14 JULY, 2006
Oil on Fire
Oil pot is bubbling and steaming again. Drums beating to the rhythm of the Domba dance. Morgan Stanley, John Fredrikson and others are keenly waiting for the time to ladle the stew onto plates.
Highly polarized and charged up world politics, claims of big oil finds ending in a fart, looming hurricane season in US Gulf and unabated thirst of oil from all parts of the world have launched the oil price rocket into space. Logistics would have a ride too.
We still believe, man would have to change his reproductive and consumer behavior to control spiraling oil prices while tanker owners, growing and gobbling tonnage, should follow the oil supply curve closely...
****************
13 JUNE, 2006
The BLOB
As expected, The Cash BLOB whips the cream off stock and commodity markets, leaving small investors/ speculators high and dry once again.
But Oil is still standing tall, like the last warrior. Guess, waiting for the hurricane season in USG for that last leap when the BLOB makes its most priced killing before hibernating this winter...
***************
2 MAY, 2006
Shooting Commodity Prices - Blame it on US (not us)
Today USA has established itself as the universal debtor. By now USA is addicted not only to oil but all good things the world can offer - Buy, Beg or Borrow.
Its a story about spending more than you have or can. In India we say, don't stretch your feet beyond your bed sheet.
As trade deficit mounts, basic economic instrument is to increase interest rates, which would promote savings and cut down on expenses/borrowings. But raising interest rates have negative impact on stock
markets. Easy and populist way out is to print more greenbacks, which has found favour with US presidents in fray for re-elections as rising US financial markets make them popular. But expanding money supply to maintain liquidity means expanding debt. And thus their economy has got into this vicious circle.
The most amazing thing about the two-decade bull market in US was that it occurred after the dollar gold window had already closed. All the capital drawn into dollar-denominated assets was priced in a currency that was being devalued every single day. With all those borrowings and trade deficit, US dollar cud have depreciate like Latin American currencies, but only due to the thriving Asian/ European economies, which won't let the dollar fall below certain level to see their exports flowing to ever ready old Uncle Sam.
Now, given the weak dollar, government determination to inflate, and little incentive to save; commodities remain the only way out for over stressed resources to breathe -- offering tremendous upside potential. The commodities like Gold, oil, metals are on a bull run and so are the Asian/ European feeder markets. The fundamentals are undeniable. Long live Uncle Sam!!!
Shooting commodity prices intensify the struggle for raw materials and tension between new building socioeconomic relations. Interestingly, looking back into history offers a very uncomfortable perspective. Since the 1930s war has always helped to pull the USA out of recessions:
- The Great Depression ended with world war II.
- The slump in the 1950s ended with the Korea war.
- In the 1960s Vietnam war.
- In the early 1980s the Nicaragua conflict
- Mid 1980s Iran-Iraq showdown.
- The Iraq war after the dot com bust until now.
And now it has established eye contact with Iran.
What next...
*****************
20 APR, 2006
OIL - FEAR FACTOR
Middle-East has always been the hub of oil politics in post world war II era. Naturally, as they sit on 60% of the world's oil supplies. But start of this century, temperatures are shooting higher.
The United States is addicted to Oil, as Mr. Bush puts it. Whosoever, West or Middle or East, is deemed to be the de-stabilizing influence to the free flow of oil to international markets from the Middle East is on the wrong side of bush. Saddam Hussein demonstrated a willingness to threaten to use the oil weapon and to use his own export program to manipulate oil markets.
Now Iran is on the same course. Iran's president Mahmoud Ahmadinejad went on record saying ,"Crude oil prices still are below their true value..."- stopped short of saying Iran would use oil as a weapon, a tactic much feared by his antagonists on the nuclear issue. Nor did he say what oil prices should be.
The US is becoming increasingly nervous by oil shortages in the face of the inability of oil supplies to keep up with world demand. States like China and India are now threatening the lion's share. US Secretary of State Condoleezza Rice makes no bones about it when she says, "It is sending states like China and India, that are growing very rapidly in an all-out search for energy - that is, really sending them into parts of the world where they've not been seen before. And challenging, I think, for our diplomacy."
Politics or no politics, reality is that the oil demand is growing out of proportions. Demand projection for the next 10 years, is ripping through the supply ceiling. With no immediate alternatives in sight, oil companies are having a boom time. Logistics had its share too and will keep having it as long as the employers...
***********
4TH APRIL, 2006
Oil to remain firm
While some tanker owners are contemplating to lay up their beauties, Oil prices have shot up above $67 with 23 per cent of Nigerian output still shut by rebel attacks and no sign of Royal Dutch Shell restarting exports from its Forcados oilfield and EA terminal. The removal of 550,000 barrels per day of Nigerian oil has coincided with growing demand from refiners in the United States.
Also, Shipments of crude oil from the OPEC will probably fall 0.3 percent to 24.88 million barrels a day in the four weeks to April 8, compared with the previous four weeks, because of a decline in production from the group.
Prices are 20 percent higher than a year ago. Many believe, global economy could absorb $60 a barrel crude. The latest indication is that OPEC is unlikely to allow prices to fall back sharply and keep the prices high for the time being. "There is a consensus based on market fundamentals that a sustained price will be maintained in the short term," Sonatrach Chief Executive Mohamed Meziane said in Algiers.
Clearly, the oil producers are turning valves clockwise to maintain high prices in relatively weaker weeks, adding to the woes of tanker owners.
Oil prices still trading near record levels may lead to a decline in demand for hydrocarbons as consumers look toward alternative energy supplies. G8 ministers are now already discussing development of alternative energy sources such as nuclear power, a competing energy source OPEC officials have previously criticized as potentially unsafe. Prez. Bush has effectively sold this riskier preposition to India and is now actively working to see the nuclear treaty between the two nations go thru.
**************
24 MARCH, 2006
India's Oil demand to rebound
India's thirst for oil should pick up in the coming months after unexpectedly weak growth last year, but the dominance of the low-energy services sector will keep it out of China's league among the world's biggest guzzlers. Oil demand in the world's second-most populous nation edged up 1.1 per cent last year, despite an 8 percent increase in gross domestic product, far different from most developed nations where energy use grows in lock-step with the economy.
Some analysts see a recovery this year, in part thanks to a flurry of activity surrounding regional elections this spring and the unwavering expansion of Asia's third-largest economy. Call it a temporary blip. Oil demand will rise again. The sheer momentum of economic growth would raise oil demand.
But others say rising rail traffic, the supply of nearly free electricity to farmers and a trend toward more fuel-efficient cars could disappoint dealers who had hoped for a bigger boom from Asia's third-largest consumer.
The fact that the services sector makes up 54 per cent of the economy will also restrain growth.
"The share of services has grown. Except for transportation, the service sector's energy consumption is not so high," said T.K. Bhaumik, chief economist at Reliance Industries, India's largest oil and petrochemicals company.
For oil markets, tepid growth means India will remain in the shadow of industrialised China -- which consumes three times as much oil and is growing many times faster -- until new refinery projects turn it into a major exporter by the end of this decade.
***********
10TH FEB., 2006
Oil Bite - The old snake and frogs
There was this old handicapped snake, unable to catch his prey and fill his belly. He was almost dead, when he found this oasis full of juicy frogs. But frogs were too fast for the snake's reflexes.
The snake met with the king of frogs and told him that he loved frogs and he wanted to have friendship with them. The snake suggested the king frog that he might sit on his back for a ride, which would also consolidate his (the king frog's) position among other frogs. The king frog agreed to the snake's proposal. After enjoying joy ride and display of power for few days, the king frog was requested by the snake to let him have one of the frogs from his kingdom. King frog felt obliged and consented. This was just the beginning... and one by one the snake consumed all the frogs, while king frog was enjoying the joy ride through his diminishing kingdom.
And finally the king frog was ready for his journey to the final destination...
********************
1 DECEMBER, 2005
India plans Strategic Oil Reserves
India's Ministry of Petroleum and Natural Gas has proposed a plan to build a strategic oil reserves facility that can store 10 million metric tons, or 73.3 million barrels, of crude oil.
India currently does not have such a facility, although local refiners have their own independent storage facilities. The Oil Industry Development Board, a government organisation, will invest around usd 450million to build the facility.
The board will also study the possibility of building a facility that can store three billion cubic meters of natural gas, to ensure at least 15 days' supply. The Finance Ministry will discuss the proposal before sending it to the cabinet for approval.
p.s.How long wud it take to happen is to be seen.
******************
9TH NOV, 2005
Oil to flow thru Mundra SBM
Come December 2005 and IOCL's Panipat Refinery is ready to receive additional 6 MMTPA of crude ie 2 VLCCs per month through the single buoy mooring (SBM) facility at Mundra port in Gujarat.
Earlier in Aug. '2005 BPCL pegged up volumes of its Mumbai Refinery from 6.9 MMTPA to 12 MMTPA.
Just to remind you again of Indian quest for OIL:
Expansion plans of Existing refineries are as under:-
-----------------------------------------------------
(i) Expansion of Panipat Refinery of IOCL from 6 MMTPA to 12 MMTPA by end of 2005. (6MMTPA) - DONE
(ii) Expansion of Mumbai Refinery of BPCL from 6.9 MMTPA to 12 MMTPA by July, 2005. (5.1MMTPA) - DONE
(iii) Expansion of HPCL's Mumbai Refinery from 5,5 MMTPA to 7.9 MMTPA by December, 2006. (2.4MMTPA)
(iv) Expansion of Visakh refinery of HPCL from 7.5 MMTPA to 8.33 MMTPA by December-2006. (0.83MMTPA)
(v) Expension of New Mangalore Refinery of MRPL from 9.69 MMTPA to 15 MMTPA by Dec. 2006. (5.31MMTPA)
(vi) Expension of Jamnagar refinery of Reliance from 33MMTPA to 60MMTPA by March-2009. (27MMTPA)
-------------------------------------------
TTL ADDITION by way of expension: 46.64MMTPA
-------------------------------------------
Following NEW refineries have been planned:
-------------------------------------------
HPC, Bhatinda 9 MMTPA Dece.-2006
BPC, Bina 6 MMTPA Sept.-2009
IOC, Paradip 9 MMTPA March-2010
MRPL, New Mangalore 15MMTPA Dec. - 2010
----------------------------------------
TTL ADDITION by way of new refineries = 39MMTPA
----------------------------------------
******************
28 SEPT., 2005
Mida's touch - whatever they touch, turns oil.
China is gearing up for a massive investment in plants to turn coal into gas
and oil. High oil and gas prices have made the coal-to-liquids (CTL) technology increasingly attractive to China, which has abundant reserves of the traditional "black gold", but relatively diminishing reserves of oil.
China's central planners have on their desks proposals for at least $24bn worth of large-scale coal-to-liquids projects, with a number of pilot plants already under construction in Inner Mongolia and other coal-rich provinces. If all of these projects went ahead, it would be the equivalent of replacing one million barrels of oil a day.
China now consumes about 7mbbls of oil a day.
The technology to turn coal into gas and oil was invented in the 1920s by the Germans, who used it to power their military during the second world war. More recently, it was refined by South Africa in the 1980s under apartheid-era sanctions.
***************
26 SEPT, 2005
Great Indian Oil Rush
Reliance Industries Ltd will invest $5.5 to 6 billion to raise capacity of its Jamnagar oil refinery to 60 million tonnes by 2009. Adding most of the expanded capacity would be to for export markets in North and South America, Gulf countries, Europe and some countries in Africa.
The 33 million tonnes a year capacity Jamnagar refinery currently is the single largest refinery in India and the expansion would enable the firm to remain the country's second largest refinery after state-owned Indian Oil Corp (IOC). Also, Reliance Industries has bid for acquiring 51 per cent stake in a refinery in Colombia. The Indian firm is pitched against Brazil's Petrobras and Venezuela's PDVSA for the $850 million expansion of Cartegena refinery capacity to 1,40,000 barr els per day from the current capacity of 78,000 barrels per day. Colombia is looking for a partner up to 51 per cent of the capital needed for the expansion and aims to award the project in the first quarter of next year. The winning company would independently operate the refinery. State oil company Ecopetrol currently runs it. Reliance plans to shutdown down some units of its Jamnagar refinery in October for 42-days for maintenance purpose. The outage will affect supplies of LPG, petrol and
diesel.
Expansion plans of Existing refineries are as under:-
-----------------------------------------------------
(i) Expansion of Panipat Refinery of IOCL from 6 MMTPA to 12 MMTPA by end of 2005. (6MMTPA)
(ii) Expansion of Mumbai Refinery of BPCL from 6.9 MMTPA to 12 MMTPA by July, 2005. (5.1MMTPA)
(iii) Expansion of HPCL's Mumbai Refinery from 5,5 MMTPA to 7.9 MMTPA by December, 2006. (2.4MMTPA)
(iv) Expansion of Visakh refinery of HPCL from 7.5 MMTPA to 8.33 MMTPA by December-2006. (0.83MMTPA)
(v) Expension of New Mangalore Refinery of MRPL from 9.69 MMTPA to 15 MMTPA by Dec. 2006. (5.31MMTPA)
(vi) Expension of Jamnagar refinery of Reliance from 33MMTPA to 60MMTPA by March-2009. (27MMTPA)
-------------------------------------------
TTL ADDITION by way of expension: 46.64MMTPA
-------------------------------------------
Following NEW refineries have been planned:
-------------------------------------------
IOC, Paradip 9 MMTPA March-2010
BPC, Bina 6 MMTPA Sept.-2009
HPC, Bhatinda 9 MMTPA Dece.-2006
MRPL, New Mangalore 15MMTPA Dec. - 2010
----------------------------------------
TTL ADDITION by way of new refineries = 39MMTPA
----------------------------------------
Going by above figures, GRAND ADDITION to India's refining capacity by the end of year 2010 wud be 85.64MMTPA AGW WP...
In terms of bbls India wud see a rush from existing 2.6mbpd to 4.4mbpd by end of year 2010, provided one doesn't kick the bucket and spill those eggs..
************
31ST AUG, 2005
Shooting Oil Prices - Sluggish Spot tanker activity - Booming Stock markets
Above are three contradictory truths of life today.
Price of oil has shot to over $70 per bbl as US Gulf Coast oil industry experts are starting to assess the extent of the damage done by hurricane Katrina. The storm has stopped most oil production in the region.
The price of oil has increased by 60% in last one year. Best minds in business expect the world to endure near record oil prices for at least another two years. Normally extreme price gains would encourage the biggest oil companies to accelerate the search for new sources of oil, which would help push down prices. But this time it's different as big oil producers have failed to boost production by building new refineries and significantly extending the search for new sources of oil.
High oil prices fuel inflation and dampen the economy, since high inflation prompts state to impose higher interest rates, which control demand and prices and promote savings, which in turn slow down economic growth.
But this has not happened till now. We try to analyze why.
High oil prices would have elicited a strong supply response. And the reason that that has not occurred is simply because Mr. Bush is not interested in controlling oil prices after gaining control of Iraqi Oil. Opec has rightly blamed US for persisting with refining bottle necks, which has been the main reason for hike in oil prices.
We acknowledge the fact that oil is a finite source and today world oil supplies may have been standing at near peak. But this sharp rally in prices is just an over-reaction to the fact. And this over-reaction has come from Saddam's funds for WMD( Did they find one? But we all know for sure that he had tons of money), which we believe is now being used in trading oil and stocks.
All of a sudden world has become cash rich. Stock markets are fearlessly cruising ahead, ignoring the basic fundas of economy.
We think shipping activity is the true indicator of world economy since it shows the physical trade taking place. Falling freight markets suggest there is down trend in trade.
The big money is blowing the gum too far. And one day it will whip the cream off small investors and disappear into thin air just to strike back later.
Whatever it is, serves to remind us of how vulnerable the world global energy system is. However, we live in this uncertain world where there is a chance that we will return to normal...
************
26 MAY, 2005
Giant Caspian oil pipeline opens
Oil is set to flow from the Caspian Sea direct to the Mediterranean for the first time after a $3.6bn (£2bn) pipeline opened on Wednesday, the 25th May. Starting in Azerbaijan, the 1,600km (1,000 mile) pipeline will pass through Georgia to the Turkish port of Ceyhan. include Azerbaijan\'s state oil company Socar, Amerada Hess, ConocoPhillips.
The project has taken more than 10 years to finish and will unlock one of the world's biggest energy reserves.
The pipeline has been an international effort and was built by a consortium led by UK oil giant BP, which has a 30% stake. Other consortium members, Eni, Inpex, Itochu, Statoil, Total, TPAO and Unocal.
Implications
============
Until now, states in the region sent almost all of their oil via the Caspian Oil Pipeline linking Kazakhstan and the Russian Black Sea. The 900-mile pipeline, is built from the Tengiz Field in western Kazakhstan to the Black Sea port of Novorossiysk.Oil from mainly the Kazakhstan region is transported along the pipeline to the Black Sea, where tankers sail into the Mediterranean Sea and onwards into the Atlantic. But narrow curves of the Bosporus Strait bisecting Istanbul presented a potential navigation hazard and serious risk of oil pollution disaster.
With start of this new pipeline, Up to a million barrels a day will eventually be heading directly west without going through the Bosporus maze. The oil in the pipeline will initially come entirely from Azerbaijani fields, but Kazakhstan is expected to participate in the project before the end of the decade. This will mean lesser waiting for tankers and quicker turn around in Med.
The BBC\'s Emma Simpson said from Baku that for energy-hungry countries such as the US the pipeline was a strategically important non-Russian, non-Middle Eastern source of oil. This will also cut down voyage by 8 to 18 days on tankers against their AG/West voyage.
Well, something not to cheer about from owners point of view, except there will definitely be more oil.
*****************
6TH MAY, 2005
The End of Oil
Taken together, the populations of China and India constitute more than one-third of the total world population. And this 35% of world population has just been swept by a decade of communication and information technology and ushered into an era of commerce and splurge.
To realize the dreams of their subjects, these neo rich nations have to develop vast infra-structure. And to build this infra structure they need lot of energy.
At current crude prices, the demand projections may fall short of the reality boom. In order to have an idea to where the demand can reach, as per year 2001 survey, per 1000 capita demand of oil in India and china was 2 bbls/day and 3.32bbls/day respectively as compared to United States's 67.06bbls/day.
On the other hand, supply side has limited ability to satisfy the rising demand. Having only 1.5 million to 2 million barrels a day of spare capacity, some OPEC nations have been assuring the world of their ability to deal with the supply crunch that looms large in future. Could only wish dinosaurs had lived a bit longer.
Here we see an oil peak graph, which shows oil supply peaking in year 2010. But with present surge in crude demand, this oil peak could easily shift to the left. So we can say with certainty that the days of cheap energy are over and I think, guys talking USD100/bbl are not just talking off the hat.
In that case, impacts of rising energy prices on the economies of most nations would be profound, specially, India and China. The eastern dream would be cut short and their subjects would again go back into hibernation.
God forbidding, if this nightmare sees the light of the day, I should not be talking about its repercussions on shipping.
*************
5TH MAY, 2005
OIL PRICES - What's the limit
Taken together, the populations of China and India constitute more than one-third of the total world population. And this 35% of world population has just been swept by a decade of communication and information technology and ushered into an era of commerce and sleek.
To realize the dreams of their subjects, these neo rich nations have to develop large infra-structure. And to build this infra structure they need lot of energy.
At current crude prices, the demand projections may fall short of the reality boom. In order to have an idea to where the demand can reach, as per year 2001 survey, per 1000 capita demand of oil in India and china was 2 bbls/day and 3.32bbls/day respectively as compared to United States's 67.06bbls/day.
Whereas, Supply side has limited ability to satisfy the rising demand. Having only 1.5 million to 2 million barrels a day of spare capacity, some OPEC nations have been assuring the world of their ability to deal with the supply crunch that looms large in future. I Could only wish dinosaurs had lived a bit longer.
But life has to go on, with or without oil.
I think, guys talking USD100/bbl are not just talking off the hat. In that case, impacts of rising energy prices on the economies of most nations would be profound, specially, India and China. The eastern dream would be cut short and their subjects would again go back into hibernation.
For Eastern dream to survive, the world will have to address the problem collectively and think of developing alternate sources of energy and at the same time promote conservation of energy, where possible. This is the only solution for win win situation for all.
******************
28 APR, 2005
Can Oil hogs enjoy their appetite eternally
Lets assume a hypothetical situation, if earth were to shrink to the size of moon, could man have sustained the present rate of population growth. The answer is a logical 'no'. Man would have to change his reproductive behavior and patterns to match the available resources.
Now, we have been talking of world oil demand growing in leaps and bounds whereas on supply side, OPEC cartel has limited ability to solve the supply crunch because it has only 1.5 million to 2 million barrels a day of spare capacity, representing barely one year of world demand growth.
The chief executive of Petro-Canada, Ron Brenneman, said yesterday, "Our view is that for this to basically self-correct is more likely to come on the demand side. That is not something that we can see occurring overnight. I suspect that is off in the future somewhere, by the time prices have an impact on consumer behavior and buying patterns and energy consumption."
We agree Mr. Brenneman. Tanker owners, while growing and gobbling tonnage, should study the supply curve more closely while Demand curve will help hedge funds, speculating in crude futures.
************
24 APR, 2005
TALE OF TWO OIL HOGS
Starting in 1993, China became a net oil importer and its oil imports have risen steadily. Last year, China imported 123 million tons of oil, while its annual oil consumption stood at 280 million tons. The International Energy Agency forecast that China will import150 million tons of oil in the year 2010 and the number will climb to 250 million by 2020.
And not too far behind, India's crude oil imports have risen 5.5 per cent to 95.315 million tonnes in year 2004-05 as against 90.434 million tonnes crude oil imported in 2003-04. Total domestic production of crude oil during 2004-05 was 34.05 million tonnes against 33.37 million tonnes in the previous financial year.
And both the countries depend largely (90%) on foreign oil tankers for their imports.
Oil on Fire
Oil pot is bubbling and steaming again. Drums beating to the rhythm of the Domba dance. Morgan Stanley, John Fredrikson and others are keenly waiting for the time to ladle the stew onto plates.
Highly polarized and charged up world politics, claims of big oil finds ending in a fart, looming hurricane season in US Gulf and unabated thirst of oil from all parts of the world have launched the oil price rocket into space. Logistics would have a ride too.
We still believe, man would have to change his reproductive and consumer behavior to control spiraling oil prices while tanker owners, growing and gobbling tonnage, should follow the oil supply curve closely...
****************
13 JUNE, 2006
The BLOB
As expected, The Cash BLOB whips the cream off stock and commodity markets, leaving small investors/ speculators high and dry once again.
But Oil is still standing tall, like the last warrior. Guess, waiting for the hurricane season in USG for that last leap when the BLOB makes its most priced killing before hibernating this winter...
***************
2 MAY, 2006
Shooting Commodity Prices - Blame it on US (not us)
Today USA has established itself as the universal debtor. By now USA is addicted not only to oil but all good things the world can offer - Buy, Beg or Borrow.
Its a story about spending more than you have or can. In India we say, don't stretch your feet beyond your bed sheet.
As trade deficit mounts, basic economic instrument is to increase interest rates, which would promote savings and cut down on expenses/borrowings. But raising interest rates have negative impact on stock
markets. Easy and populist way out is to print more greenbacks, which has found favour with US presidents in fray for re-elections as rising US financial markets make them popular. But expanding money supply to maintain liquidity means expanding debt. And thus their economy has got into this vicious circle.
The most amazing thing about the two-decade bull market in US was that it occurred after the dollar gold window had already closed. All the capital drawn into dollar-denominated assets was priced in a currency that was being devalued every single day. With all those borrowings and trade deficit, US dollar cud have depreciate like Latin American currencies, but only due to the thriving Asian/ European economies, which won't let the dollar fall below certain level to see their exports flowing to ever ready old Uncle Sam.
Now, given the weak dollar, government determination to inflate, and little incentive to save; commodities remain the only way out for over stressed resources to breathe -- offering tremendous upside potential. The commodities like Gold, oil, metals are on a bull run and so are the Asian/ European feeder markets. The fundamentals are undeniable. Long live Uncle Sam!!!
Shooting commodity prices intensify the struggle for raw materials and tension between new building socioeconomic relations. Interestingly, looking back into history offers a very uncomfortable perspective. Since the 1930s war has always helped to pull the USA out of recessions:
- The Great Depression ended with world war II.
- The slump in the 1950s ended with the Korea war.
- In the 1960s Vietnam war.
- In the early 1980s the Nicaragua conflict
- Mid 1980s Iran-Iraq showdown.
- The Iraq war after the dot com bust until now.
And now it has established eye contact with Iran.
What next...
*****************
20 APR, 2006
OIL - FEAR FACTOR
Middle-East has always been the hub of oil politics in post world war II era. Naturally, as they sit on 60% of the world's oil supplies. But start of this century, temperatures are shooting higher.
The United States is addicted to Oil, as Mr. Bush puts it. Whosoever, West or Middle or East, is deemed to be the de-stabilizing influence to the free flow of oil to international markets from the Middle East is on the wrong side of bush. Saddam Hussein demonstrated a willingness to threaten to use the oil weapon and to use his own export program to manipulate oil markets.
Now Iran is on the same course. Iran's president Mahmoud Ahmadinejad went on record saying ,"Crude oil prices still are below their true value..."- stopped short of saying Iran would use oil as a weapon, a tactic much feared by his antagonists on the nuclear issue. Nor did he say what oil prices should be.
The US is becoming increasingly nervous by oil shortages in the face of the inability of oil supplies to keep up with world demand. States like China and India are now threatening the lion's share. US Secretary of State Condoleezza Rice makes no bones about it when she says, "It is sending states like China and India, that are growing very rapidly in an all-out search for energy - that is, really sending them into parts of the world where they've not been seen before. And challenging, I think, for our diplomacy."
Politics or no politics, reality is that the oil demand is growing out of proportions. Demand projection for the next 10 years, is ripping through the supply ceiling. With no immediate alternatives in sight, oil companies are having a boom time. Logistics had its share too and will keep having it as long as the employers...
***********
4TH APRIL, 2006
Oil to remain firm
While some tanker owners are contemplating to lay up their beauties, Oil prices have shot up above $67 with 23 per cent of Nigerian output still shut by rebel attacks and no sign of Royal Dutch Shell restarting exports from its Forcados oilfield and EA terminal. The removal of 550,000 barrels per day of Nigerian oil has coincided with growing demand from refiners in the United States.
Also, Shipments of crude oil from the OPEC will probably fall 0.3 percent to 24.88 million barrels a day in the four weeks to April 8, compared with the previous four weeks, because of a decline in production from the group.
Prices are 20 percent higher than a year ago. Many believe, global economy could absorb $60 a barrel crude. The latest indication is that OPEC is unlikely to allow prices to fall back sharply and keep the prices high for the time being. "There is a consensus based on market fundamentals that a sustained price will be maintained in the short term," Sonatrach Chief Executive Mohamed Meziane said in Algiers.
Clearly, the oil producers are turning valves clockwise to maintain high prices in relatively weaker weeks, adding to the woes of tanker owners.
Oil prices still trading near record levels may lead to a decline in demand for hydrocarbons as consumers look toward alternative energy supplies. G8 ministers are now already discussing development of alternative energy sources such as nuclear power, a competing energy source OPEC officials have previously criticized as potentially unsafe. Prez. Bush has effectively sold this riskier preposition to India and is now actively working to see the nuclear treaty between the two nations go thru.
**************
24 MARCH, 2006
India's Oil demand to rebound
India's thirst for oil should pick up in the coming months after unexpectedly weak growth last year, but the dominance of the low-energy services sector will keep it out of China's league among the world's biggest guzzlers. Oil demand in the world's second-most populous nation edged up 1.1 per cent last year, despite an 8 percent increase in gross domestic product, far different from most developed nations where energy use grows in lock-step with the economy.
Some analysts see a recovery this year, in part thanks to a flurry of activity surrounding regional elections this spring and the unwavering expansion of Asia's third-largest economy. Call it a temporary blip. Oil demand will rise again. The sheer momentum of economic growth would raise oil demand.
But others say rising rail traffic, the supply of nearly free electricity to farmers and a trend toward more fuel-efficient cars could disappoint dealers who had hoped for a bigger boom from Asia's third-largest consumer.
The fact that the services sector makes up 54 per cent of the economy will also restrain growth.
"The share of services has grown. Except for transportation, the service sector's energy consumption is not so high," said T.K. Bhaumik, chief economist at Reliance Industries, India's largest oil and petrochemicals company.
For oil markets, tepid growth means India will remain in the shadow of industrialised China -- which consumes three times as much oil and is growing many times faster -- until new refinery projects turn it into a major exporter by the end of this decade.
***********
10TH FEB., 2006
Oil Bite - The old snake and frogs
There was this old handicapped snake, unable to catch his prey and fill his belly. He was almost dead, when he found this oasis full of juicy frogs. But frogs were too fast for the snake's reflexes.
The snake met with the king of frogs and told him that he loved frogs and he wanted to have friendship with them. The snake suggested the king frog that he might sit on his back for a ride, which would also consolidate his (the king frog's) position among other frogs. The king frog agreed to the snake's proposal. After enjoying joy ride and display of power for few days, the king frog was requested by the snake to let him have one of the frogs from his kingdom. King frog felt obliged and consented. This was just the beginning... and one by one the snake consumed all the frogs, while king frog was enjoying the joy ride through his diminishing kingdom.
And finally the king frog was ready for his journey to the final destination...
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1 DECEMBER, 2005
India plans Strategic Oil Reserves
India's Ministry of Petroleum and Natural Gas has proposed a plan to build a strategic oil reserves facility that can store 10 million metric tons, or 73.3 million barrels, of crude oil.
India currently does not have such a facility, although local refiners have their own independent storage facilities. The Oil Industry Development Board, a government organisation, will invest around usd 450million to build the facility.
The board will also study the possibility of building a facility that can store three billion cubic meters of natural gas, to ensure at least 15 days' supply. The Finance Ministry will discuss the proposal before sending it to the cabinet for approval.
p.s.How long wud it take to happen is to be seen.
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9TH NOV, 2005
Oil to flow thru Mundra SBM
Come December 2005 and IOCL's Panipat Refinery is ready to receive additional 6 MMTPA of crude ie 2 VLCCs per month through the single buoy mooring (SBM) facility at Mundra port in Gujarat.
Earlier in Aug. '2005 BPCL pegged up volumes of its Mumbai Refinery from 6.9 MMTPA to 12 MMTPA.
Just to remind you again of Indian quest for OIL:
Expansion plans of Existing refineries are as under:-
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(i) Expansion of Panipat Refinery of IOCL from 6 MMTPA to 12 MMTPA by end of 2005. (6MMTPA) - DONE
(ii) Expansion of Mumbai Refinery of BPCL from 6.9 MMTPA to 12 MMTPA by July, 2005. (5.1MMTPA) - DONE
(iii) Expansion of HPCL's Mumbai Refinery from 5,5 MMTPA to 7.9 MMTPA by December, 2006. (2.4MMTPA)
(iv) Expansion of Visakh refinery of HPCL from 7.5 MMTPA to 8.33 MMTPA by December-2006. (0.83MMTPA)
(v) Expension of New Mangalore Refinery of MRPL from 9.69 MMTPA to 15 MMTPA by Dec. 2006. (5.31MMTPA)
(vi) Expension of Jamnagar refinery of Reliance from 33MMTPA to 60MMTPA by March-2009. (27MMTPA)
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TTL ADDITION by way of expension: 46.64MMTPA
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Following NEW refineries have been planned:
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HPC, Bhatinda 9 MMTPA Dece.-2006
BPC, Bina 6 MMTPA Sept.-2009
IOC, Paradip 9 MMTPA March-2010
MRPL, New Mangalore 15MMTPA Dec. - 2010
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TTL ADDITION by way of new refineries = 39MMTPA
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28 SEPT., 2005
Mida's touch - whatever they touch, turns oil.
China is gearing up for a massive investment in plants to turn coal into gas
and oil. High oil and gas prices have made the coal-to-liquids (CTL) technology increasingly attractive to China, which has abundant reserves of the traditional "black gold", but relatively diminishing reserves of oil.
China's central planners have on their desks proposals for at least $24bn worth of large-scale coal-to-liquids projects, with a number of pilot plants already under construction in Inner Mongolia and other coal-rich provinces. If all of these projects went ahead, it would be the equivalent of replacing one million barrels of oil a day.
China now consumes about 7mbbls of oil a day.
The technology to turn coal into gas and oil was invented in the 1920s by the Germans, who used it to power their military during the second world war. More recently, it was refined by South Africa in the 1980s under apartheid-era sanctions.
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26 SEPT, 2005
Great Indian Oil Rush
Reliance Industries Ltd will invest $5.5 to 6 billion to raise capacity of its Jamnagar oil refinery to 60 million tonnes by 2009. Adding most of the expanded capacity would be to for export markets in North and South America, Gulf countries, Europe and some countries in Africa.
The 33 million tonnes a year capacity Jamnagar refinery currently is the single largest refinery in India and the expansion would enable the firm to remain the country's second largest refinery after state-owned Indian Oil Corp (IOC). Also, Reliance Industries has bid for acquiring 51 per cent stake in a refinery in Colombia. The Indian firm is pitched against Brazil's Petrobras and Venezuela's PDVSA for the $850 million expansion of Cartegena refinery capacity to 1,40,000 barr els per day from the current capacity of 78,000 barrels per day. Colombia is looking for a partner up to 51 per cent of the capital needed for the expansion and aims to award the project in the first quarter of next year. The winning company would independently operate the refinery. State oil company Ecopetrol currently runs it. Reliance plans to shutdown down some units of its Jamnagar refinery in October for 42-days for maintenance purpose. The outage will affect supplies of LPG, petrol and
diesel.
Expansion plans of Existing refineries are as under:-
-----------------------------------------------------
(i) Expansion of Panipat Refinery of IOCL from 6 MMTPA to 12 MMTPA by end of 2005. (6MMTPA)
(ii) Expansion of Mumbai Refinery of BPCL from 6.9 MMTPA to 12 MMTPA by July, 2005. (5.1MMTPA)
(iii) Expansion of HPCL's Mumbai Refinery from 5,5 MMTPA to 7.9 MMTPA by December, 2006. (2.4MMTPA)
(iv) Expansion of Visakh refinery of HPCL from 7.5 MMTPA to 8.33 MMTPA by December-2006. (0.83MMTPA)
(v) Expension of New Mangalore Refinery of MRPL from 9.69 MMTPA to 15 MMTPA by Dec. 2006. (5.31MMTPA)
(vi) Expension of Jamnagar refinery of Reliance from 33MMTPA to 60MMTPA by March-2009. (27MMTPA)
-------------------------------------------
TTL ADDITION by way of expension: 46.64MMTPA
-------------------------------------------
Following NEW refineries have been planned:
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IOC, Paradip 9 MMTPA March-2010
BPC, Bina 6 MMTPA Sept.-2009
HPC, Bhatinda 9 MMTPA Dece.-2006
MRPL, New Mangalore 15MMTPA Dec. - 2010
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TTL ADDITION by way of new refineries = 39MMTPA
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Going by above figures, GRAND ADDITION to India's refining capacity by the end of year 2010 wud be 85.64MMTPA AGW WP...
In terms of bbls India wud see a rush from existing 2.6mbpd to 4.4mbpd by end of year 2010, provided one doesn't kick the bucket and spill those eggs..
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31ST AUG, 2005
Shooting Oil Prices - Sluggish Spot tanker activity - Booming Stock markets
Above are three contradictory truths of life today.
Price of oil has shot to over $70 per bbl as US Gulf Coast oil industry experts are starting to assess the extent of the damage done by hurricane Katrina. The storm has stopped most oil production in the region.
The price of oil has increased by 60% in last one year. Best minds in business expect the world to endure near record oil prices for at least another two years. Normally extreme price gains would encourage the biggest oil companies to accelerate the search for new sources of oil, which would help push down prices. But this time it's different as big oil producers have failed to boost production by building new refineries and significantly extending the search for new sources of oil.
High oil prices fuel inflation and dampen the economy, since high inflation prompts state to impose higher interest rates, which control demand and prices and promote savings, which in turn slow down economic growth.
But this has not happened till now. We try to analyze why.
High oil prices would have elicited a strong supply response. And the reason that that has not occurred is simply because Mr. Bush is not interested in controlling oil prices after gaining control of Iraqi Oil. Opec has rightly blamed US for persisting with refining bottle necks, which has been the main reason for hike in oil prices.
We acknowledge the fact that oil is a finite source and today world oil supplies may have been standing at near peak. But this sharp rally in prices is just an over-reaction to the fact. And this over-reaction has come from Saddam's funds for WMD( Did they find one? But we all know for sure that he had tons of money), which we believe is now being used in trading oil and stocks.
All of a sudden world has become cash rich. Stock markets are fearlessly cruising ahead, ignoring the basic fundas of economy.
We think shipping activity is the true indicator of world economy since it shows the physical trade taking place. Falling freight markets suggest there is down trend in trade.
The big money is blowing the gum too far. And one day it will whip the cream off small investors and disappear into thin air just to strike back later.
Whatever it is, serves to remind us of how vulnerable the world global energy system is. However, we live in this uncertain world where there is a chance that we will return to normal...
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26 MAY, 2005
Giant Caspian oil pipeline opens
Oil is set to flow from the Caspian Sea direct to the Mediterranean for the first time after a $3.6bn (£2bn) pipeline opened on Wednesday, the 25th May. Starting in Azerbaijan, the 1,600km (1,000 mile) pipeline will pass through Georgia to the Turkish port of Ceyhan. include Azerbaijan\'s state oil company Socar, Amerada Hess, ConocoPhillips.
The project has taken more than 10 years to finish and will unlock one of the world's biggest energy reserves.
The pipeline has been an international effort and was built by a consortium led by UK oil giant BP, which has a 30% stake. Other consortium members, Eni, Inpex, Itochu, Statoil, Total, TPAO and Unocal.
Implications
============
Until now, states in the region sent almost all of their oil via the Caspian Oil Pipeline linking Kazakhstan and the Russian Black Sea. The 900-mile pipeline, is built from the Tengiz Field in western Kazakhstan to the Black Sea port of Novorossiysk.Oil from mainly the Kazakhstan region is transported along the pipeline to the Black Sea, where tankers sail into the Mediterranean Sea and onwards into the Atlantic. But narrow curves of the Bosporus Strait bisecting Istanbul presented a potential navigation hazard and serious risk of oil pollution disaster.
With start of this new pipeline, Up to a million barrels a day will eventually be heading directly west without going through the Bosporus maze. The oil in the pipeline will initially come entirely from Azerbaijani fields, but Kazakhstan is expected to participate in the project before the end of the decade. This will mean lesser waiting for tankers and quicker turn around in Med.
The BBC\'s Emma Simpson said from Baku that for energy-hungry countries such as the US the pipeline was a strategically important non-Russian, non-Middle Eastern source of oil. This will also cut down voyage by 8 to 18 days on tankers against their AG/West voyage.
Well, something not to cheer about from owners point of view, except there will definitely be more oil.
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6TH MAY, 2005
The End of Oil
Taken together, the populations of China and India constitute more than one-third of the total world population. And this 35% of world population has just been swept by a decade of communication and information technology and ushered into an era of commerce and splurge.
To realize the dreams of their subjects, these neo rich nations have to develop vast infra-structure. And to build this infra structure they need lot of energy.
At current crude prices, the demand projections may fall short of the reality boom. In order to have an idea to where the demand can reach, as per year 2001 survey, per 1000 capita demand of oil in India and china was 2 bbls/day and 3.32bbls/day respectively as compared to United States's 67.06bbls/day.
On the other hand, supply side has limited ability to satisfy the rising demand. Having only 1.5 million to 2 million barrels a day of spare capacity, some OPEC nations have been assuring the world of their ability to deal with the supply crunch that looms large in future. Could only wish dinosaurs had lived a bit longer.
Here we see an oil peak graph, which shows oil supply peaking in year 2010. But with present surge in crude demand, this oil peak could easily shift to the left. So we can say with certainty that the days of cheap energy are over and I think, guys talking USD100/bbl are not just talking off the hat.
In that case, impacts of rising energy prices on the economies of most nations would be profound, specially, India and China. The eastern dream would be cut short and their subjects would again go back into hibernation.
God forbidding, if this nightmare sees the light of the day, I should not be talking about its repercussions on shipping.
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5TH MAY, 2005
OIL PRICES - What's the limit
Taken together, the populations of China and India constitute more than one-third of the total world population. And this 35% of world population has just been swept by a decade of communication and information technology and ushered into an era of commerce and sleek.
To realize the dreams of their subjects, these neo rich nations have to develop large infra-structure. And to build this infra structure they need lot of energy.
At current crude prices, the demand projections may fall short of the reality boom. In order to have an idea to where the demand can reach, as per year 2001 survey, per 1000 capita demand of oil in India and china was 2 bbls/day and 3.32bbls/day respectively as compared to United States's 67.06bbls/day.
Whereas, Supply side has limited ability to satisfy the rising demand. Having only 1.5 million to 2 million barrels a day of spare capacity, some OPEC nations have been assuring the world of their ability to deal with the supply crunch that looms large in future. I Could only wish dinosaurs had lived a bit longer.
But life has to go on, with or without oil.
I think, guys talking USD100/bbl are not just talking off the hat. In that case, impacts of rising energy prices on the economies of most nations would be profound, specially, India and China. The eastern dream would be cut short and their subjects would again go back into hibernation.
For Eastern dream to survive, the world will have to address the problem collectively and think of developing alternate sources of energy and at the same time promote conservation of energy, where possible. This is the only solution for win win situation for all.
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28 APR, 2005
Can Oil hogs enjoy their appetite eternally
Lets assume a hypothetical situation, if earth were to shrink to the size of moon, could man have sustained the present rate of population growth. The answer is a logical 'no'. Man would have to change his reproductive behavior and patterns to match the available resources.
Now, we have been talking of world oil demand growing in leaps and bounds whereas on supply side, OPEC cartel has limited ability to solve the supply crunch because it has only 1.5 million to 2 million barrels a day of spare capacity, representing barely one year of world demand growth.
The chief executive of Petro-Canada, Ron Brenneman, said yesterday, "Our view is that for this to basically self-correct is more likely to come on the demand side. That is not something that we can see occurring overnight. I suspect that is off in the future somewhere, by the time prices have an impact on consumer behavior and buying patterns and energy consumption."
We agree Mr. Brenneman. Tanker owners, while growing and gobbling tonnage, should study the supply curve more closely while Demand curve will help hedge funds, speculating in crude futures.
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24 APR, 2005
TALE OF TWO OIL HOGS
Starting in 1993, China became a net oil importer and its oil imports have risen steadily. Last year, China imported 123 million tons of oil, while its annual oil consumption stood at 280 million tons. The International Energy Agency forecast that China will import150 million tons of oil in the year 2010 and the number will climb to 250 million by 2020.
And not too far behind, India's crude oil imports have risen 5.5 per cent to 95.315 million tonnes in year 2004-05 as against 90.434 million tonnes crude oil imported in 2003-04. Total domestic production of crude oil during 2004-05 was 34.05 million tonnes against 33.37 million tonnes in the previous financial year.
And both the countries depend largely (90%) on foreign oil tankers for their imports.
posted by sudkjain @ 2:58 AM
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