulaziz al-Saud, to Moscow – the first ever visit to Russia’s capital city made by a sitting Saudi monarch. It was also the largest ever foreign delegation to Moscow, and King Salman’s presence – given that he does not usually do such visits – showed how significantly Saudi viewed its relationship with Russia from that point. At this meeting, and the many meetings on the sidelines between officials of the two countries in which the real business is done, US$3 billion or so of specific deals were agreed across a wide range of areas, not just in the oil sector. Russia’s Energy Minister, Alexander Novak, flagged at the time that Russian gas producer Novatek was in talks for Saudi investors to take part in its Arctic LNG-2 project, a follow-up to its US$27 billion plant in the Yamal peninsula. It was also agreed that Saudi Arabia’s sovereign wealth fund, the
IndianOil to build more crude oil tanks at Adani’s Mundra port
Adani Ports and Special Economic Zone Ltd on Tuesday signed an agreement with Indian Oil Corp Ltd (IOCL) towards augmentation of IOC’s crude oil volumes at Mundra. Indian Oil will expand its existing crude oil tank farm at APSEZ’s Mundra Port, thus enabling it to handle and blend additional 10 mmtpa crude oil at Mundra. This will support IOCL’s expansion of its Panipat Refinery (Haryana). IOCL is raising the capacity at its Panipat Refinery by 66% to 25 MMPTA to meet India’s rapidly growing energy requirements, Adani Ports said in a statement. “Mundra Port is a major economic gateway that serves the northern hinterland of India by providing multimodal connectivity. It gives us immense pride to strengthen our partnership further and support IOCL, which plays a vital role in ensuring the energy security of the nation. As IOCL’s trusted long-term partner, APSEZ is well equipped to handle the additional 10 MMTPA crude oil at our existing single buoy mooring (SBM) at Mundra.” said Karan Adani, CEO and Whole Time Director of APSEZ. Indian Oil, which accounts for nearly half of India’s petroleum products’ market share, has a refining capacity of 80.55 MMTPA and over 15,000 KM of pipeline network. Part of IOCL’s current crude oil requirement of 15 MMTPA for its Panipat Refinery is handled at the SBM at Mundra Port. The Mundra SBM is located 3-4 km off the coast where Very Large Crude Carriers (VLCCs) unload crude oil. An undersea pipeline then transports this crude oil from SBM to the Crude Oil Tank Farm and thereafter to the refinery at Panipat via the Mundra Panipat Pipeline (MPPL). Indian Oil is currently operating a crude oil tank farm in an exclusive area in Adani’s Mundra Special Economic Zone, consisting of 12 tanks with a total capacity of 720,000 KL. The addition of 9 new tanks will augment the storage capacity to 1,260,000 KL, thus making Mundra Port by far the largest port based crude oil storage facility for IOCL. This will be accompanied by augmentation of the MPPL pipeline capacity by IOCL to 17.5 mmtpa. IOCL Board had approved a capital expenditure of INR 9000 crore for the crude oil tanks and MPPL augmentation in December 2021, Adani Ports said. This expansion project at Mundra Port underlines the trust of state-run IOCL in APSEZ, earned through its strategic approach of modernizing its ports, improving turnaround time, and thus creating value for its customers, the company said.
Petrol, diesel price hike on cards? Here’s what govt said
With crude oil prices jumping to 14-year high amid the ongoing Russia-Ukraine war, speculations are high that oil marketing companies (OMCs) in India may also start raising fuel prices gradually. Union minister for petroleum and natural gas Hardeep Singh Puri on Tuesday said oil companies will determine the fuel prices and assured that there will be no shortage of crude oil in the country. “I assure you all that there will be no shortage of crude oil. We will make sure that our energy requirements are met, even though 85 per cent of our requirements are dependent on imports for crude oil and 50-55 per cent on gas,” Puri said at a press conference. There have been speculations that petrol and diesel prices may start to rise after the release of state elections results later this week. However, Puri refuted allegation that the fuel prices were reduced by the Centre earlier due to elections and the rates will be hiked again after the polls. Puri said the Centre had reduced Rs 5 per litre on petrol and Rs 10 per litre on diesel last year, but “young leaders” said it was done because of the Assembly elections in five states, the results of which will be announced on March 10. He said people should take note of other conditions such as the Ukraine-Russia crisis to understand why the rates were hiked globally. “Oil prices are determined by global prices and there is a war-like situation in one part of the world and the oil companies will factor that in. The oil companies will themselves determine the prices. We will take decisions in the best interest of the citizens,” Puri said. Fuel price at present Prices of petrol and diesel have remained stable since November, even though Brent crude prices fell to $70 per barrel in December. Before November 2021, soaring pump prices were a major cause of concern for the consumers as it scaled to record highs. However, prices eased after the government cut excise duty on petrol and diesel by Rs 5 and Rs 10 per litre, respectively. Most of the states followed suit by reducing the value added tax (VAT) in addition to excise duty, bringing the much-needed cheer to consumers. At present, petrol costs Rs 95.41 a litre in Delhi and Rs 109.98 in Mumbai. Diesel is priced at Rs 86.67 a litre in Delhi and Rs 94.14 in Mumbai. CNG prices hiked Earlier in the day, CNG price in the national capital and adjoining cities was hiked by Rs 0.50 per kg. CNG price in NCT of Delhi has been increased to Rs 57.51 per kg from Rs 56.51, according to the information posted on the website of Indraprastha Gas Ltd – the firm which retails CNG and piped cooking gas in the national capital. Following the firming up of international gas rates, IGL has been raising CNG rates by up to 50 paise (Rs 0.50) per kg periodically. Prices have gone up by about Rs 4 per kg this year alone. Crude oil prices rose by Rs 37 to Rs 9,321 per barrel on Tuesday as participants widened their positions on a firm spot demand. On the Multi Commodity Exchange, crude oil for March delivery traded higher by Rs 37 or 0.4 per cent at Rs 9,321 per barrel in 9,660 lots. FM expresses concern Finance minister Nirmala Sitharaman also expressed concern over rising crude prices and indicated that the central government is looking to tap alternative sources. “It will certainly have an impact on Indian economy”, the minister said. “How much we are going to be prepared to take it as a challenge and mitigate the impact is something which we will have see as we go (along)”. Noting that India imports more than 85 per cent of its crude oil requirements, she said when oil prices go up, it is a matter of concern and “now we will have to see how it pans out”. The government is watching to see if there are alternative sources from where it can get crude, she said but hastened to add: “Obviously global markets are all equally unthinkable at various sources”.
U.S. Sanctions Can’t Keep China From Buying Russian Oil
China has proven with Iran that it has much practice and great skill in working around sanctions, and the U.S. has made it even easier to do so in the case of Russia in several ways, including leaving gaping loopholes in its sanctions that China and Russia can exploit. The current ambiguity surrounding these mechanisms suits China perfectly, as until it believes that it is militarily, technologically, and economically able to directly challenge the U.S. as the world’s number one superpower its strategy will remain to gradually build up its economic power through the multi-generational power-grab project, ‘One Belt One Road’ (OBOR), as analysed in depth in in my new book on the global oil markets. This project contains within it a corollary colonialist element by dint of its land and sea routes secured through chequebook diplomacy. Given this, China cannot afford at this stage of its strategy to be seen to back Russia fully in President Vladimir Putin’s apparently ill-considered invasion of Ukraine and this was clearly evidenced in China’s abstentions – unwanted and unexpected by the Kremlin – in the United Nations Security Council’s votes last Friday firstly to condemn the war and secondly on whether to open the special emergency session of the General Assembly the next day. One basic factor that has worked in China’s favour in circumventing sanctions on continuing to do business, especially oil and gas business, with Iran – and will equally apply to its doing the same with Russia – is the lack of exposure of China’s firms to the U.S. financial infrastructure – particularly to the U.S. dollar – and the ease with which companies can set up new special purpose vehicles to handle ring-fenced areas of their businesses to allow for special situations, such as sanctions. As a corollary of this operational independence, China made no secret at the time of the pre-2016 sanctions against Iran or the post-2018 sanctions against it that it was going to use its Bank of Kunlun as the main funding and clearing vehicle for its dealings with Iran. The Bank of Kunlun has considerable operational experience in this regard, as it was used to settle tens of billions of dollars’ worth of oil imports during the U.N. sanctions against Tehran between 2012 and 2015. Most of the bank’s settlements during that time were in Euros and Chinese renminbi and in 2012 it was sanctioned by the U.S. Treasury for conducting business with Iran. Rather like Iran – whose Foreign Minister, Mohammad Zarif, infamously stated back in December 2018 at the Doha Forum, that: ‘If there is an art that we have perfected in Iran, [that] we can teach to others for a price, it is the art of evading sanctions’ – China has always regarded any U.S. sanctions as a fun puzzle to solve. Washington learned early on – when it sanctioned Zhuhai Zhenrong Corp, the massive state-owned oil trading firm founded by the man who started oil trading between Beijing and Tehran in 1995 as a means by which Iran could pay for arms supplied by China to be used in the Iran-Iraq War – that Beijing would not be playing the sanctions game according to anyone’s rules but its own. Indeed, at a time when according to the U.S. ‘there is clear evidence that China did not import any crude oil from Iran in June [2020] for the first time since January 2007’, OilPrice.com showed that over a period of only 51 days just before the U.S. statement, China imported at least 8.1 million barrels of crude oil (158,823 barrels per day) from Iran. In the case of Russian oil and gas exports, though, there is no need for China to go through all the trouble it took to circumvent the sanctions on Iran, for three key reasons. Firstly, there are currently no direct sanctions in place from either the U.S. or the E.U. on Russian oil or gas energy exports. A statement was released over the weekend that both are discussing a ban on Russian oil imports but this has not been approved yet and can still be worked around by China in the same way it did for Iran. In fact, despite several announcements last week of various types of sanctions being placed on a slew of Russian banks, one bank that was notably absent from all of the U.S.’s lists was Russia’s third biggest lender, Gazprombank, which serves Russian state gas giant (with huge oil interests as well) Gazprom. Indeed, Gazprombank and Russian state-owned banking giant, Sberbank, are also not on the list of the seven institutions that the E.U. wants banned from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) messaging and payments system. The second reason why Russia and China are untroubled that their oil and gas trade will be affected is that, in addition to the de facto exemptions so far granted to the aforementioned institutions, the U.S. issued on 24 February the ‘General License 8A’ waiver. Although this sounds as sexy to many as a cold haddock, to would-be sanctions evaders it is the waiver equivalent of Scarlett Johansson or Brad Pitt. Just in case any potential sanctions evaders may have missed the signal being given by the U.S., the U.S. Treasury Department went to great trouble to explain the nub of the point: “Treasury is reiterating … that energy payments can and should continue.” In its further detailed guidance, just in case any would-be sanctions evader thought that they would have to engage in any tricky manoeuvring to circumvent the wrath of the U.S., the Treasury explained how to use the waiver to continue to deal with a Russian oil or gas company: “For example, a company purchasing oil from a Russian company would be able to route the payment through a non-sanctioned third-country financial institution as an intermediary for credit to a sanctioned financial institution’s customer in settlement of the transaction.” The Treasury concluded: “Treasury remains committed to permitting energy-related payments –
Russia Says Energy Embargo Could Send Oil Prices Over $300
With the US reportedly said to vote as soon as Tuesday on a proposal to ditch trade relations with Russia and Belarus, including suspending oil imports despite repeated objections from Germany which has stated that a collapse in supply threatens “social cohesion”, Russian Deputy PM Novak said that a ban on Russian oil would result in catastrophic consequences for global market according to Interfax, warning that Europe is pushing Russia towards an embargo on gas deliveries through Nord Stream 1, which is currently filled to maximum capacity, although Moscow has not taken this decision yet. Warning that “no one would benefit from an embargo on gas deliveries through Nord Stream 1”, Novak said that replacing Russian oil deliveries to Europe would take longer than a year. he also warned that a global embargo on Russian oil could push prices over USD 300/bbl, although he said that Russia knows where it would re-direct oil to if Europe and US refuse it. Addressing a potential ban on Russian oil, Goldman’s commodities team wrote overnight that Europe’s dependence on Russian oil imports, of c. 4.3 mb/d of which 0.8 mb/d comes from pipeline, suggests that such a coordinated response will likely take time, leaving the possibility for only a US ban in short order. While the headline of potential further US sanctions are likely to support prices, such a move would likely have negligible impacts on global crude and products markets. The US only imports a little over 400 kb/d from Russia at present (Dec-Feb average), already down from a peak of 770 kb/d in May-Jun 2021. As such, volumes this small are well within the market’s ability to redirect flows and as such Goldman expects minimal overall impact on crude fundamentals. Such statements will nonetheless likely continue to severely curtail Russian seaborne oil exports, due to the threat of additional sanctions or of public censure. Case in point, the sole purchase of a cargo on Friday was immediately followed by public reprobration, strongly disincentivizing further Western acquisition, with so far no sign of Chinese purchases either. This, Goldman concludes, “leaves risk to our $115/bbl short-term oil forecast clearly skewed strongly to the upside.”
India’s First 2G Ethanol production plant from Bio Mass of Bamboo in Assam
India will soon get its first Bio-Refinery to produce Bio Ethanol from BioMass of Bamboo in Assam, North East. Engineers India Limited is poised to assist the industry’s Energy Transition journey to achieve carbon neutrality Biofuel Energy. The government of India has been pushing for self-sufficiency in petroleum products by replacing fossil fuels with renewable resources and one of the major thrust areas has been to promote technology for the production of ethanol from non-food feedstock and roll out of 20% ethanol blending in petrol by 2025. The Implementation of India’s first 2G Ethanol production plant from bamboo-based feedstock is in full swing at the ABRPL facility in Assam. With its core engineering strength and technology scale-up capabilities. The need and use of energy are rapidly increasing which change the way of energy production. It is necessary to produce more renewable energy, to replace fossil fuels.
How Sanjeev Kumar made Gujarat Gas India’s Largest City Gas Distributor
To anyone meeting him for the first time, Sanjeev Kumar, Managing Director, Gujarat Gas Ltd (GGL), may come across as a soft-spoken academic. But this demeanour can be highly misleading. The impressive numbers clocked by the country’s largest city gas distribution (CGD) company tell an altogether different story. Under Kumar’s leadership, GGL reported Rs 100.4228 billion revenue from operations, with profit after tax of Rs 12.755 billion (three-year CAGR of 63.58 per cent) in FY21. It is this that has made the 1998 batch IAS officer of the Gujarat cadre the winner in the Emerging Companies category of the BT-PwC India’s Best CEOs ranking. The performance becomes even more credible once you realise that the company has successfully met several challenges since the March 2020 nationwide lockdown. “Gas demand fell by over 80 per cent within days due to disruption in economic activity. However, we believed that the effects of the pandemic were but a pause and the country would bounce back. As a result, we invested 40 per cent higher growth capex during the period,” says Kumar. Consequently, GGL was able to unveil a record 150 CNG stations in the previous fiscal, the highest by any CGD entity in India. Further, the company added more than 100,000 households to its customer base, and also fast-tracked the laying of more than 3,000 km of pipelines. The period witnessed commissioning a record number of new markets, with its CGD network getting rolled out in Rajasthan, Madhya Pradesh, Haryana and Punjab. With the help of the LNG trading arm of Gujarat State Petroleum Corp. (GSPC), GGL strengthened its natural gas supplies by changing the portfolio mix through longterm deals at reasonably attractive prices to offset the increase in spot LNG prices. This helped them in providing natural gas to customers at competitive tariffs. BITING THE BULLET But that’s not the end of the story. “When the LNG prices spiked, GGL increased the tariff for industrial consumers by 55 per cent. Nobody had thought that they would be able to push through such a steep increase. But they surprised everyone by doing that, putting to rest a lot of concerns around their pricing power,” says Harshvardhan Dole, Energy Analyst at financial services firm IIFL Securities. On being asked how they were able to achieve that, Kumar smilingly remarks: “Our close engagement with large industrial consumers helped convince them of the necessity for a hike. We also managed to persuade them to draw lower quantities of gas to ensure a regular supply to small customers, which helped us in purchasing slightly lesser quantities of expensive LNG.” This ability to move quickly on pricing-related decisions provides stability to the company’s margin profile. By the time the first wave of the Covid-19 pandemic ebbed, GGL became the first CGD in India to cross 10 million metric standard cubic metres per day (MMSCMD) gas sales volume to touch the record high volume of 12 MMSCMD. Similarly, CNG sales not only recovered sharply but jumped more than 25 per cent over the pre-pandemic level. AGGRESSIVE EXPANSION STRATEGY The company has charted out an aggressive expansion strategy as more regions are opened for CGD operations. It has set its sights on Ahmedabad district, which holds high growth potential due to the presence of a large number of industrial clusters. It recently commissioned 17 new markets, which were won through competitive bidding. It is also looking at expanding its CNG infrastructure at the same pace. It now plans to double capex to Rs 10 billion from an average of Rs 5 billion a year. Gujarat Gas is a successful example of reverse privatisation (it was earlier a private company owned by British Gas). All our processes are aligned with global best practices. In the recent past, we have introduced periodic review for all key performance indicators, which are now helping us periodically monitor business progress,” says Kumar. In the past few years, the central government’s efforts at extending the gas grid to more cities have resulted in the entry of a large number of public and private sector entities into the CGD business. So, will enhanced competition impact GGL’s future growth? “There is no direct impact of this on us as a company since India is a huge market, with enough space for everyone to grow. Moreover, only a fraction of the country has been covered with CGD networks so far. The way the business is expanding, I am confident that we will continue to thrive,” asserts Kumar.
Saudis Could Hike Prices For Their Oil To Highest Spreads On Record
Saudi Arabia, the world’s largest oil exporter, could raise its official selling prices for Asia for April to the highest differentials to benchmarks on record, as buyers scramble to secure additional crude from the Middle East amid toxic Russian cargoes after Putin’s invasion of Ukraine. The Saudis are expected to raise significantly their official selling prices (OSPs), and Arab Light—the Kingdom’s flagship grade—could see its price for Asia next month at as much as $4.50 per barrel over the Oman/Dubai average, which would be a record high differential, three of five refining sources in Asia said in a Reuters poll on Wednesday. The expected Arab Light price would be $1.70 per barrel more than the price at which the grade is selling to Asia in March. Saudi Arabia generally sets the pricing trends of the other major Middle Eastern oil producers, and it usually sets the OSPs of its crude for the following month around the fifth of each month, typically after the monthly OPEC+ meeting. This month’s meeting on March 2 didn’t result in any surprises and the OPEC+ group rubberstamped another modest 400,000 barrels per day (bpd) increase in its collective oil production for April, despite soaring oil prices after a key member of the pact, non-OPEC producer Russia, invaded Ukraine. The expectation of a sharp increase in Saudi oil prices reflect the rallying Dubai/Oman prices, off which Middle East’s crude for Asia is priced, and the exceptionally tight market for Asian buyers, many of which are now seeking extra volumes from the Middle East – despite oil’s rally to over a decade-high – as they are wary of touching barrels from Russia. Crude from Russia, the key Saudi ally in the OPEC+ pact, has become increasingly toxic for buyers globally after Russia’s invasion of Ukraine was met with harsh banking sanctions for Russian banks.
Hydrogen On Track To Become A $1 Trillion Per Year Industry
New reports suggest that the hydrogen market could be worth $1 trillion per year by 2050 as it becomes viewed as a vital energy source in the transition from fossil fuels to greener alternatives. With greater numbers of energy companies and governments investing in hydrogen projects, it could form a major part of the energy mix in the coming years. Hydrogen is expected to be worth a fortune in the future if investment trends in the energy source continue. Several countries around the world are producing hydrogen, but the type of production varies significantly. Many oil and gas firms produce grey or blue hydrogen, transforming waste carbon from fossil fuel into hydrogen, which still relies on gas operations. But now, following two years of pandemic and the COP26 climate summit, several countries are looking to invest in green hydrogen, creating the energy source using water electrolysis. Michele DellaVigna, commodity equity business unit leader for the EMEA region at Goldman Sachs, explained, “If we want to go to net-zero we can’t do it just through renewable power.” And “we need something that takes today’s role of natural gas, especially to manage seasonality and intermittency, and that is hydrogen.” He also highlighted the plethora of potential uses for hydrogen, “We can use it for heavy transport, we can use it for heating, and we can use it for heavy industry.” To reach this $1 trillion a year estimate, hydrogen would have to occupy around 15 percent of the global energy market. With oil companies seeing hydrogen as a way to reduce their carbon footprint by using carbon capture and storage (CCS) technology to transform carbon waste into usable energy, hydrogen production is likely to increase substantially over the next decade. This will be further supported by government and energy company investment in green hydrogen projects, which are cropping up across Europe and Asia. The International Energy Agency (IEA) predicted the growth of the hydrogen market long ago in its 2019 report on the Future of Hydrogen. Hydrogen demand has increased threefold since 1975, with 6 percent of the world’s natural gas and 2 percent of coal going towards hydrogen production in 2019. Although it criticised the high level of carbon emissions created by the industry. And now, it’s not just European and Middle Eastern countries developing their hydrogen economies, Namibia has big plans for a new green hydrogen plant. At an estimated cost of $18 million, the hydrogen plant will be situated in the Erongo region, with construction commencing this year to be operational in 2023. The project will be carried out as a joint venture between the Ohlthaver & List (O&L) Group and CMB.TECH. The executive chairperson for O&L, Sven Thieme, explained of the plan “While the move away from fossil fuels may take several paths, green hydrogen is one that shows tremendous potential in getting us there.” He suggested that Namibia is the perfect location for a green hydrogen project thanks to its existing solar, wind or hydroelectric power operations. India is another country looking to increase its hydrogen production by introducing new policies to welcome hydrogen into the energy mix. The government’s new Green Hydrogen Policy responds to India’s National Hydrogen Mission, which aims to establish the country as a green hydrogen hub and reduce the quantity of carbon emissions being released. India aims to produce five million metric tonnes of green hydrogen per year by 2030. The new policy allows green hydrogen producers to access renewable energy or set up their own projects more easily, waiving several related charges and facilitating related licensing processes. And now Japan is trialling its first hydrogen train, putting the energy source into action. In February, the train company JR East debuted its first hydrogen-powered hybrid train, a zero-emissions means of transportation developed by Hitachi and Toyota at a cost of $34.8 million. The first phase of testing will begin in March, with plans to launch a commercial service by 2030. The train, Hybari, is powered by hydrogen fuel cells and batteries, with tanks supplying hydrogen to the fuel cells and electricity generated through a chemical reaction with oxygen in the air. Energy is stored by the batteries each time the train brakes. The combination of energy sources allows the train to reach a greater range than if it ran on batteries alone. It is expected to reach a top speed of 100kph and a range of 140km on a single filling of high-pressure hydrogen. However, the cost of a hydrogen-powered train will likely remain higher than traditional diesel-fuelled trains. So, will hydrogen be the energy of the future, forming a large proportion of the green energy mix of the next decade? Many countries and energy companies seem to be betting big on hydrogen, both the kind derived from fossil fuels and the green type. As hydrogen projects appear across many countries, it’s likely that the energy source is here to stay in one form or another.