MonitorsPublished on Aug 18, 2022
Energy News Monitor | Volume XIX, Issue 6
Quick Notes

Strategic Vectors in a Low Carbon World: Issues for India


The world has seen many energy transitions: from human to biomass energy; from biomass to animal energy: from biomass to wind and water-derived energy; from wind and water to energy from fossil fuels. These transitions offered improvement in efficiency, cost and ease of use and were primarily mediated by the market. The current transition from fossil fuels to renewable energy (RE) is different in many ways. It is mediated primarily by government policy response to market failure to correct negative externalities (climate change) of fossil fuel use. The transition is much more than a mere substitution of one fuel with another at the supply end but one that will demand a complete transformation of the energy delivery system.

There is no dearth of technical and economic modelling studies on scenarios for global and national RE diffusion and the required policy inputs, but these are mostly designed to promote RE rather than objectively discuss the geo-political, economic, social, and structural challenges that the transition is likely to entail. The limited corpus of literature on the geopolitics of RE is generally optimistic. According to most projections, the scarcity of fossil fuels will be replaced with the abundance of renewables and the widely dispersed availability of RE will eliminate problems associated with the geographic concentration of fossil fuels.

Some of the studies see the de-centralised nature of RE democratising access to energy and offering a substantial peace and security dividend to the world. Current responses to China’s leading role in producing and using technologies for harnessing RE, particularly solar energy technologies, suggest otherwise. A recent report on solar PV (photovoltaic) supply chains from the IEA (international energy agency) cautions that “the level of concentration of global PV supply chains in China is creating challenges that governments need to address.” To take on the challenge of solar supply chain concentration in China, the West is encouraging developing countries to invest in domestic manufacturing and also invest in alternative supply chains.

India’s Geo-strategic Vectors

Despite the ongoing energy transition, there is continuity in key domestic values such as self-reliance for strategic autonomy, economic progress for material power asset maximisation and social justice for domestic coherence that have informed India’s energy policy. These key values, embedded in the internal dimensions of India’s energy policy have influenced India’s strategic vectors for external projection that include but not limited to dependence, resilience, and identity.  India’s domestic values and strategic vectors will continue to inform energy policy even in the low carbon world.


The low carbon era is likely to be far more material intensive than the fossil fuel era. Effectively, generating 1 terawatt of electricity from solar energy could consume 300-400 percent more material input than generating electricity using natural gas or coal as fuel.  For example, if global solar energy generation capacity increases to 630 GW (gigawatts) by 2030 as required by the net zero goal for 2050, the production of polysilicon will have to double. India set itself a target of increasing RE power generating capacity to 500 GW by 2030 (this goal is not part of India’s recently updated NDC (nationally determined contribution to the Paris agreement on climate change). Even if the goal is not met, India’s RE power generation capacity will increase substantially given the tremendous policy push and financial incentives offered to private sector investment in RE.

India is also incentivising domestic manufacture of RE equipment, but it is not likely that this effort will reduce the import of key minerals and technologies for the production of solar modules and batteries. However, mineral supply disruptions may not have the dramatic impact that oil supply disruptions have had on oil-importing economies like India.  Oil is a primary source of energy that requires continuous growth in production; minerals are part of the equipment that harness RE, and they do not require continuous replacement and growth in supply.  The value of the global mineral trade even in a scenario where RE dominates is likely to be an order of magnitude lower (billions of dollars) than that of the oil trade (trillions of dollars).  If mineral-rich countries hold up production, alternative higher-cost mining sites can be developed to fill in the gaps as mineral resource endowment is not highly concentrated. Minerals from older devices can also be recycled and reused.

In this light, India’s decision to “make” rather than “buy” RE equipment raises some issues. Both in mineral mining and RE equipment production, cost competitiveness matters.  Investment in relatively high-cost domestic manufacturing will effectively increase the cost of reducing carbon emissions and may misallocate scarce capital that may be better employed in adaptation measures for climate change.  Overall development and social justice through energy access (among other things) may also suffer as capital is diverted to the production of carbon mitigation goods.


Electricity is the main vector for RE and the economics of electricity is shaped through physics. Electricity is a heterogeneous good across space and time (electricity at 12 noon and 12 midnight are different goods as are electricity produced in a densely populated city and that produced in an unpopulated desert.  In both cases the former is far more valuable than the latter). The nature of electromagnetism that produces electricity makes storage, transmission, and flexibility difficult and expensive. These properties make intermittency the primary risk in the low carbon era just as scarcity was the primary risk in the fossil fuel era.  In a scenario where RE dominates energy supply, flows (that counter intermittency) will matter more than stocks (as it was in the case of fossil fuels). Control over strategic reserves of energy and control over pipelines and sea lanes will have to be replaced with control over the grid that facilitates the flow of electricity.

The grid network will require not only storage but also require flexible and interrelated power systems that can balance supply and demand in real time. RE is much less geographically concentrated and any country can specialize in those aspects of RE trade in which it has a comparative advantage based on factors such as technology, relative price, and cost of transport. Surplus production of low carbon electricity such as hydropower or solar power from one country could be exported to cover the deficit in another country.  This means that a resilient grid will have to be regional rather than national. Cooperative relationships with neighbouring countries will matter more than relationships with far away resource-rich countries.  For India control over the grid network will become vital for resilience in energy supply for national security and for projecting influence, especially in the South Asian region where it will be the largest producer and consumer of low carbon electricity. The grid network will include physical assets such as power lines and storage facilities, and virtual interconnections that will multiply as the number of decentralised suppliers and consumers increase.

Electrifying everything including transportation with electric vehicles will compromise diversity, one of the key attributes of energy security. When there is compromise on electricity supply due to technical, natural, or manmade causes, economic and social life will come to a standstill. Investment in alternative low carbon sources such as Hydrogen that do not rely on the electricity network will increase diversity but the high cost of redundancy that has to be built into the low carbon energy system will remain a matter of concern for India that has vital development needs.

The reliance on the private sector that dominates the RE sector in India accounting for over 96 percent of capacity may also compromise resilience. The primary motivation for private investment in India and elsewhere is private profit maximisation not the production of public goods such as energy security. This was evident in the recent past when private thermal power generators in India reduced the import of coal because of high international prices contributing to an “energy (coal) crisis” in late 2021 and early 2022. When oil prices increased private refiners preferred export of refined products to maximise profit rather than provide energy security to India.  In both cases the government had to intervene to protect national security.


The gradual shift in India’s positions in multilateral climate negotiating platforms reflects the change in its identity from that of a non-aligned ‘leader of the poor’ (G77) to a ‘member of the affluent club’ that is aligned mostly with the interests of industrialised nations (G20). India is attracting investments for low carbon energy sources from industrialised economies, and it is also developing domestic manufacturing capacity in RE technologies. In the process, India is emerging as the primary ‘adjustment variable’ in the effort to counter the dominance of China in RE supply chains. But in the domestic context, millions of impoverished Indians are the ‘adjustment variable’ in addressing climate change.  India can facilitate these millions to industrialise, develop and urbanise using traditional fuels like most of the world did or India can marginalise their needs in its quest for a global role in the geopolitics of the low carbon world.

Source: International Energy Agency

Monthly News Commentary: Oil

Oil Imports from Russia Increase



With the upcoming G7 summit set to discuss cutting dependency on Russian fossil fuels, India said its sourcing of crude oil is totally driven by its national interests and that its position on the issue is “very well understood” by various countries. India’s crude oil imports from Russia have jumped over 50 times since April and now make up for 10 percent of all crude bought from overseas. Foreign Secretary Vinay Mohan Kwatra said India’s crude oil import is purely determined, governed and motivated by India’s energy security considerations, noting that it is one of the key aspects in terms of the country’s national economic interests.

Russia rose to become India’s second biggest supplier of oil in May, pushing Saudi Arabia into third place but still behind Iraq which remains No. 1, data from trade sources showed. In May, Indian refiners received about 819,000 bpd Russian oil, the highest thus far in any month, the data showed. That provided Indian refiners, which rarely used to buy Russian oil due to high freight costs, an opportunity to snap up low-priced crude. Russian grades accounted for about 16.5 percent of India’s overall oil imports in May, and helped raise the share of oil from the C.I.S. countries to about 20.5 percent, while that from the Middle East declined to about 59.5 percent, the data showed. The share of African oil in India’s crude imports last month surged to 11.5 percent from 5.9 percent in April, the data showed. India’s oil imports in May totalled 4.98 million bpd, the highest since December 2020, as state refiners raised output to meet growing local demand while private refiners turned focus to gain from exports, the data showed. India’s oil imports in May were about 5.6 percent up from the previous month and about 19 percent from a year earlier, the data showed. India has defended its purchase of “cheap” Russian oil saying imports from Moscow made only a fraction of the country’s overall needs and a sudden stop would drive up costs for its consumers. Higher oil imports from Russia curbed OPEC’s share in India’s overall imports to 65 percent in April. The share of Russian oil in Reliance Industries’ overall crude imports in May rose to over a fifth as the conglomerate snapped up discounted Russian oil, according to data. Reliance imported about 1.4 million barrels per day oil in May, up 9.1 percent from April, the data showed.


India’s petrol consumption jumped by 54 percent and that of diesel soared by 48 percent in the first fortnight of June from a year earlier with continuing demand recovery from a relatively low base in 2021 when the world’s third-biggest oil user was in the grip of the second wave of COVID-19. Petrol sales by state-owned fuel retailers, which control roughly 90 percent of the market, at 1.28 million tonnes (MT) between 1 and 14 June was 54.2 percent higher than the same period last year when a devastating second COVID-19 wave wreaked havoc on the economy. This consumption was 48.2 percent higher than the demand in the first fortnight of June 2020 and 25 percent more than the 1.02 MT of sales in the pre-COVID June 2019. Month-on-month sales were up 0.8 percent. Diesel, the most-used fuel in the country, saw sales jumping 47.8 percent year-on-year to 3.4 MT between June 1-14. This was 37.3 percent higher than the corresponding period of June 2020 and 20.3 percent more than the pre-COVID 2019 period. It was 12 percent higher than the 3.03 MT of consumption during 1-14 May this year.


Indian Oil Corporation (IOC) is using boats to deliver cooking gas or LPG (liquefied petroleum gas) cylinders to households in flood-ravaged southern Assam, especially in Silchar, the region’s main commercial hub. The company rose to the occasion and ensured an uninterrupted supply of cooking gas, petrol and diesel in the flood-affected areas. Retail outlets were instructed to prioritise the supply of diesel to mobile tower operators to keep the communication channels alive in the face of continuous power cuts. LPG door delivery continued through boats, which replaced delivery vans. This resulted in achieving an enviable LPG cylinder backlog in Assam of only 1.03 days and just over 1.7 days in the three more severely affected districts — Cachar, Karimganj and Hailakhandhi.

New domestic LPG connections cost an additional INR 850 with IOC, Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corp Ltd (HPCL), effective 16 June, increasing the one-time security deposit households need to pay towards the cylinder and pressure regulator. The deposit has been increased from INR 1,450 to INR 2,200 (US$18 to US$28) for the cylinder (single bottle 14.2 kg connection), while for the pressure regulator it has been raised to INR 250 from the existing INR 150. For customers in the north-eastern states, it has been revised to INR 2,000 (INR 1,150) for the cylinder and INR 200 (INR100) for the pressure regulator. Households opting for double bottle connections (DBC) will have to pay an additional security deposit, of the same amount, towards the second cylinder. There is no change in the security deposit (borne by the oil companies) for Prime Minister Ujjwala Yojana customers.

Retail Prices

The windfall taxes on domestic crude oil production and fuel exports will generate close to US$12 billion (INR 948 bn) for the government in the remainder of the current fiscal while trimming profits of firms such as Reliance Industries Ltd (RIL) and ONGC (Oil and Natural Gas Corporation), Moody’s Investors Service said. On 1 July, the government-imposed windfall gain taxes on the export of petrol, diesel and aviation turbine fuel (ATF), and on the domestic production of crude oil. It has also mandated exporters to meet the requirements of the domestic market first. Following the government’s announcement, Indian oil companies will have to pay INR 6 per litre (US$12.2 per barrel) on exports of petrol and ATF, and INR 13 per litre (US$26.3 per barrel) on exports of diesel. At the same time, upstream producers will have to pay taxes of INR 23,250 per tonne (US$38.2 per barrel) of crude oil produced in India. The additional revenue will help to offset the negative impact of a reduction in excise duties for petrol and diesel announced in late May to tame soaring inflation.

Finance Minister (FM) Nirmala Sitharaman said that “phenomenal profits” made by some oil refiners on exporting fuel at the expense of domestic supplies had prompted the government to introduce an export tax on petrol, diesel and ATF. The export levy as also the windfall tax imposed on record profits of domestic oil producers will be reviewed every fortnight to calibrate them if the need arises, she said. She said the new taxes are aimed at improving the supply of petroleum products in the domestic market, as private producers were mainly focussing on exports. The government slapped an export tax on petrol, diesel and jet fuel (ATF) and imposed a windfall tax on crude oil produced locally. The government framed new rules requiring oil companies exporting petrol to sell in the domestic market, the equivalent of 50 percent of the amount sold to overseas customers, for the fiscal year ending 31 March 2023. For diesel, this requirement has been put at 30 percent of the volume exported. These restrictions on export are aimed at shoring up domestic supplies at petrol pumps, some of which had dried up in states like Madhya Pradesh, Rajasthan and Gujarat as private refiners preferred exporting fuel to selling locally.

The Centre can meet the fiscal deficit target of 6.4 percent for 2022-23 if there are no excise duty cuts to lower high oil prices and additional spending on subsidies, De­utsche Bank’s chief economist Kaushik Das said. Listing out the factors which are leading to concerns over the fiscal situation, it said the government reduced central excise duty on petrol by INR 8 per litre and diesel by INR 6 per litre, expenditure allocation on fertiliser subsidies was raised by INR 1.1k bn (US$13.8 bn) and an INR 610 bn (US$7.7 bn) scheme on cooking gas was also announced.

Private fuel retail operators such as Reliance Industries Ltd, BP, Shell, and Rosneft-backed Nayara will have to maintain supplies at reasonable prices at all their pumps as the government has brought all retail outlets under universal service obligations. So far, the obligations for fuel retailers were limited to pumps located in remote areas. Universal service obligations include maintaining supplies of petrol and diesel during specified working hours, and providing fuel to customers within a reasonable time and at reasonable prices, the oil ministry said. The ministry said the demand for petrol and diesel surged by 50 percent in certain locations in some states during the first half of June over the same period of last year. The surge has been noticed mainly in Rajasthan, Madhya Pradesh, and Karnataka where private companies have a large share of the supply.

Jharkhand government announced it had slashed VAT (value added tax) on ATF to 4 percent from 20 percent. The decision to reduce tax has been taken to increase air connectivity in the state and bring down airfares to boost tourism, the state government said. The otification shall be effective from the date of its publication in the Official Gazette. As many as 23 states have already lowered VAT on jet fuel from highs of 20-30 percent. ATF makes up about 40 percent of the operating cost of an airline. Jet fuel prices are at a record high in line with the global surge in energy prices. And since India is dependent on imports to meet its oil needs, the only way to cut jet fuel prices is to reduce taxes. ATF presently is chargeable at an 11 percent ad valorem rate of excise duty. A concessional rate of 2 percent is applicable for ATF sold under the Regional Connectivity Scheme.


Shell, a UK-based oil and gas firm, said it has launched a used oil management service to organise India’s waste oil disposal system and to increase the rate of re-refining, as it aims to achieve circular economy goals while reducing waste. For this, the company has partnered with used oil re-refiners to initiate the collection and re-refining of used oil on a pan-India basis. The firm plans to strengthen its network of partners to further scale up the initiative in the coming years. The service aims to create an ecosystem for transitioning used oil disposal, which is acknowledged as being the biggest challenge in promoting circularity in the industry, to a formal setup. India witnesses the generation of about 1.3 MT of used oil annually, of which, less than 15 percent is re-refined.

BPCL has shut half of its crude processing capacity at its 240,000 barrels per day (bpd) Mumbai refinery in western India since June 10 to carry out maintenance, the company said. The state-run refiner has shut a 120,000 bpd crude unit and some secondary units including diesel hydro desulfuriser and hydrogen generation units for 20 to 25 days, the company said. Other units are functioning as normal, the company added. BPCL had planned the maintenance shutdown for March but pushed it back to take advantage of strong fuel cracks. The refiner also plans to shut units at its 156,000 bpd Bina refinery in central India and 310,000 bpd Kochi refinery in the southern Kerala state later this year. It plans to shut a 2.6 MT a year hydrocracker at its Bina refinery for 10 days for catalyst replacement in September. The company also plans to fully shut its Bina refinery for 25 to 30 days for maintenance in April-May next year, the company said.


The government is likely to deregulate domestic crude in a bid to remove a market anomaly, boost its tax revenue and help producers such as ONGC and Oil India Ltd get a better realisation of crude produced by them. The Centre at present decides which state-run refinery gets how much crude from each producer. The price is then worked out on a traditional formula with Brent as a marker, instead of the global practice of a ‘five-cut’ — or yield of five most-used refined products — norm. The allocation is done every six months. A study by Petroleum Planning and Analysis Cell, a while ago, had also favoured deregulation of domestic crude and projected an 8-10 percent increase in realisation from ONGC’s Mumbai High crude.

Rest of the World


International crude oil prices have come off their recent highs and declined on fears of the possibility of a recession in the global economy following aggressive monetary policy tightening by central banks and the likelihood of a weak demand outlook for the commodity. The ongoing COVID-led lockdown in parts of China too led to a decline in the prices. Also, international crude oil prices declined amid recession fears followed by aggressive monetary policy tightening by central banks. Notably, the prices of the key global commodity had soared sharply on account of supply chain disruptions, as well as some sanctions on trade following Russia’s invasion of Ukraine in late February. Also, the Organization of the Petroleum Exporting Countries (OPEC) and its allies have agreed to ramp up output by nearly 648,000 barrels a day in July and August, nearly two-thirds more than previously planned rises of about 432,000 barrels a day. This agreement of raising output, too, has likely weighed on the crude oil prices.

Middle East & OPEC+

OPEC in June did not deliver on an oil output increase pledged under a deal with allies, a survey showed, as involuntary declines in Libya and Nigeria offset supply increases by Saudi Arabia and other large producers. The OPEC pumped 28.52 million bpd in June, the survey found, down 100,000 bpd from May’s revised total. OPEC had planned to boost June output by about 275,000 bpd. OPEC plus Russia and other allies, known as OPEC+, are unwinding 2020 output cuts made due to the pandemic, although many are struggling to do so. OPEC+ at a meeting stuck to its planned output hike for August. The deal called for a 432,000 bpd increase in June from all OPEC+ members, of which about 275,000 bpd is shared by the 10 OPEC producers the agreement covers. Supply from the 10 rose by just 20,000 bpd, the survey found.

Nigeria’s Senate said it will investigate oil company Shell Plc over alleged illegal extensions of oil exploration leases and is seeking a refund of US$200 million which it said accrued over the period. The upper house of parliament said a seven-member committee has been mandated to investigate oil exploration leases granted to Shell’s Nigerian division from 1959 to 1989 and from 1989 to 2019 under a joint venture agreement with NNPC (Nigerian National Petroleum Corporation). The Senate said the decision to investigate was following the non-payment of US$200 million accruals from Shell’s oil mining lease under its joint venture with NNPC and the illegal renewal of leases by the government’s oil ministry and petroleum regulator. Oil companies, including Chevron and ExxonMobil, operate in Nigeria through joint ventures with the NNPC. The Senate said Shell and its joint venture partner NNPC were granted extensions of oil exploration leases by the oil ministry outside the law, causing the government to lose fees, taxes, rents and royalties.

Iraq seeks to raise its crude oil production to 8 million bpd by the end of 2027 to fulfil its commitment to export quota within the OPEC, Iraqi Oil Minister Ihsan Abdul-Jabbar Ismail said. Projects are underway in Iraqi oil fields, especially in the southern province of Basra, according to the Minister. On 1 June, the Iraqi oil ministry said it had exported about 102 million barrels of crude oil in May, with an average of 3.3 million bpd. Ismail’s remarks came after the OPEC and its allies, collectively known as OPEC+, decided to significantly raise oil supply in July and August to stabilize the surging oil prices. Iraq’s economy heavily relies on crude oil exports, which account for more than 90 percent of the country’s revenues.

World oil demand growth will slow in 2023, OPEC delegates said, as surging crude and fuel prices help drive up inflation and act as a drag on the global economy. Fuel use has rebounded from the 2020 pandemic-induced slump and is set to exceed 2019 levels this year even as prices hit record highs. But high prices have eaten into growth projections for 2022 and fed into expectations for slower growth in 2023. The OPEC is expected to publish its first forecast for 2023 demand in July. An OPEC delegate and another source familiar with OPEC thinking said they expected world demand growth of 2 million bpd or less in 2023, a rise of just 2 percent, compared with growth of 3.36 million bpd expected in 2022. OPEC is expected to publish its first demand forecast for 2023 in its monthly report on July 12, an OPEC source said.  Oil demand forecasters often have to make sizeable revisions given changes in the economic outlook and geopolitical uncertainties, which this year included Russia’s invasion of Ukraine and recent Chinese coronavirus lockdowns. OPEC originally forecast demand growth in 2022 of 3.28 million bpd, in its first forecast published in July 2021, later raising it to more than 4 million bpd before cutting it to 3.36 million bpd.

Japan Oil, Gas and Metals National Corp (JOGMEC) said it will provide equity financing to the new oil and gas exploration project by Japan’s Cosmo Energy Holdings Co Ltd in Abu Dhabi, without disclosing the sum. UAE’s Abu Dhabi National Oil Company (ADNOC) awarded the exploration rights for Abu Dhabi’s offshore block 4 to Cosmo’s subsidiary, Cosmo E&P Albahriya Ltd, in February 2021. Cosmo has been involved in crude oil development and production of the Mubarraz concession area in Abu Dhabi for more than half a century and it aims to develop block 4 cost-effectively by utilizing existing infrastructure as the concession area lies adjacent to block 4. The block 4 exploration concession has the potential to reinforce the cost-competitiveness of Cosmo’s upstream activities in Abu Dhabi, and can contribute to the stable crude supply to Japan, JOGMEC said.

North & South America

More than two weeks of protests in Ecuador caused oil company Petroecuador to lose 1.99 million barrels of oil production, the company said. it expects to reach 90 percent of pre-crisis output. Protests erupted in Ecuador in June to demand lower fuel prices and limits to the expansion of the mining and oil industries, leading to at least eight deaths and devastating oil production. The company said it recovered 19,000 bpd of output since the protests ended, while its Esmeraldas refinery was working at 70 percent capacity.

United States (US) crude inventory in the Strategic Petroleum Reserve (SPR) fell by 6.9 million barrels in the week to 24 June, according to data from the Department of Energy. Stockpiles in the Strategic Petroleum Reserve (SPR) fell to 497.9 million barrels, the lowest since April 1986, according to the data. About 1 million barrels of sweet crude and 6 million barrels of sour crude were released into the market.

Exports of crude oil from the US Gulf Coast could hit a record 3.3 million bpd this quarter, analysts said, as Europe chases US crude to offset sanctioned Russian oil. US exports have risen in the last three months, helped by Washington’s decision to release 180 million barrels of oil from the nation’s Strategic Petroleum Reserve, which have flooded the domestic market. Exports to Europe are expected to average about 1.4 million (bpd) this quarter, about 30 percent higher than the year-ago quarter, while export to Asia is set to drop to under 1 million bpd, according to energy data firm Kpler.

Mexico’s state-owned oil company Pemex substantially increased crude oil exports to the North American market in May, according to the firm’s most recent report, which shows a significant cut in shipments to Europe and Asia. Pemex said its crude exports averaged 965,000 bpd in May, and some 740,000 bpd went to “America”, which accounts mainly for the US. That compares to shipments of 594,000 bpd to the same region in April, out of a total 1.02 million bpd. Meanwhile, exports to Europe fell to 32,000 bpd in May from 100,000 bpd in April, and dispatches to the Far East fell to 192,000 bpd from 330,000 bpd in April, Pemex said without giving an explanation for the changes. US refiners imported the most heavy crude in nearly two years, customs data showed, as they cranked up motor fuel production and sought to replace sanctioned Russian oil. Pemex produced an average of 1.67 million bpd of crude in May and has exported an average of 930,000 bpd in the first five months of the year. Pemex has said it would drastically reduce planned crude exports this year as it works to meet the government’s target of refining all of its oil domestically.

Oil output in the Permian in Texas and New Mexico, the biggest US shale oil basin, is due to rise by 84,000 bpd to a record 5.316 million bpd in July, the US Energy Information Administration (EIA) said. Total output in the major US shale oil basins will rise 143,000 bpd to 8.901 million bpd in July, the highest since March 2020, the EIA projected. In the Bakken in North Dakota and Montana, EIA projected oil output will rise 19,000 bpd to 1.197 million bpd in July, the most since November 2020. In the Eagle Ford in South Texas, output will rise 28,000 bpd to 1.180 million bpd in July, its highest since April 2020.

The price of US gasoline averaged more than US$5 a gallon for the first time, data from the AAA showed, extending a surge in fuel costs that is driving rising inflation. The national average price for regular unleaded gas rose to US$5.004 a gallon on 11 June from US$4.986 a day earlier, AAA data showed. High gasoline prices are a headache for President Joe Biden and congressional Democrats as they struggle to maintain their slim control of Congress with midterm elections coming up in November. Biden has pulled on numerous levers to try to lower prices, including a record release of barrels from US strategic reserves, waivers on rules for producing summer gasoline, and leaning on major OPEC countries to boost output. Yet fuel prices have been surging around the world due to a combination of rebounding demand, sanctions on oil producer Russia after it invaded Ukraine and a squeeze on refining capacity.

Venezuela’s PDVSA began switching most oil sales to prepayment, requiring spot cargo buyers to pay in full before tankers can set sail after several recent defaults. The new payment terms, first communicated in April to companies intermediating in the oil sales, sharply reduced May oil exports and left tanks storing the country’s flagship crude grade near full capacity. As more loaded vessels waited for authorizations to set sail, the volume of crude stuck in the tankers almost doubled to 3.7 million barrels so far this month from 1.9 million barrels in March. PDVSA’s demand comes after at least three tankers left Venezuelan waters this year without buyers paying for the cargoes. The OPEC-member country, since 2019, relies on firms with little track record of trading after its big customers pulled out due to heavy US sanctions on the country. Washington has identified many of these firms as shell companies.

APA Corp said its joint venture (JV) with France’s TotalEnergies SE has made an oil discovery at an exploration well off the coast of Suriname. APA has a 50 percent working interest in the block where the oil discovery was made, with TotalEnergies the operator and the holder of the remaining stake. The discovery is close to a massive oil field found by an Exxon Mobil Corp-led consortium in Guyana, that was estimated to hold nearly 11 billion barrels of oil equivalent.

US Sanctions

The oil and gas industry is “under siege” due to years of under-investment, OPEC Secretary General Mohammad Barkindo said. The resulting supply shortage could be eased if extra supplies from Iran and Venezuela were allowed to flow. Years of sanctions have limited supplies from Iran and Venezuela. In addition, the West has imposed sanctions on Russia, a member of OPEC+ that groups the OPEC and allies, following Moscow’s invasion of Ukraine on 24 February, tightening oil markets further.

Asia Pacific

Lanka IOC, the subsidiary of Indian Oil Corporation in Sri Lanka, kept its petrol pumps running throughout, 28 June, amid Sri Lanka’s worsening fuel crisis. This is happening while government-owned petrol pumps have run dry. The Sri Lankan government had announced that it was suspending the sale of fuel for non-essential services for two weeks till 10 July. Stating that it has run out of fuel, the island nation requested both private and public sector employees to work from home. Meanwhile, the government issued tokens to vehicles that had waited in queues for over three days. The military, which distributed the tokens, said that those vehicles would be prioritised when the Ceylon Petroleum Corporation (CPC) resumed deliveries.

Russia has become China’s biggest supplier of oil as the country sold discounted crude to Beijing amid sanctions over the Ukraine war. Imports of Russian oil rose by 55 percent from a year earlier to a record level in May, displacing Saudi Arabia as China’s biggest provider. China has ramped up purchases of Russian oil despite demand dampened by Covid curbs and a slowing economy.

Sri Lanka’s Power and Energy Minister Kanchana Wijesekera said that they have reached out to several Russian crude oil suppliers to solve the island nation’s energy crisis. He said that they are trying to obtain Russian crude oil on credit to keep the country’s only oil refinery running. He said that Sri Lanka’s oil bill has risen to US$550 million a month by June 2022. He said that Sri Lanka now owes oil firms US$730 million for oil imported on credit, and these companies will now only supply fuel after upfront payments or deposits. Sri Lanka has suffered crippling fuel shortages since February as a foreign exchange crisis worsened in the South Asian country. The country’s state-owned fuel distributor Ceylon Petroleum Corporation said it only has 5,000 metric tonnes of petrol and thus only 500 metric tonnes will be released to gas stations each day.

News Highlights: 6 – 12 July 2022

National: Oil

India explores expanding footprints in oil fields in far East Russia

11 July: India’s Oil and Natural Gas Corporation (ONGC) is deploying additional manpower to play a bigger role in operating the Sakhalin-1 oil field following ExxonMobil’s withdrawal. The company has a 20 percent stake in this energy project, located in Russia’s Far East. ONGC expressed hopes that its stake in the Russian project will not be affected in case of the possible re-organization of Sakhalin-1 by Moscow, just as had happened with the neighbouring Sakhalin-2 project. ONGC is considering purchasing additional stakes in Russian oil and gas fields from Western firms that plan to leave the country, according to media reports. This indicated the firm planned to bid for Exxon’s 30 percent stake in Sakhalin-1 and Shell’s 27.5 percent interest in the Sakhalin-2 project. Meanwhile, India has continued to boost purchases of Russian oil and invest in the country’s energy sector.

IOC, BPCL, HPCL may post INR 107 bn combined loss in Q1

11 July: Indian Oil Corporation (IOC), Bharat Petroleum Corporation Limited (BPCL) and Hindustan Petroleum Corporation Limited (HPCL) may post a combined loss of INR 107 bn in June quarter on selling petrol and diesel at rates below cost. While the raw material (crude oil) prices soared in April-June, petrol and diesel prices were not revised, leading to marketing losses which offset strong refining margins, ICICI Securities said in the report. The three state-owned oil marketing companies — IOC, BPCL and HPCL — control 90 percent of the retail petrol and diesel sales in the country. They also own refineries that turn crude oil into fuel such as petrol and diesel. While margins on turning crude into fuel have been high, the marketing wing accrued losses from unchanged petrol and diesel rates. ICICI Securities said the companies are losing INR 12-14 per litre on petrol and diesel, completely offsetting the strong refining performance during the quarter. For Reliance Industries Ltd (RIL), the brokerage saw an operationally and financially strong quarter.

Oil ministry to push for INR 440 bn compensation to offset LPG losses

8 July: The oil ministry is planning to push for an allocation of INR 440 bn to compensate state-run oil companies for the losses they have been incurring by selling domestic cooking gas or LPG (liquefied petroleum gas) at below-market rates. The amount would go towards offsetting oil marketing companies’ losses on the sale of cooking gas in 2021-22 and 2022-23 as well as providing subsidies to Ujjwala customers this year. The proposal is likely to be finalised shortly and sent to the finance ministry. The government had stopped giving subsidies on cooking gas since the beginning of the Covid-19 pandemic in 2020 but continued to provide a marginal amount of INR 10-20 with every refill on account of freight support to customers located in areas far away from depots. Recently, the government announced the resumption of a subsidy of INR 200 per cylinder for Ujjwala customers. Domestic cooking gas prices are up 77 percent in two years on a combination of higher international rates and the absence of subsidies.

India’s June fuel demand rises 17.9 percent year-on-year

8 July: India’s fuel consumption in June rose by 17.9 percent from a year earlier, government data showed, as demand in the world’s No.3 oil consumer headed back towards pre-pandemic levels. Global oil prices have surged in response to concerns about tight supplies and disruption linked to oil producer Russia’s invasion of Ukraine, but Indian consumers have to an extent been sheltered as Indian refiners have bought cheaper Russian fuel the West has shunned. Consumption of fuel, a proxy for oil demand, totalled 18.67 million tonnes, data from the Indian oil ministry’s Petroleum Planning and Analysis Cell showed. Diesel consumption rose 23.9 percent year on year to 7.68 million tonnes (MT) and was up about 21.9 percent from two years ago. Sales of gasoline, or petrol, were 23.2 percent higher from a year earlier at 2.97 MT. India’s oil and gas demand rose rapidly during the first two weeks of June, and long queues appeared at some fuel stations as concerns grew over supply.

Airlines seek clarity on export tax on petroleum products

7 July: India’s airlines have sought clarification from the government on the recent addition of export taxes on petroleum products, which has considerably increased the prices of jet fuel purchased for international flights. The higher levy aggravates cost pressures on airlines already reeling under soaring prices of aviation turbine fuel (ATF) that have set record highs several times this year. The charge also adds to what were already the highest levels of ATF taxes anywhere in the world.

LPG price up for 4th time this year but subsidy unlikely

6 July: Domestic LPG (liquefied petroleum gas) — household cooking gas supplied in cylinders — became costlier by INR 50 each as state-run retailers passed on the impact of the higher international benchmark rate. In the absence of subsidy, the fourth increase since March is bound to further stretch household budgets grappling with high motor fuel prices and last month’s imposition of GST on condiments and daily consumables. After the latest increase, a 14.2-kg refill will cost INR 1,053 in Delhi, INR 1,052 in Mumbai, INR 1,079 in Kolkata and INR 1,068 in Chennai. Rates will vary by a few rupees within this range in other states because of differences in local levies. The series of increases have turned the lack of subsidy into a sore point for consumers. The government had scrapped LPG subsidies since May 2020, taking advantage of the fall in global energy prices due to the pandemic. But it is in no mood to restore the support when the cost of refills has hit record levels and argues such intervention is unsustainable and bad economics. But as record rates subdued consumption by poor households, which were given LPG connections free of cost under the ‘Ujjwala’ scheme, the Centre on 21 May announced a subsidy of INR 200 on each refill. It is yet to be seen whether this will lift Ujjwala consumption from less than 4 refills a year.

National: Gas

CNG, PNG get more expensive in Mumbai as MGL hikes prices

12 July: Mahanagar Gas Limited (MGL) announced yet another increase in the retail price of compressed natural gas (CNG) and piped natural gas (PNG) in the megapolis to the tune of INR 4/kg (kilogram) and INR3/scm (standard cubic meter) respectively. The distributor attributed the continuing price increases to rising input gas cost and the fall in the rupee. The company has been sourcing gas from the overseas market to meet the shortfall in domestic gas allocation. Accordingly, MGL has increased the retail price of CNG by INR 4/kg to INR 80 and that of domestic PNG by INR 3/scm to INR 48.50, in and around Mumbai. The Centre had increased the price of domestic and imported natural gas by over 110 percent from 1 April.

National: Coal

India’s coal imports hit record high in June

11 July: India’s coal imports hit a record high in June despite high global prices, data from three trade sources and Refinitiv ship tracking showed, as economic activity picked up and amid a domestic shortage of the fuel. India imported over 25 million tonnes (MT) of thermal coal and coking coal in June, rising by over a third compared with the same period last year, data from consultancies Coalmint and Kpler, and trader I-Energy Natural Resources showed. Imports of thermal coal,  used mainly in electricity generation, jumped to 19.6 MT, while shipments of coking coal, used in steelmaking, rose to about 5.4 MT, Coalmint and I-energy data showed. Coal accounts for nearly three-fourths of India’s power output, and utilities account for over 75 percent of India’s coal consumption. Indian coal imports are expected to increase in the coming months. Coal India Limited (CIL) has placed orders to ship in at least 12 MT over the next twelve months to address shortfalls at utilities. Indonesia expects higher demand from India.

Rail link to ensure faster coal movement in Odisha to be operational soon: Government

11 July: At a time when the shortage of coal has plagued power producers across India, the first stretch of the Mahanadi Coal Railway, a dedicated rail line in the Talcher Coalfields, is expected to be operational in 2022, the coal ministry said. The new dedicated railway line will help ensure faster movement of coal rakes to Paradip and Damra ports in Odisha, the government said. The Centre is evaluating alternative routes for moving coal produced in eastern India, primarily from the fields of South Eastern Coalfields and Mahanadi Coalfields.

NCL dispatches 3.8 lakh tonnes of coal to power houses

9 July: CIL (Coal India Limited) arm Northern Coalfields Ltd (NCL) dispatched 3.83 lakh tonnes of coal to electricity generating plants, the highest in a single day, feeding the need of power houses in the wake of a sharp increase in the demand for the dry fuel. Overall, the company dispatched 4.14 lakh tonnes of coal, the highest ever dispatched in 2022-23, and also the second-highest since the company’s inception. CIL, which accounts for over 80 percent of domestic coal ouput, is one of the major suppliers of coal to power houses. Catering to the nation’s ever-growing energy demand in the post-COVID era, NCL has dispatched 33.54 million tonnes (MT) of coal to power plants in the current fiscal year. NCL has dispatched 36.89 MT of coal to all its consumers, registering 20.30 percent year-on-year growth. Both figures of coal dispatches are more than the assigned targets till date. NCL has produced 34.75 MT of coal till date in the current financial year with yearly growth of 25.26 percent. It sent 102 coal rakes which include 40 rakes for upcountry coal consumers and 62 rakes for pit head power plants through dedicated merry-go-round mode.

India may increase coal imports from Russia to 40 MT by 2035

8 July: India is ready to raise thermal and coking coal imports from Russia to 40 million tonnes (MT) by 2035, provided logistics issues are fixed. As per data provided by the Central Dispatching Department of Fuel Energy Complex, Russia exported 214.37 MT of coal last year. Earlier, the Indian government had approved a pact between India and Russia regarding cooperation on coking coal, a key steel-making raw material, for which domestic players remain dependent on imports from a select group of countries. Around 85 percent of India’s coking coal demand is met through imports. The cooperation with Russia will help India reduce its dependence on far-located countries like Australia, South Africa, Canada and the US (United States) for sourcing coking coal. It will also reduce the per-tonne cost of steel production, as Russia is geographically closer compared to the said countries. Earlier, the steel ministry had asked the domestic steel makers to get coking coal samples from Russia and test the raw material at their plants and update on the result of the same.

Maharashtra among top 3 states to have highest coal backup

7 July: Maharashtra is among the top three states in the country to have a high buffer stock of coal for its seven coal-fired power stations. Jharkhand and Odisha are the two other states ahead of Maharashtra, each with a buffer stock of 12-13 days. Maharashtra State Power Generation Company (MAHAGENCO) said that the state’s coal backup is over 11 lakh tonnes, which will enable the power utility to smoothly carry out electricity generation for at least 11 days even in case of any problem in fresh coal procurement. The current situation is in stark contrast to the struggle with buffer stock that Maharashtra faced in April this year when electricity demand soared and the coal with generation plants was in short supply. With the onset of monsoon, the power demand has reduced from 23,000 megawatts (MW) in summer to 19,000 MW. MAHAGENCO’s coal buffer stock has improved as 4.1 lakh tonne of the 30 lakh tonne to be imported has reached the state.

National: Power

Hike in power-purchase agreement cost won’t affect those availing of subsidy: Delhi CM

12 July: Delhi Chief Minister (CM) Arvind Kejriwal said that those getting power subsidy will remain unaffected by any changes in power purchase agreement costs in Delhi. Delhi Electricity Regulatory Commission gave its approval to power distribution companies to hike the electricity charges by up to four percent due to an increase in power purchase agreement cost (PPAC) owing to the surge in the prices of coal and gas. The new rates have come into effect from mid-June. PPAC is a surcharge applied on total energy cost and fixed charges to compensate the discoms (distribution companies) for variations in the market-driven fuel costs. The hike in power purchase agreement cost will lead to a rise in the Delhi government’s power subsidy bill, which has been estimated at INR 32.5 bn in the current fiscal. More than 80 percent of power consumers are covered under the government’s subsidy scheme.

Chinese gateway unit in Uttar Pradesh power meters raises concern

12 July: The UP (Uttar Pradesh) energy department has received a proposal for setting up China-made equipment used for assimilation of power consumption in the multi-point electricity metering system in Madhyanchal Distribution Company. The proposal crucially runs contrary to the Union ministry of power’s guidelines which apprehends the vulnerability of power supply systems and networks arising from cyberattacks through malware embedded in the “imported” equipment. The proposal has been moved by a Noida-based company Capital Power System Ltd for installing a “gateway unit” between smart meters in residential apartments and the UP Power Corporation Limited (UPPCL). If installed, the China-made equipment will work as an interface in apartments constructed in 19 districts, including Lucknow, Ayodhya, Budaun, Bareilly, Pilibhit, Shahjahanpur, Lakhimpur Kheri, Hardoi, Sitapur, Unnao, Bahraich, Shrawasti, Balrampur, Gonda, Barabanki, Rae Bareli, Sultanpur, Ambedkarnagar and Amethi. According to the proposal, the gateway has been procured from one Bay Area Compliance Laboratories Corporation, Shenzhen, China. It is a Bluetooth and Wi-Fi device. The gateway receives information from the smart meter and passes it on to the “head end system or systems” (HES) installed with the UPPCL. Information to the meter by HES also passes through the gateway – hence it supports bi-directional communication.

All existing inter-state power transmission lines mapped on PM Gati Shakti portal: Power ministry

7 July: All existing inter-state transmission system lines have been mapped on the portal of the PM Gati Shakti National Master Plan which was launched in October 2021 to push infrastructure development in the country. Further, it informed that the 90 percent under-construction ISTS (Inter State Transmission System) lines have been integrated into the portal and the remaining 10 percent are to be integrated after finalisation of the route survey by respective transmission service providers. PM Gati Shakti NMP portal will ultimately aid in solving problems of development of infrastructure in the country by building a secure, sustainable, scalable and collaborative approach towards infrastructure planning for seamless connectivity to economic zones, it stated. Prime Minister (PM) Narendra Modi launched PM Gati Shakti NMP in October last year to bring different ministries/utilities and infrastructure planning under a single unified vision across all sectors such as highways, railways, aviation, gas, power transmission, and renewable energy. In the development of power transmission projects, PM Gati Shakti NMP portal shall play a critical role in planning, tendering, implementation and approval stages.

Punjab cabinet approves 600 units of free electricity per billing cycle

6 July: The Punjab cabinet led by Chief Minister (CM) Bhagwant Mann gave final approval to the policy for providing 600 units of free power to every household per billing cycle in the state with effect from 1 July 2022. All the domestic consumers in the state will be eligible to get zero bills if their consumption is up to 600 units in every billing cycle. It will be a reprieve to the domestic consumers who have to hitherto shell out huge money every month in form of power tariffs. As per the decision, scheduled caste (SC), non-SC BPL and backward class (BC) domestic consumers who are currently eligible for free 400 units (per billing cycle) of power will also get a subsidy of 600 units. Likewise, freedom fighters of Punjab and their successors (upto grandchildren) domestic consumers who are currently eligible for free 400 units of power will also get a subsidy of 600 units per billing cycle. In case, the consumption of SC, non-SC BPL, BC and freedom fighter categories exceeds units per billing cycle then they will pay only for units consumed in addition to 600 units along with full fixed charges, meter rentals and government levies as applicable. Similarly, the Cabinet also gave a green signal for waiving off pending arrears of all the domestic consumers as on 31 December 2021 and unpaid upto 30 June 2022. This move will give relief to around 28.10 lakh domestic consumers with a total benefit of INR 12.98 bn. CM said that the Cabinet had put its stamp on the biggest guarantee to people of the state for free 600 units of power. The AAP government has reserved a sum of INR 18 bn for giving the free power, in the budget proposals for this year.

National: Non-Fossil Fuels/ Climate Change Trends

SJVN inks pact with Solarworld Energy Solutions to build two solar projects for INR 6.9 bn

12 July: SJVN entered into a pact with Solarworld Energy Solutions to build two solar power projects in Uttar Pradesh for INR 6.9 bn, which will have a total generation capacity of 125 MW. The contract value for a 75 MW solar project is INR 4.1 bn, while for a 50 MW solar project, it is INR 2.8 bn. Both the projects are scheduled to be commissioned in April 2023. Presently, SJVN has a total portfolio of around 31,500 MW and has diversified into power transmission and power trading. Recent project additions are paving the path for achieving SJVN’s shared vision of 5,000 MW by 2023, 25,000 MW by 2030 and 50,000 MW installed capacity by 2040.

BHEL commissions floating Solar PV plant at NTPC Ramagundam

9 July: Bharat Heavy Electricals Limited (BHEL) has successfully commissioned India’s largest floating Solar PV plant rated at 100 MW at NTPC Ramagundam in Telangana. The plant is installed across the natural raw water reservoir, saving valuable land resources, and also conserving water by reducing evaporation. With innovatively engineered layouts and arrangements for the solar PV modules, electricals and floaters, the plant will ensure that the aquatic ecosystem is maintained while producing clean power.

Tata Power plans INR 750 bn capex push in green energy: Chairman

8 July: Tata Power would spend INR 750 bn in the next five years to expand the capacity of its renewable energy business, Chairman N Chandrasekaran said. Chandrasekaran said Tata Power was taking a “pragmatic” approach towards achieving its renewable energy targets and had added 707 megawatts (MW) of renewable capacity in 2021-22 (FY22). Tata Power is pushing its renewable energy business at a time when its rivals — the Adani group and Reliance Industries Limited (RIL) — are also ramping up their clean energy portfolio amid India’s plans to shift to green fuels from fossil fuels. Tata Power is the first company in the sector to declare a net-carbon-zero target. Tata Power Managing Director Praveer Sinha said that the company would move away from investing in coal-based power units and be net-zero in terms of carbon emissions by 2050. The company has advanced its net-zero carbon target by five years to 2045. It is aiming for 100 percent water-neutral and zero waste by 2030.

New solar policy to light up more villages: Jharkhand CM

7 July: Jharkhand CM (Chief Minister) Hemant Soren unveiled the Jharkhand State Solar Policy of 2022. The CM said with climate change now knocking on our doors, Jharkhand has made an effort to replace thermal power with clean energy and ensure the reduction of emission of greenhouse gasses. Under this policy, the Soren government aims to produce 4,000 MW of solar power in the next five years by providing incentives and supporting entrepreneurs who are willing to invest in utility-scale solar projects, distributed solar projects and off-grid solar projects. The policy document envisages a cumulative solar power generation of 3,000 MW through solar parks, non-solar parks, floating solar power plans and canal top units. That apart, Jharkhand aims to produce 720 MW power through rooftop solar units, captive solar units, and solar power agriculture, the policy states. Under the new policy, households with an annual income less than INR 3 lakh will be provided subsidies to the tune of 60 -80 percent if they commission rooftop solar units on their residential places between 3KW and 10KW. Solar agriculture projects will draw subsidies to the tune of 30 percent of the total cost while solar pumps will be provided with subsidies up to 67 percent.

India will have to bear steep cut in fossil fuel revenues to limit global warming to 1.5 degrees Celsius

7 July: India will have to bear a steep fall in revenues from fossil fuels in its efforts to limit global warming to 1.5 degrees Celsius, but advance planning can avoid shortfalls in total revenues, according to a new report by the International Institute for Sustainable Development (IISD). India earned a revenue of US$92.9 billion from fossil fuel production and consumption in 2019 which accounted for 18 percent of its total government revenue. It could fall to around 65 percent of 2019 levels by 2050 on an energy pathway consistent with limiting global warming to 1.5 degrees Celsius, the independent think tank said.

International: Oil

US crude output and petroleum demand to rise in 2022: EIA

12 July: United States (US) crude production and petroleum demand will both rise in 2022 as the economy grows, the US Energy Information Administration (EIA) said. EIA projected crude production will rise to 11.91 million barrels per day (bpd) in 2022 and 12.77 million bpd in 2023 from 11.19 million bpd in 2021. That compares with a record 12.29 million bpd in 2019.

North Asian refiners to receive full Saudi crude allocation in August

12 July: Saudi Aramco has notified at least three North Asian buyers that it will supply full contractual volumes of crude oil in August. The world’s top oil exporter cut supply to some refiners, mostly Chinese, in July as more cheap Russian oil heads to the world’s top oil importer while demand for Saudi crude climbed in Europe in the absence of Russian cargoes. The Organization of the Petroleum Exporting Countries (OPEC) and their allies, a group known as OPEC+, decided to increase output each month by 648,000 barrels per day (bpd) in July and August, up from a previous plan to add 432,000 bpd per month.

US extends authorization of liquefied petroleum gas exports to Venezuela

7 July: The United States (US) has authorized transactions involving exports of liquefied petroleum gas (LPG) or cooking gas to Venezuela until 12 July 2023, according to the Treasury Department. The US government had issued a general license for the first time last year authorizing LPG supplies to Venezuela, mainly used in the OPEC (Organization of the Petroleum Exporting Countries) nation as cooking fuel, with that license set to expire. PDVSA is this year producing some 27,000 barrels per day of LPG according to consultancy Gas Energy’s estimates, which covers most of the country’s cooking gas demand. Imports were used to compensate for the deficit before Washington imposed trading sanctions on the company in 2019.

Russia’s LPG exporters to use Georgian port for supplies to Bulgaria

12 July: Russian exporters will start shipping supplies of liquefied petroleum gas (LPG) to Bulgaria via Georgia’s Black Sea port of Poti in July as traditional export routes remain closed, according to traders and Refinitiv Eikon statistics. Russia stopped supplying LPG to Ukraine on 24 February, when Russia sent troops into the country in what Moscow calls a “special military operation”, and has also stopped LPG rail transit to Romania, Hungary and Moldova via Ukraine, obliging exporters to look for new routes. Finland, another large export route for Russia’s LPG, has cut purchases sharply, according to Refinitiv data. Last year Russia exported 25 percent of its LPG to Ukraine and Finland.

OPEC sees slower 2023 oil demand growth, no big shale gain

12 July: The Organization of the Petroleum Exporting Countries (OPEC) expects global oil demand to rise in 2023 but at a slower pace than 2022, the producer group said in its first forecast for next year, citing still robust economic growth and progress in containing COVID-19 in China. The OPEC said it expects demand to rise by 2.7 million barrels per day (bpd), or 2.7 percent, in 2023. It left this year’s growth forecast unchanged at 3.36 million bpd. Oil use has rebounded from the pandemic-induced slump in 2020 and is set to exceed 2019 levels this year. The outlook for 2023 suggests a strain on supplies could persist as growth in non-OPEC output, which has been hit by Russian losses, is expected to lag the rise in demand.

Kazakhstan discusses steps to tackle CPC oil export restrictions

6 July: Kazakhstan said it was discussing measures to tackle the impact of restrictions on oil exports via the Caspian Pipeline Consortium (CPC), which ships Kazakh crude via Russia to the Black Sea. The CPC, which handles about 1 percent of global oil, said that a Russian court had ordered it to suspend operations for 30 days, citing issues related to oil spills. Kazakhstan, which depends on revenues from fossil fuels, relies on the CPC for most of its oil exports.

International: Gas

Japan to ask US, Australia to ensure stable LNG supply

12 July: Japan’s Industry Minister Koichi Hagiuda said he will again ask the United States (US) and Australia to boost output of liquefied natural gas (LNG) and ensure a stable supply to the country when he meets his counterparts in Sydney. Hagiuda, who had asked the US and Australian energy ministers for alternative supplies following the Ukraine crisis, will travel to Sydney to attend the energy ministers meeting by the Quad which includes the United States, Japan, Australia and India. Resource-poor Japan is facing a historic energy security risk as tensions with Moscow intensify, heightening the threat of gas supply disruptions at a time when global supply is tight and spot prices are sky-high. There is an urgent need for Japan to prepare for a potential loss of investment participation and LNG supply from the Sakhalin-2 gas and oil project in Russia’s far east, analysts said.

Hungary in talks with Romania to boost cross-border gas link

12 July: Hungary and Romania are in talks to increase the capacity of a natural gas pipeline interconnector that straddles their borders to more than 3 billion cubic meters (bcm) of gas per year, Hungarian Foreign Minister Peter Szijjarto said. Szijjarto said the planned expansion of import capacity via Romania would enhance the security of supply and offer a route for possible future imports from Greece, Turkey or Azerbaijan. He said the interconnector can carry 2.6 bn bcm of gas per year to Romania and 1.7 bcm per year to Hungary, which would initially increase to 2.5 bcm and later to more than 3 bcm. Under a long-term deal with Russia’s Gazprom signed last year, Hungary receives 3.5 bcm of Russian gas per year via Bulgaria and Serbia, and a further 1 bcm via a pipeline from Austria. The deal runs for 15 years. Russia has promised to continue gas shipments to Hungary and that Gazprom will fulfil its contractual obligations to the country, Szijjarto said. Hungary is about 85 percent reliant on Russian gas imports.

Poland backs measures to boost gas security as energy crisis flares

12 July: The Polish cabinet has backed legislation loosening gas trading rules, extending tariff protection for consumers, and contingency planning for grid operators to allow for a swift reaction if the energy crisis deteriorates. Proposed measures include a suspension of the rules obliging gas companies to trade fuel on the Warsaw exchange if a gas crisis is declared, an extension of tariff protection for 7.1 million small consumers including households until 2027, and contingency planning for gas storage and transmission operators.

Norway approves gas field expansion, development plans for two others

8 July: Norway’s government has approved expansion plans for the country’s second-largest gas field, Ormen Lange, as well as development plans for the Frosk and Tommeliten A discoveries, the oil and energy ministry said. The Ormen Lange phase 3 extension is expected to increase gas extraction by up to 40 billion standard cubic meters (bcm), with a start-up in 2025, the ministry said. The field, operated by Shell (SHEL.L) and located in the Norwegian Sea, will as a result increase gas recovery from 75 percent to 85 percent, the ministry said. Separately, the ministry also approved plans for developing the petroleum discoveries Frosk and Tommeliten A in the North Sea.

International: Coal

Japan slams Australian state’s steep coal royalty hike

7 July: Japan complained to Australia after the state of Queensland, one of the world’s biggest sources of coal and other resources, shocked miners with a steep hike in coal royalty rates to capture windfall profit, Japan’s embassy said. Japanese firms Mitsui & Co Ltd, Mitsubishi Corp and Idemitsu Kosan Co Ltd all have major coal investments in Queensland and are looking at new investments in minerals, hydrogen and renewables, which he said would require mutual trust with the state government.

UK coal mine decision delayed as politics intervenes

7 July: A UK (United Kingdom) government decision on whether to allow a new coal mine in Cumbria, northwest England, was delayed for up to six weeks after Michael Gove, the Minister responsible for the relevant department, was sacked by Prime Minister Boris Johnson. Gove, Secretary of State for Levelling Up, Housing and Communities, had been expected to announce whether the mine, being developed by privately owned West Cumbria Mining and which seeks to extract coking coal for the steel industry, should go ahead.

International: Power

US power use to reach record high in 2022 as economy grows: EIA

12 July: United States (US) power consumption was on track to rise to record highs in 2022 and 2023 as the economy grows, the US Energy Information Administration (EIA) said. The statistical arm of the US Department of Energy projected power demand will climb to 4,022 billion kilowatt-hours (kWh) in 2022 and 4,045 billion kWh in 2023 from 3,930 billion kWh in 2021. That compares with an eight-year low of 3,856 billion kWh in 2020, when the coronavirus pandemic depressed demand, and an all-time high of 4,003 billion kWh in 2018. The EIA projected 2022 power sales would rise to 1,486 billion kWh for residential consumers, 1,367 billion kWh for commercial customers as more people return to work in offices and 1,026 billion kWh for industries. That compares with all-time highs of 1,477 billion kWh in 2021 for residential consumers, 1,382 billion kWh in 2018 for commercial customers and 1,064 billion kWh in 2000 for industrials.

Texas grid avoids blackouts with voluntary cutbacks amid scorching heat

11 July: Texas’s power grid operator held off from imposing rolling blackouts using voluntary cutbacks and appeals to conserve energy as scorching triple-digit temperatures hit much of the state. The Electric Reliability Council of Texas (ERCOT) warned of a potential shortage in reserves “with no market solution available.” Its website showed the operator entered late afternoon with about 3,600 megawatt (MW) of operating reserves — which could power three-quarters of a million homes. Large industrial power users helped avoid blackouts with power cuts, including companies that mine for Bitcoin and other cryptocurrencies. The grid operator, which oversees power to more than 26 million people in the state, declined to comment on specific company power usage or facilities. ERCOT had assured residents earlier this year that it had enough reserves to meet demand after millions of people suffered without power through a deep freeze in early 2021 for several days.

France plans full nationalisation of power utility EDF

6 July: France will fully nationalise EDF, Prime Minister Elisabeth Borne said, in a move that would give the government more control over a restructuring of the debt-laden group while contending with a European energy crisis. The utility has also been hurt by government moves forcing it to sell power to rivals at a discount as part of efforts to shield French consumers from a sharp increase in the cost of living. The company said output losses will reduce its core profit this year by €18.5 billion and the discounted power sales will cost it a further €10.2 billion. Its debt is projected to rise by 40 percent this year to more than €61 billion. Meanwhile, planned new-generation nuclear reactors require investments of more than €50 billion.

International: Non-Fossil Fuels/ Climate Change Trends

China’s surging hydropower a boon for its climate goals, energy bills

12 July: A surge in hydropower output in China this year, boosted by record-breaking rainfall, is helping the world’s biggest polluter meet green targets as well as cut liquefied natural gas imports (LNG) amid tight global supplies. Southern China recorded its heaviest rainfall in 60 years from March to May, topping up the region’s huge dams, and lifting hydropower generation by 18 percent in the first five months of the year compared with a year earlier. Meanwhile, thermal-power production, mostly from coal-fired utilities, dropped 4 percent in the January-May period. The jump in hydropower generation is also helping the world’s No. 2 economy avoid the power shortages it experienced last year, partly caused by a drought that affected dam water levels. China currently relies on coal for about 60 percent of electricity generation, down from over 75 percent in 2010, 3-5 percent on gas and the rest on renewables. Hydropower output in May jumped 27 percent on year to 121.7 billion kilowatt-hours (kWh), a record for this period. Abundant rain also allows reservoirs to store more water for hydro generation in the coming months. China added about 23 GW of new hydropower capacity in 2021, bringing total hydro capacity to 16 percent of the power mix. Solar, though much smaller, is growing more rapidly. In the first five months this year, solar power output increased by 13 percent on year, accounting for 2.7 percent of total electricity production, a record high.

IEA warns global solar supply chains are too concentrated in China

7 July: Countries need to expand manufacturing of solar panels from their current concentrated base in China to ensure secure supply and meet targets for cutting planet-warming carbon emissions, the International Energy Agency (IEA) said. The world needs to double its current capacity to produce the “key building blocks” of solar panels: polysilicon, ingots, wafers, cells and modules, by 2030, the IEA said in a new report. Partly thanks to Chinese investment, solar photovoltaic technology, which converts sunlight into electricity, has become the cheapest way to generate power in many parts of the world. In 2021, China was home to 79 percent of the manufacturing capacity for polysilicon, the IEA said. A full 42 percent of that is located in the province of Xinjiang, where the country’s largest plant accounts on its own for 14 percent of global capacity. European countries have the potential to manufacture these parts in ways that emit less carbon, thanks to the high shares of nuclear and renewables in their power mixes, the report said.

Norway scrambles to avoid empty hydropower reservoirs this winter

7 July: Norwegian hydropower producers are cutting output in southern Norway this summer to save water for the winter, fearing a looming supply crunch after a prolonged period of dry weather diminished reservoir levels. There is also concern that hydropower, which accounts for around 90 percent of Norwegian electricity generation, will continue to be exported to continental Europe. The reservoirs feeding many of the plants are currently only 59 percent full, compared with a 20-year median level of 68 percent, according to data from energy regulator NVE.

Shell to start construction of renewable hydrogen plant in Netherlands

6 July: Shell Plc said it would start building a renewable hydrogen plant in the Netherlands, which according to the energy giant will be Europe’s largest once it is operational in 2025. Shell said the 200 megawatt (MW) electrolyser, named Holland Hydrogen I, in the port of Rotterdam would produce up to 60,000 kilograms of renewable hydrogen per day. The London-based company, which aims to become a net zero greenhouse gas emissions company by 2050, has been boosting low-carbon output as it shifts away from oil and gas. Shell said it aims to produce hydrogen at the plant using electricity generated by the offshore wind park, Hollandse Kust Noord, which it partly owns. Renewable and low-carbon hydrogen is crucial in curbing emissions, but it will only account for 5 percent of the global final energy mix by 2050, falling short of what is needed to meet climate goals, global energy consultancy DNV said.

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