Author: Ricardo Perez

State-run China National Offshore Oil Co, one of the country’s top importers of Russian oil, has in recent months been pumping shipments of ESPO blend from Russia’s Far East into a newly launched reserve base, according to traders and tanker trackers.

This is the first time stockpiling of Russian ESPO blend crude at CNOOC’s new reserve base has been reported. CNOOC did not have an immediate comment.

The stockbuild, estimated at more than 10 million barrels by tanker tracker Vortexa Analytics, helped lift China’s seaborne imports of the flagship Russian export grade to a record high in March, supporting prices of the ESPO blend despite tepid demand from independent Chinese refiners.

Though less than China’s crude consumption in a day, the stockbuild cements Russia’s position as China’s top oil supplier and comes as sales to India, Moscow’s No.2 oil client since the war in Ukraine, slowed due to western sanctions-driven difficulties over payments and shipping.

CNOOC began pumping the Russian crude last November into the 31.5 million-barrel storage base it has built in east China’s Dongying port, according to trading sources and Vortexa.

“ESPO discharges into Dongying began surging … after the port put into use three new berths able to dock Aframax vessels,” said Emma Li, Vortexa’s senior China oil analyst. Each ESPO cargo is about 100,000 metric tons or 740,000 barrels and the oil is typically carried in Aframax-sized tankers.

Vortexa did not specify whether the 10 million barrels were part of CNOOC’s commercial stockbuild or for China’s strategic petroleum reserve, but two senior traders who closely track ESPO flows said Beijing has been boosting its emergency stockpile.

“This is part of what the government has repeatedly called for, which is to hold the bowl of energy security firmly in our own hands,” one of the traders said on condition of anonymity given the sensitivity of the matter.

China, the world’s largest crude oil buyer, tightly guards information on its emergency government stockpile and private estimates of China’s strategic reserve vary widely.

Vortexa put China’s strategic reserve levels at 280 million barrels, while consultancy Energy Aspects pegged them at 400 million barrels. By comparison, the U.S. Strategic Petroleum Reserve stands at roughly 364 million barrels.

Russian oil arrivals into China, including via pipelines under long-term contracts, rose one quarter last year to a record 2.14 million barrels per day (bpd), making Moscow its top supplier for a second straight year, ahead of former top provider Saudi Arabia’s 1.72 million bpd.

China’s National Food and Strategic Reserves Administration did not respond to a Reuters request for comment.

‘SAFEGUARD NATIONAL ENERGY SECURITY’

Overall, about 29 million barrels of ESPO blend were discharged between November and March into Dongying port, of which 19 million barrels were sold to independent refiners known as teapots while the rest was stockpiled, according to Vortexa.

At 10 million barrels, the stockpile would occupy one-third of the capacity at the CNOOC-built Dongying storage site, which began operation in February 2023. China processes roughly 15 million barrels of crude oil a day.

The 6.4 billion yuan ($885 million) tank farm is a tie-up to “jointly safeguard national energy security”, the Shandong provincial government said last year when the storage site was launched.

The site, situated near CNOOC’s offshore oilfields, also helps CNOOC market its own production to Dongying, home to 32 independent refineries.

Before last November, the Dongying site was used mostly to store offshore crude and fuel oil, Vortexa’s Li said.

China’s overall seaborne ESPO imports hit a record 28.7 million barrels in March, data from analytics firm Kpler showed.

Of that, CNOOC purchased a record 8.5 million barrels in March, of which 7.4 million barrels were imported at Dongying, Kpler data showed. This compares with 5.2 million barrels imported at Dongying each in January and February, 3.7 million barrels in December, and 1.4 million barrels in November when ESPO imports to the site began.

“Lower demand from India prompted more Russian oil sales to China as really there are not many countries that can take Russian oil now,” an ESPO dealer said.

($1 = 7.2330 Chinese yuan)

By  Reuters / Chen Aizhu and Florence Tan , April 15, 2024

Speculators are often drawn to organisations that have a track record of failure and no revenue or profit because of the thrill of investing in a business that has the potential to turn a profit.

However, the truth is that investors will typically collect their loss share when a company has annual losses over an extended period of time. A business operating at a loss has not yet demonstrated its worth through profits, and soon outside funding may stop coming in.

Even in this day of tech-stock blue-sky investing, a lot of investors stick to a more conventional approach, purchasing stock in successful businesses like Aegis Logistics. Now, this is not to argue that the business offers the greatest investment opportunity available, but business success largely depends on profitability.

From a COVID low of 2020, the company has given a return of 190 percent. But the stock has been volatile for the past one year just giving a return of 20 percent. So, should you take the opportunity of this consolidation to invest for the long term? Well, for that let’s understand the business of Aegis Logistics and what the future holds.

Corporate Overview Of Aegis Logistics

Aegis Logistics is the top private player in India for LPG imports and handling, and it leads the country in integrated oil, gas, and chemical logistics. The company uses its cutting-edge Necklace of Liquid & Gas terminals, which are located in India’s main ports and have a static capacity of 1,14,000 MT for LPG and 15,70,000 KL for Chemicals & POL storage.

With its headquarters located in Mumbai, Aegis Group was established in 1956. Aegis Logistics is a well-known Liquefied Petroleum Gas (LPG) parallel marketer with a strong presence in India.

The company has a sizable network of distributors that offer LPG cylinders and appliances to residential, commercial, and industrial clients. It also has a large distribution of retail outlets that dispense autogas.

To help major enterprises switch from alternative fuels to LPG and optimize their economic benefits, Aegis also offers LPG installation and interfuel services.

Business Segments Of Aegis Logistics

The company has two primary business segments – the Liquid Logistics Division and the Gas Division.

Liquid Logistics Division

Revenues from liquid terminalling increased by approximately 54.80% to ₹417.97 crore from ₹270.01 crore in the prior year. The division’s EBITDA also increased, reaching ₹271.50 crore from ₹195.59 crore. This segment contributed the highest percentage to the overall revenue.

The product mix and the capacity increase at Mangalore, Kandla, and Haldia increased EBITDA performance by 38.81%. Future capacity increases at Haldia, Kandla, Mangalore, and Kochi, along with increased capacity utilization and a better mix of products handled at those ports, will drive growth in this segment. The Mumbai terminals are still operating at maximum capacity.

Gas Division

Aegis Group encompasses the entire logistical value chain, from LPG distribution to sourcing and terminalling. Due to increased volumes and prices, the division’s revenues in FY 2022–2023 were ₹8,209.25 crore as opposed to ₹4,360.97 crore in the prior year.

The Gas division’s EBITDA climbed to ₹526.23 crore from ₹389.32 crore the year before, mostly as a result of increasing terminalling and distribution volumes. This segment contributed almost 95 percent to the overall revenue.

For FY 2022–2023, distribution of LPG and propane across all channels in bulk and packaged cylinders remained a priority. The integrated logistical services offered by Aegis Group position the company to win market share and realize the aim of a more sustainable future, while the continuous development indicates an increasing demand for LPG.

Financials Of Aegis Logistics

In the fiscal year 2023, Aegis Logistics saw a substantial increase in revenue, surging by 86.3% to reach ₹8,627.21 crore as opposed to ₹4,630.98 crore in FY2022. Analyzing a span of four years, encompassing FY2020 to FY2023, the company displayed a Compound Annual Growth Rate (CAGR) of 6.3% in revenue.

Simultaneously, there was a noteworthy upturn in net profit, experiencing a 33% increase from ₹384.94 crore in FY2022 to ₹510.7 crore in FY2023. Over the cumulative four-year period from FY2020 to FY2023, the net profit showcased 56.21% CAGR.

In FY23, Aegis Logistics maintained favorable financial metrics with a Return on Equity (ROE) of 17.88% and a Return on Capital Employed (ROCE) of 17.08%.

Future Plans Of Aegis Logistics

Better Economics With LPG

According to the Kelkar Committee report, the industrial sectors primarily rely on imported LNG, which costs INR 45.6 per scm, while domestically produced natural gas is primarily utilized for PNG in households and CNG in automobiles. Compared to propane LPG, which costs INR 42.2 per square meter, this is more expensive.

Furthermore, the heat content of natural gas is 10,000 Kcal/scm while that of propane is 12,467 Kcal/scm. Propane uses less energy density and has a higher calorific value to generate the same amount of heat. Therefore, propane is less expensive than natural gas at INR 3.38 per million calories compared to INR 4.56 per million calories for natural gas.

To get LPG gas at a lower cost, Aegis Logistics has a joint venture (JV) with Itochu Corporation, a Japanese multinational corporation. This allows AEGIS to offer more competitive propane LPG rates in the industrial gas market.

New Storage for Green Ammonia

Aegis Logistics and Royal Vopak NV, a Dutch multinational company that specializes in the storage and management of a range of products, including chemicals, oil, gases, biofuels, and vegetable oils, have formed a 51:49 joint venture known as Aegis Vopak Terminals Ltd (AVTL).

Across five important Indian ports on the east and west coastlines, this joint venture oversees 11 terminals. With a total capacity of over 960,000 cubic meters, AVTL is becoming a significant participant in the independent LPG and chemical tank storage market in India.

The company’s next phase of growth would involve investing INR 1,000 crore to build a plant in Odisha that can store 80,000 tonnes of green ammonia.

Robust Expansion Plans

The company has several upcoming port construction projects that will boost the capacity of the Liquids division in the future. The Kandla Port which has a capacity of 35,000 KL is expected to commission in Q4FY24.

The company expects the JNPT Port which has an 110,000 KL capacity to be commissioned in phases and will be fully operational by June 2024. The Mangalore Port which has a 76,000 KL capacity is also expected to be partially operational by the end of FY24 and the balance in Q1FY25.

Conclusion

After understanding Aegis Logistics’ financials, growth drivers, and future expansion plans, it seems the company is well-positioned for long-term growth. With strong profitability, increasing capacity, and focus on the high-potential LPG market, Aegis could continue its upward trajectory.

However, with some recent volatility, investors should assess if the current valuation prices are too much for future optimism. What do you think – is Aegis’ growth story still intact and is now the time to buy in?

By: Tank Terminals / Trade Brains , April 09, 2024

Vitol, the foremost independent commodity trader globally, has for the second consecutive year, secured profits surpassing its competitors, solidifying its status as a dominant force in the international energy markets.

Headquartered in London, the privately-owned conglomerate recorded a net profit of $13 billion in 2023, as reported by individuals familiar with the company’s financial performance.

According to a Financial Times report, although down from the record $15.1 billion Vitol made in 2022, the net profit figure is more than three times higher than the $4 billion it reported in 2021, illustrating how much Vitol has benefited from disruption to energy markets in the past two years.

Russia’s invasion of Ukraine

Russia’s invasion of Ukraine in February 2022 sent energy prices soaring as the west responded with sanctions, leading to one of the biggest shifts in global commodity flows in history. Price volatility eased in 2023, but commodity flows remain disrupted.

According to the report, Vitol does not publicly release its financial results, which are only available when its accounts are filed in the Netherlands later in the year.

The company declined to comment on the profit figure, which dwarfed its biggest competitors and was larger than some of the world’s biggest oil producers, including Italy’s Eni.

Lower commodity prices meant turnover fell to $400 billion from $505 billion in 2022 but the total volume of energy products traded by Vitol increased by 4% year-on-year, last month’s statement said.

The growth was driven by gas and liquefied natural gas volumes, which grew by 19% and 24% respectively. The volume of oil and refined petroleum products that the group traded remained roughly flat at 7.3 million barrels per day.

Vitol’s closest rival Trafigura made net profits of $7.2 billion in its last financial year, which ended in September, while fellow privately held energy trader Gunvor made $1.3 billion, it said last week.

Bumper payout

The report noted that the second consecutive blockbuster year will mean another bumper payout for Vitol’s approximately 450 senior partners spread across the trading hubs in London, Geneva, Singapore and Houston.

It will also add to the cash pile Vitol has available to expand the business. In 2022 the group doubled its shareholder equity to $25.8 billion, according to its last set of accounts.

Vitol has already begun spending some of the windfall, launching in January a €1.7 billion bid to acquire Italy’s Saras, which owns the biggest single refinery in the Mediterranean on Sardinia. Last year its Turkish subsidiary Petrol Ofisi agreed to acquire BP’s downstream business in Turkey. On completion, Vitol will have invested in about 9,000 petrol stations worldwide, including 3,900 it owns in Africa through Vivo Energy.

In the UK, Vitol owns and operates five power plants through its partially owned subsidiary VPI, making it a bigger power generator than Centrica. VPI also has three more power facilities being built in the region — two in the UK and one in Ireland.

By: Nairametrics, April 09, 2024

The panel’s next meeting is scheduled to be held on June 1, ahead of a planned full OPEC and OPEC+ ministerial meetings, which are expected to decide whether to proceed with the current level of cuts beyond June or reverse some of the reductions.

After the meeting today, Ole Hansen, Head of Commodity Strategy at Saxo Bank, commented,

“Brent crude oil toys with $90 after OPEC+ decided to stick with oil supply cuts for the first half of the year, keeping global markets tight and potentially sending prices higher.”

Brent Crude was up by 0.73% at $89.61 early on Wednesday ahead of the weekly EIA inventory report.  

In early March, the members of the OPEC+ alliance that had pledged the Q1 cuts announced they would roll over the supply reductions until the end of the second quarter.

Saudi Arabia, Iraq, the United Arab Emirates (UAE), Kuwait, Kazakhstan, Algeria, Oman, and Russia are now cutting their respective crude oil production and exports in the first half of 2024 with extra voluntary reductions, on top of the voluntary cuts OPEC+ previously announced in April 2023 and later extended until the end of 2024.  

Russia will be cutting oil production instead of exports in the second quarter of 2024 so that all OPEC+ producers that reduce output contribute equally to the cuts, Russian Deputy Prime Minister Alexander Novak said last week.  

The OPEC+ group is set to continue with its production cuts until at least the end of the first half of 2024 as the alliance’s Joint Ministerial Monitoring Committee (JMMC) did not recommend any changes to output policy at its meeting on Wednesday. 

The JMMC is the OPEC+ panel that monitors the situation in the oil market and assesses compliance with the cuts. It doesn’t take decisions on policy as it just recommends possible actions to the full OPEC+ ministerial meetings.

After a short regular meeting today, the panel did not recommend to the OPEC+ ministers any change to the current levels of production, as widely expected.

By Oilprice.com / Charles Kennedy , Apr 03, 2024

INEOS has completed the acquisition of TotalEnergies’ 50% share of Naphtachimie (720 ktpa steam cracker), Appryl (300 ktpa polypropylene business), Gexaro (270 ktpa aromatics business) and 3TC (naphtha storage) announced on 5 July.

These businesses had previously been joint ventures between the two companies. A number of other infrastructure assets have also been acquired including part of TotalEnergies ethylene pipeline network in France.

INEOS will now fully integrate the Naphthachimie, Gexaro and Appryl petrochemical businesses, assets and infrastructure into INEOS Olefins & Polymers South at Lavera in Southern France. Gexaro, which is located on the Lavera refinery site will continue to be operated by Petroineos.

Xavi Cros, CEO of INEOS Olefins & Polymers South adds: ‘We are pleased that we have today completed the acquisition of TotalEnergies petrochemical assets at Lavera. This is a major step forward for the INEOS French and South European businesses. We will now fully integrate these assets and enhance the competitiveness of our offer.’

By Tank Terminals, April 02, 2024

Hess Corp. and Chevron Corp. have insisted they can complete their merger mid-2024 despite arbitral proceedings launched by Exxon Mobil Corp. over Guyana’s Stabroek block.

“The parties currently expect to complete the transaction in the middle of 2024”, Hess said in a letter to shareholders, made public as an attachment to a recent regulatory disclosure by Chevron. The joint announcement of the merger last year gave the first half of 2024 as the expected date of closure.

The merger would result in Chevron taking over Hess’ stake in Stabroek. ExxonMobil operates the offshore block with a 45 percent interest through Esso Exploration and Production Guyana Ltd., while Hess subsidiary Hess Guyana Exploration Ltd. (HEGL) holds a 30 percent interest. China National Offshore Oil Corp’s CNOOC Petroleum Guyana Ltd. holds the remaining 25 percent.

However ExxonMobil initiated arbitration proceedings March 6 before the International Chamber of Commerce tribunal asserting that a pre-emption right accorded to each of the three parties in the Stabroek joint operating agreement (JOA) applies to Chevron’s acquisition of Hess. A pre-emption right or right of first refusal (ROFR) allows a partner to prevent a co-venturer from selling a stake to an outside party without first offering the stake to the partner.

Hess filed for arbitration March 11 with the opposite claim. China’s state-owned CNOOC followed suit March 15 with the same claim as ExxonMobil.

The cases have been confirmed in filings with the U.S. Securities and Exchange Commission (SEC).

In a simplification of the court process, Hess said in the letter the three Stabroek co-venturers agreed to unify the arbitration cases into one. “On March 26, 2024, following a joint application by the parties, the authority administering the arbitration consolidated the three arbitration proceedings”, Hess told stockholders in the letter.

“Chevron and Hess believe that the Stabroek ROFR does not apply to the merger due to the structure of the merger and the language of the Stabroek ROFR provisions”, Hess said.

“HGEL intends to vigorously defend its position in the arbitration proceedings and expects the arbitration tribunal will confirm that the Stabroek ROFR does not apply to the merger”, Hess added.

“If the arbitration does not result in a confirmation that the Stabroek ROFR is inapplicable to the merger, and if Chevron, Hess, Exxon and/or CNOOC do not otherwise agree upon an acceptable resolution, then there would be a failure of a closing condition under the merger agreement, in which case the merger would not close, and, pursuant to the terms of the Stabroek JOA, the Exxon affiliate and the CNOOC affiliate would cease to have rights under the Stabroek ROFR with respect to the merger”, the letter said.

“In that event, Hess would remain an independent public company and would continue to own its participating interest in the Stabroek Block.

“Based on the express terms of the Stabroek JOA, Chevron and Hess do not believe there is any material likelihood that the circumstances described in this paragraph will occur”.

With discovered recoverable resources of over 11 billion barrels of oil equivalent according to Hess, the 6.6 million-acre block is the main reason behind Chevron’s $60 billion purchase of Hess announced October 23.

Chevron or Hess may themselves junk the merger deal if completion is not achieved by October 22, 2024, or if extended, April 22, 2025, or October 22, 2025, under the terms of the agreement, according to Hess.

The merger agreement had set April 18, 2024, as the end date but both New York-based Hess and California-based Chevron have waived the termination right available to either party with respect to the April end date, according to Hess.

In another potential hurdle, Guyanese authorities could assert a requisite approval on their part over the merger, Hess said.

“As of the date of this proxy statement/prospectus, the parties do not anticipate that any such approval will be required from any Guyanese governmental body, agency or authority”, read the letter.

Meanwhile in the U.S., Chevron and Hess continue to work to clear an anti-trust review by the Federal Trade Commission, Hess said in the letter.

While the letter voiced confidence about the closure timeline, Hess had told employees in an email March 6, 2024, a copy of which was posted on the SEC, that the consummation could be delayed due to the arbitration.

by Rigzone Staff / Jov Onsa, Monday, April 01, 2024