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As U.S. production of crude oil continues to climb towards its pre-pandemic production levels of 13 million barrels a day—a welcome development given high gas prices—the need for new investment to facilitate exports and imports is growing.

While U.S. consumption almost equals what we produce, we still export and import a considerable amount of oil for a variety of reasons, most of which have to do with the capacity of U.S. oil refineries as well as the grade of oil that can be refined domestically.

One development that has both made shipping oil more cost effective and reduced its environmental impact has been the advent of Very Large Crude Carriers, or VLCC, which have the capacity to carry as much as 80 million gallons (2 million barrels) of crude at a time. Having fewer and larger ships carrying crude reduces emissions and lessens the risk of an incident that might potentially spill oil.

The United States has only one deepwater port currently operating that can load VLCC’s directly, but several more are in the planning and approval process, nearly all of which would be off of the Texas Gulf Coast. These offshore ports are being touted by the industry as an important step for domestic energy exports.

There are numerous steps in the process to obtain a license from the U.S. Maritime Administration that must be accomplished before any construction can begin, including a thorough environmental impact and safety review.

Enterprise Products’ Sea Port Oil Terminal (SPOT) is the first applicant in the queue, having recently gone through its public comment period for its Final Environmental Impact Statement (FEIS). As expected, SPOT (and all deepwater port applicants) received significant commentary from the public, including many environmental organizations.

But the public isn’t the only group weighing in on SPOT’s deepwater port project. Notably, the American Bureau of Shipping (ABS), the preeminent ship classification society in the country and one of the biggest in the world, filed a comment indicating that SPOT’s deepwater port design would not meet its new rule requirements that take effect in 2023.

The issue, which several marine experts also identified in their public comments, concerns the risks created by SPOT’s plan to put their Single Point Mooring (SPM) buoys over half a mile closer to their platform than any other design under consideration—or other existing designs elsewhere.

It appears that this rule change by ABS will ultimately require a design change to SPOT’s offshore terminal, which may not come until after SPOT receives its license. But according to these marine experts that commented on SPOT application, the likely design change is extremely problematic because moving the SPM further from the platform would result in different environmental impacts that were not evaluated and disclosed in this recent process.

The ABS and some of the other commenters are strong supporters of deepwater ports, so raising these alarm bells appears to come from a place of concern that design flaws could create unnecessary risks and problems for the industry writ large and are not merely dilatory. The question is whether the government will grant a license to SPOT amid this significant development or require SPOT to adjust their design before the process can continue.

It is clear this issue is significant enough to warrant further consideration before a flawed system design carries the fate of an industry with it.

Forbes by Ike Brannon, December 1, 2022

Norway’s oil and gas firms have raised their investment forecasts for 2022 and 2023 as more development plans are being made, a national statistics office (SSB) survey showed on Thursday.

The country’s biggest business sector now expects to invest 175.3 billion Norwegian crowns ($17.50 billion) in 2022, up from a forecast of 172.8 billion made in August, the SSB said.

Next year’s investments are seen at 149.7 billion crowns, up from a previous view of 135.3 billion, but the figure is expected to increase as companies plan to approve more projects by the end of this year, it added.

Spending on new offshore fields is only included in the survey when companies submit plans for development and operation (PDO) to the authorities.

Oil companies are expected to approve more than a dozen new projects by the end of this year, when Norway’s temporary tax incentives, which were approved in 2020 to support offshore investments, expire.

As a result, the estimate for 2023 will likely increase significantly when numbers are next updated in February, SSB said.

“In that survey, the first estimate for 2024 is also published. With all these developments included already then, there is reason to expect a relatively high initial estimate for 2024,” SSB said in a statement.

The investments in field development for 2023 rose by 12% to 50.2 billion crowns compared to the previous survey, mainly due to higher cost estimates at some fields, it added.

Expected spending on exploration was broadly unchanged.

Rising costs and supply chain bottlenecks, as well as market uncertainty could put some planned projects on hold.

Last week, Equinor (EQNR.OL) postponed a decision on whether to develop the Arctic Wisting oil discovery, which would have become the world’s northernmost producing field.

Reuters by Nerijus Adomaitis, November 2022

South Korean and Saudi Arabian leaders pledged stronger ties on Thursday in the fields of energy, defence industry and building projects, as the oil-rich kingdom signed investment agreements worth $30 billion with South Korean companies.

South Korean President Yoon Suk-yeol told Saudi Arabia’s Crown Prince Mohammed bin Salman he hoped the two nations can expand cooperation, calling the Middle Eastern country a key partner for its economy and energy security.

Yoon held talks in Seoul with Prince Mohammed, who arrived on Thursday from Bali, Indonesia, where he had participated in a conference of the Group of 20 (G20) major economies.

Yoon hoped to see South Korean companies’ participation in projects such as the NEOM smart city project in Saudi Arabia and further cooperation in defence industry and future energy such as hydrogen, his office said in a statement.

Prince Mohammed noted the role of South Korean businesses over the years in the development of Saudi Arabia’s national infrastructure and wanted to see stronger cooperation with South Korea based on the trust built between the two countries.

“In particular, he said he would like to drastically strengthen cooperation with South Korea in the areas of defence industry, infrastructure and construction,” Yoon’s office said.

Earlier, South Korea’s industry ministry said companies including Samsung C&T Corp (028260.KS) and POSCO Holdings Inc (005490.KS) had signed over 20 agreements with Saudi counterparts in fields such as energy cooperation, railways, chemicals, pharmaceuticals and gaming.

Saudi-based Asharq TV quoted the kingdom’s investment minister as saying deals signed on Thursday were worth $30 billion. It also quoted the Saudi Venture Capital Company as saying it had agreed to establish seven specialised funds.

Among the agreements, Korea Electric Power Corp (KEPCO) (015760.KS) and four other Korean firms signed a memorandum of understanding with Saudi Arabia’s Public Investment Fund to build and operate a hydrogen and ammonia production plant in the Saudi kingdom, the company said.

The project will be worth about $6.5 billion, said a source with knowledge of the deal, who was not authorised to speak with media on the matter and declined to be named.

The plant is expected to produce 1.2 million tonnes of green hydrogen and ammonia annually, KEPCO said. It is to be built over 2025-2029 and operate for 20 years, the Yonhap news agency reported on Thursday, citing industry sources.

Another pact is Hyundai Rotem Co’s (064350.KS) memorandum of understanding with Saudi Arabia to cooperate on a railway project for the Middle Eastern country’s $500 billion NEOM economic zone and smart city, the ministry said. It did not disclose the potential dollar amount of this agreement.

“The (South Korean) government will actively support the successful implementation of cooperative projects which apply Korea’s state-of-the-art architecture … in NEOM,” said South Korea’s trade minister, Lee Chang-yang.

Hyundai Rotem shares rose 8.5%, versus a 1.1% drop in the wider market (.KS11). Shares in Lotte Fine Chemical (004000.KS), which signed an agreement for chemical industry cooperation with the Saudi Ministry of Investment, rose 2.1%.

Also, S-Oil Corp (010950.KS), whose largest shareholder is Saudi Arabian Oil Co (Saudi Aramco) (2222.SE), said it plans to invest a total of 9.3 trillion won ($7.0 billion) into its Ulsan factory to produce more high-value petrochemical products.

Reuters by Joyce Lee, November 2022

Canadian renewable energy company Neogreen Hydrogen and Portuguese developer of photovoltaic solar parks Frequent Summer announced on Monday plans to invest more than 1 billion euros ($1.04 billion) in a green hydrogen plant in Portugal.

So-called green hydrogen, produced using renewable electricity such as wind and solar, is seen as a key power source that can reduce pollution from long-haul heavy transport, steel and chemical industries and power generation.

The plant will be built in the port city of Sines, 150 km (93 miles) south of Lisbon, and will include a 500-megawatt electrolyzer “for the production of ‘green’ hydrogen and derived fuels,” the companies said in a statement.

The agreement for the state to make 10.5 hectares available to install the plant will be formally sealed on Monday. The companies did not give a specific time frame for the investment nor say when hydrogen production would start.

NeoGreen Hydrogen Corp. chief executive Chris Corson said that “having a project in the heart of the European Union, which will be one of the main hubs of demand for hydrogen in the coming years, is strategic for us as a company.”

Portugal expects to become a major producer and exporter of green hydrogen with 70 private investors or groups planning to spend 10 billion euros ($10.2 billion), the environment minister said on Thursday. read more

Portugal’s largest utility EDP (EDP.LS) and oil and gas company Galp Energia (GALP.LS) and a Portuguese-Danish-Dutch consortium are each planning to build green hydrogen plants in the same industrial hub of Sines. read more

Portugal’s three main glass producers and two biggest cement makers, together accounting for 10% of the country’s industrial carbon emissions, also joined a new consortium to launch a green hydrogen plant.

By Reuters, November 22, 2022

PT PGN Tbk as Pertamina Gas Subholding is targeting the international natural gas market through fulfilling natural gas and Liquified Natural Gas (LNG) needs in Turkey. PGN cooperates with BOTAS or Petrolium Pipeline Corporation as a Turkish state-owned enterprise engaged in oil transportation and natural gas trading for natural gas or LNG supply to Turkey.

PGN and BOTAS signed a Memorandum of Agreement (MOU) on Sunday, November 13. The signing was carried out by the President Director of PT PGN Tbk M. Haryo Yunianto and BOD Member of BOTAS Corporation, Kerim Tamakiran, witnessed by the Minister of Energy and Mineral Resources of the Republic of Indonesia, Arifin Tasrif, President Director of PT Pertamina (Persero), Nicke Widyawati, Chairman of Kadin, Arsjad Rasjid, & Chairman of B20, Shinta Widjaja Kamdani.

PGN President Director M. Haryo Yunianto explained that PGN’s cooperation with Botas is not only limited to natural gas and LNG supply, but also regarding the development of hydrogen cooperation, LNG infrastructure, LNG Trading, underground gas storage facilities, human resource development, and other potential businesses.

“This collaboration will strengthen bilateral relations between Indonesia and Turkey, especially in diversifying energy distribution. Indonesia and Turkey can become an essential energy market for the sustainability of bilateral energy trading, especially natural gas. To support cooperation, PGN and BOTAS continue to coordinate on infrastructure readiness such as FSRU and LNG terminals,” said Haryo in a written statement.

According to Haryo, diversification of routes and natural gas supply sources is important for certainty of natural gas and LNG supplies. Therefore, the distribution of natural gas and LNG for Turkey will also come from other sources, not only from Indonesia.

Currently operating is the Arun LNG Hub managed by PT Perta Arun Gas (PAG) as an affiliate of Gas Subholding. The strategic location of Arun makes it the center of LNG trading Asia and global LNG Hub destinations such as China, Australia, Angola, Egypt, and the United States.

“PAG’s main business is LNG receiving terminals, regasifications and LNG Hubs. The strategic location is near the Malacca Strait with the potential of nearly 100,000 ships sailing through, thus becoming an important asset for PAG as a world-class LNG Hub center. Its operation is fully supported by the government through the appointment of PAG as the only LNG Bonded Logistics Center Manager in Indonesia,” explained Haryo.

“We hope that the cooperation with BOTAS will continue until the commercial execution stage. PGN will certainly get benefits to further widen its business to the international arena. On the other hand, Turkey can be helped in terms of fulfilling natural gas energy in big cities and industrial centers as natural gas consumers in large quantities,” concluded Haryo.

By Tank Storage Mag, November 21, 2022

Indian refiners are wary of buying Russia crude oil loading after Dec. 5 when European Union sanctions take effect, pending clarity on the proposed G7 price cap mechanism, according to sources familiar with the refiners’ crude purchase plans.

Chinese refiners have already begun slowing down Russian oil imports from next month.

The Asian giants, who are two of the world’s top three importers, had become Russia’s biggest customers after the West shunned Russian oil after the outbreak of war in Ukraine.

Reduced buying by both of them would leave Russia chasing alternative customers, potentially depressing prices even if those new buyers are unlikely to join a plan by rich nations in the Group of Seven (G7) to cap Russian oil prices.

Reliance Industries Ltd (RELI.NS), operator of the world’s biggest refining complex and a major customer for Russia, has not placed orders yet for Russian cargoes loading after Dec. 5, two sources familiar the refiner’s purchase plans told Reuters.

Neither has state-run Bharat Petroleum Corp (BPCL.NS), they said.

The Indian companies did not respond to Reuters email seeking comments.

According to the sources, Reliance is cautious about reactions from foreign banks given its exposure to the western financial system and overseas sales of refined products.

“There are too many uncertainties attached to the cap mechanism. We don’t know what the payment mechanism could be and what could be the cap level,” said a source at one of the state refiners.

Still, Indian Oil Corp (IOC.NS), the country’s top refiner, has placed orders for Russian cargoes, including for loading some parcels beyond Dec. 5, under term and spot deals, said one of the sources.

“IOC wants to secure barrels,” the source said, adding that Indian refiners have the option of raising purchases under their term deals with the suppliers, mainly in the Middle East, to meet their contractual commitments if they face problems in getting Russian supplies.

IOC did not respond to Reuters email requesting comment.

In contrast, private refiner Nayara Energy, majority owned by Russian entities, plans to continue Russian oil imports, sources aware of its crude purchases said.

After western sanctions were imposed on Russia and Rosneft, which owns about 49% of Nayara, most foreign banks stopped dealing with Nayara, leaving the refiner dealing through Indian banks.

PAYMENT, INSURANCE
While refiners are cautious about sanctions, India and Russia have set up alternatives to western insurance, finance and maritime services in order to conduct their trade.

Indian refiners buy Russian oil on a delivered basis with insurance – cargo, P&I and hull and machinery – arranged by Russian entities. India accepts Russian insurance.

Also, India has recently devised a mechanism to settle trade with foreign nations in rupee terms through vostro accounts of foreign banks in India.

A commerce ministry official on Tuesday said Russia’s Gazprombank had opened a vostro account with UCO Bank (UCBK.NS), and VTB Bank (VTBR.MM) and SberBank (SBER.MM) have opened accounts with their own India-based branch offices. read more

India’s central bank in July this year introduced a new mechanism for international trade settlements in rupees.

Reuters by Nidhi Verma, November 22, 2022

Saudi Aramco eyes hydrogen deals in Japan.

The Sixth “Saudi-Japan Vision 2030” Ministerial Meeting was held in Tokyo under the auspices of the Saudi Ministry of Investment and the Japanese Ministry of Economy, Trade and Industry. On the Japanese side, Nishimura Yasutoshi, Minister of Economy, Trade and Industry, and Yamada Kenji, State Minister for Foreign Affairs, participated in the meeting, with Nishimura making the opening speech.

On the Saudi side, Khalid Al-Falih, Minister of Investment, gave an opening address, and was joined at the meeting by the Saudi ambassador to Japan, Naif Al Fahadi. The minister said that Saudi Arabia is “very keen on promoting and strengthening this strategic partnership with Japan as a reliable partner.”

Al-Falih said that the Saudi-Japan Vision 2030 meeting came just before Saudi Arabia’s Crown Prince Mohammed Bin Salman’s state visit to Japan from Nov. 19-21. The minister said that 89 of the initiatives from the vision are “being materialized, with some already completed.” He added that it was important to not only to ensure the quantity of these initiatives, but to also emphasize their quality.

Al-Falih said Saudi Arabia aims to be one of the world’s fifteen largest economies by the end of this decade.

Khalid Al-Falih, Minister of Investment said:

The Saudi economy is already expanding at 10.2 percent in the first three quarters of 2022.

Al-Falih

“That is the fastest growing rate among the G20 economies.”

“We now have over 40 industrial cities, already developed and many of them are hosting Japanese who are doing very well in the industrial sector,” he said. Al-Falih added that Japanese companies can invest in virtually all sectors of Saudi Arabia.

When it comes to space exploration, the Saudi minister said that the Kingdom has developed a new space strategy to join the “top ten space nations by 2030 and become a global space champion.”

“We will prioritize commercial returns from our space program, and bolster your competitiveness and increase our share of the space market and we would love to see the Japanese aerospace exploration agency JAXA participate in our space program,” he added.

Al-Falih told the audience at the Saudi-Japan Vision 2030 meeting that Saudi Arabia plans to significantly increase gas production capacity including producing and exporting LPG, which is key to the Japanese economy.

“We are investing here in Japan with Showa Shell initially, now with Idemitsu, But we will also invest in Saudi Arabia,” he said.

Blue and green hydrogen are also important for Saudi Arabia’s agenda, Al-Falih said. “Blue and green hydrogen are being invested in in Saudi Arabia at a scale nobody else is doing, and we started the discussion with our Japanese counterparts more than ten years ago.” Al-Falih said he signed an MOU when he was last in Japan and helped join forces with the Japanese led hydrogen council to signify and ARAMCO.

“In NEOM, the world’s largest hydrogen project is being built and ARAMCO is investing to produce 11 million ton of blue hydrogen that is being done in coordination and consultation with Japanese companies,” he explained.

Al-Falih congratulated Japan on its progress made for Expo 2025 Osaka, Kansai, adding that Saudi Arabia is actively working on hosting Expo 2030 in Riyadh. Nishimura, who is also chairman of the Japan-Saudi Parliamentary Friendship League, welcomed the Saudi delegation and emphasized the importance of the two countries’ relationship.

Nishimura Yasutoshi, Minister of Economy, said:

For Japan, which imports approximately 40 percent of its crude oil from Saudi Arabia, Saudi Arabia is the most important partner in terms of energy security.

“I would like to once again express my gratitude for the stable supply of crude oil over the long term. I also expect Saudi Arabia to take a leadership role in stabilizing the international crude oil market as the situation in Ukraine makes the global energy supply and demand uncertain.”

“In addition, the socio-economic reforms and mega-projects promoted by Saudi Arabia’s leadership have become even more important as new growth drivers for the Middle East and for realizing the global trend toward carbon neutrality.”

“Japan will contribute to the economic and social reforms of Saudi Arabia through the Japan-Saudi Vision. Together with the people of Saudi Arabia, we will further accelerate and further expand our efforts.”

Nishimura explained that since the Fifth Ministerial Meeting two years ago, “steady progress” has been made. He went through some of the representative initiatives which included cooperation in the field of clean energy. “[Clean energy] is important for the oil-free reform that Saudi Arabia is aiming for.

Last month, JOGMEC and Saudi Aramco signed a comprehensive cooperation agreement in the field of hydrogen and ammonia. We will accelerate cooperation toward the realization of a sustainable society,” he said.

Nishimura added that demand for housing construction is “strong in Saudi Arabia.” “A Japanese building materials company has started a project to manufacture and supply houses in Saudi Arabia using a concrete 3D printer in cooperation with a Saudi conglomerate,” he said.

The Japanese minister said they are proceeding with a plan to establish an R&D center in Namie Town, Fukushima Prefecture, to accept and train around 100 Saudi engineers annually. He added that they will “contribute to the realization of a digital society with Japanese technology in specific fields such as construction.”

Another representative initiative includes cooperation in new fields that capture the social reforms of Saudi Arabia.

In the entertainment field, e-sports competitions between the two countries were held in both Japan and Saudi Arabia. Also, at the 2nd Saudi Anime Expo held in Riyadh last month, many Saudi and Japanese cosplayers dressed as Japanese anime characters such as ‘Dragon Ball’ and ‘Kimetsu no Yaiba’.

“It is a great pleasure that Japan’s content industry is contributing to economic and social reform, and the Ministry of Economy, Trade and Industry will continue to support this field,” he said. “Finally, I would like to express my respect for the leadership of everyone in attendance and the efforts of all the organizations involved in supporting the project, ‘Shukran Jazeelan‘ (thank you very much)” Nishimura concluded by thanking his guests in Arabic.

The event was concluded by Minister Nishimura’s closing remarks, whereupon the delegations moved to another room for signing of agreements and the exchange of gifts.

Highlights:

• Saudi Arabia is “very keen on promoting and strengthening this strategic partnership with Japan as a reliable partner,” said Khalid Al-Falih, Minister of Investment
• He congratulated Japan on its progress made for Expo 2025 Osaka, Kansai, adding that Saudi Arabia is actively working on hosting Expo 2030 in Riyadh

Sixth ‘Saudi-Japan Vision 2030’ Ministerial Meeting takes place in Tokyo, Tokyo, November 8, 2022.

By Hydrogen Central, November 18, 2022

One of the under-reported factors behind the ongoing diesel shortage is the loss of U.S. refining capacity since the start of the Covid-19 pandemic. Today I will discuss the factors that led to this loss.

According to the Energy Information Administration (EIA), at the beginning of the pandemic U.S. refiners had 19.0 million barrels per day (BPD) of operable refining capacity (Source). This was the highest number ever reported by the EIA.

By December 2021, that number had fallen to 17.9 million BPD — a loss of 1.1 million BPD of capacity in less than two years.

Here is the thing many do not understand about refining. It is a boom and bust business, and these refiners do not have crystal balls. It is widely reported when they make huge profits, but they also regularly endure huge losses.

U.S. energy policy has been clear about the intent to phase out fossil fuels. If you are a refiner forecasting billions in losses — and you require massive investments in order to keep your refinery operating safely and in compliance with the laws — you may very well simply make the decision to close down.

There are two excellent sources of information detailing which refineries closed, and why they closed. The first is the EIA.

During the summer, the EIA reported U.S. refinery capacity decreased during 2021 for second consecutive year, in which they discussed one of the major closures in 2021. They also showed this excellent graphic of how refinery capacity has evolved in recent years:

But I stumbled upon a more detailed look recently. In a Twitter thread, Laura Sanicola, an oil and energy reporter at Reuters, highlighted the individual refinery closures from the start of the pandemic through June 2022.

She reports on nine refinery closures, but the theme is consistent. Most of the refineries were closed due to demand loss as a result of the Covid-19 pandemic.

But, aren’t these companies earning billions of dollars? Isn’t that an argument for keeping these refineries open? There are two points to make on that argument.

First, it is possible to make billions of dollars as a company, but to lose money consistently in an individual refinery. We have seen this happen a lot with East Coast refiners that didn’t have access to cheaper oil from the U.S. shale boom. They had to continue to procure crude oil on the international markets, and that put them at a competitive disadvantage.

Second, current refiner profits are a snapshot in time. Today, U.S. demand for petroleum has largely recovered. In fact, distillate demand has recovered to pre-pandemic levels.

But, these companies are projecting the future. They are looking at long-term demand forecasts for petroleum products. Those projections indicate declining fuel demand over time. Thus, they do not want to invest billions of dollars that could take a decade or more to pay off.

Imagine that you are running a chain of stores. Overall, your company is highly profitable, but you have stores that are consistently unprofitable. Further, those stores are outdated, the outlook for demand in these areas is weak, and it will cost a lot of money to upgrade them. You would probably close those locations.

That, in a nutshell, is why we have lost refining capacity in the U.S. It’s going to take some changes in our energy policy to address this.

Forbes by Robert Rapier, November 18, 2022