Russian hydrocarbon (Oil and Gas and Coal) Industry: News #4

Russia delivers the largest volume of LNG to China in 12 months and increases its crude shipments by 25%, 09.22.2024.

By the end of the summer, Moscow increased shipments of its hydrocarbons to China, according to the analysis of data from the Chinese customs authorities. This occurs against the background of attempts by Western countries to expel Russian oil and gas from world markets and damage the Russian economy.

Russia supplied the Asian giant with 872,000 tons of liquefied natural gas (LNG) in July 2024 — the highest monthly volume in the last 12 months, according to data from the General Administration of Customs of China. It should be noted that more deliveries were registered exactly one year ago, in July 2023 (1 million tons).

Although in terms of the volume of LNG supply to China, Russia ranked third in July only behind Australia (2 million tons) and Qatar (1.62 million tons), in terms of the total volume of gas transported by pipelines and liquefied natural gas exported to that country, Moscow maintains the first place (3,800 million cubic metres).

Overall, in July 2024, Beijing increased its natural gas imports in relation to the same month in 2023 by 8%. This is a new high for the corresponding month, as well as the second highest result in the history of the country's customs statistics, according to the aforementioned agency.

Similarly, Moscow increased oil supplies to China by more than a quarter. Specifically, according to the customs body, shipments from Russia increased in July by 25.6%, to reach 2.21 million barrels per day (b/d), which corresponds to 9.37 million tons per month. Beijing's spending on Russian crude oil last August amounted to $5.39 billion.

The second largest oil supplier was Malaysia. Iraq also increased its exports, while Saudi Arabia reduced shipments to China by 17.4%, to 1.25 million b/d. In absolute terms, Beijing imported 49.1 million tons of oil in August, up from 42.34 million tons in July.

After Russia launched its special military operation in Ukraine, numerous Western countries imposed sanctions on Russian energy resources, including oil, refusing to buy it and preventing Moscow from trading it on world markets.

The purpose of these restrictions was to hit Russia's economy and prevent it from achieving its goals in Ukraine. However, the result of these measures was nothing less than an aggravation of the energy crisis in the West itself, which intensified the recession in several countries, such as Germany.

At the same time, Russia found alternative markets for its resources among the countries that did not support such illegal unilateral measures of the collective West.

Yandex Translate from Spanish.

https://noticiaslatam.lat/20240922/rusia-entrega-a-china-el-mayor-volumen-de-gnl-en-12-meses-y-eleva-sus-envios-de-crudo-en-un-25-1157681927.html

The Chinese and Indians are not stupid and will create capacity to buy and use cheap Russian energy because even if they don't need it themselves they can always sell it to European countries.

No doubt the Chinese government is looking at the Russian gas reserves and their efforts to divert supply in their direction and thinking they can close down less efficient power generation plants like coal fired plants if the pipelines for gas can be put in place the transfer of energy is quicker and easier and more efficient... something Europe used to benefit from.

Even piping gas supplies directly to North Korea would help their energy management and would also enable them to continue the pipelines to South Korea for which SK can get cheap energy too and NK can earn transit fees for also.

This occurs against the background of attempts by Western countries to expel Russian oil and gas from world markets and damage the Russian economy.

There are no alternative suppliers who can fill for Russia, so this policy is manifestly retarded.   It is an effort to damage the world economy.   But you can
expect this from the self-anointed exceptionalist lunatics in the NATzO west.

Russia Overtakes US in Gas Supplies to EU Again, 10.03.2024.

Russia once again overtook the US in gas supplies to the EU in the third quarter of 2024.

MOSCOW, 4 Oct - RIA Novosti. Russia has once again overtaken the United States in terms of gas supplies to the European Union in the third quarter, while taking the highest market share in nine quarters, according to RIA Novosti's analysis of data from the analytical company Bruegel.

During the specified period, Russia supplied 13.3 billion cubic metres of gas to the European market, compared to 13 billion in the previous quarter and 11.5 billion a year earlier. As a result, the share of Russian companies in European imports increased to 19.4% from 17.2% in April-June, reaching a maximum since the second quarter of 2022.

Russia mainly supplied gas via pipelines: deliveries via pipelines increased by 8% in the quarter and by almost 13% over the year, to 8.6 billion cubic meters. The volume of liquefied natural gas exports in the last quarter amounted to 4.7 billion cubic metres, which is 6% less than the level of April-June, but 21% more than the third quarter of last year.

At the same time, the US reduced its LNG supplies by a quarter for the quarter and by a third for the year, to 9.5 billion cubic metres. As a result, the US became the third main gas supplier to the European Union for the second quarter in a row, and Russia became the second.

Norway remains the leader in gas exports from the third quarter of 2022 with 21.7 billion cubic meters in July-September. At the same time, over three months, this country reduced the volume of supplies by nine percent, but this is still five percent more than the figure for the same period last year.

The top five gas suppliers to the EU in the third quarter also included Algeria , which reduced supplies by 19% over three months to 7 billion cubic metres, and the United Kingdom , which increased them by almost 40% to 5.1 billion cubic metres.

RIA Novosti previously reported that the United States sharply reduced its export of liquefied natural gas to the European Union in July, which caused the income of American suppliers to fall to its lowest level since 2021. The main reason for the decline is the reorientation of supplies to the Asian market.

https://ria.ru/20241004/gaz-1976278614.html

India ramps up Russian oil imports, 10.04.2024.

The South Asian country is looking for long-term energy supply deals with Moscow to support its rapid economic growth.

India’s oil imports from Russia rose in September as overall demand for hydrocarbons increased ahead of the Diwali festive season, according to analytics firm Kpler, as reported by the Indian Express.

Shipments from Russia to India grew by 6.4% compared to August, reaching 1.88 million barrels per day, which accounted for 40.2% of New Delhi’s total imports. Analysts noted a significant rise in import volumes due to the expected resumption of operations at most refineries undergoing maintenance, starting in October.

The newspaper emphasized that India is “extremely sensitive” to oil prices. Although discounts on Russian fuel have narrowed over time, Indian refiners remain interested. Given the high import volumes, even lower discount levels lead to substantial savings.

Viktor Katona, head of oil analytics at Kpler, noted that expectations of a reduction in India’s purchases from Russia did not materialize. However, data indicated a noticeable increase in imports from Saudi Arabia, which has reportedly reduced its prices in a bid to increase its market share in India.

Katona noted that imports from Russia could rise further as Indian refineries seek to secure long-term contracts with Moscow for energy supplies. Business Standard reported last week, citing sources at the Ministry of Petroleum and Natural Gas, that India’s state-owned oil refiners are in talks with Russia to sign long-term supply agreements, potentially finalizing deals by next April, when the new fiscal year begins.

As the world’s third-largest consumer of crude oil, India relies on imports for over 85% of its needs. Russia has become India’s top oil supplier, with New Delhi often highlighting Moscow’s role in ensuring the nation’s energy security. While private refiners already have annual contracts for Russian oil, state companies have primarily purchased it through spot markets, reserving long-term contracts for Middle Eastern sources.

However, ministry sources indicated that high volatility in spot prices has made this arrangement less appealing. Long-term contracts are anticipated to stabilize pricing and provide India with consistent access to Russian oil at a lower cost.

India significantly increased its purchases of Russian crude following the outbreak of the Ukraine conflict and subsequent Western sanctions on Moscow in 2022, capitalizing on the discounts offered after Russia lost traditional buyers in the West.

https://www.rt.com/india/605231-india-ramps-up-russian-oil/

Russia's dependence on oil and gas revenues is steadily declining, by Georgy Bovt for Rossiyskaia Gazeta.10.07.2024.

The Wall Street Journal caused a stir in the oil market, citing Saudi Arabian Oil Minister Abdulaziz bin Salman, who wrote that prices could fall to $50 per barrel if OPEC+ members fail to comply with production quotas. OPEC, however, hastened to deny this information. However, there is no smoke without fire: most likely, this is about Riyadh's intention to "intimidate" those members of the expanded cartel that do not comply with the established quotas. This primarily concerns Iraq and Kazakhstan (the Saudis even sent delegations to both countries recently to "call them to order"). Russia observes quota discipline: the rules allow for a slight temporary excess. Our country allowed it in the summer (at the peak of demand for fuel) and now, according to the same rules, it is compensating for it by reducing production in October by 10 thousand barrels per day, in November by 30 thousand, and by the end of September next year Russia must reduce production by 480 thousand barrels per day.

Against the backdrop of Riyadh's unambiguous hints, many began to talk about the possibility of a repeat of the 1985-1986 scenario, when the kingdom, in a fight to maintain its market share, sharply increased production and brought down oil prices, which had a detrimental effect on the USSR economy. However, since then the world has changed, the Russian economy has changed, and the cartel's influence on the market has not increased. This year, the share of the OPEC+ member countries on the oil market was 48%, last year it was 50%, and in 2022 - 51%. Yes, the Saudis have an oil production cost of less than $10 per barrel (in Russia it ranges from $20 from old wells to just over $40 on the shelf and $50 at new wells, which is comparable to the cost of shale oil production in the US - $35-50 and conventional oil at $43-45), and they can easily increase production in order to maintain market share. However, the kingdom's budget is more than 75% dependent on oil. Given Riyadh's huge spending, including on the ambitious Vision 2030 modernization program, in 2023 the breakeven price of oil was $81 per barrel (the world price was already lower), this year it is already $96 (the price of Brent is now $73-75). The budget has been in deficit for the second year: this year the kingdom's revenues will amount to $312 billion with expenses of $333.5 billion. And the national debt has reached 24% of GDP (in Russia it was 15% of GDP in 2023, in the EU on average - 82%, in the US - 123%).

In Russia, the share of oil and gas revenues in the budget is actually falling. From 2011 to 2014, it averaged 50% of budget revenues, against the backdrop of low prices in 2015-2017, it fell to 39.5%, in 2022, against the backdrop of sharply increased prices, it rose again to 41.6%, last year it was 30.3%, and this year it may be 31.3% (the forecast for 2026 is 25.2%). At the same time, the decline in the share of oil and gas revenues is occurring in the context of a significant increase in total revenues and a reduction in the budget deficit, which has not been observed in the entire post-Soviet period. Usually, everything was the other way around. Now, the total federal budget revenues in 2025 are expected to be at the level of 40.3 trillion rubles, which is 11.6% y/y higher than the plan for 2024 (36.1 trillion rubles) and 1.6 times higher than revenues in 2021 (25.3 trillion).

The 2025 budget includes an export price for Russian Urals oil of $69.7 per barrel (which means Brent should be closer to $80) at an exchange rate of 96.5 rubles per dollar.

The current situation in the Russian Federation is strikingly different from the late USSR, and the country's budget is more resistant to price fluctuations than the Saudis'. So the West has fewer levers of influence on Russian finances through "oil sanctions" and price manipulation. Therefore, when Deputy Prime Minister Alexander Novak says that the Russian Federation will withstand "any prices" for oil, he is not so far from the truth. Of course, we are not talking about eternally low prices. The same Saudi Arabia, if it undertakes a price war, will rely on its gold and foreign exchange reserves (more than $450 billion) and an increase in debt, but this resource is not endless. The kingdom is already ready to abandon the target price for oil at $100 per barrel and is preparing for a long period of relatively lower prices.

The threat to oil prices in the near future may come not so much from Saudi Arabia, which so far has only hinted at the possibility of increasing production as punishment for "OPEC+ disobedients", but from the slowdown of the global economy and, above all, its two main "workshops" - China and the USA. In China (it is an importing country, unlike the USA), oil consumption has already decreased by 3% from January to August.

This may overlap with the plans of OPEC+, which has been voluntarily reducing oil production by 2.2 million barrels per day since the beginning of this year, to gradually roll back these cuts from December. However, this is unlikely to happen automatically. The decision may still be adjusted, since the expanded cartel monitors the balance of supply and demand every month and can adjust if there is a deficit or surplus of oil on the markets. Since oil and its prices are one of the most volatile factors, forecasts are constantly changing. At present, the International Energy Agency forecasts a deficit of 100 thousand barrels per day of oil supply in the fourth quarter with a slight decrease in global demand to 103.9 barrels per day. There is also a factor of geopolitical risks - due to the situation in the Middle East, as well as, in particular, around Iran (3% of world production) and the Strait of Hormuz, through which large oil traffic passes. Finally, oil-producing countries, including Russia, may - what a paradox - unexpectedly receive help from the American Federal Reserve System if it continues to lower the discount rate, "warming up the market", including the oil futures market. Also, too strong a fall in oil prices is not advantageous for America itself, with its strong oil and gas complex (which is itself a powerful lobby and is especially politically connected with the Republicans) and relatively high oil production costs (comparable, let us recall, to the Russian one).

So, in the short term, a 1985-1986-style oil price shock is not in sight anytime soon.

https://rg.ru/2024/10/06/griadet-li-cenovoj-shok-na-neftianom-rynke.html