India contemplating to release its petroleum reserve amid Russia-Ukraine conflict
In the wake of ongoing Russian-Ukraine conflict, India is seriously contemplating releasing its Strategic petroleum reserves to minimize the impact of the recent steep rise in crude oil in the International Market that has reached its all time high since 2014. Crude oil prices which were hovering between USD 60 to 80 a barrel for the past one year has crossed USD 103 a barrel after Russia invaded Ukraine last week. According to sources, the decision to release strategic reserves would be taken in the coming weeks if the Russian-Ukraine tension does not escalate any further. India had formed Indian Strategic Petroleum Reserve Ltd (ISPRL) Company in 2005 with an objective to maintain an emergency fuel reserve of 5.33 Million Metric tons (MMT) to ensure emergency fuel reserve for 10 days. Last year, it also initiated the process to build another strategic reserve of 4 MMT with an investment of Rs 100 billion at Chandikhole in Odisha. The Idea behind preparing a strategic oil reserve is to stock crude oil when it is at its low in the International Market, and use it domestically when the prices are high in the international market or in case the country faces any emergency situation. “Government is closely monitoring the global energy market, its petroleum price volatility, possibilities of supply disruptions due to the evolving geopolitical situation and would take appropriate decisions as and when required to minimize the volatility in the domestic market,” said a senior officer of the Union Petroleum Ministry here on Monday. However, no final decision has been taken yet. Meanwhile, the Ministry has also told the ethanol producing companies to speed up India’s alcohol-blending target. India has set a target to meet 20% ethanol blending by 2025 that could save more than Rs 300 billion foreign reserve. Presently India has increased its domestic ethanol production from 2 billion litre in 2014 to 7 billion litre reveals a recently released report of the Niti Ayog.
BP quits Russia in up to $25 billion hit after Ukraine invasion
BP is abandoning its stake in Russian oil giant Rosneft in an abrupt and costly end to three decades of operating in the energy-rich country, marking the most significant move yet by a Western company in response to Moscow’s invasion of Ukraine.
Oil soars as Russian energy supply fears intensify
Oil prices jumped on Monday as Western allies imposed more sanctions on Russia and blocked some Russian banks from a global payments system, which could cause severe disruption to its oil exports. Brent crude rose $4.82, or 4.9%, to $102.75 by 1028 GMT after touching a high of $105.07 a barrel in early trade. The Brent contract for April delivery expires on Monday. The most active contract, for May delivery, was up $4.74 at $98.86. U.S. West Texas Intermediate (WTI) crude was up $4.62, or 5%, at $96.21 after hitting $99.10 in early trade. “Growing concerns about disruptions to Russian energy supplies are pushing oil and gas prices up sharply,” said Commerzbank analyst Carsten Fritsch. Russia is facing severe disruption to its exports of all commodities from oil to grains after Western nations imposed stiff sanctions on Moscow and cut off some Russian banks from the SWIFT international payment system. Russian crude oil grades, which account for about 10% of global oil supply, were hammered in physical markets. Goldman Sachs bank raised its one-month Brent price forecast to $115 a barrel from $95 previously. “We expect the price of consumed commodities that Russia is a key producer of to rally from here – this includes oil,” the bank said. President Vladimir Putin put Russia’s nuclear deterrent on high alert on Sunday. Russian forces seized two small cities in southeastern Ukraine, the Interfax news agency said, but ran into stiff resistance elsewhere. Talks between Ukraine and Russia have started at the Belarusian border, a Ukrainian presidential adviser said, aiming to agree an immediate ceasefire. “If there’s any progress made in this meeting, we’re going to see a sharp reversal in markets – we’ll see stocks rise, the dollar rise and oil fall,” said OANDA analyst Jeffrey Halley. British oil major BP decided to exit its Russian oil and gas investments, opening a new front in the West’s campaign to isolate Russia’s economy. BP is Russia’s biggest foreign investor. “The sanctions and the exodus of Western oil companies are likely in the medium to long term to result in lower Russian oil and gas production,” said Fritsch. The Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, a group known as OPEC+, are due to meet on March 2. The group is expected to stick to plans to add 400,000 barrels per day (bpd) of supply in April. Ahead of the meeting, OPEC+ revised down its forecast for the oil market surplus for 2022 by about 200,000 bpd to 1.1 million bpd, underscoring market tightness.
Europe can’t stop buying Russian gas. Here’s why
Three days after Russia invaded Ukraine, and after sweeping sanctions were levelled against Vladimir Putin’s regime, Europe’s appetite for Russian gas shows no sign of diminishing. On Sunday morning, Gazprom, the Kremlin-controlled energy giant, said gas exports from Russia to Europe via Ukraine were proceeding just as expected. On Friday, figures from Ukraine’s grid operator showed that European imports of Russian gas through Ukraine jumped by nearly 40% on Thursday, the day the invasion began, according to Bloomberg. Oil and gas have so far been exempted from Western sanctions on Russia. Here’s why Europe has continued buying Russian gas. The continent came to depend on it Europe once enjoyed reliable gas supplies from the North Sea field – which is now all but depleted. Russia, meanwhile, has the world’s largest reserves of natural gas. The European Union relies on Russia for about 40% of its gas – more than twice as much as Norway, its next-largest import partner. In 2021, Russia sold about $100 billion worth of oil and gas to Europe, William Jackson, an economist at Capital Economics, estimated. Gazprom supplied about a third of Europe’s gas in 2020, according to Bloomberg. Germany came to depend on it Germany, the largest economy in Europe, relies on Russia for more than half its gas. Germany has been phasing out nuclear power in favour of gas, and has been trying to build a new pipeline to bring in more from Russia. This is the Nord Stream 2 pipeline, which would supplement the existing Nord Stream 1 pipeline and follow a similar route through the Baltic Sea. Germany suspended the Nord Stream 2 project shortly after Russia invaded – but notably, it did not cancel the project altogether. The cost is comparatively low Analysts said increased European imports of Russian gas on the day of the invasion were partly because market forces pushed up the price of non-Russian gas. Stefan Ulrich, a gas analyst at BloombergNEF, said on Thursday that non-Russian gas prices were “well above the likely sales price for many Gazprom import contracts.” Georg Erdmann, former chair of the Department of Energy Systems at the Institute for Energy Technology at Berlin University of Technology, told CNBC that the gas industry “assumes Russia to be a rather reliable commercial partner” that fulfils its long-term contracts. Lawmakers have eyes on consumer energy costs Europeans have suffered a winter of soaring gas prices, raising home energy bills. European lawmakers are now wary of spooking their voters with the spectre of further price increases. Ursula von der Leyen, president of the European Commission, has insisted that the EU would be able to cope should there be any disruption to gas imports.
ONGC’s Ultra deep find off Andhra coast yielding results
ONGC is slowly but steadily moving towards putting the country’s east coast on the global map for areas that boast of hydrocarbon production from ultra-deepwater. It is simultaneously working towards inking production enhancement contracts with various contractors to boost output from other blocks too. “Out of four appraisal wells (in ultra-deep find) planned, two wells have been drilled and both wells proved to be gas bearing. Production Testing Performance in these two wells is in line with expectation – 0.75 million cubic metre per day approximately,” an official told BusinessLine. In 2007, about 150 km off the Andhra Pradesh coast is ONGC’s ultra-deep water find, called UD-1, in the famous Krishna-Godavari block KG-DWN-98/2. The progress had been slow on this area of the block due to technological challenges that it was throwing up. ONGC earlier was looking at producing almost 20 million standard cubic metre a day by 2019-2020 from the area. Simultaneously, ONGC is also taking its association with American giant Exxon to the next level and it doesn’t rule out partnering with the latter for ultra-deep find. In 2019 a Memorandum of Association (MOU) was inked between ONGC and Exxon. During Phase-I, ONGC and Exxon were engaged in Joint Technical sessions to discuss and evaluate the Deep water areas of India and had finalised potential areas for collaboration in eastern and western coast of the Indian sedimentary basin. The Phase-II entry letter and Confidentiality Agreement between the two were signed in May 2021. After the first kick-off meeting pertaining to Phase-II held on July 12, 2021, two Joint Technical Workshops have been conducted for West Coast and East Coast Collaboration areas. Data pertaining to East coast is in the process of exporting from the National Data Repository (NDR) for reprocessing by Exxon Mobil at their centre at Houston, USA, an official in the know said. The next Steering Committee Meeting pertaining to Phase-II is planned soon where parties will look to align on mutually agreed collaboration areas for transition to Phase 3 (Joint Collaboration). Meanwhile, to further boost its hydrocarbon output, ONGC is working on production enhancement contracts for six blocks. “As part of its Action Plan, ONGC has been planning for Tariff based production enhancement contract model for six fields,” another official said. ONGC has chalked out a detailed exploration strategy and looking at yet to be tapped 14 sedimentary Basins – Narmada; Ganga-Punjab; Saurashtra- South Rewa; Cuddapah; Chattisgarh; Bastar; Deccan Syneclise; Bhima – Kaladgi; Pranhita-Godavari; Kerala Konkan; Andaman; Karewa; Spiti Zanskar; and in Bengal basin ONGC is consolidating the recent find through appraisal and moving through acreage acquisition under OALP and seismic data acquisition.
All about India’s blue economy
Blue economy essentially refers to the multitude of ocean resources available in the country that can be harnessed to aid the production of goods and services because of its linkages with economic growth, environmental sustainability, and national security. The blue economy is a vast socio-economic opportunity for coastal nations like India to utilise ocean resources for societal benefit responsibly. India’s blue economy is a subset of the national economy comprising the entire ocean resources system and human-made economic infrastructure in marine, maritime, and onshore coastal zones within the country’s legal jurisdiction. With some 7,500 kilometres, India has a unique maritime position. Nine of its 29 states are coastal, and it’s geography includes 1,382 islands. There are nearly 199 ports, including 12 major ports that handle approximately 1,400 million tons of cargo each year. Besides, India’s Exclusive Economic Zone of over 2 million square kilometres has a bounty of living and non-living resources with significant recoverable resources such as crude oil and natural gas. Also, the coastal economy sustains over 4 million fisherfolk and coastal communities. Why has the Government come out with a draft Blue Economy Policy? Given India’s vast maritime interests, the blue economy occupies a vital potential position in India’s economic growth. It could well be the next force multiplier of GDP and well-being, provided sustainability and socio-economic welfare are centred. Therefore, India’s draft blue economy policy is envisaged as a crucial framework towards unlocking the country’s potential for economic growth and welfare. What are the important elements of this policy? According to the draft policy, the blue economy is one of the ten core dimensions for national growth. It dwells on policies across several key sectors to achieve the holistic development of India’s economy. The draft document focuses on seven thematic areas such as national accounting framework for the blue economy and ocean governance; coastal marine spatial planning and tourism; marine fisheries, aquaculture, and fish processing; manufacturing, emerging industries, trade, technology, services, and skill development; logistics, infrastructure and shipping including transshipment; coastal and deep-sea mining and offshore energy; security, strategic dimensions, and international engagement. Has India fully leveraged this part of its overall economy? India has tapped its vast coastline to build ports and other shipping assets to facilitate trade, but the entire spectrum of its ocean resources is yet to be fully harnessed. Several countries have undertaken initiatives to utilise their blue economy. For instance, Australia, Brazil, the United Kingdom, the United States, Russia, and Norway have developed dedicated national ocean policies with measurable outcomes and budgetary provisions. Canada and Australia have enacted legislation and established institutions at federal and state levels to ensure progress and monitoring of their blue economy targets. With a draft blue economy policy framework of its own, India is now all set to harness the vast potential of its ocean resources.
Ukraine crisis to give India crude jolt
Fuel prices are poised to go up by Rs 7-8 per litre as Brent, the global benchmark crude, raced towards the $100 per barrelmark on Tuesday as the Ukraine crisis spooked the oil market already struggling to meet rising demand. As Brent hit $98/barrel, the mix of crude bought by India, otherwise known as the Indian Basket, too rose to $93. 6, marking a $10 increase since November 4 when the Centre cut excise duty by Rs 10 on a litre of diesel and Rs 5 on petrol to give relief from high oil prices ahead of the state polls. Pump prices have remained unchanged since then under an informal government diktat. The sharp in- crease has widened the gap between the actual cost and retail prices of petrol and diesel, leading to under-recovery for retailers. According to ballpark, every $1 increase in crude price impacts retail rate by 70-80 paise. The freeze on price revision, as seen after previous polls, is expected to be lifted once the last ballot is cast on March 7 and the retailers will start raising the prices. They, however, may not get to recoup the past under-recovery fully, which will impede profit of companies such as IndianOil, Hindustan Petroleum and Bharat Petroleum. But on the flip side, high oil prices will buoy the bottom lines of domestic producers such as ONGC and Oil India Ltd. The Ukraine crisis will keep oil on the boil in the coming months to keep fuel prices in focus, unless a breakthrough in the US-Iran talks brings Iranian oil to the market. But there will be no hiccup on supplies since India barely imports oil from Russia through the western route. But the Ukraine crisis will pinch India in gas prices too. India meets half its gas needs through imports by way of LNG, or liquefied natural gas. Though India hardly imports LNG from Russia, the crisis has pushed up the fuel’s prices. This will raise the cost for industry. Rising fuel costs will jack up inflation and may prompt hardening of monetary policy by the RBI, raising the cost of living.
LNG majors spy fivefold growth prize in emerging India, Asia
ustralia, one of the world’s biggest exporters of liquefied natural gas, aims to target a forecast boom in demand in India and across emerging Asia as nations shun dirtier coal. The supplier, which vies with Qatar and the US as the top LNG shipper, should step up efforts to win deals in seven markets — also including Indonesia, Bangladesh and Vietnam — that are projected to boost demand from 40 million tonnes in 2020 to 255mt by 2050, according to a government report. “A strong LNG demand outlook in our region will allow Australia to capitalise on the growth of global spot markets and meet unexpected demand,” said Keith Pitt, Minister for Resources and Water. Mr Pitt has called for the development of more production capacity, and last year backed Woodside’s approval of the $US12 billion ($16b) Scarborough project off WA. Established LNG markets in China, Japan, South Korea and Taiwan are expected to lift imports from 200mt in 2020 to about 243mt by 2050, according to the report. Australia earned $32b from LNG exports in the year to June 30, and forecasts the value of gas production will rise through 2050, while coal earnings tumble, as developing nations, particularly in Asia, switch to the less-polluting fuel. Climate campaigners, however, advocate a faster shift from fossil fuels to renewable energy, arguing that wider adoption of LNG will only stall efforts to tackle planet-warming climate change.
India’s fuel demand to touch record high despite soaring crude oil prices
India, the world’s third-biggest oil user, expects consumption of petroleum fuels to touch a record next year even as crude prices move toward the $100-a-barrel mark. Demand has been pegged at 214.5 million tons in the year starting on April 1, according to predictions by the Indian oil ministry’s Petroleum Planning and Analysis Cell. If achieved, that would be an all-time high and an increase of 5.5% from a revised estimate for 2021-22. Local sales of gasoline, diesel and other fuels have started picking up after being whipsawed by several virus waves and tax-inflated pump prices in the past two years. However, the nation is yet to recoup the losses caused by the pandemic that had decapitated consumption by as much as 70% at one stage following the world’s strictest lockdown in 2020. Any rise in consumption in India, the third-biggest crude oil buyer that relies on the global market for about 85% of its requirements, would raise the country’s import bill at a time when the South Asian nation is facing one of the deepest budget deficits among major economies. The government may focus on converting more sugar and grains into biofuel to reduce its dependence on overseas supplies and cut bulging sugar stockpiles. The timing is not in India’s favor. Oil prices hovered near their highest level in seven years after Russian President Vladimir Putin signed an order to send what he called “peacekeeping forces” to the two breakaway areas of Ukraine that he officially recognized on Monday. The world’s largest independent oil trader Vitol Group expects oil prices to be above $100 for a “prolonged period” over the next six to nine months. That would inevitably increase pump prices in India. Why green hydrogen is the future of energy High oil prices pose a challenge to India’s demand recovery. When crude oil traded around $100 a barrel in 2013-14, the country’s annual consumption growth of petroleum products slumped below 1%. Consumption has been lower than initial projections by the oil ministry’s agency during the past three years.
Russia-Ukraine conflict: Moody’s says global oil, natural gas prices may see sharp rise
Global oil and liquified natural gas (LNG) prices are likely to see a sharp rise in the event of a Russia-Ukraine conflict, which would have negative implications for net energy importers, Moody’s Investors Service said on Wednesday. Moody’s Investors Service Managing Director Michael Taylor said trade effects are likely to arise from import diversion and diversification, although there may be opportunities for commodities producers in Central Asia to increase supply to China. Supply chain bottlenecks will also be aggravated, adding to inflation pressures in the region. Tensions have been escalating between Ukraine and Russia in recent weeks, and on Monday Moscow decided to recognise two separatist regions of eastern Ukraine as independent and deployed Russian troops there. “The global price of oil and liquified natural gas (LNG) is likely to rise sharply in the event of a conflict, which will be positive for the relatively few exporters in the Asia Pacific region and negative for the substantially greater number of net energy importers. “However, a mitigating factor is that several Asian economies have long-term supply contracts in place for LNG, which will limit the impact of fluctuations in the spot price,” Mr Taylor said. Global crude oil benchmark Brent neared the $100 per barrel on Tuesday amid rising threat of invasion in Ukraine and fears of sanctions on Russia, the largest exporter of natural gas and second-largest oil exporter. India imports about 85% of its crude oil needs and about half of its natural gas requirement. While the imported crude oil is turned into fuels such as petrol and diesel, gas is used as CNG in automobiles and fuel in factories. In a statement, Moody’s said its rated issuers in the Asia-Pacific have limited direct exposure to Russian or Ukrainian entities. Nonetheless, issuers in APAC may not be immune to second-round effects of a conflict. Among the possible transmission channels are commodities prices, trade effects and financial market disruption. “Financial market effects will have the largest near-term impact: for example, if a conflict gives rise to widespread risk aversion, funding conditions for high yield issuers, some of which are already experiencing constrained access to finance due to other factors, will deteriorate further,” Moody’s said.