Seros Energy achieves 10,000-meter monthly drilling on CBM
Oil field services provider Seros Energy on Monday announced that it achieved a significant milestone by consistently delivering over 10,000 meters of wells on a monthly basis, exclusively for coal bed methane (CBM) drilling projects across India. The company also made a noteworthy indent as an Indian service provider to execute more than 200 hydraulic fracturing jobs assisted by coiled tubing in the Eastern CBM belt while unlocking pay zones with some of the most significant fracking jobs executed in the CBM reservoir, per the company. Seros Energy MD & CEO Ashish Agarwal said, “As the world transitions towards cleaner, sustainable energy sources, Seros Energy is at the vanguard, pioneering a more efficient future for CBM exploration in India. Our unwavering commitment to innovation and environmental stewardship transcends mere business strategy; it is a steadfast dedication to cultivating a sustainable energy landscape that will benefit generations to come.” The company’s expertise is sought after by major players in India’s CBM sector, including Essar Oil and Gas Exploration Production, Reliance Industries and ONGC. The contract drilling services provider offers specialised services such as Hydraulic Fracking and Well Services. Besides, it is a leading coastal fleet operator with over 40 marine assets, offering a wide range of services such as Cargo movement, Harbour operations, Lighterage, and Dredging.
ADNOC Gas makes $13bn LNG commitment
ADNOC Gas is to invest $13 billion in domestic and international opportunities in the next five years and aims to more than double its liquefied natural gas (LNG) production capacity by 2028. The $65 billion top 20 oil and gas company included the commitments in its 2023 results, in which it recorded a net income of $4.7 billion. Dr. Sultan Ahmed Al Jaber, Chairman of ADNOC Gas – the integrated gas processing unit of ADNOC – said the investment will increases its EBITDA by up to 40% by 2029. He said last year it made substantial investments, awarding contracts worth $4.9 billion to expand its processing capacity, which will provide additional sales volumes of up to 20%. “Our international sales momentum grew in 2023 with the signing of LNG export agreements worth up to $12 billion, securing our returns in the coming years and capitalising on the increasing global demand for LNG as a transition fuel,” he said. “We are looking to increase our LNG export volumes in a growing global market. Our aim is to acquire the new Ruwais LNG plant and more than double our LNG production capacity by 2028.” ADNOC has announced its intention to take a final investment decision (FID) on the Ruwais LNG project in 2024. AG Image for 646726165InDr. Ahmed Alebri, CEO of ADNOC Gas, said its strong financial performance underpins its confidence to expand its global footprint and explore new revenue streams. “We aim to expand internationally by acquiring new positions in the gas value chain, targeting opportunities in Europe, India, China and South-East Asia if they add value to our business,” he said. ADNOC Gas is well-positioned to benefit from ADNOC’s planned expansion of oil production capacity to five million barrels per day (bpd) by 2027. The company will continue to expand its natural gas pipeline network and develop infrastructure to boost gas supply for its petrochemicals growth in Ruwais. ADNOC Gas aims to enhance operational efficiency through decarbonisation, digital transformation, and artificial intelligence (AI)-led technology innovation, which is expected to yield savings of up to $400 million annually.
Indian Oil Corp Shifts To Spot Market As Russian Contract Ends: Report
The oil supply agreement between Rosneft and Indian Oil Corp, which expired in March, has not been renewed due to disagreements over price and volumes, according to a Reuters report citing sources familiar with the matter. As a result, India’s leading refiner has resorted to spot markets. The annual oil deal between IOC and Rosneft signed initially during Russian President Vladimir Putin’s visit to India in December 2021, was renewed for a second time a year ago, just months before Moscow’s military involvement in Ukraine. According to the report, the term contract between the state-run Indian Oil Corporation (IOC) and Rosneft expired on March 31st. It further added that the agreement for 2024-25 has yet to be renewed. IOC and Rosneft may still reach an agreement for the deal if they can come to terms, states the report. In the interim, the Indian firm plans to procure Russian oil from the spot markets. New Delhi has been capitalising on discounted Russian oil as Western nations refrained from purchasing and imposed sanctions on Moscow following its invasion of Ukraine, with Russia emerging as the primary supplier to the world’s third-largest importer. Under IOC’s annual oil purchase contract with Rosneft, the agreement entailed a monthly supply of 1.5 million metric tons (equivalent to 360,000 barrels per day) at a discount ranging between $8 and $9 per barrel to Dubai quotes on a delivered basis. IOC, along with Bharat Petroleum Corp (BPCL) and Hindustan Petroleum Corp (HPCL), were in the midst of negotiations with Rosneft for an annual contract starting from April 1, aiming to secure up to 400,000 barrels per day of oil, as per a previous Reuters report. However, Rosneft’s proposal fell short of expectations, offering only 4-6 cargoes per month, totalling up to 4 million barrels. This was significantly below the collective requirement of the Indian refiners, according to the report. Additionally, Rosneft’s offer included a discount of $3-$3.50 per barrel compared to Dubai quotes within the term deal, similar to prevailing rates in spot markets, indicated the report.
Crude oil’s climb towards $90 per barrel is a matter of anxiety for India, oil secretary Pankaj Jain says
Crude oil’s climb towards $90 per barrel is a matter of anxiety for India, oil secretary Pankaj Jain has said. “Whenever prices go up, it does cause anxiety, cause concern,” Jain said. Brent, the international crude benchmark, has risen to $89 per barrel, adding $15 in about four months. “Does it stop at $90? That’s the matter of anxiety,” Jain said. India is the third-largest importer of crude in the world and imports 88% of its requirements. The impact of high prices can be gauged only if they are sustained for long, Jain said, adding that if prices stay this way for a month or longer, companies will respond appropriately. Geopolitics and traditional summer demand were driving up prices, Jain said. An Israeli attack on the Iran embassy in Syria on Monday, which killed some of the senior Iranian military officers, is threatening to widen the conflict in the Middle East. Fuel prices get a usual boost during summer, helped by increased holiday travel and air conditioning demand. “Either crude prices go up or cracks go up (in summer). This year so far, crude prices have gone up, cracks haven’t gone up,” Jain said. India imports about 88% of the crude it consumes. Refiners are expected to regularly align domestic prices of fuel with international rates. After extreme volatility hit the global oil markets in 2022, state oil companies stopped regular revision of prices. They have recently cut retail prices of both petrol and diesel by Rs 2 per litre.
Russia’s Sokol Crude Starts to Move to India Again via Traders
Despite stricter enforcement of the U.S. sanctions against Russian oil exports, some tankers loaded with Russia’s Sokol crude grade are near India signaling Indian ports as their destinations, vessel-tracking data compiled by Bloomberg showed on Tuesday. After more than a year of gorging on cheaper Russian crude, Indian refiners began to avoid Sokol shipments at the end of last year and avoid taking delivery of crude loaded on tankers of Russian state fleet owner Sovcomflot, following the ramp-up of U.S. sanctions on Russia. It now appears that some of the Sokol trade may have returned, via traders offering attractive discounts, refining sources have told Bloomberg. According to the ship-tracking data the newswire has compiled, three tankers carrying Sokol crude are near India’s west and east coasts. It’s not clear if they would discharge in India and whether issues with delivery and payments due to the sanctions have been overcome, Bloomberg notes. The U.S. levied new sanctions against Russia in February on the second anniversary of the Russian invasion of Ukraine and in response to the death of opposition politician Alexey Navalny. Among the 500 targets of the new sanctions, the U.S. Treasury and State are targeting Sovcomflot and more than a dozen tankers linked to the Russian state-owned firm. Stranded cargoes of Sokol, previously headed to India but idled off South Korea and Singapore since the U.S. stepped up sanctions enforcement, started to make their way to China last month, beginning to clear a backlog of more than 10 million barrels of the grade sitting on tankers at sea. After the sanctions on Sovcomflot, all Indian refiners are said to be now refusing to take Russian crude transported on Sovcomflot vessels to avoid running afoul of the stricter enforcement of the U.S. sanctions on Russia. One of the tankers currently near the Indian coast, Vostochny Prospect, is owned and managed by Sovcomflot, per the Equasis international maritime database cited by Bloomberg.
Petrochemicals Are Driving 90% Of China’s Oil Demand Growth
Last year, Bloomberg caused quite a stir in energy circles when it predicted that global demand for road fuel will peak in 2027. According to Bloomberg, demand for road fuel will hit an all-time high of 49 million barrels per day just three years from now before entering terminal decline. Bloomberg says that rapid adoption of electric vehicles, shared mobility and ever-improving fuel efficiency are the biggest bear catalysts for oil, with EVs expected to displace a staggering 20 million barrels per day in oil demand by 2040, or 10x the current estimate. Bloomberg also reported that demand for gasoline and diesel for road transport has already peaked in the U.S. and Europe, and is set to do so in China in the current year. Meanwhile, demand in India will start shrinking in the 2030s. Well, we have just completed the first quarter of 2024 and all eyes are on the world’s biggest consumer of fossil fuels: China. Chinese crude oil imports jumped by 5.1% Y/Y in January and February, driven by increasing fuel demand during the Lunar New Year holiday. According to Reuters’ calculations based on data reported by the Chinese General Administration of Customs. China’s oil cargo arrivals climbed to a total of 10.74 million barrels per day (bpd) in the first two months of 2024, compared to 10.4 million bpd in last year’s corresponding period. However, the Jan-Feb clip represents a considerable slowdown from 11.39 million bpd crude arrivals in December 2023. It’s hard to predict how demand will unfold in the coming months although Chinese refiners, in recent years, have stepped up purchases when prices are relatively low and pumped the brakes when oil climbs above $80 per barrel. China’s oil market is closely watched by energy experts not only due to its sheer size but also because of the ongoing EV revolution in the Middle Kingdom. According to Lu Ruquan, president of state-owned China National Petroleum Corp.’s Economics & Technology Research Institute, EVs will displace more than 20 million metric tons of crude demand this year, good for 10% of the country’s gasoline and diesel consumption. China’s sales of battery-powered EVs rose 18.2% in January-February, a lower growth clip compared to 20.8% for all of 2023. However, together with plug-in hybrids, China’s new energy vehicle (NEV) sales jumped 37.5% in the two-month period, versus 36.2% for 2023. NEVs accounted for 33.5% of total car sales in January-February versus 28.3% in the same period a year earlier. Further, intense price wars have led to some EVs achieving price parity with ICE vehicles sooner than projected, putting further pressure on oil demand. Thankfully for the oil bulls, China’s EV boom might not be enough to destroy oil demand growth due to another boom in a pivotal oil industry: petrochemicals. China’s oil demand is expected to continue growing in the coming years mainly because the country is aggressively onshoring its petrochemicals sector, displacing demand that was previously served by imports from Japan, Europe, South Korea and the Persian Gulf. A new breed of private refiners such as Hengli Petrochemical and Rongsheng Petrochemical has emerged in China, and they are spending billions of dollars building plants specializing in chemicals, rather than gasoline and diesel. Indeed, the International Energy Agency has reported that 90% of China’s increased oil demand from 2021 to 2024 comes from chemical feedstocks like LPG, ethane, and naphtha. IEA notes that between 2019 and 2024, additional Chinese production capacity for ethylene and propylene will exceed the combined current capacities of Europe, Japan, and South Korea. Between 2018 and 2023, China’s output of synthetic fibers alone rose by 21 million metric tons–enough to spin more than 100 billion T-shirts a year. Analysts have noted that this transition towards petrochemicals may have significant climate implications, and could potentially lead to a significant decline in emissions. Whereas petroleum fuels must be burned to be used, instantly putting emissions into the atmosphere, petrochemicals tend to keep their carbon locked up in their molecular structures and can be easily recycled. Buttressing the bullish thesis, China’s economy has kicked off the current year on a bright note, with manufacturing and service sectors recording positive growth. The Caixin/S&P Global China manufacturing purchasing managers’ index clocked in at 51.1 in March— its strongest since February 2023 — after coming in at 50.9 in February. Economists had expected the reading to hit 51, according to a Reuters poll. The 50-point mark separates expansion from contraction.
UAE Slashes Exports of Medium Sour Crude
The United Arab Emirates (UAE) is slashing exports of its Upper Zakum grade as it is diverting more volumes of the medium sour crude to a huge domestic refinery, traders and analysts have told Reuters. ADNOC, the state oil and gas firm of one of OPEC’s top producers and exporters, is estimated to have shipped around 650,000 barrels per day (bpd) of Upper Zakum crude in March, compared to a monthly average of around 940,000 bpd throughout 2023, according to Rystad Energy data cited by Reuters. At the same time, ADNOC has exported more volumes of the lighter and sweeter grade Murban to replace lower volumes of Upper Zakum, according to traders and analysts. More Upper Zakum crude is now being run at ADNOC’s refurbished Ruwais refinery, which has a capacity to process 837,000 bpd of crude. Back in 2018, ADNOC said it would invest $3.1 billion to introduce crude processing flexibility at its Ruwais oil refinery. Since then, the refinery has been modified to enable ADNOC’s Ruwais Refinery-West complex to process up to 420,000 bpd of Upper Zakum crude or similar crude types. This has freed more volumes of the UAE’s Murban crude, which fetches a higher price on the global oil markets, to be utilized for export sales. Commenting on the refinery modification at the time, ADNOC said that “we can maximise the benefit of price differentials to enhance refinery margins, improve the middle distillate products and release valuable Murban crude into the market.” ADNOC began using Upper Zakum at its domestic refinery in September last year, traders told Reuters. Later in the autumn of 2023, sources familiar with ADNOC’s plans told Reuters that the Abu Dhabi firm had already notified some of its term customers that it would reduce the volume of Upper Zakum supply in 2024. On the other hand, the UAE has said it would boost supply of the more expensive Murban crude, especially as the Middle Eastern producer won a higher quota under the OPEC+ agreement for 2024. “Barrel-for-barrel, Murban brings more revenue for equal compliance,” Adi Imsirovic, director of Surrey Clean Energy, told Reuters. Importers of the UAE’s medium sour grade Upper Zakum, most of all China, will now have to scour the market for other sources of heavier crude.
Asia LNG Purchases Hit March Record
Imports of liquefied natural gas into Asia last month hit the highest ever for that month, at 24 million tons, which was a 12% increase on a year earlier, Bloomberg reported, citing Kpler data. The leaders of the importers’ pack were China, India, and Thailand, the data showed, with imports expected to continue at elevated levels as ample gas inventories are dampening demand for new shipments and lower prices on the spot market. Because of that lower demand, shipments of liquefied gas to Europe dropped 20% in March from a year earlier, Kpler also said. Within Asia, India led with the highest increase in LNG imports, at close to 20%, followed by China, whose LNG purchases increased by 22% in March from a year earlier. Japan’s LNG intake added 8%, after two months of import declines in a row, the data also showed. Weak European demand has helped push LNG prices lower, making the fuel more attractive for large Asian buyers. Three months before the March record, shipments of LNG to Asia hit the highest ever for any month: the December total stood at 26.61 million tons, again per Kpler data. High LNG import levels in China and the rest of Asia could create more competition for LNG supply to Europe at a later point as the continent is now more dependent on the super-chilled fuel for its natural gas supply after the loss of a large part of the Russian pipeline gas supply. The relative calmness in the LNG market in recent months could turn into volatile turbulence again if fresh supply concerns emerge and if this winter is really cold in Europe and/or Asia. These lower LNG prices on the spot market could see China break its own LNG import record, set back in 2021, and boost India’s intake of liquefied natural gas by 10% this year. In 2021, China imported 78.8 million tons of LNG. Asia LNG purchases on the spot market totaled 161 cargoes over the first three months of the year, S&P Global data shows, which was an annual increase of about 33%
Natural Gas Producers Are Ready To Pounce When Prices Rebound
U.S. natural gas producers are slashing production in response to multi-year low prices. But they are also looking beyond the current slump, preparing to turn on more output by flexible operation of their inventory of wells. “Natural gas is currently pricing at or below costs of production,” an executive at an exploration and production company said in comments in the quarterly Dallas Fed Energy Survey released this week. Prices are historically low due to weak winter demand amid milder weather, record output at the end of 2023, and higher-than-average natural gas stocks. Working natural gas stocks in the week to March 22 were 41% more than the five-year average and 23% higher than last year at this time, per the latest EIA data. The oversupply and low prices have prompted many producers to start reducing production. But some are also stocking up inventories of wells ready to start pumping – or to be turned in line – as soon as prices rebound. Producers expect natural gas prices to recover next year amid growing demand for LNG exports and new LNG export plants that are slated to begin operations in 2025. “All of us in the natural gas business are pinching as many pennies as we can right now,” Josh Viets, Executive Vice President and Chief Operating Officer at Chesapeake Energy, told the audience at Hart Energy’s DUG GAS+ Conference & Exhibition 2024 in Louisiana this week. But Chesapeake Energy, set to become the top U.S. natural gas producer after the planned merger with Southwestern Energy, is also deferring production from around 80 wells this year, which would give it up to 1.0 bcf/d of productive capacity available from deferred turn in line wells (TILs) by the end of 2024. “The way I like to think about it is we’re using the reservoir as storage,” Viets told the conference, as carried by Bloomberg. “When the market says, ‘hey, I need more gas,’ we’ll be in a position to quickly restore that to help meet the needs of consumers.” In the Q4 2023 earnings release in February, Chesapeake Energy said it would be building productive capacity to align with consumer demand. By year-end, the company plans to have deferred around 35 drilled but uncompleted wells (DUCs) and about 80 TILs. A measured approach to production activation would be responsive to market demand, Chesapeake noted. Other U.S. natural gas drillers, including the current top producer EQT Corporation, have also reduced output in response to the low domestic prices. “The low prices we are experiencing now are causing us to tuck it in and keep our powder dry,” an executive at an E&P company said in comments to the Dallas Energy Survey. “While companies are certainly protective of cash flow, they all want to be ready to service the next wave of LNG projects coming online in 2025,” Erin Faulkner at Enverus wrote this week. Despite multi-year low natural gas prices in the United States, domestic producers continue to be optimistic about the long-term prospects of gas as a fuel, both in America and abroad. Recent deals for LNG supply and midstream expansion point to an optimistic view in the industry about global gas demand and the role the U.S. could play in meeting said demand, despite the halt to LNG permit reviews. Chesapeake, for example, signed in February its first LNG Sale and Purchase Agreements to buy around 0.5 million tonnes per annum of LNG from Delfin LNG at a Henry Hub-linked price with a targeted contract start date in 2028. Chesapeake will then deliver the LNG to commodity trader Gunvor on an FOB basis with the sales price linked to the Japan Korea Marker (JKM) for a period of 20 years. Pipeline giant Enbridge announced this week a joint venture to build and operate natural gas pipelines connecting gas supply from the Permian to the U.S. Gulf Coast to tap into growing LNG export demand. Henry Hub prices are set to rise by the end of 2024, and further still in the medium term, according to executives polled in the Dallas Fed Energy Survey. Survey participants expect a Henry Hub natural gas price of $2.59 per million British thermal units (MMBtu) at year-end, compared to an average price of $1.44 per MMBtu through most of March when the survey responses were collected. Executives see Henry Hub prices at $3.18 per MMBtu two years from now, and at $3.94 per MMBtu five years from now.
US Oil Suppliers Muscling Into OPEC+ Markets All Over the World
One major beneficiary of sanctions on Russian and Venezuelan oil? US suppliers who’ve muscled their way into markets once dominated by OPEC and its allies. US oil exports have set five new monthly records since Western nations began imposing sanctions on Russia in 2022. And with trade restrictions on Venezuela set to renew in April, American barrels are beginning to displace sanctioned crude in India, one of the biggest buyers of illicit oil. The shift underscores the extent to which sanctions have helped American crude capture market share around the world. While US oil has long been the world’s go-to flex barrel, the disruption of energy flows after Russia’s invasion of Ukraine created new pull for American barrels. Shipments to Europe and Asia surged in the aftermath, transforming the US into one of the world’s largest exporters. Record production from the US — coming just as OPEC and its allies curb their own supply — has also helped American producers gain a bigger foothold in overseas markets. Physical oil prices are reflecting that, with WTI in Houston trading near the highest levels since October and sour benchmark Mars not far behind. “US production is going up and OPEC and Russian production is going down — so the US, by definition, is going to have more market share,” said Gary Ross, a veteran oil consultant turned hedge fund manager at Black Gold Investors LLC. India — the third-largest crude importer and Moscow’s second largest buyer after China — is the latest market seeing an influx of US oil. American shipments to India are set to jump in March to the highest in nearly a year, according to data from crude tracking firm Kpler. At the same time, Russian oil imports have fallen by about 800,000 barrels a day since last year’s high point, Bloomberg tanker tracking shows. Russian shipments may decline further with Indian oil refiners no longer accepting cargoes from tankers owned by state-run Sovcomflot PJSC, which was recently sanctioned by the US. While US supplies can’t fully replace Russian crude due to differences in oil quality and voyage times, “there’s definitely a bit of a pivot there towards pulling in more US crude,” said Matt Smith, lead Americas oil analyst at Kpler. Indian refiners have also halted purchases from Venezuela ahead of the expiry of a US sanctions waiver in the middle of next month. Those supplies are now poised to hit the lowest this year. Even before the latest raft of trade restrictions, the US was fast becoming a key supplier to Asia, where US imports hit an annual record last year, according to the EIA. And in Europe, which has largely eschewed Russian oil since the war in Ukraine began, US shipments will hit a record 2.2 million barrels a day in March, according to vessel tracking data compiled by Bloomberg. To be sure, not all of the pull from Europe is due to sanctions. Imports into the Netherlands have surged since West Texas Intermediate was included in the dated Brent benchmark last year, ensuring US crude would become a part of the European diet. But shipments increased markedly after the imposition of sanctions as European nations sought non-Russian sources of supply. US imports to France jumped nearly 40% from 2021 to 2023, while those to Spain rose 134%. “As US production continues to gradually grind higher, every incremental barrel that’s being produced is likely going to be exported,” said Kpler’s Smith.