Afghanistan’s Taliban Reports $80 Million In Crude Oil Sales In 10 Days
Afghanistan has sold 150,000 tons (1.1 million barrels) of crude oil from the Amu Darya basin for more than $80 million over the past 10 days, with Beijing’s investment in the country beginning to bear fruit. On Sunday, Humayun Afghan, the spokesperson for the Taliban’s Ministry of Mines and Petroleum, revealed that the group had sold 130,000 tons of crude oil for $71.6 million before it successfully put up another 20,000 tons (146,000 barrels) of crude worth $10.5 million for bidding on the same day. This marks a reversal of fortunes for one of the Middle East’s most volatile regions with the country previously importing the 50,000 barrels of oil it consumes daily from neighboring countries such as Iran and Uzbekistan. It all began a year ago when China’s Xinjiang Central Asia Petroleum and Gas Co, or CAPEIC, signed a 25-year contract with Taliban authorities in Afghanistan. That contract requires CAPEIC to invest $150 million by the first year and a total of $540 million by 2026. So far, CAPEIC’s investment of $49 million in Afghanistan has helped boost the country’s daily crude oil output to more than 1,100 metric tons (8,000 barrels per day), a volume that could increase significantly if the company is to fulfill its contract. According to a top Taliban official, CAPEIC fell short of its investment target due to inaccurate estimates of material and labor costs coupled with a three-month delay in the approval of its financial plan by Afghan authorities. “The investments will add up as the contract stipulates,” the Taliban official told VOA on condition of anonymity, adding that the Taliban’s treasury earned about $26 million from the project last year. Spanning Afghanistan and Tajikistan, the Amu Darya basin is estimated to contain 962 million barrels of crude oil and 52,025 billion cubic feet of natural gas, according to a 2011 assessment by the U.S. Geological Survey. To tap into this potential, CAPEIC plans to dig 22 additional wells in 2024, aiming to increase daily production to more than 2,000 tons, or~15,000 barrels. Beijing has been cozying up to Kabul ever since the United States withdrew from Afghanistan in 2021 after a 20-year presence. Chinese diplomats have been meeting their Afghan counterparts almost weekly since the establishment of a Taliban government in Kabul, with western analysts alluding to some sort of emerging “cooperation.” Back in January, Chinese President Xi Jinping received the diplomatic credentials of the Taliban’s ambassador to Beijing. The move confounded foe and friend alike because no country has formally declared its recognition of the Taliban government. However, it’s not clear if Beijing’s action constitutes diplomatic recognition. “Although the attraction of [Afghanistan’s] mining and energy resources is strong, there is considerable Chinese wariness about the internal security situation, the reliability of Taliban assurances regarding foreign investments, and Afghanistan’s poor infrastructure,” Andrew Scobell, distinguished fellow for China at the United States Institute of Peace, told VOA. Meanwhile, other geopolitical analysts have hypothesized that Beijing’s main motivation in its dealings with Afghanistan is risk mitigation amid a potential security vacuum, a viable reason considering that the two countries share a 92 kilometer-long border. Last year, Beijing and Islamabad agreed to include Afghanistan in the China-Pakistan Economic Corridor. CPEC provides a blueprint for civil-military cooperation aiming to enhance the participants’ connectivity. There’s little doubt that China wants to project power over Central Asia for several reasons. First, the region is a core component of the Belt and Road Initiative, a global infrastructure development strategy adopted by the Chinese government in 2013 to invest in more than 150 countries and international organizations. Second, on a regional level, Beijing would want Kabul to consider it a top ally over competing powers such as Russia and India, both of which have some influence over Afghanistan. On its part, the U.S. government and other lawmakers are more concerned about the possibility of China taking over the Bagram airfield in the north of Kabul that its military used as its main base throughout the Afghan war. “We don’t see Afghanistan as a place where we need to compete with the Chinese and the Russians,” Thomas West, the U.S. special representative for Afghanistan, has declared. The United States and China have adopted very different diplomatic approaches toward Afghanistan. Whereas Beijing has chosen the investment/security cooperation route, the U.S. remains the leading humanitarian donor to Afghanistan, providing more than $2 billion in humanitarian assistance since the Taliban takeover.
GAIL to set up India’s largest, 1,500-KTA Ethane Cracker project in MP
GAIL (India) Limited has plans to set up India’s largest, 1,500-KTA Ethane Cracker Project at Ashta in Sehore district of Madhya Pradesh (MP), the company said on Monday. The product will entail an investment of around Rs 600 billion and will have a product slate of various ethylene derivatives. The public sector undertaking (PSU) will seek investment approval for the project from its Board of Directors. GAIL said in a regulatory filing to the stock exchanges that it has submitted its request to the Madhya Pradesh state government for providing suitable enablers for the project. “Around 800 hectares of land shall be provided by the MP Industrial Development Corporation Limited, for which the state government has already initiated the process,” said GAIL.
Gujarat Gas, GAIL, Petronet LNG shares: 3 cos to benefit if natural gas is included in GST
Jefferies in its latest note said that the Modi government reviving talks to include natural gas under GST should aid companies such as Gujarat Gas Ltd, GAIL (India) Ltd and Petronet LNG Ltd, adding that three out of four key states that could hold sway are under the ruling NDA. Such an inclusion could lower natural gas cost by $0.8-0.9 per mmBtu and aid faster adoption, helping GAIL’s transmission and trading volumes in the medium term, the foreign brokerage said. GAIL’s consolidated Ebitda could rise 2 per cent assuming it retains the benefit in the LPG segment, it added. In the case of Gujarat Gas Ltd, it’s competitiveness to propane is seen improving 6 per cent, aiding volumes or margin. Gujarat Gas would benefit in Morbi, Jefferies said noting that the 6 per cent VAT on natural gas sold in Morbi, if subsumed under GST, would improve Gujarat Gas’ competitiveness to propane by Rs 2.5 per kg at current prices. If passed on, this would improve volumes; if retained, it would improve margins. Petronet LNG could also benefit as improved competitiveness of natural gas if GAIL passes on the $0.8-0.9 MMBtu benefit should drive volume growth, aiding PLNG’s LNG volumes. It said such benefits would accrue gradually over the medium term. “VAT on CNG in Delhi/Mumbai/Gujarat is 0 per cent/3 per cent/5 per cent. We expect CGD players to pass on the benefit to consumers if CNG is subsumed under GST. This should increase the discount to petrol/diesel and marginally aid volume growth,” Jefferies said.
Energy ministries: Delicate balance between energy security, rising demand
In the last two terms of the Narendra Modi-led National Democratic Alliance (NDA) government, clean energy and energy transition became a crucial part of economic growth. With India now positioning itself as the voice of the Global South, the push towards green growth is expected to continue. However, rising energy demand could tilt India’s energy basket towards fossil fuels from coal to oil and natural gas. Return of coal and natural gas The country’s electricity demand has not been as coal-dependent as in the past couple of years. With electricity demand touching a new record every year, it is coal that is running the show. The Union power ministry has pulled all strings to ensure surplus supply, including directives on importing coal and running gas-based units. Officials say this has helped the country wade through extreme heat days with no major hiccups. This has had a domino effect on supply of domestic coal, imported coal, and also natural gas. Coal India Ltd (CIL) is looking to have the highest ever supply of coal this year. The Union Ministry of Coal has ensured coal availability of more than 15 days this summer (it usually would go below 10 days). The new coal minister has to maintain this streak with the much-needed support from the Railways, states, the power ministry, and generating stations. Maintaining enough fuel supply while facing global pressure to dial down on coal mining and usage will remain a challenge for these two ministries. But, for the power ministry, the challenge of energy security is multifold. It would need to balance green energy, which has grown multiple times in the last decade but is not available round the clock. All the power ministers in the Modi government have also donned the hat of the minister of new and renewable energy. With India committing 500 Gw of green energy by the end of this decade, both the power and new and renewable energy ministries would need to put feet on the pedal while developing allied infrastructure from transmission to energy storage. The new power minister will also have to walk the tightrope on the new power distribution reforms scheme, which requires cooperation from all states to fix the beleaguered power supply ecosystem. In tandem with the larger push towards cleaner fuels, the petroleum and natural gas ministry aims to expand the Sustainable Alternative Towards Affordable Transport (SATAT) scheme, under which it aims to set up 5,000 compressed biogas plants by FY25, officials say.
Growth in U.S. Oil and Gas Output Slows Down
Oil and gas production in the United States hit record highs at the end of 2023 but has since trended lower, and the growth in output has slowed year-over-year. U.S. companies have slowed production growth rates as oil prices stabilized at lower levels last year compared to the 2022 highs, and U.S. natural gas prices saw a slump to multi-decade lows early this year. This year’s increase in shale and overall U.S. crude production will be much lower than in the past two years, analysts and forecasters say. The decline in oil and gas prices compared to the spikes seen in 2022, the ongoing merger wave in the U.S. shale industry, and the focus on shareholder returns—instead of production growth—have all combined to drag output growth lower in recent months. The total number of active drilling rigs for oil and gas in the United States saw no change in the last week of May, according to data from Baker Hughes. The total rig count stayed the same at 600, compared to 696 rigs this same time last year. Meanwhile, U.S. crude oil production stayed the same for the eleventh week in a row at an average of 13.1 million barrels per day (bpd) for the week ending May 24—down by 200,000 bpd from the all-time high of 13.3 million bpd. Moreover, Primary Vision’s Frac Spread Count, an estimate of the number of crews completing wells that are unfinished, fell by 6 in the week ending May 24, to 257. As a result, growth from the Lower 48 basins was no more than 500,000 bpd in March 2024 from the same month last year, per EIA data cited by Reuters columnist John Kemp. This compares to yearly growth of up to 1 million bpd in the second half of 2023. In other words, U.S. oil production is growing, but at a much slower pace than in 2022 and 2023. Amid the ongoing consolidation in the American oil and gas industry, producers have become bigger and are focusing on shareholder returns. They wouldn’t be inclined to respond to every price spike with a major boost in drilling that ultimately floods the market with oil and depresses prices. As the U.S. industry matured and balance sheets and market valuations strengthened after the record-high earnings of 2022, a wave of consolidation began towards the end of 2023. The big companies are looking to become bigger by adding premier assets of the takeover targets to their portfolios. And the key driver of the industry now is returning more to shareholders and preparing for inventory stacked up for years of production ahead without the need to grow organically by investing too much cash flow into the drilling of new locations and wells. U.S. natural gas production is also off the recent record highs as major producers have curtailed some output in the spring in response to the natural gas price slump earlier this year, which saw prices tumble to a three-decade low. America’s oil production growth may be slowing, but it will still be leading global supply growth from non-OPEC+ producers, according to OPEC’s latest estimates. This year, liquids supply growth from non-OPEC+ is expected at 1.2 million bpd, pushed up by rising output in the U.S., Canada, Brazil, and Norway, OPEC said in its latest Monthly Oil Market Report in May.
Petrol touches ₹100/litre in some cities, here’s why it’s so costly
Fuel prices are on the rise again. On Tuesday, petrol cost Rs89.29 a litre in Delhi, while diesel cost Rs79.70 a litre. In some parts of India, for example in Rajasthan and Madhya Pradesh, petrol even crossed the Rs100 mark for the first time. Part of the reason is recovering crude oil prices, even as central and state taxes remain a pain point. These taxes were raised last year as the pandemic dried up other revenue sources for the government. The elevated taxes kept fuel prices up in India even though crude oil prices had crashed and stayed low for much of 2020. The current petrol price break-up in Delhi shows 60% of what you pay at the gas station goes as excise duty and value-added tax. Just about 40% is the price of crude oil. When the Congress-led government was in power between 2004 and 2014, the crude component was around 51% on average, and taxes and other charges comprised 49%. During the Narendra Modi government’s tenure, the share of taxes in the retail price has climbed up from 45% in late 2014 to an average of over 67% in the two months of 2021 so far. Since February 2020, petrol has become costlier by over Rs17.50 a litre, and diesel by nearly Rs16 a litre. This also means the Centre’s revenues got a reprieve in the pandemic-hit year just from fuel taxes.
India’s end-use energy consumption to grow by 90% by 2050: Rosneft CEO
Oil giant, Rosneft’s CEO, Igor Sechin, stressed that Asian countries, Russia’s trading partners, will account for the highest growth in oil demand with India, accounting for the highest growth rate, by the middle of the century. In his keynote speech at the 27th St Petersburg International Economic Forum (SPIEF), Sechin emphasised that over the next five years, India is projected to continue its strong economic momentum, and become one of the top three largest economies in the world, with a GDP of $5 trillion, and by 2050, will overtake the US, in terms of the size of the economy. He added that India’s end-use energy consumption is set to grow by 90 per cent by 2050, – one of the fastest growth rates in the world, Rosneft said. India’s economy has made significant strides in recent years. Since 2010, energy demand has grown by 45 per cent, making the country, the third largest energy consumer in the world, he pointed out. Recently, Rosneft signed a term contract with Indian Oil Corporation(IoCL), to increase oil supplies, and diversify India’s oil grades. The Agreement took place during Igor Sechin’s, recent visit to India. Indian companies ONGC Videsh, Oil India, Indian Oil Corporation, and Bharat Petroresources, have been owners of 49.9 per cent of Rosneft’s subsidiary, JSC Vankorneft, since 2016. Rosneft’s CEO projected that developing countries will be the main drivers of oil consumption in the coming decades. By 2030, demand growth in this group of countries is expected to account for 95 per cent of global consumption growth in aggregate. The highest growth in oil demand is expected in Asian countries, which are Russia’s main trading partners. Little impact of production cuts Sechin said that OPEC+ agreement, seems to have little impact on the oil market, as observed by the stockpiling of reserves by both Western, and Middle Eastern companies, potentially anticipating significant market changes. These “phantom barrels”, could offset the effects of voluntary production cuts by major OPEC members, evidenced by market quotations declining, after recent ministerial decisions, he added. Moreover, the looming uncertainty surrounding the upcoming US presidential elections, where public sentiment is influenced, among other things, by fluctuations in gasoline prices, implies a heightened level of market volatility. The possibility of regulatory changes within the industry, contingent upon election outcomes, underscores emerging risks, prompting major players to explore alternative strategies. Energy transition Sechin criticised the prioritisation of anthropogenic factors in climate change discourse, and argued against the effectiveness of energy transition initiatives in addressing environmental concerns. Despite considering hydrogen as a promising clean fuel, he pointed out the current limitations in production technology, logistics, and market readiness. Highlighting that even as renewable energy accounts for less than 5 per cent of global energy production, and EVs only make up around 3 per cent, the consumption of oil, gas, and coal has continued to rise. Lack of profitability in green energyinitiatives is leading to divestment from the traditional energy sector, exacerbating the challenge of transitioning to sustainable energy sources, Sechin argued.
India Accelerates Green Hydrogen Initiative
India took a crucial step towards the demand creation of green hydrogen and its derivatives in the country on Saturday. The Solar Energy Corporation of India (SECI) issued a Request for Selection (RfS) to select green ammonia producers for manufacturing green ammonia in India through cost-based competitive bidding, according to the Ministry of New and Renewable Energy. This initiative falls under Mode 2A of the Strategic Interventions for Green Hydrogen Transition (SIGHT) Programme, part of the National Green Hydrogen Mission, which is implemented by the Ministry of New & Renewable Energy. The bidding process, covering a total available capacity of 0.539 million Metric Tonnes (MT) per annum of green ammonia, will be conducted through e-bidding followed by e-reverse auction. The produced green ammonia will be supplied to fertiliser companies. Earlier, the Ministry had issued Scheme Guidelines for implementing Component II of the SIGHT Programme, specifically focusing on incentivizing the procurement of green ammonia production (under Mode 2A) of the National Green Hydrogen Mission. The Solar Energy Corporation of India has been selected as the implementing agency for this Scheme. Within the broader SIGHT Programme ambit, the Ministry has already allocated 0.412 million metric tonnes (MT) per annum of green hydrogen production capacity and 1.5 GW per annum of electrolyzer manufacturing capacity. The National Green Hydrogen Mission, inaugurated on January 4, 2023, with an outlay of Rs. 197.44 billion until FY 2029-30, is poised to contribute significantly to India’s endeavour to achieve self-reliance (Aatmanirbhar) through clean energy initiatives. It serves as a beacon for the global clean energy transition. This mission holds the promise of substantial decarbonisation of the economy, curbing dependence on fossil fuel imports, and positioning India as a frontrunner in both technology and market aspects of Green Hydrogen. The initiative by the ministry lays the groundwork for a greener, more sustainable future, in alignment with India’s commitment to combat climate change and foster inclusive growth.
TotalEnergies inks two Asian LNG supply deals
French energy giant TotalEnergies has entered into deals to supply liquefied natural gas (LNG) to Indian Oil and Korea South-East Power. TotalEnergies said on Tuesday these contracts allow the firm to secure medium-term outlets for its global LNG supply portfolio, and they also strengthen the company’s footprint in Asian markets. The Paris-based firm signed a sales and purchase agreement (SPA) with Indian Oil (IOCL) for the delivery to India of up to 800,000 tons per year of LNG for ten years from 2026. TotalEnergies also signed a heads of agreement (HoA) with Korea South-East Power (KOEN) for the delivery to South Korea of up to around 500,000 tons per year of LNG for five years from 2027. The company did not provide further details regarding the deals. During the first quarter, TotalEnergies sold 10.7 million tonnes of LNG, down 3 percent compared to 11 million tonnes in the same period last year mainly due to lower demand in Europe. This was also down 9 percent compared to 11.8 million tonnes in the prior quarter. The company’s LNG sales decreased 8 percent year-on-year to 44.3 million tonnes in 2023. TotalEnergies says it is the world’s third largest LNG player with a global portfolio of 44 million tonnes per year in 2023 thanks to its interests in liquefaction plants in all geographies. The company benefits from an integrated position across the LNG value chain, including production, transportation, access to more than 20 million tonnes per year of regasification capacity in Europe, trading, and LNG bunkering.
Qatar’s Huge New Long-Term LNG Contracts Are Crucial for Both China and the West
Although the U.S. and China are indirectly involved in the ongoing Russia-Ukraine and Israel-Hamas wars, the conflict between the world’s two leading Western and Eastern powers has not itself turned hot – yet. There are many senior officials on both sides who believe it is only a matter of time before it does, with the consensus being that it will follow the conventional war template seen in the current Ukraine conflict in the first phase at least. As recently as March, Admiral John Aquilino, head of the U.S.’s Indo-Pacific Command, said he believes that China’s military will be prepared to invade the contested territory of Taiwan by 2027. Given this, liquefied natural gas (LNG) looks set to remain the world’s emergency energy source, as it became after Russia invaded Ukraine, as analysed in full in my new book on the new global oil market order. It is readily available in the spot markets and can be moved quickly to anywhere required, unlike gas or oil sent through pipelines. Unlike pipelined energy as well, the movement of LNG does not require the build-out of vast acreage of pipelines across varying terrains and the associated heavy infrastructure that supports it. Against this backdrop, the competition between the U.S. and its allies and China and its partners for upcoming long-term LNG contracts from Qatar will be intense. Even without any new major conflict in the next few years, global demand for LNG is projected to increase by more than 50 percent by 2040, according to oil and gas major Shell. Before the U.S. became the world’s biggest exporter of LNG at the end of last year, Qatar had long held that position, only occasionally relinquishing the top spot to Australia. The Emirate’s importance is set to be boosted further as the outlook for the U.S.’s LNG exports remains uncertain, with a pause on approvals of permits for new LNG projects still in place. Together with this, an indefinite pause also remains on U.S. exports of LNG to non-free trade agreement countries. Many of these are in Asia, and any lengthy continuation of this LNG exports pause would be devastating, forcing them to continue their use of coal for power generation or increasing reliance on the Middle East and Russia for supplies, according to recent comments from the Asia Natural Gas & Energy Association. Although Europe is presently well provided with LNG, the balance in its supply chain remains a complex and delicate one, even without any further escalation in conflict from Russia on its eastern flank or from increased competition in demand from Asia. As it stands now, Qatar will account for at least 40 percent of all new LNG supplies across the globe by 2029, according to recent comments from its government. These projections are in line with independent industry figures, with the huge increase in production set to come from the ongoing expansion of its North Field projects. This 6,000 square kilometre field is one part of two sites that constitute the world’s biggest gas field. The other 3,700 square kilometre section is Iran’s South Pars gas field, which accounts for around 40 percent of the Islamic Republic’s total estimated 33.8 trillion cubic metres (tcm) of gas reserves and about 75 percent of its gas production. Qatar’s North Field expansion program will see six major new developments in the North Field East (NFE) and North Field South (NFS) to 2029. Four new ‘trains’ (production facilities) – each with 8 million metric tonnes per annum (mtpa) – will be built on the NFE site, and two (with the same production capacity) in the NFS site, totalling 48 million mtpa of new LNG production. At the end of February, QatarEnergy announced another set of projects – focused on its North Field West (NFW) – that will increase its LNG output from the current 77 million mtpa to 142 million mtpa before the end of this decade. This compares to the 404 million mtpa of LNG traded globally in 2023 and to industry estimates that this figure will reach around 625-685 million mtpa in 2040. It is with an eye on these NFW sites that Qatar very recently announced that it will very shortly sign more long-term LNG supply deals to add to the 25 million tonnes of sales secured last year. However, there is no guarantee that the Emirate will award the contracts to the West. It has long been forced to play a delicate diplomatic balancing act between the two great Middle Eastern powers (Saudi Arabia and Iran) and their principal superpower sponsors (the U.S., up until relatively recently, and China, respectively), positioned as it is directly between the two big regional players. In the lead up to Russia’s invasion of Ukraine, China was engaged in a flurry of activity to expand its sources and methods of gas supply, as also analysed in full in my new book on the new global oil market order. This began in March 2021, with the signing of a 10-year purchase and sales agreement by the China Petroleum & Chemical Corp (Sinopec) and Qatar Petroleum (QP) for 2 million mtpa of LNG. December 2021 saw another major long-term contract for Qatar to supply China with LNG, on that occasion a deal between QatarEnergy and Guangdong Energy Group Natural Gas Co for 1 million mtpa of LNG, starting in 2024 and ending in 2034, although it could be extended. Quite aside from ensuring a diversity of gas supply – and very quick supplies if necessary – these deals (and later ones) with China subtly shifted Qatar at that point into the China-Russia-Iran sphere of influence, as far as the U.S. was concerned. This was especially concerning for Washington as this meant an alliance between the world’s top LNG exporter at the time (Qatar) and one of the world’s top holders of gas reserves (Iran), both of which were founding members of the 11-member Gas Exporting Countries Forum (GECF), together with Russia. The deals also further inextricably