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India to become one of top three global oil consumers continuing to increase here and will keep growing.”
LONDON: India’s growing middle class will soon make it the thirdbiggest oil consumer, reshaping the global energy map as China uses less and the US produces more. India will overtake Japan this quarter, International Energy Agency (IEA) estimates show. The country’s galloping demand growth may eventually surpass China’s, a shift that was unforeseen just a few years ago. As living standards improve, the number of Indians buying cars and trucks has risen, boosting gasoline use by 19 per cent in April alone from a year earlier. The International Monetary Fund (IMF) predicts the economy will swell by 7.5 per cent this year as Prime Minister Narendra Modi makes business reforms, beating Chinese growth for the first time in a quarter-century. Growth is unbelievable India “reminds me of China a decade ago,” said Amrita Sen, chief oil HUNGRY FOR MORE: As living standards improve, the number of Indians buying cars and trucks has risen, boosting gasoline use by 19 per analyst at London-based consult- cent in April alone from a year earlier. — Bloomberg file picture ants Energy Aspects. “The demand growth is unbelievable.” The country’s unbridled thirst consume about 4.1 million barrels ganisation of Petroleum Exporting Opec is meeting to discuss produc- na, whose annual growth is estition limits. India imports about 85 mated at 295,000 barrels a day by for oil has helped bolster crude of oil a day this quarter, compared Countries (Opec) conference. per cent of its oil, with the majority the IEA. prices as they start to recover from with Japanese demand of 3.8 mil“India is growing: We have a new coming from Opec countries. a six-year low. It’s a further jolt to lion barrels a day. The US and Chi- Price recovery Oil has rebounded to about $60 a In April, the country’s oil use government, a new confidence in the energy market after the US na are the world’s top oil users. “India will be a big centre of oil barrel from $45 a barrel in Janu- rose by about 300,000 barrels a the economy, people are driving shale revolution pushed Russia out of the top spot for natural gas and gas demand growth in the next ary. A price of $65 would be “eq- day, similar to the growth rate seen more,” said Lalit Kumar Gupta, production and paved the way for few years,” IEA Executive Director uitable,” Indian Oil Minister in January and February. If that chief executive officer of MumbaiMaria van der Hoeven said in Vi- Dharmendra Pradhan said on pace is maintained for the rest of based refiner Essar Oil Ltd. “Even the first American exports. The IEA estimates India will enna, where she’s attending an Or- Wednesday in Vienna, where the the year, India may overtake Chi- with oil prices rising, demand is BUNDESBANK
REPORT
German growth upgraded FRANKFURT: Economic growth in Germany has picked up faster than expected thanks to low unemployment, higher wages and the weak euro, raising forecasts for the coming years, the German central bank, or Bundesbank, said on Friday. The German economy, Europe’s biggest, was projected to expand by 1.7 per cent in 2015, 1.8 per cent
in 2016 and 1.5 per cent in 2017, the Bundesbank said. Economic projections That marked an “appreciable” upgrade from the central bank’s previous economic projections in December, when it had pencilled in growth of 1.0 per cent for this year and 1.6 per cent for next year, the German central bank. — AFP
Car sales Passenger-vehicle sales rose about 16 per cent in April, according to the Society of Indian Automobile Manufacturers. It expects vehicle sales to grow as much as 8 percent this financial year. “Cars are cheap and finance is available,” said Anand Dorairajan, a 32-yearold human-resources executive at a shipping firm in Mumbai. He bought a Hyundai car eight months ago to add to the Suzuki his family already owned, paying about $11,300. “When young people start working, they want to buy a vehicle with their first salaries. That’s what I did.” As part of his ambitions for economic growth, Prime Minister Modi has proposed an end to government controls on fuel pricing, putting more money in the hands of state-run refiners. He has called on them to expand to meet demand as he works to shift the economy more towards manufacturing. New refinery Indian Oil. started a 300,000-barrel-a-day refinery on India’s east coast in April and plans to add capacity at a plant in Gujarat in western India. Bharat Petroleum Corp. intends to expand its refinery in central India and Chennai Petroleum Corp. will boost capacity in the south. — Bloomberg News
Slump in crude prices forces deep cost cuts After overspending by the industry during the boom years, the collapse in prices in the second half of last year laid bare the need to reduce costs and introduce more efficiencies
LONDON: The slump in crude prices has jolted the oil industry into deep cost cutting which, unlike the previous downturn, could last for a few years at least. After overspending by the industry during the boom years, the collapse in prices in the second half of last year laid bare the need to reduce costs and introduce efficiencies. Oil producers globally have embarked on billions of dollars in savings in recent months, forcing oil service providers and contractors, in turn, to slash rates by as much as 50 per cent in some cases. Partial rebound A partial rebound in crude prices this year will give service companies such as Baker Hughes, Schlumberger and Petrofac little respite. Unlike the previous collapse in 2009, when prices plunged 75 per cent only to rebound within months, industry analysts forecast a very gradual recovery in prices this time, which means costs will need to fall a lot further still.
UNCERTAIN TIMES: Well drilling costs in the North Sea are expected to drop by an average of 30 per cent by the end of next year due to a surplus of rigs in the market. — Bloomberg file picture
“Higher prices have led to cost inflation over the past years and now we need to reverse that trend,” BP’s Chief Executive Officer, Bob Dudley, told the Opec seminar in Vienna on Wednesday. “This will be tough and will require some very new thinking, but I believe it will lead the industry leaner and thinner into the future to use capital more efficiently.” Rig rates and service costs rose by up to 35 per cent between 2010 and 2014 as oil prices held above $100 a barrel. Since prices reversed companies are scrambling to trim costs wherever they can: from hardball negotiations with rig suppliers and contractors, to cutting rig workers’ onshore leave and changing supply ship travel patterns.
Some rig operators are now sharing vessels and helicopters to shuttle staff offshore. But that may be only the tip of what’s to come, and service providers could be hit hard. In the North Sea, an area that has suffered in recent years from particularly high operating costs, well drilling costs are expected to drop by an average of 30 per cent by the end of next year due to a surplus of rigs in the market, according to Malcolm Dickson, Principal North Sea Analyst at oil consultancy Wood Mackenzie. “The industry has been through ups and downs before, but this is a different situation,” Dickson said. “We believe there will be a more sustainable deflation effect from this drop-off because companies have realised you need to focus
more on costs and value over volume. The supply chain has realised that as well and is collaborating more.” Brent crude, at around $65 a barrel, is still 40 per cent lower than a year ago and a Reuters poll sees it rising only to $75.90 on average in 2017 as ample supply and US. Wood Mackenzie sees Brent still well below $100 in 2018, at $85 a barrel. The current downturn has forced major oil companies to cut hundreds of jobs in the North Sea alone. - Reuters
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