Category: Nieuws

Despite Western-led sanctions aimed at punishing Russia over its war in Ukraine, growing demand for Russian energy imports has helped keep the country’s besieged economy afloat.

China and India, Asia’s biggest and third-biggest economies, respectively, have been the biggest drivers of the trend.

Russia’s economy shrank by just 2.1 percent in 2022 — far less than previously forecast contractions of up to 12 percent.

How much has Chinese and Indian demand for Russian energy grown?

China and India, both of which have declined to condemn Russia or impose sanctions over the war, became the biggest buyers of Russian crude oil last year as Western countries restricted imports and imposed sanctions.

China’s imports of Russian crude oil spiked 8 percent in 2022, the equivalent of 1.72 million barrels per day (bpd), according to Chinese customs data, making Russia the East Asian giant’s second-biggest supplier.

Kpler, a commodities market analysis firm, has estimated that China will import some 5.62 million bpd in February, beating the previous all-time high.

China’s imports of Russian pipeline gas and liquefied natural gas in 2022 soared 2.6 times and 2.4 times, respectively, to $3.98bn and $6.75bn, respectively.

Meanwhile, China’s imports of Russian coal last year surged 20 percent to 68.06 million tonnes.

India, which has emerged as the biggest customer of Russian oil, in January imported a record 1.4 million bpd of the commodity — a more than 9 percent rise from December.

India’s imports of thermal coal in 2022 rose nearly 15 percent to 161.18 million tonnes.

Analysts have said that cheap imports are difficult to ignore for Prime Minister Narendra Modi, who has boosted security ties with the West while maintaining warm Russia ties, as he faces both high inflation and an election year.

Turkey has also emerged as a top buyer of Russian energy crude oil and coal, with analysts pointing to Pakistan and Bangladesh as markets that are likely to follow suit and ramp up Russian energy imports at discounted prices.

Taking a page from heavily-sanctioned Iran, Russia has built up a “shadow fleet” of up to 600 old oil tankers to circumvent Western sanctions, according to the Economist Intelligence Unit (EIU).

Demand for oil storage tanks in Singapore is also surging, Bloomberg reported last month, suggesting that Russian fuel is being blended with other oil and re-exported, making it more difficult to trace.

“While Russian gas pipeline exports to Europe have obviously collapsed, Russian exports of both oil and coal have continued to flow at close to pre-war volumes,” Gavin Thompson, vice chairman for energy in the Asia Pacific at Wood Mackenzie, told Al Jazeera.

What restrictions have been placed on Russian energy exports?

The European Union began phasing in sanctions on Russian oil last year, and on December 5, imposed a ban on seaborne crude oil exports. The EU, the G7, and Australia also agreed to set a price cap on Russian crude oil at $60 per barrel, $20-30 per barrel less than its competitors depending on price fluctuations. Prices will be adjusted every two months.

The price of Russian crude oil, however, has been trending well below the $60 cap in the past two months, which means European companies can still provide secondary services like shipping, finance and insurance.

On February 5, a new round of restrictions and price caps were put in place on higher-value Russian refined oil products like diesel and cooking fuel.

The goal is not to cripple Russia completely — which would send global oil prices skyrocketing — but to “cause pain to the Kremlin,” said Matt Sherwood, the EIU’s Senior Europe and Lead commodities analyst.

“The price caps and the sanctions … still make it economical for Russia to continue producing and ship out its oil, but it also means it’s having to trade and price that oil at such a discount that it’s having an impact on its fiscal situation and its financing of its war machine,” Sherwood told Al Jazeera.

How are sanctions affecting Russia?

Following the EU’s ban on Russian oil product exports that took effect on February 5, Russia said it would cut crude oil production by 500,000 barrels a day, or about 5 percent of total volume, starting in March.

Analysts say the restrictions, the EU’s sixth package of sanctions since the war began, will be more difficult to circumvent than past measures because finding new markets for oil products is harder to do than for crude oil, which countries like China and India can refine themselves and sell for a profit.

Moscow has also said it will not trade with any country that mentions the G7 price cap in their contracts.

The EIU has predicted the emergence of two parallel global oil markets should sanctions continue: one that trades in heavily discounted Russian oil like China and India have been doing, and another that shuns Russian oil.

Despite growing exports to Asia, Russian oil and gas revenues fell 50 percent year-on-year overall in 2022, a shortfall Moscow had to make up for in other ways such as by selling its foreign currency reserves.

Revenue could continue to fall along with the price of oil as global markets adjust to the new price cap system and logistical challenges, said Thomas O’Donnell, an external global fellow at the Wilson Center and an instructor at the Free University of Berlin.

“After the first year, when there was a shock to the market when oil and gas prices were relatively high, Russia largely made up for the restrictions on selling its oil. Going forward things are more under control now,” O’Donnell told Al Jazeera.

“Now that it’s set up, we’ll see if the EU, G7 and the US will be willing to squeeze Russia and that has to do with what different people see as the dynamics of the market.”

Russia has said it expects its overall oil and gas revenues this year to drop by nearly one-quarter from 11.6 trillion roubles to 8.9 trillion roubles ($155bn to $119bn), adding to Moscow’s need to find new revenue streams.

MacKenzie said that both China and India are expected to have strong demand for Russian energy in 2023.

“Russian waterborne crude exports have already rebound to over 3 million bpd as Asian buyers continue to import Urals crude as discounts remain attractive,” he said.

“China has a much higher appetite to pick up more Russian crude than India in 2023. And Russian crude exports may need to increase in the near term if Russian distillate exports struggle to clear to new markets after the EU ban on Russian products and Russian refiners are forced to cut crude runs.”

ALJAZEERA by Erin Hale, February 28, 2023

Copenhagen Infrastructure Partners (CIP), a major in offshore wind development, has acquired a majority stake in a blue ammonia project which will be developed alongside US-based Sustainable Fuels Group (SFG).

While the financial terms of the transaction were not disclosed, CIP said it has acquired the stake in this project through its Energy Transition Fund (CI ETF I).

Located along the Gulf Coast, the project has commenced detailed engineering (FEED) and will initially consist of two phases, each with a production capacity of 4,000 tons per day (~3.0 million tons of annual production from both phases) once operational in 2027.

Furthermore, the project has entered into an agreement with International-Matex Tank Terminals (IMTT), a terminal and logistics company, to provide ammonia storage and handling services.

As disclosed, the project will use Topsoe’s SynCOR™ technology to produce blue ammonia with the lowest carbon intensity and is expected to reduce CO2e emissions by 90% (Well-To-Gate) compared to traditional ammonia production, thereby abating 5.0 million tons of CO2 per year.

CPI said that the project will form part of the CI Energy Transition Fund, which closed in August 2022 at the hard cap of €3 billion, and like all current CIP Funds, is aligned with the UN Sustainable Development Goals (SDGs) principally through the expected avoidance of greenhouse gas emissions resulting from its investments.

The CI Energy Transition Fund focuses on clean hydrogen, and other next-generation renewable technologies to facilitate the decarbonisation of hard-to-abate sectors such as agriculture and transportation.

Søren Toftgaard, Partner in Copenhagen Infrastructure Partners, commented on the acquisition: “We are developing a global portfolio of clean hydrogen and hydrogen-related products, such as clean ammonia. Blue ammonia is considered an important part of a successful energy transition, which can potentially help fill the ammonia shortage in Europe as well as being a stepping stone to the successful implementation of green projects, and we are excited to bring this project to the Gulf Coast region. Further, the agreement provides important diversification to our CI ETF I portfolio and can provide a platform for future hydrogen-related investments in the US.”

OFFSHORE Energy, February 28, 2023

The government has not yet commented on whether Porto Kòrsou is a serious candidate for the reopening of the refinery. The initiator is open to a collaboration to reopen, Prime Minister Pisas said.  

During the parliamentary meeting that took place last week, Pisas called on party members to think about possible parties in the context of reopening the refinery. This is in response to the withdrawal of the Caribbean Petroleum Refinery (CPR), because complaints have been filed against them. 

Sven Rusticus, spokesperson on behalf of Porto Kòrsou, thinks he can be of value to the development of the Isla site, also from an economic point of view. In addition, Rusticus says that the refinery has a rich history in Curaçao, and that he wants to value that history in the plans he has.  

“Besides creating employment, the redevelopment of the refinery will bring direct financial benefits,” said Rusticus. How this is all made possible is still being considered.

By Curaçao Chronicle, February 28, 2023

China’s oil refining capacity overtook the United States as the world’s largest in 2022, an industry official said on Thursday, though its production of fuel products lagged the United States due to low utilization rates.

Total refining capacity in China expanded to 920 million tonnes per year, or 18.4 million barrels per day (bpd), in 2022 Fu Xiangsheng, vice president of the China Petroleum and Chemical Industry Association, told reporters.

That compares with U.S. refining capacity as of December at 17.6 million bpd, according to the International Energy Agency’s latest oil market report.

China’s recent wave of refinery expansions has been led by state-run PetroChina and large private firms such as Zhejiang Rongsheng group and Jiangsu Shenghong Petrochemical, mainly to fill a supply gap in petrochemicals rather than transportation fuels.

China’s total refined products output last year was less than 700 million tonnes (5.1 billion barrels), at an average plant utilisation rate of around 70%, the association said, compared with more than 800 million tonnes in the United States, where average utilisation exceeded 90%.

China has 32 refineries with at least 200,000 bpd capacity each, according to the association, citing the launch of a new facility built by PetroChina (601857.SS) in Jieyang in Guangdong province as a recent example of the country’s growing capacity.

Reuters by Andrew Hayley, February 23, 2023

China National Petroleum Corp started trial runs of its mega greenfield refinery complex in Guangdong on Sunday, said the nation’s largest oil and gas producer by domestic annual output.

Located in Jieyang in South China’s Guangdong province, the complex, which also includes a 1.2 million ton per year ethylene plant, is PetroChina’s single-largest investment of its kind in China.

With a total 65.4 billion yuan ($9.57 billion) investment, the project started construction in 2018 and is part of the company’s efforts in international oil and gas cooperation and refinery business upgrade, it said.

Products produced include petroleum, diesel, aviation kerosene, high density polyethylene, low density polyethylene, polypropylene, styrene and butadiene.

Environmental investment of the project is estimated to reach 7.25 billion yuan, 11 percent of the project’s total investment, to ensure energy conservation and emission reduction, the company said earlier.

CHINADAILY by Zheng Xin, February 16, 2023

For a 20-year period, Mexico Pacific will sell approximately 2 million tonnes per annum of LNG from the planned Sonora export plant to Exxon Mobil.

ExxonMobil LNG Asia Pacific (EMLAP), an affiliate of ExxonMobil, has agreed to buy liquefied natural gas (LNG) from Mexico Pacific’s proposed Saguaro Energia LNG export plant in Sonora state.

Under the 20-year term sales and purchase agreements (SPAs), ExxonMobil will buy nearly two million tonnes per annum (Mtpa) of LNG on a free-on-board basis.

The LNG will be delivered from the first two trains planned to be built at Mexico Pacific’s anchor LNG export facility, Saguaro Energia LNG, in Puerto Libertad.

Mexico Pacific CEO Ivan Van der Walt said: “We have reached a critical point on contract volumes required for the final investment decision (FID) on our first two trains and will now shift focus to close contracting on the significant commercial momentum in place for a subsequent Train 3 FID.

“With natural gas playing a critical role in the quest for global energy security and the energy transition, we remain committed to supplying vital energy for decades. As we position for FID on the first two trains, we will also commence advanced engineering with Bechtel.”

Furthermore, ExxonMobil holds the option for 1Mtpa of LNG from Train 3 at the proposed plant.

ExxonMobil Upstream LNG senior vice-president Peter Clarke said: “We look forward to working with Mexico Pacific to continue growing ExxonMobil’s LNG portfolio and deliver Permian natural gas to global markets.”

The Saguaro Energia LNG project is planned to be developed in phases, with the first phase involving the construction of two 4.7Mtpa liquefaction trains, two tanks, and one berth.

The second phase will involve the construction of a third 4.7Mtpa train.

By OffshoreTechnology, February 16, 2023

Crude oil could soon swing into a deficit that will make next year a difficult one, Goldman Sachs said, as spare production capacity dwindles and underinvestment threatens future supply.

Speaking on the sidelines of an event in Saudi Arabia, Goldman’s top commodity analyst Jeffrey Currie said, as quoted by Bloomberg, that the industry is not spending enough to secure future production and that spare capacity globally is declining.

This could tip the oil market into a serious supply problem next year, but the price for a barrel of Brent could top $100 before then.

According to Currie, rising demand from China and sanctions on Russian oil will contribute to the deficit, which he expects to manifest in the second quarter of this year.

In response, producers will tap their spare capacity, leaving it lower than it was before. Eventually, this will lead to a serious imbalance between supply and demand.

“Right now, we’re still balanced to a surplus because China has still yet to fully rebound,” Currie told Bloomberg. “Are we going to run out of spare production capacity? Potentially by 2024 you start to have a serious problem.”

Saudi Arabia’s energy minister has echoed the concern about insufficient spending on future oil production. In fact, Abdulaziz bin Salman has been warning about that for more than a year, and he did so again this weekend.

“All of those so-called sanctions, embargoes, lack of investments, they will convolute into one thing and one thing only, a lack of energy supplies of all kinds when they are most needed,” he said.

Brent crude has been trading at between $75 and $80 a barrel for most of the year so far but Goldman, along with other investment banks, believes it has higher to go. According to Currie, the oil market will swing into a deficit by May.

OilPrice.com by Irina Slav, February 16, 2023

The five largest Western oil firms announced nearly $200 billion in profits after the Ukraine war sent energy prices soaring. As China reopens, oil demand is likely to stay strong, alongside calls for windfall taxes.

Financial markets were stunned in April 2020 when the price of oil turned negative for the first time ever. As demand plummeted during the first COVID lockdown, the main US oil benchmark price fell to minus $30 (minus €28) a barrel.

Naysayers said prices would never recover. They warned that big oil’s days were numbered and the end of the hydrocarbon era was nigh. While they are correct about the direction of travel, their timing was way off.

The same five Western oil giants — ExxonMobil, Shell, Chevron, BP and Total — who made huge losses in 2020, have just collectively announced more than $196 billion in annual profits, helped on by a spike in oil demand caused by the Ukraine war and the post-pandemic recovery.

For much of the first half of last year, the oil price surpassed $100 and in March, Brent crude hit $139 a barrel. For the remainder of the year, it settled between $70 and $95 — much higher than the $40 to $50 needed for oil majors to make profits.

Exxon’s profit in 2022 was a record not just for itself but for any US or European oil giant. BP’s $28 billion profit was the highest in its 114-year history, while Shell made more than double the profit it made in the previous year.

As well as soaring oil prices, falling debt levels helped the oil majors to increase capital spending on fossil fuel production as governments prioritized energy security due to the supply shock caused by Western sanctions on Moscow and the Kremlin’s inconsistent energy supplies to Europe after the invasion of Ukraine.

BP CEO Bernard Looney was denounced by the green lobby when he said he wanted to “dial back” some of the energy giant’s investments in renewable energies due to the risk of oil and gas supply shortages causing more price volatility.

Contempt for ‘dirty’ cash cows

Public anger at Big Oil’s announcements of record profits is visceral, not only due to the urgent green energy push.

Over the last year, households and businesses have been hit hard by skyrocketing utility bills and the price of gasoline. While many governments have tried to limit the damage with subsidies, many see Big Oil as profiteering from public misery, so calls for windfall taxes on profits are growing louder.

The UK and the European Union have already imposed temporary levies on oil and gas sector profits. Politicians and unions have called for those to be increased. In their results updates, Shell, Total and BP revealed that the new taxes would cost them each about $2 billion — about 5% to 8% of profits.

ExxonMobil, meanwhile, is suing the EU to get the bloc to scrap its new windfall tax. The US’s largest oil firm argues that Brussels has exceeded its authority by imposing the levy, which it says is normally a role for national governments.

Exxon spokesperson Casey Norton said in December that the tax would “undermine investor confidence, discourage investment and increase reliance on imported energy.”

Biden urges tax hikes for oil majors

US President Joe Biden used his State of the Union address this week to call for energy giants to be squeezed further, demanding a quadrupling of taxes paid on share buybacks.

“When I talked to a couple of [energy companies], they said, ‘We are afraid you are going to shut down all the oil refineries anyway, so why should we invest in them?’ We are going to need oil for at least another decade,” Biden told Congress. “Instead, they used those record profits to buy back their own stock, rewarding their CEOs and shareholders. Corporations ought to do the right thing.”

The top Western oil companies paid out a record $110 billion in dividends and share repurchases to investors in 2022, according to a tally by Reuters news agency.

Oil giants have slashed their longer-term investments in recent years, partly after the US shale oil bust of the last decade but also after nursing heavy pandemic losses. With an ever-uncertain future due to the green energy transition, reticence remains over major capital spending.

China reopening to fuel demand

More pain could be on the way for consumers and businesses as China reopens after a 3-year zero-COVID policy, further fueling demand for oil while boosting Big Oil’s profits further still.

Although oil prices are not expected to reach their July 2008 all-time high of $150 a barrel anytime soon, some analysts predict the price could reach $100 again later this year — before a recession or downturn hits major economies and stalls demand.

In its latest oil market forecast published Tuesday, the Oxford Energy Institute said that oil prices would reach $95.7 a barrel, partly as a result of demand from Asia’s powerhouse economy. Goldman Sachs sees prices returning to $100 by December.

Russia said this week it planned to cut production by half a million barrels a day from next month, a move that sent prices higher. Moscow blamed the move on Western oil sanctions, including a European Union price cap of $60 on Russian crude oil. The Kremlin has so far diverted the oil it used to send to Europe to China and India, albeit at a 30% discount.

A further sign of strong oil demand came this week from Barclays Capital which forecast even higher profits for the oil majors. It set a share price target of 10 pounds ($12, €11.29) for BP, a near doubling from its Friday price of 5.61 pounds.

The Indian Express by Nik Martin, February 14, 2023