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In a bid to make India Aatmanirbhar in the field of oil and natural gas, Prime Minister Narendra Modi on Wednesday invited global oil and gas giants and to explore opportunities to develop oil and gas set up in India.

He further pointed out the measures taken by his government to develop the sector, during his annual interaction with the experts and CEOs of top global companies working in the global oil and gas industry.

He furthered his desire to make India Aatmanirbhar or self-reliant in the field. The Indian government has been taking several measures to reduce the export & India’s dependence on the global market to fulfil its oil needs.

PM Modi invites global giants to make India ‘Aatmanirbhar’ in oil & gas sector 

Amid the continued rising prices of crude oil in the global market in the past year, the Indian government’s bid to become self-reliant has become all the more important.

PM Modi invites CEOs to partner with India in development of oil & gas sector in India. “Goal is to make India Aatmanirbhar in the sector. Focus has shifted from revenue to production maximization,” PM said during interaction with CEOs & experts of global oil & gas sector: PMO

Prime Minister Modi thoroughly discussed the oil and gas sector reforms implemented over the last 7 years, including those in exploratory and licensing strategy, a statement released by PIB said. The statement further added that PM also discussed gas marketing, policies on coal bed methane and coal gasification, and other reforms of the Indian Gas Exchange.

PM further added that such changes will continue with the goal of making India’s oil and gas sector ‘Aatmanirbhar.’ When it comes to exploration and production, Modi says the focus has switched from maximising “revenue” to maximising “production. PM Modi went on to say that India is filled with opportunities and optimism, creative ideas and innovation. 

The Prime Minister also mentioned the importance of improving crude oil storage facilities. He discussed the present and projected gas infrastructure development, including pipelines, city gas distribution, and LNG regasification terminals, in response to the country’s fast-expanding natural gas demand. He recalled how, since 2016, the comments made at these sessions have been extremely helpful in gaining a better knowledge of the difficulties faced by the oil and gas industry.

Industry leaders appreciate govt’s efforts to expand Oil & gas industry

The central government’s efforts to improve energy access, affordability, and security have been lauded by the industry leaders, who were attending the PM’s address. Industry leaders from around the world, including Rosneft CEO Igor Sechin, Saudi Aramco CEO Amin Nasser, BP CEO Bernard Looney, Reliance Industries CEO Mukesh Ambani, and Vedanta CEO Anil Agarwal, joined the discussion.

On the same, industry leaders appreciated PM’s effort and said, ”India is adapting fast to newer forms of clean energy technology, and can play a significant role in shaping global energy supply chains. They talked about ensuring sustainable and equitable energy transition, and also gave their inputs and suggestions about the further promotion of clean growth and sustainability,” the statement added. 

RepublicWorld by Aakansha Tandon, October 28, 2021

Trying to bounce back from Covid, the world has run headlong into an energy crisis. The last spike of this magnitude popped the 2008 bubble.

Crude oil is up 65% this year to $83 per barrel. Gasoline, above $3 per gallon in most of the country, is more costly than any time since 2014, with inventories at the lowest level in five years. 

Meanwhile natural gas, which provides more than 30% of all U.S. electricity and a lot of wintertime heating, has more than doubled this year to $5 per million Btu. 

Even coal is exploding, with China and India mining as fast as possible. The price of U.S. coal is up 400% this year to $270 per ton. 

The situation is considerably worse in Europe, where electricity prices have quintupled and natgas prices have surged to $30/mm Btu—the energy equivalent of paying $180 for a barrel of oil. 

All this is feeding into the inflation loop, pushing up the prices for energy-intensive metals like nickel, steel, silicon. Fertilizer, mostly made from natural gas, has ramped past 2008 record highs to nearly $1,000 a ton, obliterating the $300 to $450/ton range of the past few years. China announced this week it would halt fertilizer exports. Copper, perhaps the most vital raw material in building out a wind and solar industry, is near a record at $4.50 per pound. 

We’ll have to deal with inflation after surviving the challenge of not freezing to death this winter. “Only some form of government intervention that mandates large-scale power cuts and rationing to certain sectors can curb gas demand and temper gas prices materially this winter,” wrote Amrita Sen of Energy Aspects last week. 

Whom can we blame for this mess? A combination of factors. It starts with central banks persisting with artificially low interest rates and a flood of cheap money despite record levels of consumer spending and a 30% surge in Chinese exports—all of which is straining against pandemic-constricted supply chains. Add to that Russia not flowing nearly as much gas into Europe as expected (perhaps as a passive-aggressive tactic to force approval of Nord Stream 2).

But the roots go deeper. The ESG and carbon divestment craze has so demonized fossil fuels (and nuclear power) that institutional investors and governments have cut them out of portfolios entirely, and have instead been flowing capital to more socially acceptable low-carbon alternatives. Blackrock announced last year it would no longer finance fossil fuel development (though it still owns a lot). Wall Street gurus like Jim Cramer have called the oil industry “uninvestable” and “a perma-short.”

But the problem is, renewable energy hasn’t proven sufficiently scalable to pick up the slack. In July, according to the U.S. Energy Information Administration, renewable energy sources (excluding hydropower) provided just under 10% of total electricity generation (gas was 42%). 

Has it gone too far too fast? Germans now regret shuttering their fleet of nuclear power plants over the past decade, while some Dutch are second-guessing closing down Europe’s biggest gas field at Groningen. Meanwhile, North Sea gas drilling has slowed, and onshore fracking has been banned in the U.K. 

Economist Ed Yardeni summed it up as well as anyone in a research note this week: “Renewables aren’t ready for prime time. So instead of a smooth transition, the rush to eliminate fossil fuels is causing their prices to soar and disrupting the overall supply of energy.” 

It’s hard to blame Big Oil. Accustomed to being demonized, the industry has been falling over itself to shrink oil production and reinvest in renewables even if it means lower margins. Add to that the existential crisis of the 2020 pandemic lockdowns, which temporarily pushed the price of oil below zero because companies ran out of storage tanks to put fuel that no one was using. Forbes contributors last year had a field day debunking predictions from the anticarbon crowd that 2020 would be the year of “peak oil demand.” Perhaps it’s more evident now that for all their growth, renewables aren’t yet scalable replacements for fossil fuels. 

“Now faced with traditional sources of capital gone, the majors are backing off because of political pressure. They’re all trying to win a popularity contest,” says John Goff, the billionaire chairman of Contango Oil & Gas, which is in the process of merging with Independence Energy (spun out of private equity giant KKR). As a result of the trepidation, “there is massive underinvestment in the industry. We are hundreds of billions behind,” says Goff. He’s investing via publicly traded Contango, which made a number of acquisitions in the past two years, and is in the process of merging with Independence Oil & Gas, a catch-all for oil assets spun out of private equity giant KKR, which is no longer pursuing fresh oil deals. 

Contango expects to grow both via M&A and the drill bit. Says Goff, “The single biggest risk on the planet is the lack of sufficient energy for everybody.” 

Don’t expect OPEC to rush into vast new investments. In the wake of the pandemic, the group had to cooperate to hold back millions of barrels per day that would have flooded the market. At the beginning of the year OPEC said its supply cushion stood at around 9 million barrels per day. It’s been adding back supplies at a recent pace of 400,000 bpd per month into the face of even stronger demand growth. From 93 million bpd early this year, global oil demand has rebounded to 98 million bpd. The U.S. Energy Information Administration thinks demand could hit a record 100.9 million bpd by the end of 2022, but it’s unclear where all that will come from. Already Nigeria and Angola are having a hard time opening their spigots wider. By the end of next year the only excess capacity left could be with the Saudis, Kuwait and UAE. Analysts at Bernstein Research note this week, “It is hard to see what will stop the inevitable rise of oil prices to greater than $100/bbl outside of demand destruction.”

Could America’s frackers come to the rescue? Don’t count on it. Though the U.S. rigcount has recovered somewhat, domestic oil production is around 11.3 million bpd, down from 12.9 million pre-Covid. Companies have embraced the “live within cash flow” mantra. And the industry does not trust President Joe Biden, considering that he has promised an end to new drilling in America and his first acts in office included canceling pipelines and halting oil leases. Rather than encourage America’s independent oil producers, the administration has begged OPEC for more oil, while threatening to halt U.S. oil exports. Meanwhile, the latest negotiations in Washington, D.C., over a potential $2 billion spending bill involves a new law that would enact a domestic carbon tax. 

Frackers do not like these risks. There are pockets of resistance. So many banks have stopped lending to oil companies that in June Texas Gov. Greg Abbott signed a bill into law that bans state investment in companies that cut ties with the oil industry. So any bank that won’t do business with oil drillers will face a boycott. Another Texas bill would bar any municipality from prohibiting new residential gas hookups—as has become de rigeur in California. 

Those American oil companies that have survived the past two years don’t even need the banks or other traditional pools of capital as long as they stay disciplined, says a managing director at a smaller private equity firm that still invests in oil companies. “They’re restricting supply because they are desperate to be profitable. Shareholders are demanding free cash and shareholder democracy.” 

The evolution of the U.S. oil company is likely to look something like Civitas Resources, the new name for the public company that will emerge from the pending combination of Bonanza Creek Energy, Extraction Oil & Gas and Crestone Peak Resources—to form a dominant consolidator in the Denver-Julesburg basin oilfields of Colorado. Civitas Chairman Ben Dell, an activist investor who founded Kimmeridge Energy, says their objective is to build an oil company that could fit into an ESG portfolio. He says that Civitas is dedicated to making a net-zero product by acquiring carbon offsets. Dell says that the nature of fossil fuel providers will change when companies can target a carbon price that incentivizes them to generate valuable carbon credits for doing work like stopping leaks and plugging old wells. And he’s big on the prospects for “nature-based carbon solutions,” like trees.

Patience is not a virtue extolled by Greta Thunberg nor featured on the agenda for the upcoming COP26 UN climate conference in Glasgow, but Dell emphasizes that we’re at the point in the energy transition where the only real options are patience in reducing emissions while using gas as a bridge fuel, or an abrupt turn toward de-growth that would slash emissions but necessitate economic collapse and poor people freezing to death. “If you phase out the on-demand delivery system, that raises the price and the volatility. That’s a regressive tax. The low-income consumer gets hit with that,” says Dell. “We have to be thoughtful about how we transition. It’s going to require a massive amount of investment, and half a century.” 

Pray for breakthroughs in nuclear fusion, and keep in mind that the last time an energy bubble of this magnitude popped (in 2008) it helped usher in the Great Recession.

Forbes by Christopher Helman, October 28, 2021

The whole country smells of schnitzel, fries and chicken nuggets because the cars run on biodiesel made of used cooking oil? Could this be the future of driving? Yes. And no. After all, the rumor about the smell is not true.

“OMV is working on increasing the amount of used cooking oil for the production of biofuels”, confirms Gudrun Kollmitzer. But the path from the fast-food-chain fryer to the tank of a car is long and complex. And used cooking oil is just one of many raw materials that OMV works with and that can be processed into Green Diesel using a method known as Co-Processing.

We are constantly looking at alternative sources of feedstock for our fuels. A lot is being done worldwide in this area; new developments are happening all the time. What’s important for us is to stay on the ball and to evaluate for each of the highly promising developments whether the availability and product yield are right for us for each of the different feedstocks

Gudrun Kollmitzer, Head of Bio & Feedstock, OMV Downstream GmbH

What exactly is Co-Processing?

“Co-Processing” basically does what it says – processing substances together. In this case it refers to the technology that will be used in the Schwechat Refinery to produce Green Diesel. While conventional methods blend in the biofuel component from vegetable oil or used cooking oil only after the diesel has been produced, with Co-Processing the biofuel is processed together with the crude in what’s known as a hydrotreatment plant. Here hydrogen is added to the oil mixture, thereby removing non-desirable components such as oxygen or other impurities. What remains is pure hydrocarbon, which, from a chemical viewpoint, closely resembles diesel fuel obtained from crude oil alone. This is also a very high-quality fuel that can be used in vehicles without any problems.

Even today, the diesel that we pump at the filling station usually has a conventional biocomponent mixed in, although this is limited to up to seven percent for quality reasons. The high product quality achieved with Co-Processing allows us to increase this to  as much as 25 percent, thereby achieving a far sharper reduction in the carbon footprint.

Upgrade in the Schwechat Refinery

The first attempts in the Schwechat Refinery to produce high-quality biodiesel through Co-Processing started back in 2016. The plan now is to build a large plant capable of processing up to 160,000 metric tons of biogenic feedstock every year. This will make OMV one of the first companies in Europe to run an industrial-scale Co-Processing operation. “The advantage with Co-Processing is that there are no technical limitations regarding the raw materials, the feedstock. In theory, the plant can process crude together with any other type of oil – rapeseed, sunflower or, yes, used cooking oil. That said, just like with the crude itself, these oils must meet certain quality levels, but there are clear specifications for this. For example, a limit on how much phosphorous or other metals they are allowed to contain”, explains Gudrun Kollmitzer. At present, the limiting factor is rather one of availability: “The oil used is heavily dependent on supply. Not all feedstocks are available in the requisite quality and quantity”.

A for algae oil?

Initially, vegetable oils should be the primary source in the Co-Processing plant in Schwechat, thereby producing first-generation biofuels. And there is a clear legal framework in place to ensure that no competition develops between plate and tank: “For us this means that we will not be allowed to raise the biocomponent in our fuels above the national limit of 7 percent maximum in the coming years”, reports Gudrun Kollmitzer. “That is why we are already looking at the next phase, namely the expansion of our portfolio to include second-generation biofuels, i.e. waste-based fuels. Included here for example is processing used cooking oils. The special challenge lies in the availability of used cooking oil and its quality. The feedstock first has to be processed properly before it can be incorporated in the refining process”. And OMV is also on the ball when it comes to “Advanced Fuels”, i.e. third-generation biofuels. “We are constantly looking at alternative sources of feedstock”, explains Gudrun Kollmitzer. This is where oils from algae and cashew shells for example come into play. “A lot is being done worldwide in this area, new developments are happening all the time and there’s a lot of research in every direction. What’s important for us is to stay on the ball and to evaluate for each of the highly promising developments whether the availability and product yield are right for us for each of the different feedstocks”.

Sustainable production

Hydrotreated vegetable oil, as produced in the Co-Processing plant in the Schwechat Refinery from 2023, can save up to 360,000 metric tons of CO2 a year compared to fossil diesel. That is equivalent to the emissions of a car driving 60,000 times around the equator. To qualify as a biofuel, the fuel must achieve a CO2 reduction of at least 65 percent compared to fossil diesel.

Even if we cannot know at present which feedstock will eventually win the race, it is clear that there is no way around reducing CO2. After all, even though the importance of alternative drive forms such as electric is increasing, in the medium term, cars powered by gasoline and diesel will remain a common sight on our roads for a long time to come given their long service life. This means that environmentally sound alternatives for these conventional fuels are simply a must.

Facts on biofuel

• First generation: First-generation biofuels are fuels that are blended with oil, sugar or starch from plants such as rapeseed, sunflower, soya or sugar beet.
• Second generation: Second-generation biofuels use waste and residues from plants, for example from timber production, food manufacturing or composting, e.g. used cooking oil, manure, straw, wood waste.
• Third generation: Third-generation biofuels are known as “Advanced fuels”, e.g. from algae.

The Port of Long Beach is expansive, made up of 3,520 acres of land and 4,600 acres of water with 10 piers and 80 berths. The city’s port authority, however, does not own all of this area, with dozens of acres owned by private companies.

But it appears port officials are looking to change that.

In September, the port announced the purchase of 28.6 acres—about 25% of which is submerged—in the heart of the Harbor District. The waterfront site is made up of three parcels on the north end of Pier D and is currently owned by Sioux Falls-based building materials production and bulk cargo transportation company L.G. Everist Inc.

The port has agreed to pay more than $65.5 million for the property, which includes a heavy cargo boat ramp used primarily for unloading large rocks and other dry bulk construction materials, according to the announcement.

Once the transaction is complete, the port will take over the leases of the seven tenants that operate on that portion of Pier D. Tenants include Sause Brothers, Connolly Pacific, SBA Communications, Gambol Industries, Polaris Mineral, Robertson’s Ready Mix and Subsea Global Solutions.

“We’re going to maintain the status quo in terms of the operations of those businesses, and we’re going to support them,” Port of Long Beach Executive Director Mario Cordero said. “In the long term, it is another opportunity for the port authority to have land at our disposal.”

Combined, the leases are expected to bring in $3.5 million in revenue annually, according to port officials.

Assuming the purchase is completed, there will still be more than 60 acres of privately owned land within the Harbor District, not including the Valero refinery, according to port spokesman Lee Peterson. Plains All American’s fossil fuel tank farm and NRG’s power plant occupy 45 acres on Terminal Island, and the Craig family trust owns 14 acres on Pier D.

In the North Harbor area, there are 29 smaller parcels with 25 different owners, but port staff does not have an exact acreage available, Peterson said.

L.G. Everist has owned the property for about five decades, having purchased it from Craig Shipyard, according to port officials. The shipyard was operating on the property prior to state approval for a commercial seaport in Long Beach in 1911.

When and if more of the privately owned parcels become available, the port will work to purchase them, Cordero said. Since summer of last year, the port has experienced an unprecedented cargo surge, causing delays and forcing many ships to sit idle off the coast. One strategy for alleviating congestion was to set up additional container staging areas on unused land.

“We certainly want to take advantage of opportunities that are available to us,” Cordero said, “because we are learning more and more how important land availability is to the port.”

lbbusinessjournal by Brandon Richardson, October 23, 2021

China’s crude oil imports are estimated to have declined to an average of 9.62 million barrels per day (bpd) in September, down by 8.6 percent from the previous month, data from energy analytics provider OilX showed.

Chinese crude imports last month also dropped by 2.2 million bpd, or by 18.7 percent, compared to September 2020, OilX’s estimates show.

Last year in September, major Asian importers led by China imported a lot more crude oil, taking advantage of the cheap cargoes in the spring and summer when oil prices were half the level they are today.

Chinese crude imports last month continued to be weighed down by the stricter oversight on imports, refining operations, and market practices of refiners. In addition, Chinese economic activity moderated in September, further depressing crude oil imports, OilX’s oil analysts Juan Carlos Rodriguez and Valantis Markogiannakis said.

Loading of cargoes en route to China in September was close to the five-year average.

Yet, oil sitting in floating storage offshore China, Malaysia, and Singapore remains at high levels, suggesting that the increased scrutiny faced by independent refineries is weighing on imports, OilX’s analysts noted.

Since China increased earlier the scrutiny over the import and business practices of its independent refiners, commonly known as teapots, imports from those refiners have been lower. 

Last month, refinery throughput at independent refiners bounced back from the lowest in more than a year seen in August. Independent Chinese refiners reduced their run rates to 4.3 million bpd in August, the lowest level in nearly a year and a half, OilX data showed last month.

In September, the crude throughput at the teapots recovered to 4.6 million bpd, up from the 17-month low in August, the analytics provider noted.

The “rebound could potentially show that independents have learned how to navigate the new regulatory landscape, however power rationing in some Chinese provinces may hinder refiners’ comeback,” OilX analysts said.

OilPrice by Tsvetana Paraskova, October 4, 2021

After an epic summer of hurricanes, heat waves, floods, and fire, climate change has never seemed more alarmingly real, at least to the roughly one in three Americans directly affected by it. By early July, we already had eight climate-related disasters with economic losses of $1 billion or more, together claiming at least 331 lives. 

Mark van Baal saw this all coming. A one-time seller of refrigeration systems in Europe, he became a journalist because he was “fed up with not doing something socially responsible.” Inspired by Al Gore’s An Inconvenient Truth, he zeroed in on climate change and came to see the fossil fuel industry as a key culprit. But after 10 years of journalism, he was frustrated by the limitations of writing about the need for change. “I came to the conclusion that Shell does not listen to journalists, nor to activist groups, nor to governments,” van Baal wrote. “The only ones who can convince Shell to choose another course are its shareholders.” So he shifted from journalism to advocacy. 

The 20 largest firms, responsible for one-third of all carbon emissions—and decades of denialist propaganda—have long resisted efforts to overhaul their business. Reasoning that the success of the Paris agreement hinges on the compliance of Big Oil, van Baal set out to force that compliance. In 2015, he started Follow This, an organization that orchestrates shareholder rebellions against publicly held fossil-fuel companies in the hope of bringing recalcitrant executives to heel. Follow This

Here’s how it works: van Baal’s organization facilitates small purchases of stock in a given oil company by individual investors. Once those investors accumulate enough shares (for Shell, the minimum was 5 million euros worth), they gain the ability to introduce a resolution to the board of directors, which Follow This does on their behalf. The resolutions demand that companies pledge to make their operations compatible with the Paris agreement. This forces the board to take a formal position on the matter and requires voting shareholders to make an active choice.

The group’s first target, in 2016, was Shell, only 3 percent of whose shareholders supported its climate-friendly resolution. (CEO Ben van Beurden had advised them to vote against.) When the resolution was reintroduced a year later, the vote tally in favor rose to 6 percent, and 7 percent abstained—a signal, Van Baal says, that they disagreed with the board. That same year, Shell announced it would cut its emissions in half by 2050. The company didn’t promise any immediate action, Van Baal points out, but its announcement signaled a shift in the conversation.

Today, Follow This boasts thousands of “green shareholders” who have introduced shareholder resolutions to squeeze the leaders of 12 different oil and gas companies. As a result, the group reports, Shell, Equinor, and BP all have set climate targets, and climate resolutions have received majority votes at ConocoPhillips, Phillips66, and Chevron. So I reached out to Van Baal to ask what the changes will mean for Big Oil. His responses have been edited for length and clarity.

Talk a little bit about the progress of your organization.

Yeah, we are now representing almost 8,000 green shareholders who all share our conviction that we need the oil industry to change to have any chance to stop climate change, to achieve the Paris goals. We use the ownership in these companies to make them change course. We think this is crucial, because at the end of the day, the shareholders are the only entity these companies have to listen to. Most oil companies are more powerful than most [other] companies and most countries. 

Why was this kind of tactic needed?

We need to persuade the boardroom, and they’re not going to change on their own accord. When I started Follow This, and even when I was a journalist, I sometimes dreamt that a major CEO would have an epiphany. These people live in the same world as we do. And they must also see that the only way to protect supply chains is to dramatically change their business. So I sometimes pictured a CEO with an emotional debate with one of his children and a sleepless night and then he would see the light.

But that’s not gonna happen. These people are so completely entrenched in their historic business model, which is basically turning hydrocarbons into Petro dollars. They’ve dedicated their career to this simple model of getting oil out of the ground to refine it and sell it. So they can’t imagine another world. But luckily, investors can. If the climate crisis turns into climate disaster, they know that their billions are at risk. So it’s really risk management.

You’ve made some gains, but how can these executives really be brought around?

Investors have to step up. The only way these companies are going to change is when investors massively vote for these kinds of resolutions. Because otherwise they can always claim that investors are happy with their behavior. With this group of retail shareholders, we’re able to show that there’s a large group of people who want these companies to change and see them as part of the solution. So we file the shareholder resolutions, we make sure it’s on the agenda, and investors have to vote—but we need the big institutional investors to really persuade them.

What do you want from the companies?

We have a very simple and consistent ask: Commit yourself to the Paris agreement, commit yourself to emission reductions in line with the agreement. And science basically dictates it. If we were to have any chance to achieve the Paris agreement, emissions have to be cut by 40 percent by 2030, approximately, and have to be zero by 2050. That’s the scientific translation. So, radical emission reductions in the next 10 years. That’s the only thing we asked for.

And how do you define emissions?

The key content is to set various consistent targets for all emissions. We make it very clear that it’s not only the emissions of the operations of the company, but also the emissions of the products. That’s the key discussion. Should they set the emissions only for the company, or for all the emissions they’re responsible for. The jargon for that is “scope three emissions.”

Why are fossil fuel companies so resistant to change?

They know the outcome. They know that they have to stop investing in oil and gas and start investing in something else. They said to shareholders, you have to vote against this because it’s an unreasonable ask, because we have no responsibility. We have no control over the emissions of our products.

So then they could rightfully claim that they were the first [global oil company] to take responsibility for scope three product emissions. They basically said, “Your resolution is unnecessary because we are now industry-leading with this promise for 2050.

So now you should focus on other oil majors.” We did, but we kept the pressure on Shell because we really want the industry to change in this decade. A promise for 2050 is useless if it’s not backed up by immediate action, right? If the next 10 years will be business as usual, which most oil majors want, then we already lost any chance to reach the Paris agreement.

Delay is the new denial!

I think there’s three steps. First, oil companies denied climate change. Then they denied that it was a supply side problem. They said, “It’s the consumers. And as long as people want to fly, and drive a car, then there’s nothing we can do. We just delivered the demand.” Now the denial is: “We have to change, but we can only change slowly.” So they make this delay. A lot of oil majors have nice promises for 2050.

How do you light a fire under them, so to speak?

To get to majorities you need institutional investors. They have to be crystal clear to industry that there is no time for gradual transition anymore. If they wanted a gradual transition, they should have started in the ’80s when they knew—and then decided to fund climate denial. It needs to be a very disruptive transition.

But is all of this happening too late? 

I think it is absolutely possible to achieve the Paris Accord, but that means a reduction of emissions worldwide of roughly 40 percent. Almost half of the oil and gas needs to be replaced by renewables in the next 10 years. And technically it’s possible. There’s enough sunlight, wind, tides, what have you, to power the world economy. It’s not a supply-side problem. The only problem is the incumbents who refuse to change. 

How can these oil execs ignore the extremely obvious threat that climate change poses?

I’ve spent a lot of time thinking about this: How is it possible that you don’t see this? That we’re heading for the abyss, that you play the key role? I always refer to the Kodak scenario because it’s such a clear example. Kodak had invented digital photography in [the mid-1970s]. And they didn’t dare to bring it to the market because they were too afraid. They were too accustomed to their old business model selling film.

[Renewable energy] is getting cheaper and cheaper. And getting oil out of the ground is getting more expensive. The real problem is in the boards of these companies. There are people who have made it to the board by being extremely successful in just one business model. It’s a cliché, but Bill Gates always says success is a lousy teacher—it convinces smart people that they can’t be wrong. I can’t get into the minds of CEOs. I think maybe a problem is that if they were to go for a new business model, they have to give up power. They have to say, “Okay, I don’t know. I also don’t know exactly what’s gonna happen in the future.”

I don’t think we should underestimate the lives of these people. Imagine you joined a company in your early 20s; you get a new job in a new part of the world. You take your family across the globe. It’s a lot of sacrifice. And then every assignment you’re very successful, and you get a promotion. And finally you reach the top of the pyramid. And then outsiders are going to tell you that you need a new business model!

But isn’t the bigger issue an unwillingness to sacrifice the golden goose?

The reason we are successful is because investors now see how big of a threat climate change is to their portfolios. Traditionally, an investor who has responsibility over pensions would say, “we give every company maximum flexibility to maximize profit, because that’s what we have to do for our pensioners.” And now they say, “Our entire portfolio is at risk. So we’re gonna put constraints on the oil and gas industry.”

Mother Jones by Piper McDaniel, October 19, 2021

Even after hitting the highest levels in several years in recent days, oil prices have further room to rise this winter. At least short-term market fundamentals suggest so, analysts say.

Inventories around the world have fallen to below the pre-pandemic five-year average as stocks are depleting, with demand bouncing back amid a weaker supply response from producers.

The energy crunch in Europe and Asia and record-high natural gas and coal prices add more arguments to the bullish case for oil in coming months as a switch from gas to oil products such as fuel oil and diesel, especially in Asia, is already underway.

The structure of the oil futures curve a year from now also points to a tight market and headroom for higher crude prices. 

Stocks Draw As Demand Rebounds

On the demand side, recovering economies and mobility have boosted global oil demand in recent months, leading to inventory drawdowns that have reduced global stocks to below recent averages. 

In both the United States and the OECD developed economies as a whole, commercial oil stocks have dropped to below pre-COVID five-year averages after more than reversing the huge builds from the spring and summer last year, Reuters market analyst John Kemp notes. 

As of the latest reporting week, U.S. commercial crude oil inventories stood at 427 million barrels, around 6 percent below the five-year average for this time of year. Gasoline inventories were about 2 percent below the five-year average, distillate fuel inventories were 9 percent lower, while propane/propylene inventories were a massive 21 percent below the five-year average for this time of year, the latest EIA data showed. 

In OECD, commercial stocks in August were 162 million barrels below the pre-COVID five-year average, the International Energy Agency (IEA) said in its latest monthly report last week. Preliminary data for the U.S., Europe, and Japan show on-land industry stocks fell by a further 23 million barrels in September.

Globally, implied Q3 refined product balances “show the largest draw in eight years, which explains the strong increase in refinery margins in September despite significantly higher crude prices,” said the IEA. 

The energy crisis in Europe and Asia could additionally boost global oil demand by 500,000 barrels per day (bpd) compared to a “normal” market without a natural gas and coal crunch, the agency noted, raising its 2021 and 2022 global oil demand forecasts.  

Supply Lags Demand As OPEC+ Keeps Market Tight

While demand has rebounded despite the summer COVID flare-ups in the U.S. and Asia, supply additions to the oil market have been lagging behind the pace of growing demand. 

First, it was Hurricane Ida that limited U.S. oil supply from the Gulf of Mexico from the end of August through most of September. Supply will not recover to its full capacity until early next year, as a Shell-operated platform will remain offline until the end of 2021. 

At the same time, the OPEC+ group continues to keep the market tight, adding just 400,000 bpd each month to its overall supply. That’s despite calls from the U.S. and other consuming nations to open the taps and tame the high oil prices, and despite the energy crisis which has forced utilities to fire up oil-fueled power generation amid record-high natural gas prices, boosting demand for oil products. 

OPEC+ leaders point to expected oversupply next year and to the need to look beyond the next two months in their decision to continue to reverse only 400,000 bpd per month of their cuts. 

Saudi Energy Minister, Prince Abdulaziz bin Salman, last week basically ruled out the option that the alliance would respond to the oil price rally by adding more supply than planned. 

“We should look way beyond the tip of our noses. Because if you do, and take ’22 into account, you will end up by end of ’22 with a huge amount of overstocks,” he said on Thursday.

Moreover, output figures point to the fact that OPEC+ is actually pumping well below its collective production ceiling. As per Bloomberg’s estimates, if all members of the alliance stuck to their respective production ceilings in September, the overall production of the group would have been 747,000 bpd higher than what it was. 

It looks like OPEC+ is not too worried about demand destruction at $85 oil, at least not for now. The group’s leaders stress the importance of a longer-term vision and stability on the market, expecting increased supply in 2022 from both their own wells and from the U.S. shale patch, which appears to be maintaining its capex discipline even at $80 oil. 

‘Blowout’ Backwardation Points To Even Higher Oil Prices

At the end of 2021, however, supply remains tight, while backwardation—a key indicator of a tightening market—between the December 2021 Brent contract and the December 2022 contract has jumped to above $8 per barrel in recent days. This is the steepest 12-month Brent backwardation since 2013, according to Refinitiv Eikon data cited by Reuters. 

“Energy crunch is carving out an USD80/b oil floor,” Japanese MUFG Bank said in its Oil Market Weekly report last week. 

“The blowout in Brent crude timespreads in recent trading days signals that the pathway [to] even higher oil prices remains firm,” the bank’s research team wrote.  

Oilprice.com by Tsvetana Paraskova, October 13, 2021

A global gas shortage and end economic rebound are boosting demand for oil, buoying Gulf states whose economies depend on the fossil fuel. 

Brent Crude has rallied 60% this year, filling Saudi Arabia’s coffers. The kingdom, OPEC’s biggest producer, is earning more money from oil exports than any time since 2018. 

However, there’s growing anxiety among key energy-consuming nations as prices also rise for commodities such as natural gas, food and metals, triggering a rise in inflation that could derail the recovery.

OPEC+’s decision last week to stick to slow production increases triggered a fresh surge in prices, and U.S. Energy Secretary Jennifer Granholm raised the prospect of a potential release of crude from the Strategic Petroleum Reserve. 

Granholm’s remarks “were clearly aimed at trying to incentivize Saudi Arabia and its OPEC+ partners to put more barrels on the market,” according to RBC Capital Markets.

Saudi Aramco seems confident demand will remain high. The world’s largest oil company repeated its intention to increase capacity as oil demand rises.

The prized position of the world’s most valuable company to Saudi Aramco.

The Saudi state oil giant hit $2 trillion this week, just shy of Apple, symbolic of how the economy is changing this year.

Apple shares have suffered as consumers rein in spending on home entertainment and get back into the world. That transportation activity has sparked a boom in oil prices that feeds directly to Aramco’s bottom line.

The Slant

Corruption is deeply entrenched

in Iraq, and an estimated $150 billion has escaped the country since 2003. The government, which gets most of its revenue from oil profits, hands it over to ministers that often use it to finance supporters. What should be done?

Universal income, Ziad Daoud writes for Bloomberg Opinion.  China and India, who account for much of Iraq’s income, can be convinced by the international community to transfer money directly to Iraq’s 25 million adults, bypassing the political elite.

Need to Know

Iraqi voters headed to the polls for parliamentary elections that are not only a chance to judge the 17-month government, but also their premier’s attempts to calm the Saudi-Iran rivalry and repair the nation’s oil industry.  

Saudi Arabia’s sovereign wealth fund has taken over Newcastle United FC from billionaire Mike Ashley after it received approval from the U.K.’s Premier League following a year and a half wait. It has also committed to funding Amazon’s Middle Eastern rival Noon.com

The UAE has become the first of the Persian Gulf petrostates to commit to eliminating planet-warming emissions within its borders, setting a new target that aligns it with most major economies. Satellites over Iran spotted large clouds of methane over fossil fuel infrastructure. 

Iran told the U.S. it should release at least $10 billion of frozen Iranian funds if it wants to resume nuclear talks. Also this week,  researchers discovered a hacking group with alleged ties to the Iranian government had waged a yearslong campaign to steal information from aerospace and telecommunications companies in the Middle East, the U.S., Europe and Russia. 

Egypt’s first smartphone maker will assemble headsets for other companies as it seeks to become the main contract builder of electronics bound for the rest of Africa. 

ACWA Power, Saudi Arabia’s first $1 billion listing since Aramco, will start trading in Riyadh on Monday. The $1.2 billion IPO drew interest from investors looking for exposure to a business seen as key to the kingdom’s plans to diversify away from oil. Initial demand amounted to several billion dollars and advisers had to limit institutional investors’ allocations.

Last Word

Dubai ruler Sheikh Mohammed bin Rashid Al Maktoum ordered the hacking of phones belonging to his estranged wife using the controversial Pegasus software, a London court ruled.

The surveillance of Princess Haya Bint al-Hussein using the NSO Group Ltd. technology was employed as the couple fights over the welfare of their children after the princess flew to the U.K. with them in 2019. 

Sheikh Mohammed has denied the allegations, saying the findings were “based on an incomplete picture” and “were made in a manner that was unfair.” Lawyers for Princess Haya declined to comment. 

Bloomberg by Gwen Ackerman, October 7