Suncor Tops Profit Estimate as Oil Sands Production Soars to Record High

By Tsvetana Paraskova - Feb 22, 2024

Canada’s Suncor Energy beat Q4 quarterly earnings estimates as its oil sands production jumped to an all-time high and total upstream production was the second highest in company history.

Suncor Energy (NYSE: SU) reported late on Wednesday adjusted operating earnings of US$1.21 billion (C$1.635 billion) for the fourth quarter of 2023, down year-on-year due to lower crude and products realizations. But the adjusted operating earnings of US$0.94 (C$1.26) per common share were above the US$0.78 (C$1.05) expected in the average analyst estimate, per LSEG data cited by Reuters.

The higher upstream production and strong downstream operations in the fourth quarter helped Suncor beat analyst estimates, despite the lower profits that all oil companies have reported this earnings season, due to weaker oil and natural gas prices.   

Suncor booked for Q4 its “best-ever” Oil Sands production of 757,400 barrels per day (bpd), with upgrader utilization over 100% outside the maintenance period. Total upstream production hit 808,100 barrels of oil equivalent (boe/d) - the second-highest quarter in company history.

For full-year 2023, total upstream production of 745,700 boe/d was also the second highest in the company's history, while oil sands output was at a record high of 689,600 bpd, including best-ever production at Syncrude and Firebag, Suncor said.

“Upstream reliability across our operations was at or near record highs, achieving the second highest quarterly total production in the company's history and the highest quarterly Oil Sands production,” Suncor’s president and CEO Rich Kruger said.

“Downstream performance was equally strong with refining utilization in the quarter at 98%,” Kruger added.

Canadian oil producers in Alberta plan higher output for this year and expect to earn more from their heavy crude once the long-delayed expanded Trans Mountain Pipeline enters into service. Despite the uncertainty around the start date of the Trans Mountain Pipeline Expansion (TMX), some of the biggest Canadian producers plan to boost production in Alberta’s oil sands in the short to medium term.

INCREASED TAXES 

Lower Oil Prices Are Set to Hurt Alberta’s Budget

OOPS WE GOOFED

By Charles Kennedy - Feb 22, 2024

The Premier of Alberta Danielle Smith has warned that lower oil prices will have an impact on the province’s new budget, forcing some spending cuts.

During a televised address on Wednesday night, Smith said "Lower resource revenues will certainly require us to show more restraint than previously predicted.”

"We will ensure this is done thoughtfully and with priority given to the programs and services Albertans most rely on such as health, education and social supports," the Premier added, as cited by the Canadian Press.

Alberta’s budget is tied to its oil revenues, which are calculated on the basis of the West Texas Intermediate benchmark. Even minor changes in the benchmark’s value can have an impact of hundreds of millions of dollars on the Canadian oil province’s finances.

Alberta’s FY 2023/24 budget was tied to an average WTI price of $79 per barrel but for much of the year that ends this March, the U.S. benchmark has traded lower than this, meaning the budget calculations of the Alberta government had to be adjusted.

Recently, oil prices have been on the mend amid continued tensions in the Middle East but there is no guarantee the rally will either strengthen or continue seeing as there are bearish factors at play as well. Chief among these are doubts about the strength of Chinese oil demand.

Premier Smith has acknowledged that basing the province’s budget on oil revenues is not the wisest option, saying in her speech this week it was time for Alberta to get off the “budget rollercoaster” of oil revenues. She added, however, that the provincial government will not raise taxes to balance the new budget.

For the next financial year, the Alberta budget stipulates an average WTI price of $76 per barrel on average, declining to $73.50 per barrel in the following fiscal year.

Land Availability Forced India To Scale Back Solar Power Installations

By Julianne Geiger - Feb 22, 2024

India's solar installations fell dramatically last year as the country ran into difficulties acquiring the large swaths of land needed, a new research report said on Thursday.

Research firm Mercom Capital said in a new report that India's solar installations came in at just 13.4 GW last year, a 7.5 GW drop from the year prior.

The challenges that India faced in adding solar installations were not the high cost of solar. The biggest challenges were delays in land acquisition, connectivity issues, and new regulations such as General Network Access (GNA) and grid compliance.

"Module price drops in Q3 led to increased orders, but grid compliance and last-minute connectivity issues due to new regulations caused project commissioning delays," added Priya Sanjay, Managing Director of Mercom India.

The research report elaborated that the grid connectivity challenges, power evacuation concerns in areas inhabited by a bird known as the Great Indian Bustard, and project extensions all contributed to the decline in installations last year, along with compliance with the amended grid code provisions. 

As of the end of last year, India's total solar capacity stood at 72GW—85.4% of which is utility-scale projects and 14.6% of which is rooftop solar.

India's large-scale solar project pipeline is 105.3 GW, with an additional 70.6 GW of projects tendered and awaiting auction as of the end of last year.

"Compared to most of 2023, market challenges like ALMM and high module prices no longer hinder projects. The absence of these financial obstacles allows previously stalled projects from 2023 to potentially proceed toward commissioning now," Sanjay said. He also called on the government to "ensure adequate substations and transmission infrastructure to accommodate the large capacity of projects" commissioning in Q1 2024.

 

India’s Refining Margins Slump as It Struggles to Secure Russian Oil

By Tsvetana Paraskova - Feb 22, 2024

Refining margins for India’s biggest state-owned refiners have dropped in recent months amid more difficult access to Russian crude and soaring freight rates due to the Red Sea disruption to crude shipments, analysts and traders tell Bloomberg.

For most of 2023, Indian refiners enjoyed high refining margins and profits as they imported cheap Russian crude at $20 a barrel and more below international benchmarks.   

Margins started eroding last quarter, although they are still higher than before the Russian invasion of Ukraine, which upended global crude trade flows. The decline in refining margins is due to higher costs for Indian refiners because of higher competition for Russian supply in Asia, increased freight costs, and tougher U.S. sanctions enforcement, which has limited India’s access to very low-priced crudes from Russia.

India could lose its refining advantage if it loses its edge on procuring cheaper crude from Russia, Mukesh Sahdev, head of oil trading and downstream research at Rystad Energy, told Bloomberg.

Stricter sanctions enforcement, narrowing discounts of Russian grades, and spiking freight rates due to the threats to shipping in the Red Sea have weighed on India’s crude purchases and imports of Russia’s oil in recent weeks.

The tougher enforcement of the G7 sanctions and related payment issues have been holding up Indian purchases of some cargoes of Russian crude oil, with tankers previously headed to India turning back eastwards, tanker-tracking data monitored by Bloomberg showed early this year.

Supply of Russia’s Sokol grade to India seems to be particularly hit by the tougher sanction enforcement.

In January, India’s crude imports from Russia slipped for a second consecutive month and were at their lowest level in a year, according to tanker-tracking data reported by Reuters.

Russia continues to be India’s top crude supplier, but deliveries to India fell by 4.2% from December to 1.3 million barrels per day (bpd) in January, per data from LSEG cited by Reuters. Vortexa pegs India’s crude imports from Russia at 1.2 million bpd last month, down by 9% month-on-month.  

By Tsvetana Paraskova for Oilprice.com

 

Loophole Allowed Russia to Earn $1.2 Billion From Fuel Sales to the EU

By Charles Kennedy - Feb 23, 2024

An EU sanctions loophole that allows imports of Russian crude if it’s refined elsewhere made Russia an estimated $1.2 billion (1.1 billion euros) from sales of fuels in the European Union last year, despite the embargo on direct imports from Russia, an investigation by NGO Global Witness showed on Friday.

For more than a year, the EU has had a ban in place on imports of seaborne crude oil and fuels from Russia – with a temporary derogation for Bulgaria – as the bloc and its U.S., UK, and other allies look to stifle oil sales revenues for Vladimir Putin to wage his war in Ukraine.

However, Russian crude oil refined into fuels elsewhere, in India, for example, can be imported into the EU and the Kremlin is still receiving revenues for its fuels ‘laundered’ outside Russia.

Global Witness has tracked seaborne flows of crude from Russia to refineries around the world and then on to the European ports, and revealed that in 2023, an estimated 35 million barrels of Russian oil entered the EU in the form of refined petroleum products. It’s impossible to track specific molecules, but Global Witness analyzed the relative volume of Russian versus non-Russian oil used in a refinery’s feedstock, where data is available.

“The fuel is entering through a not-so-small loophole left in EU sanctions which allows products refined from Russian oil to flow into the bloc. This has resulted in a ‘laundromat’ where refineries in countries like India and Turkey, can import discounted Russian crude, refine it into products like diesel, jet fuel, or gasoline, and legally sell the refined oil to embargoing jurisdictions like the EU,” Global Witness said.

Through the same loophole, Russian fuel is also making its way into the UK and the U.S. In August 2023, a Global Witness analysis showed that one in every 20 UK flights ran on jet fuel made from Russian oil, and in November Global Witness reported that the U.S. had imported 30 million barrels of fuel from refineries that import Russian oil.  

By Charles Kennedy for Oilprice.com

ABOUT TIME

UK Quits Treaty Allowing Oil Firms to Sue Governments Over Climate Policy

By Charles Kennedy - Feb 22, 2024

The UK will leave the Energy Charter Treaty (ECT), a 1994 pact that allows oil and gas companies to sue governments over their climate policies for compensation for lost profits.

The Energy Charter Treaty was originally designed to promote international investment in the energy sector and has historically provided protections for investors in fossil fuels.

Efforts to modernize the treaty, which the UK considers “outdated” in view of its net-zero policies and ambitions, have failed, resulting in a stalemate, which prompted the UK government to announce on Thursday that it would leave the Energy Charter Treaty (ECT) “after the failure of efforts to align it with net zero.”

After considering the views of businesses, industry, and civil society, ministers will now instigate the UK’s withdrawal, which will take effect after one year, removing protections for new investments after this period. ?

The UK is not the only European country quitting the treaty—France, Spain, the Netherlands, and six other EU member states have announced similar moves.

According to the UK, proposals to modernize the treaty to support cleaner technologies have been subject to months of talks between European countries, resulting in a stalemate. The UK government believes that the decision to leave the treaty “will support the UK’s transition to net zero and strengthen its energy security.”

“The Energy Charter Treaty is outdated and in urgent need of reform but talks have stalled and sensible renewal looks increasingly unlikely,” the UK’s Minister of State for Energy Security and Net Zero, Graham Stuart, said in a statement.

“Remaining a member would not support our transition to cleaner, cheaper energy, and could even penalise us for our world-leading efforts to deliver net zero.”

Environmentalists welcomed the UK's withdrawal from the ECT.

“Leaving this incredibly flawed treaty is a brilliant win for our environment and the climate,” Kierra Box of Friends of the Earth, said, as quoted by the BBC.

 

Iraq Reopens Refinery after a Decade-Long Shutdown

By Charles Kennedy - Feb 23, 2024

Iraq reopened on Friday its rehabilitated North Oil Refinery in Baiji, which had been inactive for more than 10 years and which brings OPEC’s second-largest crude producer closer to being self-sufficient in oil products, the Prime Minister Media Office said in a statement.

The Baiji refinery was damaged by insurgent violence when Al Qaeda and later ISIS were fighting for control of Iraqi territories and for control of the oil refinery.  

The refinery was shut down in 2014 when Islamic State fighters seized it and stole crude and petroleum products from the territories they controlled in Iraq to fund their insurgency.  

The repaired refinery was inaugurated today by Iraqi Prime Minister Mohammed Al-Sudani, who praised the staff of the North Refineries Company who undertook the challenge of reconstructing the facility after it was liberated from ISIS.

The reopened oil refinery has a processing capacity of around 150,000 barrels per day (bpd). The restart of the refinery raises the total processing capacity of the Baiji refining complex to 290,000 bpd, according to Reuters.

With the start-up of the North Oil Refinery in Baiji, Iraq is nearing the capacity necessary to supply all of Iraq’s oil product demand by the middle of next year, at the latest, PM Al-Sudani said at the inauguration ceremony.

“This will save us billions of dollars that will be allocated to other service and economic sectors by ceasing the import of oil derivatives, thus achieving our reform goals,” the Prime minister's media office said.

Despite producing more than 4 million bpd, Iraq continues to import oil products—a policy that has been in place for decades. With the reopening of the North Oil Refinery in Baiji, “we are on track to meet the country's total oil derivatives needs by mid-next year, potentially even surpassing this goal ahead of schedule,” Iraq says.