Energy supply finds new paths from wells to kitchens
OPEC output is recovering as Kazakhstan seeks export alternatives, while disruption at Hormuz shapes ADNOC Gas liftings and household LPG losses in India.
Economics & Markets··Night
OPEC output rises as shut-in capacity returns
Crude output from the 11-member OPEC rose by 1.17 million barrels per day from the previous month in July, reaching 19.85 million barrels per day, according to a Reuters survey. The increase came as some Gulf supply shut during the Iran war and the effective closure of the Strait of Hormuz returned. Iraq posted the largest increase, followed by Kuwait. Iran also raised exports, although the resumed US blockade on Iranian ports in mid-July slowed shipments again. Saudi supply edged lower, while Libya, whose shipments were not affected by the war, pumped more. July extends a recovery from May, the lowest monthly level measured by Reuters surveys since at least 2000. Seven members of OPEC+ had agreed to raise production in July, but the Middle East conflict prevented the increase from proceeding as planned. The monthly gain therefore reflects more than implementation of a fresh output target. The uneven return of previously shut capacity, constraints on port and strait access, and the fact that some members increased production while others declined all shaped the aggregate supply result.[1]
Kazakhstan seeks to reduce reliance on one export line
Kazakhstan's energy ministry is considering alternative routes after Ukrainian drone attacks repeatedly halted the country's main oil export line. Options include the Baku-Tbilisi-Ceyhan pipeline, Caspian shipments through Azerbaijan, the Baku-Supsa route and additional eastward pipeline supply to China. Flows through the Caspian Pipeline Consortium stopped on three separate occasions in July. The latest week-long closure briefly removed more than 1 million barrels per day of Kazakh production from the market. The line carries crude from Tengiz, Kashagan and Karachaganak to Russia's port of Novorossiysk; Chevron, ExxonMobil, Shell and Eni hold stakes in those fields. The Russian Federation is the consortium's largest shareholder with 24 per cent, while affiliates of Chevron and ExxonMobil are minority owners. The search for alternatives demonstrates the difference between production capacity at the field and oil that can reach world markets. Redirecting volumes to another pipeline or across the Caspian may spread physical disruption risk, but route capacity, port connections and cross-border transport arrangements must be able to carry a meaningful part of the existing flow.[2]
Hormuz disruption reaches company earnings and household cylinders
Disruption to shipping through the Strait of Hormuz is producing different consequences for a gas producer and household-fuel distribution. ADNOC Gas reported second-quarter net income of 665 million dollars despite restricted product liftings, above its guidance range of 400 million dollars to 600 million dollars. Gas supply at Habshan recovered to 85 per cent of capacity after security incidents in April. The company also took final investment decisions on new phases of its Rich Gas Development project and awarded 8.2 billion dollars of engineering and construction contracts. In India, the loss incurred by Indian Oil, BPCL and HPCL on each household LPG cylinder narrowed from 500 rupees, or 5.25 dollars, in July to 188 rupees, or 1.97 dollars, in August. Yet 90 per cent of the country's LPG imports pass through Hormuz, and about 60 per cent of households use LPG as their main cooking fuel. The government has redirected supply from industrial users to households while urging refiners to raise production. The same physical passage problem affects liftings and investment timing at a company, while shaping per-cylinder losses, government compensation and decisions about which users receive fuel first in the household market.[3], [4]
