Global recoverable oil reserves fall

Oslo-based energy analyst Rystad's latest analysis of the world’s energy backdrop indicates a 9% fall in recoverable oil resources, adding more pressure to the planet’s energy security.

Rystad Energy estimates that the world has a total of 1,572 billion barrels of recoverable oil reserves, but only about 1,200 billion barrels are likely to be economically viable before 2100 and US$50 per barrel.

The fall is partly down to 30 million barrels of oil produced last year and also a substantial reduction of 120 billion barrels in undiscovered resources. Leasing bans on federal land in the US will mean that a further 20 billion barrels stay in the ground, Rystad said.

Commenting on the findings, the firm’s head of analysis, Per Magnus Nysveen said, “While the drop in oil availability is positive news for the environment, it may threaten to further destabilize an already precarious energy landscape.

Energy security is a matter of redundancy; we need more of everything to meet the growing demand for transport, and any action to curb supply will quickly backfire on pump prices worldwide, including large producers such as the US Politicians and investors can find success by targeting energy consumption, encouraging  electrification of the transport sector, and drastically improving fuel efficiency.”

Rystad has also updated its estimated of total undiscovered oil, with a sharp reduction from one trillion barrels in 2018, to 350 billion barrels. This, the firm explained, was due to a rapid collapse in investor appetite for exploration exposure, leading to fewer government leases.

This downward revision is good news for carbon compliance, Rystad said, but could have negative consequences for global energy security, particularly if electric vehicle adoption falls short of expectations.

Pakistan: Oil and gas production on the decline

According to a report by Pakistan’s leading brokerage house, Topline Securities, during FY22, oil production in the country declined by 3%YoY to 26.8 million barrels or 73,400 barrels per day (bpd). Oil production in the country during 4QFY22 was down by 6%YoY as against 17%YoY increase in 4QFY21. 

This was largely due to: 1) decline in production from Nashpa, Adhi, and Makori East oil fields, and 2) no addition of any sizable oil field. On a QoQ basis, the decline in oil production was due to annual turnaround at Meyal, Jhandial and Pariwali.

During FY22, Pakistan gas production has come down by 2% YoY to 3.38k mmcfd which is largely in line with last 5-year average production decline.

Gas production in 4QFY22 contracted by 2% YoY due to: 1) their association with lower oil production, and 2) lower offtakes due to annual turnaround and maintenance. 

During 4QFY22, gas production was almost flat or up by paltry 1%QoQ despite lower offtakes from MARI due to annual turnaround of Foundation Power Company Daharki Limited (FPCDL) and Dakhni and Maramzai fields during the quarter.

As new block auctions were held last year, exploration activity in the new awarded blocks is likely to increase. Production flows in FY23 could also be higher due to the recent discoveries in FY22.

In FY22, Geological and Geophysical (G&G) activities remained on a higher side where 3D seismic acquisition rose to 1,913 Sq. Kms. However, 2D seismic activities decline to 2,507 Sq. Kms.

During 4QFY22, Geological and Geophysical activities showed an increase, with 3D seismic acquisition increasing to 1,132 Sq. Kms, while 2D declined to 577 Sq. Kms. Moving forward, there are 7 seismic surveys of 2D and 3D which are going to be conducted during 1QFY23.

In FY22, meterage drilling increased by 43%YoY as the numbers of well spudded were reported at 58 as compared to 50 in the same period last year. Drilling activities (meterage) rose by 20%YoY, but fell by 19%QoQ to 44,500 meters during 4QFY22.

Overall, 8 wells were abandoned in FY22 as against 6 in the same period last year. During 4QFY22, the exploration and production companies encountered 3 abandoned wells which were Exploratory (Mian Miro Deep -1, Surghar X-1 and Bewato-1.

For 1QFY23 3 exploratory and 4 development wells have been planned for.

Oil likely to fall to US$65 a barrel by end 2022

As the Bloomberg recession tracker rose to 38%, the price of oil has plummeted below US$100 a barrel, the first time since early May this year.

Citigroup is predicting that crude, which has soared as a direct result of Russia-Ukraine conflict, could fall to US$65 a barrel by year end.

While lower crude prices (theoretically) will lead to less pain at the pump, the surge in cost for natural gas (also made worse by the war) may do lasting damage to the global economy.

The fossil fuel has skyrocketed by 700% in Europe since the start of 2021. All of this is not helping when it comes to keeping Wall Street from panicking. But Mohamed A. El-Erian writes in Bloomberg Opinion that, while the first half of 2022 was excruciating for investors in stocks, corporate bonds, crypto and lots of other assets, there are a few silver linings to make you feel a little better.

Oil posted its worst trading day (July 05, 2022) in almost three months as recession fears gripped markets, outweighing a fundamentally tight supply market. 

West Texas Intermediate crude futures settled below U$$100 on Tuesday after falling more than 8%, the most since March 09, 2022.

Risk-off sentiment spread throughout markets on escalating concerns that a global economic slowdown will ultimately hobble demand.

Oil prices have been prone to violent swings as traders fled to the exits after Russia-Ukraine conflict started, drying up liquidity. The latest plunge came as equities slid and the US$ surged. Citigroup said that crude could fall to US$65 this year in the event of a recession.

Oil prices have been under pressure in the past month as central banks aggressively raise interest rates. Still, physical barrels are fetching enormous premiums.

Saudi Arabia hiked its official selling prices to Asia on Tuesday. Its flagship Arab Light crude price will be US$9.30 above its regional benchmark in August, an increase of US$2.80. 

“Crude oil prices have slumped as weakening demand concerns are starting to outweigh fears about tight supply,” said Fawad Razaqzada, market analyst at City Index.

“A growing number of analysts are expecting that many of the world’s leading economies will suffer negative growth in the next few months, and this will drag the US into a recession.”

While futures have been pressured by the threat of a global economic slowdown, key market time-spreads remain robust, indicating that there’s solid demand for near-term supplies. A strike in Norway and supply disruption in Libya has exacerbated that strength of late.

Pakistan: Perfect example of putting cart before the horse

It may not be possible for me to recap the history of ‘energy crises’ in Pakistan spread over 75 years in a few hundred words. Since the country is dependent on funds extended by the multilateral lenders, the country has remained a ‘Guinea Pig’. 

The donors have done all sorts of experimentation. I am refraining from talking about other policies imposed on Pakistan and confine my narrative to just one issue ‘Energy Stigma’.

It is known to all and sundry that Pakistan is capable of producing 50,000MW hydel energy. However, during the last 75 years the aggregate installed dependable capacity has remained below 10,000MW. It may be recalled that at one stage multilateral lenders refused to provide funds to WAPDA for the construction of dams/hydel power plants.

Pakistan’s energy dynamics were completely ruined in nineties when multilateral lenders started playing ‘deregulation, liberalization and privatization’ mantra. Under this theme the first Independent Power Plant (IPP) was initiated under the banner of The Hub Power Company based on furnace oil in the private sector. 

Then the floodgates were opened and all sorts of plants were established using a variety of fuels, including natural gas.

The managers of energy sector in the government as well as lenders knew very well the factors responsible for the technical bankruptcy of WAPDA: rampant theft of electricity and poor recovery. However, distribution of electricity remained the sole prerogative of state owned distribution companies. At that time I had termed the policy of creations of power plants in the private sector “Putting cart before the horse”.

It is on record that dozens of power plants have been established in Pakistan but all the distribution companies are still operating in the public sector. Track record of these entities is pathetic because of electricity theft and non-recovery of outstanding dues. These entities have also failed in revamping their infrastructure which is highly depleted and incapable of handling additional load.

It is also known to all that thermal power plants are not cost effective and cost of generation was bound to increase with the hike in crude oil prices, mainly due to geopolitics. However, no credible efforts were made to increase indigenous production of oil and gas as well as refining capacity.

Then the ruling junta started playing imported LNG mantra. Nobody objected on this ‘make shift arrangement’. However, groups having ‘vested interest’ made this a prime source of energy. After the imposition of economic sanction on Russia, LNG prices rose to historic level. Since Pakistan has no ‘long term’ agreements with suppliers now it is buying gas at the most expensive cost in the spot market.

To cover up its inefficiency to procure LNG, the government has resorted to load shedding of electricity. Some analysts go to the extent of saying that the Government of Pakistan (GoP) does not have foreign exchange for the import of energy. To save the face it is talking about high price and non-availability.

I can bet that local refineries have the surplus capacity to produce furnace oil and almost all the thermal power plants operating in the country are dual-fired (capable of use furnace oil as well as gas). That means if LNG is not available plants can be run on furnace oil.

Iran: Neighborhood policy neutralizes impact of US sanctions

A year into his administration, Iranian President Ayatollah Seyed Ebrahim Raisi succeeded in diversifying Iran’s foreign policy options through the nascent neighborhood policy he set out last year.

When he assumed office last year in August, Ayatollah Raisi made it clear that he had a new agenda for Iran’s foreign policy. He outlined his foreign policy goals within what came to be known as the Neighborhood Policy, which rests on fostering mainly economic relations with neighboring countries and non-Western powers. 

The new policy orientation soon yielded results, leading to Iran’s membership in the Shanghai Cooperation Organization (SCO) in the first weeks of Raisi’s presidency. Since then, the President traveled to many countries in a bid to advance his foreign policy goals. This included visits to Russia, Turkmenistan, Tajikistan, Oman, and Qatar, to name a few. 

A senior Iranian lawmaker has said that the neighborhood policy of Raisi played in a major role in Iran’s efforts to neutralize US sanctions. The lawmaker, Javad Karimi Quddousi, who is a member of the Iranian parliament’s National Security and Foreign Policy Committee, said the Raisi presidency marked a shift in Iranian foreign policy.

According to the lawmaker, one reason that why the US sanctions had negative impact on Iran’s economy was that the previous government failed to prioritize enhancing economic relations with neighboring countries and focused its time and energy on boosting Iran’s relations with Europe, which has been seeking to sow divisions among Muslim states. 

“Sanctions were also effective in cases where our relations with neighboring countries were strained in the previous government. When I asked Saif (Valiullah Saif, the former governor of the Central Bank) to make bilateral agreements for the exchange of national currencies between other countries, his answer was that this issue was not realized. While diplomacy and many trips between countries are for the realization of this goal,” he told Iran’s state news agency IRNA. 

Qoddousi added, “The 13th government created a unique and unprecedented transformation in foreign relations with neighboring countries in the shortest time. Membership in unions such as Shanghai [SCO], Eurasia, (and possibly) BRICS, etc., signing important agreements with countries in the region and the world in various fields are among the successful goals of the 13th government that have been achieved.”

The Raisi administration is continuing the neighborhood policy. On Monday, President Raisi received Azerbaijani Foreign Minister Jeyhun Bayramov, who also met his Iranian counterpart Hossein Amir Abdollahian. The visit came amid diplomatic efforts to upgrade relations between Tehran and Baku. 

It also came against a backdrop of broader diplomatic efforts by Iran in the region to improve ties with regional heavyweights such as Turkey and Saudi Arabia. Amir Abdollahian recently paid a visit to Turkey where he met Turkish President Recep Tayyip Erdogan and Foreign Minister Mevlut Cavusoglu.

In parallel, Iran and Saudi Arabia seem to be on the verge of restoring ties as a result of mediatory efforts by Iraqi Prime Minister Mustafa al-Kadhimi. The Iraqi premier visited Iran and Saudi Arabia in the past week. According to Arab press reports, Iran and Saudi Arabia could soon announce the restoration of diplomatic ties in a meeting in Baghdad. 

 

 

Taliban seek international recognition

It must be highly disappointing for Taliban that their government has neither been recognized by Muslim countries as well as non-Muslim countries. The pretext is most whimsical, education for girls.

The dichotomy of super powers is the universal truth, in the recent half century they have killed millions of people in proxy wars, used all sorts of lethal weapons and committed worst war crimes. If the heads of the states ordering killing of people can’t be trialed for war crime, why is Taliban government being punished for not providing education to girls?

One may not be wrong in inferring the conclusion that the world super powers have joined United States in punishing Taliban for defeating the self-proclaimed super power.

A Taliban-run gathering of thousands of male religious and ethnic leaders ended on Saturday by asking foreign governments to formally recognize their administration, but made no signals of changes on international demands such as the opening of girls' high schools.

The Afghan economy has plunged into crisis as Western governments have withdrawn funding and strictly enforced sanctions, saying the Taliban government needs to change course on human rights, especially those of women.

"We ask regional and international countries, especially Islamic countries … to recognize the Islamic Emirate of Afghanistan ... release all sanctions, unfreeze (central bank) funds and support in development of Afghanistan," the gathering's participants said in a statement, using the group's name for their government, which has not been formally recognized by any country.

The group's reclusive leader joined the three-day gathering of more than 4,000 men on Friday, and delivered a speech in which he congratulated the participants on the Taliban's victory and underlined the country's independence.

The Taliban went back on an announcement that all schools would open in March, leaving many girls who had turned up at their high schools in tears and drawing criticism from Western governments.

In speeches broadcast on state-run television, a small number of participants brought up girls' and women's education. The Taliban's deputy leader and Interior Minister, Sirajuddin Haqqani, said the world had demanded inclusive government and education and these issues would take time.

But the group's supreme leader, Haibatullah Akhundzada, who is normally based in the southern city of Kandahar and rarely appears in public, said foreigners should not give orders.

The gathering's final statement said defence of the Islamic Emirate was obligatory and that the Islamic State militant group, which has said it was behind several attacks in the country, was illegal.

It said it would not interfere with neighbouring countries and they should not interfere in Afghanistan.

 

United States not keen in reviving Iran nuclear deal

The chances of reviving the 2015 Iran nuclear deal are worse after indirect United States-Iranian talks in Doha that ended without progress, a senior US official told Reuters.

"The prospects for a deal after Doha are worse than they were before Doha and they will be getting worse by the day," said the official on condition of anonymity.

"You could describe Doha at best as treading water, at worst as moving backwards. But at this point treading water is for all practical purposes moving backwards," he added.

The official would not go into the details of the Doha talks, during which European Union officials shuttled between the two sides trying to revive the 2015 Joint Comprehensive Plan of Action (JCPOA) agreement under which Iran had limited its nuclear program in return for relief from economic sanctions.

Then US President Donald Trump reneged on the agreement in 2018 and restored harsh US sanctions on Iran, prompting Tehran to start violating its nuclear restrictions about a year later.

"Their vague demands, reopening of settled issues, and requests clearly unrelated to the JCPOA all suggests to us ... that the real discussion that has to take place is (not) between Iran and the US to resolve remaining differences. It is between Iran and Iran to resolve the fundamental question about whether they are interested in a mutual return to the JCPOA," the senior US official said.

"At this point, we are not sure if they (the Iranians) know what more they want. They didn’t come to Doha with many specifics," he added. "Most of what they raised they either knew - or should have known - was outside the scope of the JCPOA and thus completely unsellable to us and to the Europeans, or were issues that had been thoroughly debated and resolved in Vienna and that we were clearly not going to reopen."

Speaking at the UN Security Council, US, British and French diplomats all placed the onus on Iran for the failure to revive the agreement after more than a year of negotiations.

Iran, however, characterized the Doha talks as positive and blamed the United States for failing to provide guarantees that a new US administration would not again abandon the deal as Trump had done.

"Iran has demanded verifiable and objective guarantees from the US that JCPOA will not be torpedoed again, that the US will not violate its obligations again, and that sanctions will not be re-imposed under other pretexts or designations," Iran's UN Ambassador Majid Takht Ravanchi told the council.

The senior US official said Washington had made clear since the talks began in April 2021 that it could not give Iran legal guarantees that a future US administration would stick to the deal.

"We said there is no legal way we can bind a future administration, and so we looked for other ways to give some form of comfort to Iran and … we - along with all of the other P5+1 (nations) and the EU coordinator - thought that file had been closed," the senior US official added.

Iran struck the original deal with Britain, China, France, Russia, the United States and Germany, a group called the P5+1.

The senior US official disputed Tehran's argument that Washington was to blame for the lack of progress, saying the United States had responded positively to proposed EU changes to the draft text of an agreement reached during wider talks in March while Iran had failed to respond to those proposals.

If the deal is not revived, he said "the Iranian leadership would need to explain why it turned its back on the benefits of the deal for the sake of issues that wouldn't make a positive difference in the life of a single ordinary Iranian."

The US official did not detail those issues. Restoring the deal would allow Iran to legally export its oil - the life blood of its economy.