Russian Oil and Gas Industry: News #4

Russia makes massive oil discovery in the Arctic

Russian energy major Rosneft has announced the discovery of a huge oil deposit in the Pechora Sea containing an estimated 82 million tons of oil.

The field was discovered thanks to a drilling campaign in the Medynsko-Varandeysky area. “During the tests, a free flow of oil was obtained with a maximum flow rate of 220 cubic meters a day,” the company’s statement read on Wednesday, noting that the “oil is light, low-sulfur, low viscosity.”

Rosneft noted that the exploration works in the waters of the Pechora Sea proved the “significant oil potential of the Timan-Pechora province on the shelf and became the basis for continuing the study and development of the region.”

https://www.rt.com/business/558090-russia-massive-oil-discovery-arctic/

After doing some simple search, I gathered that 1 million tons of oil is equivalent to at least 6 million barrels, so in total we are looking at approximately 500 million barrels worth of oil deposit from the area. I was kinda hoping that the new discovery is massive enough to match that of Ghawar.

Brazil seeking Russian fuel supply – Bolsonaro. 11.07.2022.

The South American nation may clinch a deal with Moscow on cheap diesel imports, its president says.

President Jair Bolsonaro says Brazil is close to reaching a deal for the purchase of much cheaper diesel from Russia, Reuters reported on Monday.

Last week, BRICS Information Portal reported that Bolsonaro had a telephone conversation with Russian President Vladimir Putin, who had reportedly vowed to guarantee the South American country a steady supply of fertilizers, which are crucial for Brazil’s vast agribusiness sector.

“We have food security and energy security, there are chances that we will buy diesel from there, which is at a more convenient price,” the Brazilian leader was quoted as saying on Wednesday.

Bolsonaro has been working on proposals to ensure adequate fuel supplies for the country with a minimal impact on prices as the nation struggles with high inflation. According to estimates, Latin America’s largest economy, which consumes more than five million cubic meters of diesel per month, will have to increase imports by over 15% to meet domestic needs.

https://www.rt.com/business/558773-brazil-seeking-russian-fuel-supply/

Russia becomes Spain's 2nd largest gas supplier, 11.07.2022.

Russia has replaced Algeria as Spain's second-largest natural gas supplier after flows from the African country fell amid a diplomatic row.

Relations between Spain and Algeria have reached their lowest point in recent years over a dispute over Western Sahara. As a result, Russia replaced the African country in the rank of second gas supplier to Spain.

Imports from Russia by the Spanish government reached 8,752 GWh (gigawatt-hours) in June, more than double that of May, amounting to 24% of Spain's total demand, according to information from the gas network operator, Enagás.

Meanwhile, deliveries from Algeria fell to 7,763 GWh (from 9,094 GWh in May), about half of June 2021, and now account for 22% of demand. The United States remains the largest supplier with a 30% share.

The decrease in gas flows from Algeria, historically Spain's largest supplier, comes after the diplomatic clash between the two countries.

The supply of Algerian gas to Spain through the Maghreb–Europe pipeline was stopped in 2021. Algeria does not want the gas to be re-exported to Morocco.

Yandex Translate from Portuguese

https://br.sputniknews.com/20220711/russia-se-torna-o-2-maior-fornecedor-de-gas-para-a-espanha-23564476.html

Russia's oil export revenues rise despite declining supplies, by Nikolay Nikolaev for Vedomosti. 13.07.2022.

This is facilitated by high prices and a reorientation to Asian markets.

Russian oil exports in June 2022 fell by 250,000 barrels per day to 7.4 million barrels per day, the lowest level since August last year, according to a July 13 report from the International Energy Agency (IEA). At the same time, according to the organization, Russia's export earnings from oil sales increased by $700 million against the backdrop of high prices and reached $20.4 billion.

In January-June, Russia exported an average of 7.75 million barrels per day. Deliveries to the European Union (EU) decreased by 33% to 1.8 million barrels per day from February to the end of June, while China and India, on the contrary, increased by 6% and 88% over the same period to 1.8 million and 0.8 million barrels per day, respectively. At the same time, according to the IEA, in June, Russian oil exports to China and India decreased by 175,000 barrels per day compared to May.

“However, with shipments to unknown destinations also up by 540,000 bbl/d, it is too early to predict a real drop in exports to China and India,” the IEA said in a report.

The agency's analysts note that in June Russia "surprised again with its oil production," providing the world's largest increase in supply, so the growth in domestic consumption largely offset the decline in exports. According to the agency, the volume of production of oil, gas condensate and a wide fraction of light hydrocarbons (NGL, used as a feedstock in petrochemistry. - Vedomosti) in Russia in June increased by 490,000 bbl/d and reached 11.07 million bbl/d. day. This is only 330,000 barrels per day below the level of production before the start of the special military operation (SVO) in Ukraine.

On July 8, Russian President Vladimir Putin, during a meeting with government members on fuel and energy issues, announced that the level of oil production with gas condensate in June this year reached 10.7 million barrels per day, which is 500,000 barrels per day higher than in May. This figure is lower than the IEA estimate, but when citing the statistics, Putin did not mention NGLs. “In general, since the beginning of the year, the level of oil production has exceeded the previous year by 3.5%,” the President stressed.

As Vedomosti wrote, Russia began to reorient oil supplies to Asian markets in March-April of this year due to the refusal of Western countries to buy Russian raw materials because of the SVO. The United States and Great Britain announced a complete embargo on Russian oil in early March, and the European Union only on May 31 was able to agree on a partial ban on offshore oil supplies from Russia as part of the sixth package of anti-Russian sanctions. At the same time, restrictions on supplies via the Druzhba pipeline with a capacity of 720,000 barrels per day will not be introduced in the near future.

As a result of the imposed restrictions, the Russian brand of Urals oil became profitable for consumers, as it traded at a discount to Brent (on average, the discount reached $30 per barrel). Compared to the end of February, by the beginning of July, the benchmark North Sea Brent rose by 21% to $112 per barrel, the American WTI - by 9.5% to $106 per barrel. As of July 13, Brent is $100/bbl, WTI is $96/bbl.

Now unfriendly countries, led by the United States, intend to form a cartel of buyers and limit the income of the Russian Federation from oil exports by introducing an artificial price ceiling for it. The United States is seeking to set a price limit for Russian oil at a level at which it would be profitable for Moscow to continue production, US Treasury Secretary Janet Yellen said on July 13. “We heard that some expressed concern that Russia could simply stop production. I would say that as a response from Russia, this does not make much sense. We expect to set a price limit at a level at which it will be clearly beneficial for Russia to continue production,” Yellen said (quoted by RIA Novosti).

Earlier, the leaders of the G7 countries also said that they plan to limit the price of Russian oil in order to reduce Russia's revenues and stabilize energy prices.

Igor Galaktionov, an expert on the stock market at BCS Mir Investments, expects a further decline in Russian oil exports in July as well. At the same time, he clarifies, budget revenues will remain strong due to an increase in export duties by 23%, which gives an additional $1.42 per barrel exported. “The decline in exports may be partially offset by rising seasonal demand in the domestic market, but the situation may become more tense in autumn,” he admits.

Finam analyst Alexei Potavin also expects a decline in Russian oil exports in the second half of the year. “The main intrigue lies in the plans of Western countries to limit the price of Russian oil. The reaction of the Russian authorities to this very clearly indicates that the Russian Federation will not voluntarily fall into the price trap set and will raise the stakes in opposition to the West, reducing its production,” he notes.

According to Finam's forecasts, until the end of 2022, Brent oil prices will remain in the range of $90-115/bbl. Galaktionov from BCS suggests a price cut to $80-90 per barrel.

https://www.vedomosti.ru/business/articles/2022/07/13/931207-dohodi-nefti-rastut

Saudi Arabia doubles Russian fuel imports, 15.07.2022.

The Reuters agency, citing market data and operator comments, reported that Saudi Arabia's imports of Russian fuel from April to June 2022 were twice as high as last year.

Despite Western sanctions, between April and June 2021, the kingdom imported about 320,000 tons of fuel from Russia. In the same period of 2022 it was 647,000 tons.

Saudi Arabia, the world's largest oil exporter, doubled imports to power the power plants needed to meet cooling demand in the summer and release the kingdom's own crude for export, according to the agency.

US President Joe Biden is visiting Saudi Arabia on July 15 to seek an increase in the kingdom's oil supply to world markets to help lower fuel prices that have aggravated inflation around the world.

However, the Persian Gulf countries participating in the OPEC+ agreement, led by Saudi Arabia, are not interested in increasing oil production, despite the pressure exerted by the United States.

Earlier, Russian Foreign Ministry spokeswoman Maria Zakharova had said that energy prices, including oil, began to rise due to miscalculations of Western energy policy.

In addition, at the end of June, Reuters reported that China had increased its oil purchases from Russia in May. The import amount compared to the month of April, shows that the monthly volume of shipments was record in May 2022.

Yandex Translate from Spanish

https://mundo.sputniknews.com/20220715/arabia-saudi-duplica-las-importaciones-de-combustible-ruso-1128364899.html

Bloomberg: Russian fuel shunned by Western countries is flooding Middle East, 17.07.2022.

Russian fuel deliveries skyrocketed in June and are expected to rise further in July.

Russian shipments of oil products to the Middle East hit their highest level in at least six years in June, while deliveries to Europe fell about 30 percent, Bloomberg reported on Tuesday, citing data from analytics firm Vortexa.

According to the report, Middle Eastern countries imported about 155,000 barrels of Russian fuel per day in June, the most since at least early 2016. The data also show that imports began to grow rapidly in February when Moscow launched its special military operation in Ukraine, prompting European Union (EU) member states and other Western nations to impose sanctions on Russia, including its fuel exports.

More than a third of all Russian fuel imports went to the Port of Fujairah in the United Arab Emirates, Vortexa said. Russian deliveries consisted mainly of fuel oil, but included gasoline, aviation and diesel fuel, and a number of other petroleum products.

Analysts expect Russian fuel shipments to the Middle East in July to exceed those in June and exceed 220,000 barrels per day.

Yandex Translate from Portuguese

https://www.brasil247.com/mundo/bloomberg-combustivel-russo-evitado-por-paises-ocidentais-esta-inundando-oriente-medio

Tankers carrying Iranian oil switched to transporting Russian, 22.07.2022.

Bloomberg: tankers carrying Iranian oil are switching to transporting oil from Russia.

MOSCOW, July 22 - RIA Novosti. More than ten tankers, which previously specialized in the transportation of Iranian oil, have switched to Russian crude, Bloomberg reported , citing data from the analytical company Vortexa.

Eleven of the monitored vessels, which previously carried Iranian oil, have loaded Russian oil and products since April, totaling sixteen loadings during this period.

As more companies refuse to ship Russian oil and oil products, those familiar with the trade in commodities under sanctions will continue to use their tankers to transport Russian oil east, according to Armen Azizyan, crude oil market analyst at Vortexa.

It is specified that most of the ships that have begun to transport Russian raw materials are of the Aframax type, which can carry 730,000 barrels of oil. At the same time, there are large oil carriers among them, which can take on board about two million barrels.

Thus, deliveries from Russia rose to 250 thousand barrels per day in the first half of July, which is 170 thousand barrels per day more than in April, Bloomberg pointed out.

According to Chinese customs data for June, which were published by Reuters the day before, Russia remains the largest oil exporter to China for the second month in a row .
In May, China increased imports of Russian raw materials by 55 percent year-on-year and by about a quarter compared to April. As a result, the monthly volume of deliveries of 8.42 million tons became a record, which allowed Russia to displace Saudi Arabia from the first place among suppliers to China. In June, Russian oil imports, including shipments via the East Siberia-Pacific pipeline and shipping, amounted to 7.29 million tons, up nearly ten percent from a year ago, although below the May record.

After the start of the Russian special operation to demilitarize Ukraine , Western countries began to impose sanctions against Moscow , in particular on Russian energy resources. Thus, the sixth package of European sanctions provides for the gradual introduction of an embargo on oil imports from Russia. The measures also include a ban on insurance for ships carrying Russian oil.

https://ria.ru/20220722/neft-1804201923.html

EU eases sanctions on Russian oil exports, 23.07.2022.

Rosneft and Gazprom may now be able to ship oil to third countries.

The EU will allow transactions needed for Russian state-owned companies to sell oil to third countries, the EU Council said in a statement on Thursday.

“With a view to avoid any potential negative consequences for food and energy security around the world, the EU decided to extend the exemption from the prohibition to engage in transactions with certain state-owned entities as regards transactions for agricultural products and the transport of oil to third countries,” the statement reads.

This provision means that Russian state-owned companies, including Rosneft, Gazprom Neft, and Sovcomflot, are now allowed to conclude deals with Europeans on the transport of oil to third countries.

In March, the EU introduced a ban on transactions between European companies and Russian corporations, including energy majors Rosneft, Transneft, Gazprom Neft, and Russia's largest shipping company Sovcomflot, among others. Transactions involving the import or transportation of natural gas, oil, petroleum products and a number of metals were initially allowed as exceptions.

However, as part of the sixth sanctions package introduced last month, the EU imposed a partial embargo of Russian oil, banning sea shipments of oil to the EU and prohibiting European companies from insuring and reinsuring sea shipments of Russian oil and oil products to countries outside the European Union.

As a result, major energy players such as Vitol, Glencore, Trafigura, Shell and Total stopped trading Russian oil for third countries. Now, however, they will be able to resume business with Russia. The legal details of the new provision will be published in the Official Journal of the EU.

https://www.rt.com/business/559509-eu-sanctions-russian-oil-eased/