Category: Nieuws

South Korea finds competitive US crude highly attractive in times of surging benchmark oil prices, but Asia’s biggest US crude customer also aims to enhance its green energy practices by gradually increasing the share of net-zero crude oil in the overall feedstock imports from the North American producer.

Major South Korean refiners said light sweet US crude grades are typically placed on the list of top monthly feedstock choices, especially in times of high global energy prices, as the North American barrels come cheaper than many Middle Eastern grades thanks to US-South Korea free trade agreement. Persian Gulf producers, on the other hand, continue to raise their official selling prices.

South Korean refiners paid on average $78.88/b for shipments of US grades in January, lower than $82.98/b paid for Saudi Arabian crude imports and more than $7/b cheaper than $85.94/b paid for Kuwaiti barrels, according to the latest data from state-run Korea National Oil Corp. The world’s fourth biggest crude importer took 119 million barrels of crude oil from the US in 2021.

Apart from feedstock economics, crude oil trading managers and officials at major South Korean refiners told S&P Global Commodity Insights that the companies have not forgotten about their commitments to reduce their carbon footprint and they are closely monitoring the growing availability of low carbon crude in the US and Europe.

The country’s top refiner SK Innovation said March 25 it plans to purchase 200,000 barrels/year of “net zero” crude oil from Occidental Petroleum Corp. for five years from 2025.

The company’s trading arm SK Trading International has signed the deal with the Permian-based producer in an effort to accelerate the company’s energy transition initiative, an official at SK Innovation said.

SK Innovation said it will refine the crude oil from Occidental into “net zero oil products” such as eco-friendly jet fuel so as to help reduce carbon emissions and combat climate changes.

“Buying US crude, it’s not all about just cutting costs or saving dollars and cents … US crude producers are rapidly enhancing their carbon capture technology and it’s sensible for an end-user with right ESG mindset to fully support and appreciate such efforts,” a feedstock and plant operation manager at SK Innovation’s Ulsan refinery said.

Net-zero oil, CCUS technology

Net zero oil refers to barrels produced through the direct capture and sequestration of atmospheric carbon dioxide via industrial-scale direct air capture facilities and geological sequestration, unlike those “carbon neutral crude” claimed by upstream companies by simply offsetting emissions using carbon credits, the SK Innovation official said.

SKTI explained that Occidental’s first net-zero oil is created by blending crude oil with environmental attributes generated from the sequestration of atmospheric carbon dioxide captured via 1PointFive’s multi-solution platform for Carbon Capture, Utilization and Sequestration, or CCUS.

According to Occidental, 1PointFive is a CCUS platform with a singular purpose to help curb global temperature rise to 1.5°C by 2050 through the commercialization of decarbonization solutions including Carbon Engineering’s Direct Air Capture, or DAC, Air To Fuels technologies and geologic sequestration.

1PointFive’s first DAC facility, which is expected to be online late 2024, will also include pure sequestration and is in the process of being deployed using Carbon Engineering’s industrial-scale DAC solution. The facility will extract atmospheric CO2 and permanently store it deep underground in geologic formations delivering permanent and verifiable carbon dioxide removal, according to SKTI.

“We are pleased to be a part of the world’s first carbon emission reduction initiative that is underpinned by processing net-zero oil on a life-cycle analysis basis. We are also thrilled to team up with Occidental, one of the most respected energy companies in the world,” Sokwon Suh, CEO of SKTI, said.

Carbon-neutral European crude

The latest agreement with SKTI and Occidental indicated that South Korean refiners are actively looking for ways to enhance and incorporate their ESG considerations from the feedstock front, with the country also expected to continue embracing carbon-neutral crude from Norway, according to market research analysts at Korea Petroleum Association.

South Korea’s second-largest refiner GS Caltex had purchased 2 million barrels of Norway’s Johan Sverdrup crude certified as carbon neutral at the point of production for delivery in September 2021.

GS Caltex has been buying Johan Sverdrup crude on a regular basis since then, with South Korea importing more than 17 million barrels of crude from Norway in 2021, compared with 8.5 million barrels received in 2020, 1 million barrels in 2019 and 5 million barrels in 2018, according to the latest data from state-run Korea National Oil Corp.

In June 2021, Sweden’s Lundin Energy, a partner in Norway’s giant Johan Sverdrup oil field, said all future net production from Johan Sverdrup will be certified as carbon neutral produced by Intertek, under its CarbonZero standard.

S&P Global by Gawoon Philip Vahn, March 31, 2022

International sanctions do not directly target Russian gas producers but they prevent the supply of critical processing equipment and technology.

International chemicals giant Linde has joined a host of Western oil producers, oilfield service providers and technology players in exiting Russia following the country’s invasion of Ukraine, putting in doubt Moscow’s ambitions of becoming a major global exporter of liquified natural gas by 2030.

As a member of a consortium with Technip Energies and Russia’s Nipigazpererabotka, Linde is a key partner underpinning a multi-billion dollar engineering, procurement and construction contract for the Arctic LNG 2 export project led by Novatek, Russia’s largest independent gas producer.

In a statement placed on a corporate website, Linde said it is “working with the relevant governments and authorities to ensure the company fully complies with international sanctions and is safely winding down affected projects in Russia”.

In addition, Linde has “suspended all business development for new projects in Russia”.

Under the Arctic LNG 2 contract, Linde is supplying its proprietary natural gas liquefaction process for all three liquefaction trains under construction in the Novatek-managed specialised yard in Belokamenka, near the port of Murmansk.

The project includes the construction of three LNG trains, each with capacity of 6.6 million tonnes per annum.

The shareholders in Arctic LNG 2 are Novatek with 60%, TotalEnergies holding 10%, China’s CNPC and CNOOC with 10% each, as well as Japan Arctic LNG — a consortium involving Mitsui & Co Ltd — also holding 10%.

Novatek squeeze

Construction work is continuing at Belokamenka , according to the social media accounts of numerous site workers.

Pre-fabricated LNG train modules are shown in place having been transported from China recently. The modules are being rolled out to the concrete gravity-based foundation (GBS) of the first liquefaction train, according to Russian social network posts.

Novatek has said previously that all 14 heavy modules have been delivered to the yard and are set to be installed on the GBS during March.

According to the company, shareholders have provided an estimated 57% of the required $21.3 billion financing for the project by end of 2021, with the remaining bills to be paid from project financing loans arranged last year.

Novatek has not been specifically targeted by the current round of international sanctions but the impact of the measures have been felt at top management level.

Novatek core minority shareholder, Russian businessman Gennady Timchenko, on Monday resigned from the company’s board of directors after being targeted by new sanctions.

Additionally, Novatek executive chairman Leonid Mikhelson may have moved his 15% personal stake in the gas producer from a Cyprus-based company to Russia, according to reports in Moscow.

Long-term concerns

It is not yet clear the extent to which the projects in which Linde was involved will be affected, but service and maintenance without the cooperation of the original equipment manufacturer i seen as a challenge.

Before the Arctic LNG 2 contract was signed there was a move to procure Russian-made equipment for the project.

This local content push was making progress but Russian authorities eventually eased the rules to allow Novatek more freedom to order equipment from overseas to keep up with the project’s schedule.

According to Kirill Lyats, an independent energy analyst in Moscow, Russian manufacturers may eventually be able to replace foreign-made parts and technologies in the country’s LNG and gas processing projects.

“We would expect there to be a delay to the only currently under-construction LNG project, which is Arctic LNG 2 in the far north of Russia,” commented Chris Wheaton, an analyst at Stifel, an investment bank.

“As TotalEnergies has pledged not to supply more capital to the project, I would expect either another Chinese company or Saudi Aramco to replace them in the project,” he added.

The LNG plants themselves are being built by Wison in China and, as such, are likely to avoid sanctions. “But they may encounter problems in being able to be transported from China to the Gydan peninsula, as this requires specialist heavy lift vessels which are largely owned by western companies,” Wheaton noted.

It not yet clear yet how commercial offtaking and transport arrangements for the future production will be affected due to uncertainty about the future demand for Russian cargoes.

International sanctions have targeted Russian carriers such as Sovcomflot, which operates a fleet of 11 specialised LNG carriers capable of sailing through two-metre thick ice to serve Yamal LNG, with another 19 similar vessels under construction or on order to serve Arctic LNG 2.

Bleak prospects

Valery Chow, head of gas and LNG research at consultancy firm Wood Mackenzie, said sanctions are likely to hinder the ability of Novatek and Gazprom to deliver Arctic LNG 2 and Baltic LNG respectively.

Chow said prospects for Russian LNG projects not yet past the final investment decision, such as Arctic 1 and Far East LNG, are now ” bleak” and he said the Russian’s government LNG production target of 140 million tonnes per annum by 2035 looks “unachievable” at present.

Gazprom ventures

In addition to its partnership with Novatek for Arctic LNG 2, Linde has built several partnerships with Russian state-controlled gas producer Gazprom.

Two of these projects — the small-scale Portovaya LNG plant on the Baltic Sea coast and the huge Amur gas processing facility in East Siberia are close to completion.

Portovaya LNG has a capacity of 1.5 million tpa of LNG and is due online later this year.

The Russian government is believed to view this plant as a strategic outlet to deliver LNG to the country’s Baltic enclave of Kaliningrad if the region becomes isolated by Western sanctions.

The Amur processing plant treats gas from East Siberia before it is sent on to China.

Novatek also plans to build a blue hydrogen and ammonia facility on the Yamal Peninsula, next to the Yamal LNG.

Sanctions bite

US and European sanctions have prohibited the supply of equipment for hydrocarbon processing industries in Russia.

Linde has not replied to Upstream to confirm whether it expects to halt work on the four projects to comply with restrictions at the time of writing.

Chow suggested that China could emerge as the big winner from any disruptions to Russian LNG exports.

“Its negotiating power would be massively strengthened both as a LNG buyer and investor in Russian upstream and integrated LNG projects,” he said.

“We have seen Chinese interest in heavily discounted spot volumes. Competitively priced Russian LNG and better investment terms may ultimately also prove attractive enough for Indian buyers and investors respectively.”

upstream by By Vladimir Afanasiev, March 31, 2022

P expects to lose up to $25 billion, more than a fourth of its market capitalization, after divesting from its 19.75% stake in the Rosneft oil company in Russia over the country’s invasion of Ukraine.

The London-based multinational energy giant, a major employer along the lakeshore in Northwest Indiana, warned investors it could eat a $25 billion loss after quitting the Russian market after 30 years over the country’s unprovoked war on its neighbor.

The company’s total market capitalization is about $90 billion.

BP, whose largest refinery is in Whiting, has owned roughly a fifth of Rosneft since 2013. Moscow-based Rosneft is a state-run petroleum refining company, the 24th largest in the world, that pulled in $122 billion in revenue, $20.9 billion in operating income and $14 billion in net income last year.

Rosneft is the second-largest state-owned company in Russia, which has faced international scorn and opprobrium since its unprovoked attack on the independent nation of Ukraine, which was previously under its control when it was still the Soviet Union before it collapsed in 1991.

BP expects to lose up to $14 billion in the carrying value of its shares in Rosneft and another $11 billion in foreign exchange losses accumulated since 2013 that were previously recorded in equity instead of on its income statement.

The write-down of $25 million is expected in BP’s first-quarter 2022 results, virtually ensuring a massive loss for the fiscal quarter and the full year. BP, which employs about 1,700 workers at the BP Whiting Refinery, recorded a profit of $12.8 billion last year amid rising oil prices.

The oil giant expects the financial fallout will be offset at least in part by rising crude oil prices, which now stand at around $110 per barrel, promoting gas prices to soar over $4 a gallon.

nwi.com by Joseph S. Pete, March 31, 2022

The world may be less dependent on oil now than it was during the energy shocks of the 1970s, but the Ukraine conflict is stark evidence of a stubborn craving that can still disrupt economies, confound policymakers and spark political strife.

When the Yom Kippur War of 1973 triggered an Arab State oil embargo that convulsed world markets and sent inflation into double-digits, oil made up nearly half the global energy mix – a figure that has since dropped to around one third.

The shift came as rich countries focused more on services, factories became more efficient and electricity generation switched away from using oil to coal and natural gas instead.

A Columbia University study last year found that the same economic growth which half a century ago required one barrel of oil could now be had with less than half a barrel.

Some analysts had in recent years even speculated that the world economy could take future oil shocks in its stride. Others pointed to the COVID-19 lockdowns of the past two years as evidence that the economy could – in an albeit different form – function with dramatically lower oil consumption.

But the roaring back of oil demand in 2021 and the spike in oil prices triggered by the Ukraine conflict has highlighted again the size of the effort that will be needed to wean the global economy from an oil habit ingrained over decades.

Shifting oil demand is difficult in the short term as it requires trillions of dollars to replace legacy infrastructure such as vehicles and equipment, said Alan Gelder, VP refining, chemicals, and oil markets at consultancy Wood Mackenzie.

“Investment is needed to reduce the linkage of economic activity and oil demand,” he said.

The latest rally in oil prices – up 50% since the start of the year – has buried the hopes nurtured last year by the world’s central banks that the inflation stoked by pandemic-era stimulus packages would be “transitory”.

Instead it has made it only too clear just how deeply oil permeates the internal mechanics of the global economy.

PETROL PUMP ANGER

Americans are driving less and airlines are charging higher fares. From the petrochemicals used in plastics or crop fertilizers to the fuel burned simply to ship goods around the world, crude oil derivatives are a big part of the higher prices that consumers are now paying for all kinds of essential goods.Oil and inflation expectations

In the United States, the Fed estimates that every $10 per barrel rise in oil prices cuts GDP growth by 0.1 percentage point and increases inflation by 0.2 percentage point. In the euro zone, as a rule of thumb, every 10% rise in the oil price in euro terms increases euro zone inflation by 0.1 to 0.2 points, according to European Central Bank research.

Inevitably, that most visible impact is at the petrol pump.

Europe’s oil-importing nations are racing to offer motorists fuel rebates and other concessions, mindful of how their anger can spill over into wider protest – as it did with the “yellow vest” movement in France back in 2018.

Asia, as the region with not only the world’s largest demand for oil but also the fastest growth in demand, is also badly hit. Japan and South Korea are among those who are raising fuel subsidies to offset higher prices.

The world’s biggest oil producer, the United States, should be better shielded than others. Federal Reserve Chair Jerome Powell noted on Monday that the country is clearly better able to withstand an oil shock now than in the 1970s.

But that did not stop him from delivering his strongest message to date on his battle with too-high inflation, suggesting the central bank could move “more aggressively” to keep an upward price spiral from getting entrenched.

EXPENSIVE HABIT TO KICK

If it took five decades for oil’s share in the global energy mix to fall from 45% to 31%, it remains an open question how quickly the world – now with its avowed goal of net-zero carbon economies – can further reduce that share.

Motorists’ switch to electric vehicles is expected to cause a tipping point in global oil demand, sending it into decline. Passenger vehicles are the sector with the largest oil demand use, consuming around one-quarter of the oil used worldwide.

“Oil intensity will from now on fall much faster, as global oil demand will peak within the next few years, thereafter to decline, while GDP will continue to grow,” said Sverre Alvik, energy transition programme director at energy adviser DNV, which sees electric vehicles reaching 50% of new passenger vehicle sales in 10 years.

Yet that is only one side of the story.

The rising demand for oil in Asia, plus the fact that key sectors like shipping, aviation, freight and petrochemicals are much further behind the auto sector in switching to alternative fuels, mean large areas of oil demand remain firmly entrenched.

“Our projections suggest that dependence on oil, particularly imported oil, is unlikely to disappear quickly,” IEA analysts concluded in a 2019 note entitled “The world can’t afford to relax about oil security”.

Such outlooks suggest that, even in a best-case scenario, the world’s transition from oil and other fossil fuel sources will pose new challenges for consumers and policymakers alike.

European Central Bank Executive Board member Isabel Schnabel this month used the term “fossil-flation” for the price to be paid for what she called “the legacy cost of the dependency on fossil energy sources”.

For Schnabel, that cost stems partly from how policies like carbon pricing make fossil fuels more expensive but more so because of how energy producers can create artificially tight markets to push prices up at the expense of importers.

Add to that the embargoes imposed on Russian oil by the United States and Britain, and Europe’s goal of cutting its Russian gas imports, and she concluded: “A marked decline of fossil energy prices, as indicated by current futures prices, seems rather unlikely from this perspective.”

Reuters by Sarah McFarlane, March 31, 2022

Shell (SHEL.L) will invest up to 25 billion pounds ($33 billion) into the energy system in Britain over the next decade, a senior executive at the oil major said, and over 75% of which will be funnelled into zero-carbon products and services.

Shell plans to invest between 20 billion pounds and 25 billion pounds, David Bunch, head of the company’s UK operations, said on Wednesday in a post on networking site LinkedIn, and mentioned offshore wind, hydrogen and electric mobility as focus areas.

The investment plans come weeks after the British energy company said it would withdraw completely from any involvement in Russian hydrocarbons and exit all its Russian operations after Moscow’s invasion of Ukraine.

IEEFA.org by Sinchita Mitra, March 31, 2022

British Prime Minister Boris Johnson has met with the de facto rulers of the United Arab Emirates and Saudi Arabia in efforts to ease gasoline prices as the West grapples with economic headwinds from Russia’s war in Ukraine.

British Prime Minister Boris Johnson met Wednesday with the de facto rulers of Saudi Arabia and the United Arab Emirates in efforts to ease skyrocketing gasoline prices, as the West grapples with economic headwinds from Russia’s invasion of Ukraine.

Johnson was seeking greater investments in the U.K.’s renewable energy transition and ways to secure more oil to lessen British dependence on Russian energy supplies.

His visit is also aimed at pressing these two major OPEC producers to pump more oil, which would have an immediate impact on Brent crude oil prices that nearly touched $140 a barrel in trading last week. Prices have eased to around $100 in recent days, in large part due to new pandemic lockdowns in China.

Johnson met with Saudi Arabia’s Crown Prince Mohammed bin Salman and the two agreed to work together to maintain energy stability and transition to renewable fuels, Johnson’s office said.

Johnson told reporters after the meeting that the two had a “productive conversation” and agreed on the importance to fight oil price inflation, but he did not spell out whether Saudi Arabia was receptive to increasing oil production.

“I think there was an understanding of the need to ensure stability in global oil markets and gas markets and the need to avoid damaging price spikes,” he said.

Earlier Wednesday, Johnson met with Abu Dhabi Crown Prince Mohammed bin Zayed for similar talks on energy supply amid the “chaos unleashed” by Russia’s invasion of Ukraine. He stressed “the importance of working together to improve stability in the global energy market” and ways to enhance energy ties, Downing Street said.

Johnson told reporters in Abu Dhabi that Russian President Vladmir Putin’s decision to invade Ukraine is “causing global uncertainty and a spike in the price of oil.”

Because of Europe’s reliance on Russian oil and gas, Putin has “been able to blackmail the West to hold Western economies to ransom,” he said, before stating: “We need independence.”

Pressing for an immediate release of more oil is a tall order to ask of Abu Dhabi and Riyadh, which are benefiting richly from high energy prices that boost their revenues and spending powers.

Ties between Western governments and Prince Mohammed also remain tarnished by the killing of Saudi writer Jamal Khashoggi. The prince has yet to hold a direct call with U.S. President Joe Biden, who is trying to revive Iran’s nuclear accord to the frustration of some Gulf states and Israel.

Saudi Arabia and the UAE have the spare capacity to pump more oil, but they’ve so far been unwilling to change course from a deal forged with Russia. The COVID-19 pandemic pushed down demand for oil, with Brent Crude prices averaging around $42 a barrel in 2020 before climbing to $70 last year on the back of an agreement by major oil producers to drastically curb production.

The deal, spearheaded by Saudi Arabia and Russia, calls for gradually increasing production levels each month as economies recover, but it did not account for the impact of the war in Ukraine, launched by Russia three weeks ago.

The UAE’s energy minister last week said the country is “committed to the OPEC+ agreement and its existing monthly production adjustment mechanism”. His statement followed a conflicting comment from the UAE’s ambassador in Washington, who seemed to suggest the UAE was in favor of releasing more oil on the market.

Western leaders have signaled that current wartime energy security demands that allied nations pump more.

The Biden administration dispatched two officials last month to Riyadh to talk about a range of issues — chief among them global energy supplies. In a call with Biden prior to the visit, King Salman doubled down on “the importance of maintaining the agreement” that is in place between OPEC producers and Russia, according to a Saudi readout of the call.

Many U.K. lawmakers, including those in Johnson’s own Conservative party, have questioned the decision to turn to Saudi Arabia, citing its recent mass execution of 81 people on Saturday. The U.N. human rights chief said that just over half were Saudi Shiites who had taken part in anti-government protests a decade ago, calling for more rights. Some were executed after trials that failed to meet due process guarantees, said U.N. High Commissioner for Human Rights Michelle Bachelet.

Johnson told reporters that he raised human rights issues with Prince Mohammed and defended himself against criticism that he was going from one dictator to another in search of fuel sources. He claimed that the situation was improving in Saudi Arabia and that it’s important to engage with the country.

“Things are changing in Saudi Arabia. We want to see them continue to change and that’s why we see value in engaging with Saudi Arabia and why we see value in the partnership,” he said.

abc NEWS by AYA BATRAWY, March 21, 2022

The Adani Group of Indian billionaire Gautam Adani has held early talks with Saudi Arabia about potential cooperation and joint projects, including buying a stake in Saudi Aramco from the Saudi sovereign wealth fund, Bloomberg reported on Friday, citing sources familiar with the development.  

Adani Group has held talks with Saudi Arabia, discussing the idea of buying a stake in the Saudi oil giant from the Public Investment Fund, although the Indian group is not expected to pay cash for such an investment, but rather have the deal structured as an asset swap or a broader partnership, Bloomberg’s sources said.

Indian billionaire Gautam Adani, who has made his fortune in coal, ports, and green energy, is the 11^th richest person in the world, according to the Bloomberg Billionaires Index.

Adani is the second richest person in India after Mukesh Ambani, the chairman of the biggest Indian private conglomerate, Reliance Industries.

It was Reliance Industries that had negotiated a major deal with Saudi Aramco for two years before announcing last November that it was scrapping what would have been a $15-billion agreement. Two and a half years ago, in August 2019, Saudi Aramco and Reliance Industries signed a non-binding letter of intent, under which Aramco was set to buy 20 percent in the oil to chemicals division of Reliance Industries. At an enterprise value of $75 billion for the entire division, the stake that Aramco would have bought would have been worth around $15 billion.

Now Adani and Saudi Arabia are reportedly in early talks about potential partnerships. Adani could offer the Saudi sovereign wealth fund to invest in infrastructure in India, one of Bloomberg’s sources said, while all sources stressed that all talks are at an early stage.

Saudi Arabia, the world’s top oil exporter, has been seeking to partner more with India, which is the third-largest oil importer globally and whose oil demand is expected to jump in the coming years.  

Oilprice by Charles Kennedy, 21 March, 2022