Indonesia details plans to limit development of nickel smelters

Reuters | January 13, 2023 | 

Nickel pig iron plant in Indonesia.

(Image from Nickel Mines Ltd.)

Indonesia will limit construction of nickel smelters to ensure new plants produce high-value products and follow green principles in the production process, state news agency Antara reported on Friday, citing the country’s investment minister.


Noting many existing smelters already produce nickel pig iron or ferronickel, Minister Bahlil Lahadalia said Indonesia needed to prioritise using ore reserves to create higher value materials including input for batteries for electric vehicles.

“Now we prefer to push downstreaming with 80% to 100% value addition,” he was quoted as saying.

Nickel pig iron and ferronickel typically contain up to 40% of nickel.

Indonesia banned exports of unprocessed nickel ore in 2020 to promote development of nickel smelting at home.

The government has said that the export value of processed nickel products last year was estimated at $30 billion, or ten times higher than the export value of nickel four years ago.

Smelters in Indonesia often use coal as a source of energy and the minister said that new smelters should be powered by green energy without giving further details.

“Looking forward we will limit development of smelters that are not oriented towards green energy,” Bahlil said.

He did not provide a timeline for the policy. The Investment ministry did not immediately respond to a request for comment.

Previously, a senior official at the energy ministry said that Indonesia’s high-grade nickel ore reserve will only last less than two decades if there are no restrictions on smelter construction.

As of 2021, Southeast Asia’s biggest economy had 15 nickel smelters, a government official previously said.

(By Stefanno Sulaiman; Editing by Fransiska Nangoy and Ed Davies)

Indonesia Challenges China With $3 Billion Offshore Gas Project

By Charles Kennedy - Jan 12, 2023

• Last week, the Indonesian government approved a $3 billion development plan for the Tuna offshore natural gas field.
• The field lies between Indonesia and Vietnam, meaning the development will involve the Indonesian navy and will have serious geopolitical implications.
• Although China does not have a claim to the field itself, it does have fishing rights nearby and is notoriously protective of all its claims in the South China Sea.

Last week, Indonesia's government approved an offshore gas project with a price tag of over $3 billion. On the surface, that's just business as usual. Below the surface, the move is a direct challenge to China's territorial claims because the gas block is in the South China Sea.

The Tuna block, Reuters reported last week, lies in the waters between Indonesia and Vietnam. The Indonesian oil and gas regulator, SKK Migas, says the block could see peak production of 115 million cubic feet daily by 2027. The gas will be exported to Vietnam, per an earlier statement by the Indonesian energy minister.

"There will be activity in the border area which is one of the world's geopolitical hot spots," the chairman of the oil and gas regulator, Dwi Soetjipto, said. "The Indonesian navy will also participate in securing the upstream oil and gas project so that economically and politically, it becomes an affirmation of Indonesia's sovereignty."

The challenge, then, is a perfectly deliberate decision that could put Indonesia on a collision course with China, with the latter known to flex its military muscles in the South China Sea whenever another country in the basin dares try to establish a presence for oil and gas production purposes. 

Related: $4.2 Billion Oil Tanker Merger Falls Through

The South China Sea is seen by many, including in China, as a vast untapped oil and gas reservoir. The U.S. Geological Survey in the 1990s estimated these reserves at some 28 billion barrels of crude, but a 2019 report by the U.S. Energy Information Administration put these at 11 billion barrels, both proven and probable.

Natural gas reserves are also quite significant, at an estimated 190 trillion cubic feet, per the EIA, also proven and probable. But there may be a lot more oil and gas in as-of-yet undiscovered deposits under the waters of the South China Sea, according to a USGS study from 2010. To be more precise, the USGS estimates these at between 5 and 22 billion barrels of crude and 70 and 290 trillion cubic feet of natural gas.

Now, as the EIA notes in its report about the South China Sea reserves, most of the discovered oil and gas is in undisputed waters. This, however, is not really the case with the Tuna block, which lies near the Natuna Islands.

Although China does not have a claim to the islands themselves, the Wall Street Journal reported this week that it does have a claim to part of the waters around them, including fishing rights. And there have already been clashes between Indonesia and China in this area.

In 2016, the WSJ recalls, Chinese coast guards stopped the Indonesian authorities from detaining a Chinese fishing boat in the waters around the Natuna Islands. Then, in 2021, when the Indonesians sent a rig to the Tune block for some exploratory drilling, the Chinese sent the coast guard.

According to an exclusive report by Reuters from that time, Beijing had also demanded that Jakarta stop drilling in the block because its ownership is under dispute. Jakarta, however, refused. Drilling at the Tuna block ended successfully.

The situation, however, is tricky. As Reuters noted in its 2021 report, China is Indonesia's biggest trade partner and the place where a lot of investments in Indonesia come from. Yet Indonesia also considers the development of fields like the Tuna a strategic goal. And, apparently, it is ready to confront its bigger, intimidating neighbor to advance that goal.

"While China may return for another round of harassment, I don't expect Indonesia will be cowed by anything short of physical force," the director of the Asia Maritime Transparency Initiative, Gregory Poling, told the WSJ. The question, then, is whether China is prepared to use physical force to advance its claim to most of the South China Sea.

Unseasonably Warm Weather Could Help End The War In Ukraine

By Haley Zaremba - Jan 12, 2023

• An unseasonably warm winter in Europe has made headlines around the world as ski slopes close and trees flower early, but its most notable impact has been a reduction in natural gas demand.
• 
  
• Since its invasion of Ukraine, Russia has attempted to leverage its position as an energy supplier to fund its war and pressure European politicians.
• 
  
• Russia’s net energy export revenues are now declining along with natural gas prices, although a cold snap could quickly change things for Europe.

Across Europe, hundreds of sites are logging record-breaking warm winter temperatures. Ski slopes are closed during what is typically their busiest time of year due to a lack of snow. According to reports from Czech Television, some trees were even starting to flower in private gardens due to the false spring. Meanwhile, in Switzerland, the office of Meteorology and Climatology issued a pollen warning due to early blooming hazel plants. The historically warm winter has sounded alarm bells for fast action against climate change, but it’s also had a major silver lining: it’s all but eliminated any leverage Russia had over the European Union.

Russia and the European Union have been using energy imports and exports as weapons in a pyrrhic war of wills since Russia invaded Ukraine early last year. Until recently, the European Union imported almost half of its natural gas supply from Russia, making European energy demand a vital component of Russia’s economic well-being, while also rendering the EU dangerously vulnerable to the whims of Russian president Vladimir Putin’s volatile authoritarian regime. As a result of this delicate balance, the EU has tried to crack down on Russia’s war in Ukraine by imposing increasing rounds of energy sanctions on the Kremlin, while Russia has tried to prove that Europe is crying wolf by interrupting the flow of natural gas to the bloc. This has created an unprecedented energy crisis in Europe that is redrawing the rules of global geopolitics as we speak, but now with an unpredicted twist. 

Related: UK Confident It Has Secured Enough Energy Supply For Next Winter

This winter was supposed to be rough. The gas wars between Russia and Europe were supposed to trigger outages, economic turmoil, governmental stress, and civil unrest. In the United Kingdom alone, projections had predicted that 26 million people would sink into energy poverty over the winter months – in other words, one in three households. And the UK would have been rather well off compared to many other more economically depressed European countries.

Instead, gas futures are now plummeting, demand is low, and Europe has managed to rebuild its inventories. As an added boon, the weather has also brought strong winds across Europe, reducing gas demand even more by boosting wind power production. All of this means that energy markets have had an unexpected opportunity to normalize, throwing a serious wrench into Russia’s wartime strategy. 

Putin had counted on skyrocketing energy prices over the winter months to fund Russia’s costly war in Ukraine. That bet has not panned out, to say the least. Last month, Russia’s fossil fuel export revenues fell 17%, reaching their lowest level since before the war began. The EU’s most recent round of sanctions have also hit their target; since December Russia’s net energy export revenues declined €160 million ($172 million) a day. 

“Europe’s Spring Weather Is Putin’s Winter of Discontent,” summed up a recent Washington Post headline. Putin “certainly had hoped to put Europe on the brink of either some countries begging for gas, and therefore destroying the unity in Europe, or really creating massive turmoil,” Georg Zachmann, a senior fellow at the Brussels-based think tank Bruegel told the Post. “That did not play out.”

While the warm temperatures are a worrying trend for the long term, they are unbelievably lucky for Europeans in the short term. Winter is not over, however, and experts warn that European leaders should not count their chickens before they’re hatched. A prolonged cold snap could tip the scales back toward disaster for the European Union. And even if the weather stays warm, the underlying issues that created the crisis to begin with have not changed. "While it will give governments more fiscal breathing room in the first part of this year, resolving Europe's energy problems will take concerted action over the course of several years," said a note by Eurointelligence. "Nobody should believe this is over yet."

However, a new study from the Centre for Research on Energy and Clean Air (CREA) found that continuing to ratchet up energy sanctions on Russia will be a winning strategy. “The short-term windfall generated to Russia by sky-high fossil fuel prices in 2022 is starting to wear out,” CREA reports. “Further cuts to Kremlin’s revenue will therefore materially weaken the country’s ability to continue its assault and help bring the war to an end.”

TotalEnergies To Supply LNG To Germany’s Newest Import Terminal

By Tsvetana Paraskova - Jan 13, 2023,

• TotalEnergies will supply LNG to Germany's newest LNG import terminal in Lubmin.
• 
  
• The project, whose inauguration will be attended by German Chancellor Olaf Scholz, will make TotalEnergies one of Germany’s main LNG suppliers.
• 
  
• Separately, Switzerland-based trader MET Group said today it had secured binding long-term LNG capacities at the Lubmin terminal.

TotalEnergies will supply LNG and is contributing a floating storage and regasification unit (FSRU) to the Deutsche Ostsee LNG import terminal in Lubmin on the German Baltic Sea coast, which will be inaugurated on Saturday, the French supermajor said on Friday.

The project, whose inauguration will be attended by German Chancellor Olaf Scholz, will make TotalEnergies one of Germany’s main LNG suppliers, the French company said.  

Last month, TotalEnergies delivered the Neptune – one of its two FSRUs – to Deutsche ReGas, the operator of the Deutsche Ostsee LNG terminal. The vessel has an annual regasification capacity of 5 billion cubic meters of gas, enough to cover about 5% of German demand, TotalEnergies says.

Following Deutsche ReGas’s open season procedure, TotalEnergies has also contracted regasification capacity of 2.6 billion cubic meters of gas per year and began to deliver LNG from its global integrated portfolio to the Lubmin terminal.

Separately, Switzerland-based trader MET Group said today it had secured binding long-term LNG capacities at the Lubmin terminal.

Germany has been racing to build and start up LNG import terminals to secure natural gas supplies after Russia halted the Nord Stream pipeline deliveries last year. 

Last week, Germany welcomed the first tanker carrying LNG at the newly opened LNG import terminal at Wilhelmshaven, with the cargo arriving from the Calcasieu Pass export facility in the United States.

Germany inaugurated its first floating LNG import terminal at Wilhelmshaven a week before Christmas as Europe’s biggest economy looks to cut reliance on Russian gas and as Moscow halted supply via the Nord Stream pipeline in early September.

Other LNG terminals are also planned in Germany, which was rather reluctant to commit to LNG import facilities before the Russian invasion of Ukraine. After the war started, Germany, the Netherlands, Finland, and countries in southern Europe hastened to bring forward or dust off plans to build floating LNG terminals to have enough regasification capacity to replace the lost volumes of Russian pipeline gas.   

Shell Nearly Sold Its Norwegian Oil And Gas Assets In Late 2022

By Tsvetana Paraskova - Jan 10, 2023

Shell held talks last year with the biggest UK North Sea producer Harbour Energy to sell its oil and gas fields offshore Norway and some mature assets offshore the UK, but a deal ultimately couldn’t be reached due to price volatility, company sources told Reuters on Tuesday. 

Shell, as well as other majors, have worked in recent years on streamlining asset portfolios to focus on the most profitable projects. Back in 2021, Shell said that its oil production peaked in 2019 and is set for a continual decline over the next three decades as it looks toward the renewables side of the business. Shell said its carbon dioxide emissions also likely peaked—a year earlier, in 2018.  

The UK-based supermajor and Harbour Energy were in the advanced stages of talks for the sale at the end of 2022, according to Reuters’ sources.

Just then, Norway had ramped up its natural gas production and become the single largest gas supplier to Europe’s biggest economy, Germany. Yesterday, the Norwegian Petroleum Directorate said that Norway would continue to pump the current high volumes of natural gas for at least another five years as operators have pledged $30.3 billion (300 billion Norwegian crowns) to develop new fields and extend the lifetimes of producing fields.  

Shell, which has been present in Norway since 1912, would have been the latest supermajor to quit the region. U.S. majors Chevron and ExxonMobil exited operations on the Norwegian Continental Shelf in 2018 and 2019, respectively.

Now Wael Sawan, Shell’s new CEO who succeeded Ben van Beurden on January 1, is not currently reviewing the Norwegian assets, according to two Reuters’ sources. 

Apart from oil and gas assets, Shell’s business in Norway includes participation in the Northern Lights carbon capture and storage (CCS) project together with Norway’s Equinor and France’s TotalEnergies. Northern Lights is Norway’s first license for CO2 storage on the Shelf. 

Philippines Supreme Court Voids Major International Oil And Gas Deal

By Tsvetana Paraskova - Jan 10, 2023

A 2005 deal for oil and gas exploration in the South China Sea signed by the Philippines with companies from China and Vietnam is illegal, the Philippine Supreme Court ruled on Tuesday, saying the country’s constitution bars foreign firms from exploring Philippine natural resources.

The ruling, 14 years after an appeal was lodged, could make talks between China and the Philippines on energy exploration in non-disputed parts of the South China Sea more complicated, according to Reuters.

The long-running dispute in the South China Sea involves territorial claims by China as well as Vietnam, the Philippines, Taiwan, Brunei, and Malaysia. China has territorial claims to about 90 percent of the South China Sea, which has put it at odds with its neighbors.

A court in The Hague in 2016 ruled against China’s claims and in favor of the Philippines. China, however, has not acknowledged the ruling, which has heightened tensions in the area. Instead, it has continued with its agenda, according to which most of the sea is Chinese waters. 

China and the Philippines agreed at the end of 2019 to pursue joint oil and gas exploration in the South China Sea.

The South China Sea may hold 28 billion barrels of oil, according to an estimate from the U.S. Geological Survey from the mid-90s. Since then, with improvements in technology, this figure could have increased substantially.

However, in June 2022, the Philippines ditched talks with China on a potential joint exploration for oil and gas in the South China Sea due to sovereignty issues and constraints in the Philippines’ constitution.

Because of the Chinese claims over most of the South China Sea, the Philippines has struggled to find partners willing to engage in the exploration of resources in the basin.

Iraq’s First New Refinery In Decades Set To Hit Full Capacity By July

By Charles Kennedy - Jan 10, 2023

The new Karbala refinery south of Baghdad is expected to reach full 140,000 barrels per day (bpd) capacity by July this year, a source at the facility told Reuters on Tuesday.

The Karbala refinery, estimated to have cost just over $6 billion, is expected to begin commercial production of fuels in the middle of March, Iraqi Oil Minister Hayan Abdel Ghani said this weekend.  

The start of production will see the refinery doing test runs at 60% of capacity, according to the source who spoke to Reuters.

Karbala, Iraq’s first new refinery in decades, is designed to produce gasoline, LPG, jet fuel, gasoil, fuel oil, and asphalt. According to Argus, the fuels from the facility will help Iraq cut its refined product imports by an estimated 60%.

The new refinery is not expected to affect Iraq’s crude oil exports as OPEC’s second-biggest producer could either raise its oil production or cut processing rates at other refineries, the source told Reuters.  

Iraq’s exports from the southern port of Basra averaged 3.24 million bpd in December, per data from state-owned marketer SOMO seen by Reuters.

Iraq, OPEC’s second-largest producer behind Saudi Arabia, raked in more than $115 billion in oil revenues in 2023, according to figures released by the country’s oil ministry last week. That figure stems from crude oil exports of 1.209 billion barrels last year—or an average of 3.320 million bpd.

As OPEC’s second-largest crude oil producer, producing 4.5 million bpd in Q3, Iraq relies on oil revenues for nearly all of its export income.

Iraq’s oil revenues fell in 2020 to just $42 billion, according to Al-Monitor, as Saudi Arabia and Russia’s oil price war collided with the start of the pandemic, tanking crude oil prices. In 2021, Iraq’s oil revenues rebounded to $75.6 billion.

Iraq is home to the world’s fifth-largest proven oil reserves, holding 145 billion barrels.

By Charles Kennedy for Oilprice.com

CRIMINAL CAPITALI$M
Robbers pull off multimillion-dollar copper heist in Chilean port

Reuters | January 12, 2023 |

Panorama of the port of San Antonio. (Image: Patricio Mecklenburg (Metronick) | Wikimedia Commons.)

Chilean authorities said on Wednesday they were investigating a violent heist in Chile’s main seaport where thieves stole several shipping containers filled with copper belonging to state-owned giant Codelco.


Juan Carlos Catalan, the local prosecutor, said in a statement that ten armed men entered the San Antonio port early on Tuesday morning, attacked workers and stole 13 containers, 12 of which had copper.

“There was one guard and four workers that (the assailants)tied up and beat and left locked up,” Catalan said, adding that workers alerted authorities after they freed themselves.

Catalan said authorities are investigating and reviewing security footage but have not detained any suspects.

In a statement to Reuters, Codelco said the copper was scheduled to be exported and was insured. Citing police sources, local media reported the copper plates were worth an estimated $4.4 million.

The heist is the largest copper theft since a spate of gangster heists in northern Chile last October forced the government to tighten security on trains carrying copper cathodes.

The violent robbery adds pressure over shipment security in the world’s largest copper producer. Mining companies in Chile have repeatedly complained about copper thefts by specialized gangs.

Authorities blamed the train heists on international crime groups while police said Wednesday’s heist could be a local group.

“It is a gang that may be working in San Antonio because we have other crimes with similar characteristics,” local police captain Gonzalo Garcia told Radio Cooperativa, adding that it was a well-planned heist that involved multiple trucks.

“They cut off the security cameras and once the cameras were cut off, the other part of the gang went in to intimidate the guards and the workers.”

(By Natalia Ramos and Alexander Villegas; Editing by Leslie Adler and Josie Kao)

CRIMINAL CAPITALI$M

Indian gold refiners struggle as smugglers offer hefty discounts

Reuters | January 11, 2023 |

Image courtesy of Pixabay

Indian gold refiners have nearly stopped imports of gold dore, a semi-pure alloy, as grey market operators offer hefty discounts to market rates and cut into their slender margins, making business a losing proposition, industry officials say.


Most refiners in the world’s second-biggest consumer of the precious metal have suspended operations and are struggling to honour long-term supply contracts with miners, they said.

“For the last two months Indian prices have been trading at a big discount,” Harshad Ajmera, secretary of the Association of Gold Refiners and Mints (AGRM), told Reuters.

“Refiners can’t offer big discounts as they run operations with wafer-thin margins.”

India’s tax on gold dore is 0.65% lower than the rate on refined gold, so as to make domestic refining viable. But discounts over official prices in the last few weeks have widened to nearly 2% or about $30 per ounce.

Jewellers and bullion dealers were not buying from refiners as they could not offer the same kind of discount available from competing suppliers, he said.

“Our margin is less than 0.5%. How can we match the 2% discount?” asked Ajmera.

Grey market operators, or businesses that smuggle gold from overseas and sell it for cash to avoid the duties, got a boost in July 2022 when India raised its import tax on gold.

Such operators can sell gold at discounts to market prices as they evade the tax of 18.45% on gold, dealers said.

Many Indian refiners are diverting gold dore into refineries in Dubai as they could not sell refined bars at home because of the discounts, said James Jose, managing director of refiner CGR Metalloys.

India relies on imports to meet most of its demand.

The margins of grey market operators are increasing with rising prices, making smuggling even more lucrative, a scenario that can be dispelled only by cutting the import duty on gold to 5%, Jose said.

The AGRM and other trade bodies have asked New Delhi to cut import taxes.

“The government should also increase the import duty difference between refined gold and dore to 1.65%, to make refining viable,” Ajmera said.

India imports gold dore mainly from Ghana and Peru, while refined gold comes from Switzerland and the United Arab Emirates.

Gold demand usually picks up during the wedding season as the bullion is an essential part of the bride’s dowry in India and also a popular gift from family and guests at weddings.

But this year demand is muted as prices have jumped near a record peak, further eroding refiners’ sales, said Ashok Jain, proprietor of Mumbai-based gold wholesaler Chenaji Narsinghji.

(By Rajendra Jadhav; Editing by Clarence Fernandez)