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

"The fact that Russian fossil gas is still allowed to flow into Sweden, more than six months after Putin began his invasion of Ukraine, is unacceptable," Karolina Carlsson, a campaign leader at Greenpeace Nordic, said in a statement on September 8.

Indonesia wants to buy Russian oil. 09.12.2022.

The country can potentially purchase up to 1 million barrels per day in Russia.

Indonesian authorities are considering buying oil from Russia due to rising energy prices in the domestic market, President Joko Widodo said on September 12 in an interview with the Financial Times.

“We are always monitoring all options. If there is a country that gives the best price, of course. <...> The government is obliged to find various sources to meet the energy needs of its people. We want to find a solution,” Widodo replied to the question whether Indonesia intends to buy Russian oil.

Indonesian Minister of Tourism Sandiaga Uno reported on August 24 in his Instagram account (blocked in the Russian Federation, owned by Meta banned in Russia) that Russia offered to buy its oil at a price 30% lower than on the international market. According to him, the President of Indonesia is considering this proposal.

Aleksey Drugov, chief researcher at the Center for Southeast Asian Studies at the Institute of Oriental Studies of the Russian Academy of Sciences, notes the difficult situation of the current leadership of Indonesia. The President of this country, according to him, has canceled state subsidies for domestic fuel, which "threatens to a sharp rise in prices in the domestic market."

“In order for the fuel crisis not to provoke social tension and shake Widodo’s political positions, the country’s president is vitally interested in getting Russian energy resources at profitable low prices,” the political scientist told Vedomosti.

Widodo is likely to be able to discuss Russian oil purchases with Russian President Vladimir Putin at the G20 summit, which will be held on the island of Bali in Indonesia on November 15-16. But a final decision on Putin's trip to the summit has not yet been made, presidential spokesman Dmitry Peskov said on September 4.

Widodo's statement came amid the decision of the G7 countries (US, Canada, UK, Japan, Germany, France and Italy) to set a ceiling on Russian oil prices, which was announced on September 2. The G7 plans to create a cartel of Russian oil buyers who will purchase fuel no more than the established “ceiling” of the price.

Earlier, Bloomberg reported that the G7 are discussing the level of $40-60/bbl. Those who join the cartel, but will buy oil at a higher price, face sanctions, follows from the published preliminary instructions of the US Department of the Treasury. The restriction is planned to be introduced together with the entry into force of EU sanctions on offshore supplies of Russian oil, that is, from December 5, 2022.

Russian President Vladimir Putin on September 7 at the WEF-2022 in Vladivostok said that Russia would not supply its energy resources, including oil, on conditions imposed on it outside the contract. He called the idea of ​​limiting prices for Russian energy resources in an administrative way "nonsense and nonsense."

US Treasury Secretary Janet Yellen, in an interview with CNN on September 11, admitted that the imposition of a cap on Russian oil prices could lead to higher fuel prices on world markets. According to her, the G7 proposal is aimed at reducing Russia's oil revenues, but ensuring stable supplies to the world market in order to keep "prices affordable for people."

The countries of the OPEC+ agreement, which have consistently increased production quotas since April 2020, could help in this. G7 finance ministers asked them to do this. But on September 5, OPEC+ not only did not increase, but even reduced quotas for October by 100,000 barrels per day “against the backdrop of volatility and lack of liquidity” in the oil market.

Western countries have begun to impose restrictions on oil imports from the Russian Federation in response to a special military operation (SVO) in Ukraine. In March 2022, the US and UK adopted a complete ban on Russian oil supplies. In June, the European Union agreed on an embargo on oil and oil products from the Russian Federation. As a result, Russian oil companies had to hastily redirect supplies of raw materials from Europe to Asia. The main buyers of oil from the Russian Federation in this region are India and China. As a result, Russia's share in India's oil imports increased 6 times to 12%, China increased oil imports from Russia by 8% from March to July compared to 2021.

But buyers began to ask for discounts, which caused Russian oil to trade at a discount to Brent, reaching $35/bbl. Then the spread began to gradually decrease and by the beginning of September it already reached just over $20. The CBO and the sanctions imposed on Russia provoked a panic in the markets, which led to a sharp increase in oil prices. On March 8, at its peak, a barrel of Brent was trading at $128. Then the price of oil stabilized and fixed at around $100/bbl. On September 7–8, quotes fell to $87/bbl. against the backdrop of a rate hike by the European Central Bank (ECB), but quickly returned to above $90/bbl. On September 12, November Brent futures on the ICE exchange traded at $93.8/bbl.

Drugov notes that Widodo's statement was made publicly, which indicates the seriousness of Jakarta's intentions. But the United States, in his opinion, can still influence the final decision, even if it runs counter to the interests of the country. In particular, he recalled that Indonesia, under pressure from Washington, has already significantly reduced military-technical cooperation with Moscow.

According to the UNCTAD/WTO World Trade Center, Indonesia imported 6.5 million tons of oil in the first half of 2022, of which 2.8 million tons (43%) came from Nigeria, 2 million tons (31%) from Saudi Arabia. Arabia, 344,000 tons (5%) - to Angola, and just over 1.3 million tons (21%) - to "other" suppliers.

Russia did not supply a single ton of oil to Indonesia in the first half of 2022, said Kirill Rodionov, an expert at the Institute for the Development of Fuel and Energy Complex Technologies. Indonesia itself produces about 600,000-700,000 barrels per day with a consumption of 1.5-1.6 million barrels per day, adds Igor Galaktionov , an expert on the stock market at BCS World of Investments.

“Thus, the maximum volume of imports from Russia can be up to 1 million barrels per day, which will make it possible to redirect most of those sea supplies that still go to the EU countries,” Galaktionov said. However, to do this, Russian companies will have to push out suppliers that have long been entrenched in the Indonesian market, including Saudi Arabia and Nigeria.

Galaktionov also believes that Jakarta "is unlikely to want to increase its dependence on one supplier," especially in the face of pressure from the G7. Alexander Frolov, deputy director of the National Energy Institute, agrees with this. In his opinion, Russian companies will be able to supply 100,000–200,000 barrels per day of oil to the Indonesian market. But against the backdrop of the energy crisis in the country, Jakarta will most likely prefer to buy oil products from the Russian Federation, mainly fuel oil and diesel fuel, as an alternative to gas and coal, Frolov believes.

https://www.vedomosti.ru/business/articles/2022/09/12/940457-indoneziya-hochet-rossiiskuyu-neft

lancelot wrote:When these people talk about a "discount" they are measuring the price of Urals vs Brent.
The price of Brent spiked up because of the EU sanctions which supposedly make this oil more interesting. Yet Urals price did not go down.