Indian refiners cornered over one-third of Russia’s crude oil exports in H1 2024
India, the world’s third largest crude oil consumer, accounted for more than one-third of Russia’s cumulative crude oil exports in the first half of the current calendar year. Besides, India coupled with China and Turkey bought more than 90 per cent of the crude oil shipped out of the erstwhile Soviet Union during January-June 2024. According to the Energy Comment series by the Oxford Institute for Energy Studies (OIES), Russian crude exports to China, India, and Turkey accounted for 93 per cent of the total in H1 2024 Calendar Year (CY). India and China accounted for the lion’s share at 48 per cent and 34 per cent, respectively, the commentary, by Bassam Fattouh and Andreas Economou, added. As per the data from energy intelligence firm Vortexa, India’s crude oil imports from Russia during H1 2024 averaged at around 1.6 million barrels per day (mb/d) compared to roughly 1.7 mb/d imported in the year-ago period. Particularly for India, the Energy Comment pointed out that the transformation has been “phenomenal”. Prior to the 2022 sanctions on Russian oil, India’s largest annual intake of Russian crude was 52,000 barrels per day (b/d) in 2017. In 2023, India’s imports of Russian crude averaged nearly 1.8 mb/d accounting for nearly 40 per cent of the country’s total imports, while on a monthly basis they reached as high as 2.2 mb/d,” it added. There are reports that India’s state-owned refineries are considering entering into long-term oil supply agreements with Russia. But this has not been without its challenges, the latest Energy Comment said. For instance, it said that “payment issues” have caused the diversion of some Russian cargoes away from India. “Russia has recently announced that it has accumulated billions of rupees that it hasn’t yet found a use for. Also, the US and its allies have stepped up the enforcement of sanctions creating difficulties for buyers of Russian oil and idling many tankers used in the transport of Russian oil,” it added.
Govt approves ONGC’s Rs.183.65 billion additional investment proposal in OPaL to increase petrochemical presence
The government has approved ONGC’s proposal to additionally invest Rs.183.65 billion in ONGC Petro-additions Limited (OPaL), the oil and gas giant announced in a statement on Firday, August 9, 2024, and added that this would increase ONGC’s stake in OPaL from 49.36% to 95.69%. ONGC’s total investment in OPaL so far will also thus, add up to Rs.227.28 billion This move is to increase ONGC’s presence across the downstream and petrochemical value chain. ONGC’s total investment in OPaL so far will also thus, add up to Rs.227.28 billion. What os OPaL? OPaL is a petrochemical complex based in Dahej, Gujarat, which was commissioned in 2017. It has the largest standalone dual feed cracker in South-East Asia. A dual feed cracker converts naphtha and offgases from refining into polymer grade ethylene and propylene using a process which is known as thermal cracking. Thermal cracking can also produce byproducts such as benzene, butadiene, gasoline, and toluene. OPaL has the capacity to produce up to 1.5 million metric tonnes per annum (MMTPA) of polymers and 0.5 MMTPA of chemicals and has a 12% market share in India’s polymer segment. The deal can also make OPaL be able to get a sustained supply of gaseous feed from ONGC at a premium of up to 20% over the government’s Administered Pricing Mechanism (APM) gas price. ONGC is currently allowed a premium of up to 20% over the APM price.
Swan Energy plans to sell FSRU
India’s infrastructure firm Sean Energy plans to put its Vasant 1 FLoating Storage And Regasification Unit ( FSRU) up for sale the company informed the stock exchange
India now depends on Russia for 40 per cent of its oil imports
During the past three months, India has relied on Russia for 40% of its seaborne crude oil import. Year-to-date, volumes have reached an average of 1.6 million barrels per day (mbpd), an increase of 1000% compared to 2021, according to BIMCO. The increased import of Russian oil has contributed to a higher average sailing distance for crude oil tankers discharging in India. Year-to-date, the average sailing distance has risen by 10%, resulting in an 8% increase in total tonne miles despite a 2% fall in volumes. Compared to 2021, the average sailing distance is up 25%. Indian buyers started increasing sourcing from Russia in 2022. Combined, the EU and the US used to buy about 65% of Russia’s seaborne crude oil exports. This was before the implementation of sanctions on Russian oil exports, and Russia has since found new buyers. With the exception of a spike and subsequent dip in mid-2023, Russian crude oil’s share of Indian seaborne imports has climbed steadily since mid-2022. China has also increased its share, but India has been the biggest buyer since mid-2023, regularly taking 35-40% of Russian seaborne crude oil exports. India used to buy nearly 70% of its seaborne crude oil from countries in the Persian Gulf. However, the increase from Russia has reduced those volumes and India now imports only 45% from the region. Instead, the region has increased exports to for example North Europe and the Mediterranean. The shift in buying patterns has also had a significant impact on the ships carrying the crude oil. Aframax and suezmax crude tankers carry nearly all of the crude oil from Russia to India. Combined, the two ship types now carry 55% of Indian crude oil imports compared to 45% in 2021, whereas VCCs carry less. This has also had an impact on the age of ships discharging in India. Ships that still cater to Russia’s exports tend to be older than the average. Consequently, ships discharging in India are now on average four years older than in 2021 and the share of ships older than 20 years has increased from 2% to 13%. As long as the sanctions are in place, the Russia-India trade is likely to continue at the current level. However, according to the International Energy Agency, India’s demand for oil is expected to continue to increase while Russia’s production is unlikely to rise. India may therefore have to turn to other suppliers to satisfy its demand.
Big Oil Doubles Down on LNG as Renewables Falter
The LNG market is set to see a wave of new supply from 2026 and could be oversupplied from 2026-2027 until the end of the decade. Yet, Big Oil is confident that demand will be there and that their trading strategies and the moves to lock in customers from LNG projects will pay off. Renewables Commitment Falters At the same time, Europe’s top oil and gas firms haven’t seen improved market and business conditions to warrant the major push into renewables they had pledged before the energy crisis and skyrocketing prices in 2022 upended plans and shifted the focus onto energy security. BP, for example, booked a pre-tax impairment charge of $540 million in the third quarter last year related to U.S. offshore wind projects. BP and Equinor’s filing to renegotiate the power purchase agreements associated with the Empire Wind 1 and 2 and Beacon Wind 1 wind farms off the coast of New York was rejected. BP said in June that it was scaling back this year’s plans for the development of new sustainable aviation fuel (SAF) and renewable diesel biofuels projects at its existing sites, pausing planning for two potential projects while continuing to assess three for progression. “This is aligned with bp’s drive to simplify its portfolio, focusing on value and returns,” the UK-based supermajor said. Weeks later, the other UK-based giant, Shell, said it was pausing on-site construction work at a biofuels plant in Rotterdam amid weak market conditions, taking a $780-million impairment charge for the second quarter for this. The pause at the 820,000 tons-a-year biofuels facility at the Shell Energy and Chemicals Park Rotterdam in the Netherlands was needed “to address project delivery and ensure future competitiveness given current market conditions,” the company said. LNG Bet At the same time, both Shell and BP, as well as France’s TotalEnergies, are looking to further grow their LNG portfolios by raising their own liquefaction volumes and gaining access to additional third-party volumes. “In our Integrated Gas business, we said we would continue to grow our LNG portfolio by increasing both our liquefaction and access to third-party volumes,” Shell’s CEO Wael Sawan said last week when the company reported better-than-expected earnings for the second quarter. Shell has extended existing partnerships in Oman, invested in backfills in Manatee in Trinidad and Tobago, and agreed to acquire Pavilion Energy in Singapore to increase portfolio length, the executive of the world’s top LNG trader added. Shell also leads the LNG Canada joint venture project in Kitimat, British Columbia, where it is “working hard to achieve first production” by the middle of 2025, Sawan said. In addition, Shell, BP, TotalEnergies, and Japan’s Mitsui have just signed a deal with Abu Dhabi’s ADNOC to take 10% each in the Ruwais LNG project in the UAE as international partners. BP works towards building an LNG portfolio of 30 million tons by 2030, up from 23 million tons of long-term LNG portfolio last year. The company is looking at long-term contracts and at short-term market opportunities, Carol Howle, EVP, trading and shipping at BP, said on the earnings call last week. TotalEnergies has also been busy sanctioning LNG projects in recent months. The French group gave the green light to the Marsa plant in Oman, Marsa LNG, as well as the Ubeta gas project in Nigeria, which will supply Nigeria LNG. “These projects will not only contribute to the objective to grow our upstream by 2% to 3% per year in the next five years, but they will also boost the underlying free cash flow generation and ultimately shareholder distributions,” CEO Patrick Pouyanné said on TotalEnergies’ earnings call. “I think there is a fundamental structural demand coming from India, and we are convinced that the Indian market will take the relay I would say, for the traditional, Korea, Japan, and even China,” Pouyanné added. LNG demand in China is becoming more seasonal as Beijing is “moving very quickly on these renewables, continuing to increase its coal production,” the executive noted. Big Oil is positioning for a major boost in global LNG demand as a way to earn more money from their core business amid low or negative returns in the renewable energy industry.
Conflicting EIA Fuel Demand Data Confuses Oil Market Observers
The U.S. Energy Information Administration (EIA) has recently puzzled oil market watchers and participants with a considerable upward revision to America’s oil consumption and implied gasoline demand for May. EIA’s weekly data releases for that month painted a picture of tepid U.S. gasoline demand, which contributed to a decline in international oil prices and added to concerns about demand in the world’s largest oil consumer. However, the monthly update for May, published with a two-month lag compared to the weekly EIA inventory and supply reports, showed materially higher implied U.S. gasoline and overall oil demand. The traders and analysts who are closely tracking EIA’s weekly reports for trade signals and demand outlooks were left confused by the contradictory weekly-versus-monthly data. That’s nothing new; weekly data is more on the side of estimates and preliminary data, and there have always been discrepancies in these figures. But the latest monthly update for May shows a margin that is too wide. This could mean two U.S. oil demand narratives for each of the data points. According to the EIA, the weekly figures for May differed so much from the monthly data due to overestimated gasoline output and undercounted exports, Reuters’s Shariq Khan notes. The EIA seeks to show general trends in demand in weekly data. The administration always looks to align weekly and monthly data more closely, a spokesperson for the EIA told Reuters. The agency has made several changes to both data points in an effort to better reflect the state of the U.S. petroleum market, the spokesperson said. One may ask what the big deal is in some revisions to data. It’s that the weekly estimates showed a weak start to the summer driving season, with demand trailing last year’s levels, while the monthly status report suggested American oil demand set a seasonal record-high for May and gasoline demand was at its highest level since the pandemic—the most since August of 2019. The EIA’s Petroleum Supply Monthly showed that America’s total crude oil and petroleum product supplied, the proxy for oil demand, was at 20.8 million barrels per day (bpd) in May—the highest-ever for the month of May and highest since August 2023. The figure was 792,000 bpd higher compared to April. Supply of finished motor gasoline—the EIA’s proxy for gasoline demand—stood at 9.396 million bpd for May, the monthly data showed. This is a post-pandemic high, with the most gasoline supplied since August 2019. Yet, the weekly reports in May have shown that implied gasoline demand was 380,000 bpd lower than that figure. At just over 9 million bpd in May, the weekly reports back then showed weaker gasoline demand compared to more than 9.1 million for the same month in 2023. These large discrepancies are puzzling the market, although participants and analysts react more to the weekly data than to figures published with a two-month lag. Traders and analysts look at many other data releases from private firms tracking supply and demand to assess U.S. oil demand. Data from fuel-tracking platform GasBuddy has shown that May’s gasoline demand was 8.87 million bpd, which is closer to the EIA’s weekly estimates than the monthly status report. Patrick De Haan, head of petroleum analysis at GasBuddy, said last week, commenting on the EIA’s upward revision to oil and gasoline demand, “GasBuddy data suggests that gasoline demand is nowhere near what EIA is printing. Take that as you will.” But more recently, gasoline demand has been tracked as very strong in the past week, per GasBuddy’s data and analysis. GasBuddy data models U.S. gasoline demand last week at 9.28 million bpd, which is “the highest tally of 2024,” De Haan said on Monday. Traders and analysts will watch the next monthly reports from the EIA to see if the conflicting data suggests two very different demand pictures and outlooks for the U.S. summer oil and gasoline demand.
French imports of Russian LNG surge, Ukraine supporters call for halt
Shipments of Russian liquified natural gas to France more than doubled the first half of this year, according to new analyses of trade data, at a time when Europe has tried to pull back from energy purchases that help finance the Kremlin’s invasion of Ukraine. Europe has restricted oil imports from Russia, but natural gas is still allowed. And while companies in France are importing the most, one analysis found EU countries overall imported 7 per cent more Russian LNG, natural gas that has been chilled and liquified for easier ocean transport, in the first half of this year compared to the same period a year ago. Oleh Savytskyi, a founder of nonprofit Razom We Stand, which campaigns for tougher sanctions on Russian fossil fuels, said the EU’s goal of phasing out all Russian fossil fuels by 2027 was appallingly off track. He said countries buying Russian LNG are sabotaging the continent’s energy transition and contributing billions to Russia’s war effort. European governments have said banning Russian gas imports entirely would send energy and heating bills skyrocketing and industrial users of gas would suffer, too. The analysis first came from the Institute for Energy Economics and Financial Analysis (IEEFA), a U.S. nonprofit with a goal of speeding the world’s transition to more sustainable energy. IEEFA examined data from Kpler, a shipping tracker, and ICIS, a commodity data provider, both of which also provided their own analysis.
Parliament Introduces Bill for Oil and Gas Policy Stability
The Oilfields (Regulation and Development) Amendment Bill, 2024, was introduced in the Rajya Sabha to improve investment in the oil and gas sector. The Bill aims to stabilize policies, facilitate international arbitration, and extend lease durations to address long-standing concerns from investors. The Bill proposes that the terms of a petroleum lease will stay the same throughout the lease period, even if the lessee (the person or company leasing the land) is disadvantaged. This stability is meant to reassure both Indian and foreign oil and gas producers about their financial returns. Dispute Resolution Mechanism One key change introduced by the Bill is the option to resolve disputes through arbitration, which can be done either within India or internationally. This responds to requests from foreign companies for ways to handle disagreements outside of local courts. The Bill also introduces new regulations allowing the government to merge or combine petroleum exploration licenses and mining leases, leading to longer lease durations. This provides more certainty for companies exploring for oil and gas. Another important feature is “unitisation,” which allows for the joint development of connected oilfields. This means that production and processing facilities can be shared, making resource development more efficient. By changing the term “mining leases” to “petroleum leases,” the Bill aims to simplify regulatory processes. This change emphasizes that petroleum exploration has a lower environmental impact compared to other types of mineral extraction, which should speed up approvals. Additionally, the Bill seeks to replace criminal penalties for breaches of petroleum law with financial penalties. This change aims to create a more business-friendly environment. About Oilfields Regulation Oilfield regulation is often overlooked but is important. Many countries follow guidelines from the International Energy Agency. In the U.S., the Bureau of Land Management oversees federal lands, while state agencies manage onshore fields. Offshore drilling is regulated by the Bureau of Ocean Energy Management. Environmental Impact Assessments are required before drilling begins, and the National Environmental Policy Act (NEPA) is crucial in this regulation. Regulations also control flaring to reduce gas wastage, and advances in technology have improved safety in oil extraction.
China’s Falling Diesel Demand Dampens Oil Outlook
The property sector crisis and the rise of LNG use in trucking have weighed on China’s diesel demand this year, dampening the prospects of oil demand growth in the world’s top crude importer, which has been a key driver of global demand growth for years. Diesel demand in China is particularly weak and analysts expect it to remain weak for the rest of the year. With slumping diesel demand and lackluster gasoline consumption, Chinese oil demand growth is expected to be just below 3% this year compared to 2023, according to analyst estimates compiled by Reuters. To compare, China’s annual oil demand growth averaged 4.6% in the past decade and rebounded by 11.7% last year after nearly three years of COVID-related lockdowns. Gasoline demand may be plateauing, but diesel demand is outright falling, according to analyst projections. China’s diesel demand in the second half of 2024 is set to decline by between 2% and 7% on an annual basis, according to four out of five analysts in a Reuters survey. Apart from weaker-than-expected economic growth and the property crisis, Chinese diesel demand is also hit by the surge in LNG-fueled trucking, which has started to displace some diesel consumption. “Diesel demand is the most sluggish sector within oil demand in the second half, with significant displacement … in the trucking sector,” Wood Mackenzie consultant Xia Shiqing told Reuters. LNG-fueled heavy-duty vehicles are set to limit diesel use for transport, especially now that LNG is cheaper than diesel. Chinese sales of LNG trucks have been booming in recent months, as global and Asian LNG prices are much lower than the record highs seen at the peak of the energy crisis in the summer of 2022. The prospect of abundant new LNG supply coming to the market after 2026, especially from Qatar’s huge expansion projects, makes analysts optimistic about the acceleration of the Chinese LNG-fueled truck market as growing LNG supply could keep prices low enough to continue displacing diesel.
Oil Prices Set for Another Weekly Loss Despite War Premium
Despite a surge in oil prices this week on expectations of a major escalation in the Middle East, the benchmarks were set for their fourth weekly loss in a row as demand concern outweighed the war premium. Both Brent crude and West Texas Intermediate were up earlier in the day, but overall prices were down on last week, with Reuters citing a survey revealing a slowdown in manufacturing activity across most of the world and the third annual road traffic decline in China. PMI readings for July showed a slowdown in activity in Asia, Europe, and the United States, with the U.S. drop especially steep, reaching the lowest in eight months on a decline in new orders, to a reading of 46.8. The eurozone was doing even worse, with PMI across the single-currency bloc logging a reading of just 45.8 in July. The figure was unchanged from the previous month but still rather weak, prompting an inference of lower energy consumption and, by extension, lower oil consumption. China was doing better in manufacturing activity but its July reading also showed a sub-50 PMI, meaning a contraction, which automatically affects oil prices due to China’s status as the world’s largest importer of the commodity. On the bullish side, besides the escalation risk in the Middle East, the EIA surprised many by reporting stronger-than-expected domestic oil demand for May. While this will not affect prices per se, it might spark expectations of stronger than initially believed oil demand growth through the rest of the year. Despite the weakness in prices, however, some traders have started betting on Brent not just going higher but breaking through $100 per barrel. Bloomberg reported that on Wednesday alone, 300,000 crude oil call options were traded—the highest single-day volume since April. It seems concern about demand prevailed, with Brent losing most of what it gained earlier in the week to trade barely above $80 per barrel earlier in the day.