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India’s national hydrogen fuel strategy includes a focus on using renewable H2 as a primary energy source for transportation. In the movement ahead along the path of this strategy, state-run gas and oil companies have been investing in – and participating in – a number of different projects focused on its production, distribution, storage and use.

Among the projects include blending H2 with compressed natural gas for use in transportation.

The companies are also focused on green hydrogen fuel for mobility using fuel cells. Together, the state-backed oil and gas companies formed an H2 corpus fund to pay for research and development related to various applications for the clean energy, including in powering vehicles. This, according to a statement from Rameswar Teri, the union minister of state for petroleum and natural gas in the Rajya Sabha, the upper house of parliament. The companies have also started R&D projects for using renewable H2 for fuel cell-based mobility.

Furthermore, the Indian government has been backing research and development as well as technology demonstration projects at academic institutions. This strategy will help to ensure that there will be adequately educated and trained people graduating into the country’s workforce as the clean energy industry skyrockets.

Some of the hydrogen fuel projects will also be conducted at the educational institutions themselves.

Among the projects being worked on include one focused on H2-powered two-wheelers. That project is under development at Banaras Hindu University for demonstration. Another project includes H2-powered three-wheelers being developed and demonstrated by Banaras Hindu University, IIT Delhi and Mahindra & Mahindra.

Another project underway is being conducted by Indian Oil. That energy company has developed a compact reforming process for the process of hydrogen fuel production in the form of H2-enriched compressed natural gas (H-CNG). That H-CNG is used for fueling buses that are operating in Delhi.

As a component of that particular joint study with Indraprastha Gas Ltd., Indian Oil installed its complex reformer plant located at the Rajghat bus depot for Delhi Transport Corp. The oil giant also held a sixth-month trial for operating fifty of the gas-powered buses on the resulting blended H-CNG.

Hydrogen Fuel News by Erin Kilgore, August 30, 2022

Oil prices bounced off session lows to trade nearly flat in a volatile session on Monday as markets weighed Saudi Arabia’s warning that OPEC+ production could cut output against the possibility of a nuclear deal that could return sanctioned Iranian oil to the market.

Brent crude futures for October settled at $96.48 per barrel, down 24 cents, or 0.25%. It had fallen as much as 4.5% earlier in the day, breaking a three-day streak of gains.

U.S. West Texas Intermediate (WTI) crude for September delivery, which expired on Monday, was down 54 cents, or 0.6%, at $90.23. The more active October contract was down 4 cents, or 0.03%, at $90.41.

Saudi Energy Minister Prince Abdulaziz bin Salman said OPEC+ has the commitment, flexibility, and means to deal with challenges and provide guidance including cutting production at any time and in different forms, state news agency SPA reported.

Meanwhile, the leaders of the United States, Britain, France and Germany discussed efforts to revive the 2015 Iran nuclear deal, the White House said on Sunday, which could allow sanctioned Iranian oil to return to global markets.

The U.S. State Department said a nuclear deal was closer now than it was two weeks ago.

Earlier in the session, worries that aggressive U.S. interest rate hikes may lead to a global economic slowdown and dent fuel demand had pushed down prices.

“The near-term fundamentals seem more to the bears until we see some positive economic indications either out of the U.S. or China, which is looking unlikely,” said Dennis Kissler, senior vice president of trading at BOK Financial.

The U.S. Federal Reserve will raise rates by 50 basis points in September amid expectations inflation has peaked and growing recession worries, according to economists in a Reuters poll.

Investors will be paying close attention to comments by Fed Chair Jerome Powell when he addresses an annual global central banking conference in Jackson Hole, Wyoming, on Friday.

Also pressuring prices were worries over slowing fuel demand in China, the world’s largest oil importer, partly because of a power crunch in the southwest.

Beijing cut its benchmark lending rate on Monday as part of measures to revive an economy hobbled by a property crisis and a resurgence of COVID-19 cases.

The dollar index rose to a five-week high on Monday. A stronger greenback is generally bearish as it makes it more expensive for buyers with other currencies in the dollar-denominated oil market.

High natural gas prices exacerbated by reduced supply from Russia is strengthening oil demand, said Ole Hansen, head of commodity strategy at Saxo Bank.

Supply worldwide remains relatively tight, with the operator of a pipeline supplying about 1% of global oil via Russia saying it will reduce output again because of damaged equipment.

OPEC+ produced 2.892 million barrels per day (bpd) below their targets in July, two sources from the producer group said, as sanctions on some members like Russia and low investment by others stymied its ability to raise output.

Reuters by Noah Browning, August 30, 2022

Price volatility is a trader’s bread and butter, but in oil, volatility is becoming excessive, pushing traders away and making life harder for a lot of businesses that normally use oil hedges to secure some price stability that is vital for their operations.

This is according to a Reuters analysis that notes oil prices have become so wild in their everyday swings that the usual suspects, such s hedge funds, are quitting the oil market in droves, with activity there falling to the lowest in seven years.

It appears, then, that volatility is only a good thing up to a point, and this point seems to be a daily price range five times the usual one. According to the Reuters analysis, between February 24 and August 15 this year, Brent crude’s daily range averaged $5.64 per barrel. This compared with $1.99 per barrel last year.

The pullout of the speculators is only one of the problems with such high oil price volatility. The fact that companies in the food industry, for example, don’t dare hedge against further price swings is affecting their business. And it is also affecting the business of the oil industry itself.

One analyst cited by Reuters explained that oil companies are being wary of capital expenditure because of the excessive volatility in oil markets. And because they are being wary, these companies are delaying projects that could help bring the oil market into balance again, Arjun Murti told Reuters.

Speaking of the oil industry, it is not only the current volatility that is interfering with potential production growth. It is also the uncertainty about future demand as the transition movement gathers pace.

In a recent piece for the Houston Chronicle, James Osborne wrote that predicting oil demand was becoming increasingly difficult amid developments such as the now notorious Inflation Reduction Act that Congress passed earlier this month.

With all these incentives for the electrification of transport and the shift to renewable electricity generation, the future of oil demand has dimmed, he argued, even according to Big Oil.

One might argue that most Big Oil is heavily involving itself in the energy transition, which might cast a shadow over the credibility of its oil demand predictions. Yet the fact remains many governments are dead set on having a transition, however much it costs, and that’s bearish for oil demand.

The latest transition push in both Europe and the U.S. probably made a bad volatility situation worse by clouding the demand outlook while everyone can see with a plain eye that oil demand, right now, is stronger than many had expected, especially as some utilities in Europe switch from gas to oil due to prices.

This has proved too much not only for speculators but also for industry players in the oil market, according to the Reuters analysis. Open interest on the oil futures market has dropped by a fifth since Russia invaded Ukraine, with traders apparently getting tired of the price seesaw of tight supply and inflation fears.

What the future holds is—as always—impossible to say, but it is quite unlikely that the price situation will change anytime soon. This means that the negative effect this price volatility is having on businesses across industries will continue, fueling the abovementioned oil price seesaw.

Businesses will continue to need energy that is in tight supply, but high prices for this energy will continue threatening their growth prospects and the growth prospects of their respective economies.

Governments, meanwhile, will continue pouring money and legislation into the energy transition, further discouraging the oil industry from doing something meaningful about supply.

OilPrice.com by Irina Slav, August 18, 2022

Concerns about a recession in major oil-consuming markets have weighed on oil prices in recent weeks.

Last week, oil dipped to the lowest level in six months, a level last seen before the Russian invasion of Ukraine. This drop was due to concerns about economic growth in China, the world’s top crude oil importer, and in Europe and the U.S. amid high inflation and aggressive interest rate hikes.

The oil market has turned bearish this summer due to fears of slowing oil demand in a recession. Add to this the still resilient Russian supply – contrary to initial expectations of major losses – and the possibility of an Iranian nuclear deal that could return up to 1 million barrels per day (bpd) to the market, and some analysts are saying that the risks to oil prices are tilted to the downside.

“The balance of risk to the outlook now lies largely to the downside,” said Fitch Solutions Country Risk & Industry Research in a report seen by Rigzone.

Fitch Solutions kept its Brent Crude forecast at $105 per barrel this year and at an average of $100 per barrel next year.

Early last week, Fitch Solutions said that the outlook for the Eurozone economy remains “worrying” despite strong GDP data for the second quarter.

“We continue to forecast growth at just 1.0% next year, on the assumption that activity will lose considerable momentum over H222 and into H123, which will likely see the bloc as a whole flirt with recession (roughly a 50% probability),” Fitch Solutions said in an August 15 report.

Economies with large manufacturing sectors that rely more on natural gas as a source of energy consumption—namely Germany and Italy—are set to experience modest downturns this winter, Fitch Solutions noted.

Moreover, several banks, including Goldman Sachs, have downgraded their outlooks on China’s economic growth this year due to weaker than expected data for July and a tight energy supply.

Earlier this month, Goldman Sachs also revised its Brent price forecast for this quarter to $110 a barrel, down from a previous projection of $140 per barrel, but said it still believes the case for higher oil prices remains strong.

In recent weeks, oil prices have been driven down by low trading liquidity and “a mounting wall of worries,” Goldman said in a note carried by Bloomberg. Those worries include fears of recession, the SPR release in the U.S., the rebound in Russian crude oil production, and China’s snap COVID-related lockdowns, the bank’s strategists noted.

“We believe that the case for higher oil prices remains strong, even assuming all these negative shocks play out, with the market remaining in a larger deficit than we expected in recent months,” Goldman Sachs’s strategists said.

While oil prices are currently in the grips of recession fears, OPEC remains bullish on fundamentals, including demand, in the near term. The International Energy Agency (IEA) also sees robust demand this year due to increased gas-to-oil switching in power generation and industry because of soaring natural gas prices. In its latest report for August, the IEA raised its 2022 demand growth forecast by 380,000 bpd.

Global oil demand is still robust and will be such through the end of this year, OPEC Secretary General Haitham al-Ghais told Reuters last week, noting that the recent sell-off in oil doesn’t reflect fundamentals and is driven by fear.

“We still feel very bullish on demand and very optimistic on demand for the rest of this year,” al-Ghais told Reuters in an interview.

Going forward, recession fears will still top the factors shaping the trend of oil prices, but the EU embargo on Russian oil imports at the end of this year and the end of the U.S. SPR release in October could be the next bullish catalysts for oil.

By Yahoo!, August 29, 2022

Concerns are also mounting that Russia won’t bring its key Nord Stream pipeline back after a three-day maintenance starting on August 31.

European natural gas prices plunged the most since April after Germany said its gas stores are filling up faster than planned ahead of winter.

Benchmark Dutch front-month futures fell as much as 16% to 286 euros per megawatt-hour, reversing last week’s jump of almost 40%.

In Germany, gas storage facilities are filling up fast, according to Economy Minister Robert Habeck. The region’s biggest economy is set to meet an October target of 85% full already next month, he said in a statement on Sunday.

To be sure, the supply situation remains very fragile as Europe is grappling with its worst energy crisis in decades. Lower Russian flows, outages in Norway and increasing competition for LNG supplies are all bullish factors that won’t go away anytime soon.

Governments are also putting in place measures to ease the burden, setting aside some 280 billion euros, but that might not be enough. The Czech Republic, which holds the European Union’s rotating presidency, will call an extraordinary meeting of energy ministers to discuss bloc-wide solutions.

Concerns are also mounting that Russia won’t bring its key Nord Stream pipeline back after a three-day maintenance starting on August 31.

Dutch futures for next month fell 12% to 297 euros per megawatt-hour at 8:20 a.m. in Amsterdam.

Moneyweb by Vanessa Dezem, August 29

OPEC stands ready to cut output to correct a recent oil price decline driven by poor futures market liquidity and macro-economic fears, which has ignored extremely tight physical crude supply, OPEC’s leader Saudi Arabia said on Monday.

Saudi state news agency SPA cited Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman as telling Bloomberg OPEC+ has the means and flexibility to deal with challenges.

On concerns about a slowdown in the Chinese economy and a possible recession in the West, oil prices have fallen in recent weeks from as high as $120 per barrel to about $95 per barrel.

After Russia invaded Ukraine and the West retaliated by imposing harsh sanctions on Moscow, prices surged earlier this year to just below an all-time high of $147 per barrel, sparking concerns about the greatest energy supply crisis since the 1970s.

Prince Abdulaziz was quoted as saying the oil futures market has fallen into “a self-perpetuating vicious circle of very thin liquidity and extreme volatility”, making the cost of hedging and managing risks for market participants prohibitive.

He also was quoted as saying prices were falling based on “unsubstantiated” information about demand destruction and confusion around sanctions, embargoes and price caps, which have been proposed by the United States on Russian oil.

According to Prince Abdulaziz, a new agreement between OPEC+ partners beyond 2022 would be beneficial. However, risks of supply disruptions held true and a global spare capacity cushion was extremely low.

“Soon we will start working on a new agreement beyond 2022,” he said, without giving details.

Brent crude prices pared losses on the news and were trading down 1.4% at $95.40 by 1720 GMT, having earlier slipped to as low as $92.36.

The Organization of the Petroleum Exporting Countries and allies led by Russia, a group known as OPEC+, agreed to increase output by 648,000 bpd in each of July and August as they fully unwind nearly 10 million bpd of cuts implemented in May 2020 to counter the COVID-19 pandemic.

The group agreed earlier this month to raise production quotas by another 100,000 bpd in September as it faced pressure from major consumers including the United States which are keen to cool prices.

Only Saudi Arabia and the United Arab Emirates are believed to have spare capacity and the ability to increase production in a meaningful way.

But Prince Abdulaziz pointed to thin liquidity and extreme volatility taking focus away from the issue of spare capacity.

“Without sufficient liquidity, markets can’t reflect the realities of the physical fundamentals in a meaningful way and can give a false sense of security at times when spare capacity is severely limited and the risk of severe disruptions remains high,” he said.

By msn, August 29, 2022

Enbridge Inc. (Enbridge or the Company) announced it had completed a joint venture merger transaction with Phillips 66 (P66) resulting in a single joint venture holding both Enbridge’s and P66’s indirect ownership interests in Gray Oak Pipeline, LLC (Gray Oak) and DCP Midstream LP (DCP) and an agreement to realign their respective economic and governance interests in the underlying business operations.

Through the surviving joint venture as illustrated below, Enbridge will increase its indirect economic interest in Gray Oak to 58.5% from 22.8%. The parties have agreed to transfer to Enbridge, from P66, the operatorship of Gray Oak, the long-haul, contracted pipeline which provides critical, low-cost connectivity from the Permian into Corpus Christi and the Houston area.

The transfer of operatorship of Gray Oak is planned to occur in the second quarter of 2023. In turn, Enbridge will reduce its indirect economic interest in DCP to 13.2% from 28.3%, further reducing its commodity price exposure and strengthening the Company’s low-risk pipeline-utility model. 

The merger is expected to be immediately accretive to Enbridge’s distributable cash flow per share and result in an approximately US$400 million cash payment to the Company from the merged entity. The cash generated from the transaction will create additional financial flexibility and further the Company’s capital allocation priorities.

“We’re pleased to have reached this new arrangement with P66 to optimize the combined assets and drive operational and financial synergies from both assets,” said Al Monaco, President and Chief Executive Officer of Enbridge. “It’s another example of our continued focus on optimizing our portfolio and surfacing value for our shareholders, while further building out our already strong U.S. Gulf Coast export position. We look forward to continuing our strong partnership with P66.”

Gray Oak Pipeline, in combination with Enbridge’s Ingleside Energy Center (EIEC), provides an industry-leading solution to deliver low-cost, long-lived Permian Basin oil to local Gulf Coast and global export markets. The EIEC currently loads nearly 30% of North American oil exports. By 2030, the Company anticipates that the Permian oil supply will grow by an estimated two million barrels per day, enhancing Gray Oak’s utilization and driving increased oil exports off the Gulf Coast.

Further integration of Gray Oak and the EIEC is expected to support the development of new commercial solutions and future growth potential, unlocking additional value for Enbridge’s customers.

Enbridge intends to extend its solar self-power strategy by working with the other Gray Oak owners to develop solar facilities along the Gray Oak right-of-way in support of the Company’s net-zero emissions targets, and those of its customers.

Citi acted as financial advisor to Enbridge and Vinson & Elkins served as its legal counsel.

Our Great Minds, by Tina Olivero, August 29, 2022

The reopening of private refined products storage terminals in Mexico is sparking hope the government may be softening its stance towards private investments in that sector, but observers remain skeptical about the potential for substantial change.

In recent weeks, authorities have allowed some storage facilities, which had been shuttered, to resume operations.

Monterra Energy’s 2.2 million-barrel terminal in the port of Tuxpan, at which operations have been halted since late 2021, is now operating, according to a person close to the company. Monterra announced in February it had filed a $677 million lawsuit against the Mexican government for the closure of the terminal.

US-based Monterra declined comment on its Tuxpan terminal.

The government of President Andres Manuel Lopez Obrador has also recently allowed operations to resume at a terminal in the state of Sonora owned by Bulkmatic de Mexico, observers said. The Mexico-based subsidiary of the US company did not respond to requests for comment.

Similarly, the government has also renewed the import permit that had been cancelled for trader Trafigura, according to data from the Energy Secretariat, and according to a Reuters report, state oil company Pemex has started negotiations to resume business with Vitol.

The global trader’s US subsidiary in December 2020 agreed to pay $135 million in fines to the US as the resolution to charges it had bribed officials in Mexico, Brazil and Ecuador, according to the US Department of Justice.

Neither Pemex nor Vitol respond to requests for comment.

New map of demand

“It may not be much, but it’s a change in attitude,” said Alejandro Helu Jimenez, an independent consultant in Mexico City, referring to the reactivation of operations at the terminals.

Helu Jimenez, CEO of PetroIntelligence, a provider of retail prices of fuels in Mexico, thinks Pemex is allowing the participation of private companies in fuel storage to help it cope with the additional demand caused by the government’s subsidies to fuels.

The Lopez Obrador government in 2022 has doubled subsidies for gasoline and diesel to keep prices low as global values soar. The government has stopped collecting a special tax, called the “IEPS,” and most recently began subsidizing distributors through tax rebates.

The incentives have eliminated illegal imports, which were cheaper because they avoided taxation. Consumers who would typically purchase fuel from illegal importers switched back to Pemex to take advantage of the subsidies.

According to data from PetroIntelligence, the subsidies are roughly equal to 50% of their current prices.

The subsidies have revealed a new map of demand within Mexico, one that Pemex did not see before due to the illegal importers, Helu Jimenez said.

As a result, Pemex is re-designing its logistics and needs all the terminals in the country, including those owned by the private operators to meet demand, he said. The disputes over the United States-Mexico-Canada Agreement, could also be adding pressure, he said.

In July, the US and Canada initiated dispute settlement talks with Mexico under the USMCA trade agreement.

Diego Compean, an independent consultant in Mexico City, agreed with Helu Jimenez that demand increases and pressure from the US regarding the trade agreement might explain the change in the government’s attitude towards private investments.

However, he said the international pressure could be the most important factor behind the change. Compean also pointed out that although the government might be reacting to the pressure from the US, it is only restoring the way the market operated when Lopez Obrador arrived.

“It is not a full change of attitude; they are not giving any new permits,” he said.

Skepticism

Other observers told S&P Global Commodity Insights they were skeptical about the possibilities of a change in the government’s fuel terminals position and said the cases where the government has benefited private investments are few and isolated.

Most investors feel unsure about new spending and are tired of having to fight the government, observers said.

The handful of companies that have received a special treatment are mostly international firms protected by international treaties, said Carlos Vallejo Galvan, a consultant in Mexico City.

However, most local investors continue to suffer from paralysis in the sector, Vallejo Galvan said, referring to the Energy Regulatory Commission.

For the past two years,the commission has rejected permits consistently either for storage or for distribution of fuels, and in 2021 aggressively increased its supervision and verification efforts, which led to the closure of multiple storage terminals as well as transloading facilities.

The recent actions of the government could only be a sign of their reconfiguration of the market.

“A real change in attitude needs to come from the regulator,” Vallejo Galvan said.

State oil giant Saudi Aramco (2222.SE) on Sunday reported its highest quarterly profit since the company went public in 2019, boosted by higher oil prices and refining margins.

Aramco joins oil majors such as Exxon Mobil Corp (XOM.N) and BP (BP.L) that have reported strong or record breaking results in recent weeks after Western sanctions against major exporter Russia squeezed an already under-supplied global market causing a surge in crude and natural gas prices.

The company expects “oil demand to continue to grow for the rest of the decade despite downward economic pressures on short-term global forecasts,” CEO Amin Nasser said in Aramco’s earnings report.

Net profit increased 90% to 181.64 billion riyals ($48.39 billion) for the quarter to June 30 from 95.47 billion riyals a year earlier and compared with a mean estimate from 15 analysts of $46.2 billion.

It declared a second-quarter dividend of $18.8 billion, in line with its own target, to be paid in the third quarter.

Aramco shares, which were little changed on Sunday, have risen more than 25% this year.

Nasser, speaking to reporters on an earnings call, voiced concern over a lack of global investment in hydrocarbons that has led to “very limited” spare capacity. He said Aramco stands ready to raise oil output to its maximum sustained capacity of 12 million barrels per day should the Saudi government ask.

Aramco said its average total hydrocarbon production was 13.6 million barrels of oil equivalent per day in the second quarter. The company is working to increase production from multiple energy sources, including renewables and blue hydrogen as well as oil and gas, as it works on both energy security and climate goals, Nasser said.

Capital expenditure increased by 25% to $9.4 billion in the quarter compared to the same period in 2021. Aramco said it continued to invest in growth, expanding its chemicals business and developing prospects in low-carbon businesses.

It is also currently studying opportunities in the liquid-to-chemicals sector with a focus on the Asian market.

In July, Exxon posted its biggest quarterly profit ever, a net income of $17.9 billion, an almost four-fold increase from a year earlier, while European majors Shell (SHEL.L) and TotalEnergies (TTEF.PA) also benefited from surging margins for making fuels like gasoline and diesel.

The Saudi stock market, up 11% this year, is very promising for company listings in the near future, Nasser said, adding that there is “some expectation” that Aramco might list some entities within the firm.

Aramco is working to merge two energy trading units, with Aramco Trading Co to absorb Motiva Trading, ahead of a potential initial public offering of the business, sources have said.

Reuters by Hadeel Al Sayegh, August 23, 2022