PetroChina cuts gas supplies to major users to prevent shortages
PetroChina, the country’s top gas producer, has curbed supplies of the fuel to some industrial users in northern and western regions, in the first sign of emerging tightness only two months after China experienced one of its worst winter gas crunches. To prevent another around of winter shortages, state-run PetroChina started from early May limiting gas supplies and hiking prices for major customers, including city gas distributors and inland gas liquefaction plants in some western provinces, four sources briefed on the matter said. They declined to be identified as they are not authorised to speak to the media. “Suppliers are managing the increases in demand, so that they won’t be caught up in a serious supply crunch later in the year,” said Chen Zhu, managing director of consultancy SIA Energy. China’s natural gas consumption rose almost 14 percent in the first four months of the year to 71.1 million tonnes, according to Reuters calculations based on official data. That led to a surge in spot liquefied natural gas (LNG) imports in recent weeks and has lifted prices to a two-month high of $8.7 per million British thermal unit . The expansion in demand, driven by an extension of Beijing’s gasification drive and an improving economy, exceeds a 10-percent annual growth forecast by state energy giant CNPC early this year. PetroChina did not respond to a Reuters request for comment. The firm raised feed prices to 1.78 yuan ($0.2795) per cubic metre up from 1.68 yuan per cubic metre for big users in the western part of Inner Mongolia from May 11, a document reviewed by Reuters showed. It also halved the gas feed to Erdos Hong Ji Yi Tai Energy Co Ltd, a gas liquefaction plant based in Inner Mongolia, starting this week, an official from the plant said. “We were caught by surprise,” the official said. “This is the first time PetroChina has reduced our supplies ahead of summer. The price hike once again will dampen our margin.” He requested anonymity because he is not allowed to speak with media. Wang Haohao, an analyst with Zibo Longzhong Information Group, said the price hike and supply curb will likely hit all LNG plants in the Inner Mongolia region and neighbouring Shaanxi province. China operates more than 100 small inland LNG plants that source gas from state producers PetroChina and Sinopec and supply super-chilled fuel to steel mills, glass makers and residential compounds, users that are not covered by the pipeline grid. SUPPLY CAPS In another sign of supply curbs, PetroChina wanted to cap volumes supplied this year to the Inner Mongolia regional government at 2016 consumption levels, a government official told Reuters. “The negotiation reached a deadlock as we asked for more supplies for this year,” said the official. “The company is only willing to offer us the same amount they supplied in 2016, which is not enough. We cannot accept it” The official said a sweeping campaign to switch industries and household from coal to gas has led to a surge in the region’s demand for the fuel. In a broader attempt to avoid a winter squeeze, the state planner has asked national gas producers to sign annual supply contracts with major users by the end of April. State producers, however, are suffering ongoing losses in their import business of long-term oil-indexed LNG contracts as global oil hit multi-year highs of $80, while China’s domestic benchmark city-gate gas prices remained unchanged since last August, said SIA’s Chen. In debut trading at Chongqing Oil and Gas Exchange, PetroChina sold about 35 million cubic metres of piped gas at 0.155 yuan per cubic metre over government-set city-gate rates, or about a 10-percent premium, reflecting a tight market in a traditionally low season. Joonas Korpisalo Womens Jersey
Rise in crude prices poses risk to India’s current account deficit: Goldman Sachs
Crude oil prices may rise further in the coming months, following which India’s current account deficit will be around 2.4 per cent in 2018-19, says a Goldman Sachs report. According to the global financial services major, the rise in international crude prices poses risks to India’s current account deficit. “Our commodities team expects oil prices to continue to rise over the course of this summer, before moderating slightly at the end of the year. We recently increased our 2018-19 current account deficit (CAD)forecast to 2.4 per cent of GDP (from 2.1 per cent of GDP earlier),” Goldman Sachs said in a research note. CAD widened to 2 per cent or $13.5 billion in the October-December quarter of 2017, up from 1.4 per cent, or $8 billion, in the corresponding period a year ago. Globally, brent broke through the $80 a barrel mark yesterday for the first time since November 2014. “The recent spike in oil prices following the withdrawal of the US from the Iran nuclear deal poses additional upside risks to our headline inflation forecast. We estimate that a 10 per cent increase in crude oil prices leads headline inflation to rise by 10 basis points,” the report noted. Goldman Sachs forecasts 2018-19 headline CPI inflation to average 5.3 per cent. On RBI’s policy stance, the report said, a more hawkish stance by the central bank is likely following a weaker currency (the rupee has depreciated by 6.6 per cent against the US dollar year-to-date) and concerns over a rising current account and fiscal deficit. The Reserve Bank will announce its second bi-monthly monetary policy on June 6. “We expect RBI to keep policy rates on hold at its meeting on June 4-6, but shift to a hawkish tone,” it noted. The first bi-monthly monetary policy meeting of 2018-19 was held on April 4-5 and the panel had decided to maintain status quo on the interest rate citing inflationary concerns.
Dharmendra Pradhan asks Saudi Arabia for stable, moderate oil prices
With global crude prices touching USD 80 a barrel, Oil Minister Dharmendra Pradhan has pressed OPEC kingpin Saudi Arabia to keep prices stable and moderate, saying that spike in rates would have a negative impact on Indian consumers as well as the economy. Pradhan conveyed India’s concerns when Saudi Arabian Minister of Energy, Industry and Mineral Resources Khalid Al-Falih called him last evening “to discuss continued joint cooperation between the two countries and in particular the current oil market situation”, an official statement said here. Brent crude oil, which breached USD 80 a barrel mark yesterday, was trading at USD 79.54 today, the highest level since November 2014. The rally is being attributed to a combination of factors — renewed US sanctions on third-largest OPEC producer Iran, shrinking supplies from Venezuela and the International Energy Agency saying that a global surplus has finally been eliminated due to output cuts by the Organization of Petroleum Exporting Countries and its allies. “Pradhan expressed his concern about rising prices and its negative impact on consumers and the Indian economy,” the statement said. “Pradhan emphasized his desire for stable and moderate prices.” Al-Falih, on his part, assured that supporting global economic growth is one of Saudi Arabia’s key goals. “He reiterated his commitment towards stable supplies and that the Kingdom together with other producers will ensure availability of adequate supplies to offset any potential shortfalls and ensure that prices remain reasonable,” the statement added. The rally in international oil prices and a weakening rupee against the US dollar has led to a spike in domestic retail prices of petrol and diesel. Petrol prices have risen by about a rupee per litre since Monday when the state-owned fuel retailers resumed daily revision in retail prices after a 19-day pre-Karnataka poll hiatus. Diesel prices have gone up by Rs 1.15 a litre during this period. Petrol price was today hiked by 29 paisa, the second steepest increase since daily price revision was introduced in mid-June last year. It costs Rs 75.61 per litre in Delhi, the highest in almost five years. Diesel rates went up by a similar proportion to take the retail price to its highest ever rate of Rs 67.08 a litre, according to a price notification issued by state-owned firms. To make up for the almost USD 5 per barrel increase in price of benchmark gasoline (petrol) price since April 24, when the freeze on retail rates came into effect, a Rs 4 per litre increase in petrol price is warranted. Of this 98 paisa has already been affected and the remaining is likely to be passed on to consumers in near future. Similarly, on diesel, the benchmark rate has gone up by USD 4.8 per barrel, necessitating an Rs 3.5-4 a litre increase. Of this, Rs 1.15 has already been affected. The Saudi Minister updated Pradhan on his ongoing consultations with colleagues from major producing countries both inside and outside of OPEC, including Russian Energy Minister Alexander Novak and UAE Oil Minister Suhail Al Mazroui, Minister, who is also the President of the OPEC Conference, the statement said. Brian Orakpo Authentic Jersey
German-Russian gas pipeline takes shape despite US protests
Sparks fly and machines whir as workers busily prepare thousands of steel pipes that will become part of a vast undersea pipeline bringing gas from Russia to Germany’s northeastern Baltic coast. The Nord Stream 2 project will double the amount of natural gas Russia can funnel directly to the heart of Europe from newly tapped reserves in Siberia, intentionally skirting Eastern European nations like Poland and Ukraine. It also promises much-needed jobs in this poor German backwater, some three hours’ drive north of Berlin. The United States and some other German allies have bristled at the project, warning that it could give Moscow greater leverage over Western Europe. Energy-poor Germany already relies heavily on Russian gas and so far Chancellor Angela Merkel has deftly kept the new $11 billion pipeline off the table while imposing sanctions against Russia for its actions in Ukraine. But as plans become closer to reality, the pressure has increased on her, and last month after meetings with Ukrainian President Petro Poroshenko she acknowledged that Nord Stream 2 was more than just a business project, saying that “political factors have to be taken into account.” With Merkel heading to Sochi on Friday for talks with Russian President Vladimir Putin, a senior U.S. diplomat warned that proceeding with the project could result in sanctions for those involved. “We would be delighted if the project did not take place,” U.S. Deputy Assistant Secretary Sandra Oudkirk, an energy policy expert in the State Department, told reporters in Berlin on Thursday. She said Washington is concerned Nord Stream 2 could increase Russia’s “malign influence” in Europe. Oudkirk said the new pipeline would divert gas flows away from Ukraine, which depends heavily on transit fees, and could become a pathway for Russia to install surveillance equipment in the Baltic Sea, a sensitive military region. She said the U.S. is “exerting as much persuasive power” as it can to stop the project, and noted that Congress has given the U.S. administration explicit authority to impose sanctions in connection with Russian pipeline projects if necessary. “Any pipeline project – and there are many multiple pipeline projects in the world that are potentially covered by this sanctions authority – is in an elevated position of sanctions risk,” she said. Jens Mueller, a spokesman for Nord Stream 2, dismissed concerns from the U.S. and several European countries, saying the new pipeline would merely be one of many sources of natural gas for Europe. “This pipeline can’t be used to blackmail or negatively affect any country,” he told The Associated Press in an interview. Merkel’s trip to the Black Sea resort of Sochi, her first visit to Russia in a year, will be a diplomatic balancing act. While the German leader has taken a hard line on Russian actions in recent years – from the conflicts in Ukraine and Syria to the chemical attack on a former Russian spy in Britain – Germany badly needs to secure its gas supply and Berlin has calculated that Nord Stream 2 offers the best deal. Europe’s biggest economy is also the world’s biggest importer of natural gas. According to Kirsten Westphal, an energy policy expert at the German Institute for International and Security Affairs, said its import needs are likely to grow. German chemical giant BASF, a major investor in Nord Stream 2, alone uses more gas than the country of Denmark. Under Merkel, Germany has also set itself an ambitious goal of switching off all nuclear plants by 2022. While renewable power is on the rise, coal forms the bedrock of Germany’s energy mix, a fact that’s not compatible with the country’s pledge to sharply reduce carbon emissions. “If you want to take climate goals seriously then gas is simply an important source of energy,” said Westphal. From the end of 2019 when it’s to go online, the twin pipes of Nord Stream 2 will pump up to 55 billion cubic meters of gas to Western Europe each year, the same as its predecessor Nord Stream 1, which runs from the Russian city of Vyborg under the Baltic to the German city of Greifswald. The additional gas is needed to fill a projected decline in supply from Norway and the Netherlands, as their reserves wane. The aging Ukrainian Gas Transmission System, meanwhile, is a Soviet-era relic in bad need of upgrading and unlikely to be competitive in the foreseeable future. Its loss would be a severe blow to Kiev, which earns up to 2 billion euros ($2.35 billion) a year from transit fees – some 2 percent of the country’s gross domestic product. A deal that keeps Kiev in the mix could help normalize relations between Ukraine and Russia, Moscow and Berlin. “A compromise could be that on the one hand the pipeline project isn’t blocked any further,” said Claudia Kemfert, a senior energy expert at the German Institute for Economic Research. “On the other hand Russia would commit itself to keep using the gas route through Ukraine, so that all sides have a face-saving result.” Merkel’s spokesman Steffen Seibert indicated that some of the gas that passed through Ukraine’s pipes last year – over 90 billion cubic meters – will keep flowing in future. “In the end, but we’re not there yet, it will also be about the volume of gas transiting (through Ukraine),” he said. “Of course it makes a difference how many billion cubic meters it is. But I can’t give you a target number. We believe it needs to be resolved in talks and we hope that, piece by piece, things will move forward.” Marqise Lee Authentic Jersey
India adds excess crops, widens input pool in new biofuels guidelines
India’s government has approved a new national biofuels policy that permits the use of excess crops and a wider pool of inputs for biofuel production, the Ministry of Petroleum and Natural Gas said Wednesday. The policy was approved at a meeting of the country’s Union Council of Ministers chaired by Prime Minister Narendra Modi, the ministry said in a statement. The policy includes a classification system that defines first, second and third generation biofuels and details the incentives for producing each grade, as well as the support available for domestic crop farmers. It expands the scope of the raw materials permitted for fuel ethanol production in India to cover sugarcane juice, sugar including sugar derived from sugar beet, sorghum, corn, cassava and damaged grains unfit for human consumption like wheat, broken rice and potatoes. To provide farmers with price support during years of excess crop production, the policy permits the use of surplus grain in ethanol production for blending into gasoline with the approval of the National Biofuel Coordination Committee. The policy also aims to encourage second generation biofuel production and usage through a mixture of government funding of around Indian Rupees 50 billion ($737.8 million), tax incentives and higher purchase prices. It also notes the importance of using wastes like used cooking oil and non-edible oilseeds and advocates the setting up of supply chains to collect waste products. The diversion of UCO from reuse in food to biodiesel is also encouraged. The policy recognizes that solid waste can also be converted to fuel, which could potentially form 20% of the fuel pool in the country. However, it stops short of allocating resources to waste supply chain formation and conversion. George Iloka Jersey
India raises Iran oil imports in April to highest since October 2016 as US sanctions loom
India’s oil imports from Iran surged to 640,000 barrels per day (bpd) in April, its highest level since October 2016, according to data from shipping and industry sources, as refiners raised purchases ahead of looming U.S. sanctions against Tehran. Overall, India imported 4.51 million bpd in April, 2.5 percent higher than a year ago, the data showed. India’s Iranian imports rose by 49 percent from March and were 20 percent higher than a year ago, the data showed. The country is the Iran’s second-biggest buyer of crude after China. State refiners have raised their imports after Iran agreed to steep shipping discounts. Iran exported a total 2.6 million bpd of crude in April, a record since the lifting of sanctions in January 2016, according to the news service for the country’s oil ministry. Going forward, however, Iran’s oil exports are expected to fall. U.S. President Donald Trump earlier in May announced the withdrawal from a 2015 agreement between the United States, Iran and other world powers to limit Iran’s nuclear programme. The United States intends to renew economic sanctions against Iran, including on the petroleum sector. India’s Oil Minister Dharmendra Pradhan said on May 12 that it is too early to say how the sanctions will impact India. In the first four months of 2018, India imported 552,000 bpd from Iran, about 2 percent less than a year ago, the data from the sources showed. The sources declined to be identified as they were not authorized to speak with media. India’s 2018 Iran oil purchases fell because of lower intake by state refiners in the March quarter. New Delhi imported 16 percent less oil from Iran during the 2017/18 financial year as state-refiners reduced purchases after a row over development rights for Iranian natural gas fields. Iran remained the third-biggest oil supplier to India last month followed by Iraq and Saudi Arabia, the data showed. Venezuela replaced Nigeria as the fourth-biggest supplier as the South American nation pushed more barrels in India and curtailed supplies to the U.S. India received about 397,200 bpd of oil from Venezuela in April, the highest since September, up about 46.8 percent from a year ago, the data showed. Adrian Colbert Jersey
Rs 4 a litre hike in petrol, diesel prices in offing
A Rs 4 per litre increase in petrol and diesel prices is in the offing if state-owned fuel retailers are to return to pre-Karnataka poll hiatus margin levels, brokerage firms said. No sooner had Karnataka polled to elect a new state government, state-owned Indian Oil Corp (IOC), Hindustan Petroleum Corp Ltd (HPCL) and Bharat Petroleum Corp Ltd (BPCL) on Monday ended a 19-day hiatus in revising petrol and diesel prices and reverted to the practices of changing rates on a daily basis. Since then petrol price has risen by 69 paisa a litre, including a 22 paisa hike effected today that took rate in Delhi to Rs 75.32, the highest in almost five years. Diesel prices have gone up by 86 paisa a litre, including 22 paisa increase today that took the rate to their highest ever of Rs 66.79 a litre in Delhi. “Our computation suggests that downstream oil marketing companies (OMCs) are required to increase retail prices of diesel by a steep Rs 3.5-4 a litre and gasoline (petrol) by Rs 4-4.55 per litre in the coming weeks to earn normative gross marketing margins of Rs 2.7/litre,” Kotak Institutional Equities said in a report. The increase is based on assumption that global price of diesel and petrol and Rupee-US Dollar exchange rate remain stable hereon. “We note that the lack of price hikes over the past three weeks, before Karnataka elections amid a sharp increase in global crude/product prices, has resulted in sharp moderation in gross marketing margins to around Rs 0.5-0.7 a liter,” it said. Last week, ICICI Securities had said that auto fuel net marketing margins were weak at Rs 0.31 a litre due to no price hike after April 24. OMCs returned to daily price revision from May 14. They are estimated to have lost about Rs 5 billion on absorbing higher cost resulting from the spike in international oil rates and fall in rupee against the US dollar. The benchmark international rate for petrol, used for revising rate on April 24, had gone up from $78.84 per barrel to $82.98 on May 14. It has further risen to $83.30, indicating more daily hikes would be needed to level retail price with cost. Similarly, benchmark international diesel rates during this period have climbed from $84.68 per barrel to $88.93. Also, the rupee has weakened to Rs 67.06 per US dollar from Rs 66.62, making imports costlier. Paul Millsap Authentic Jersey
ONGC capital spending not impacted by oil price: Moody’s
Defying a global trend, India’s flagship national oil company ONGC did not cut its capital spending on exploration and development after oil prices collapsed between 2014-16, Moody’s Investors Service said today. In a report, Moody’s said while ONGC did not reduce capital spending on oil and gas exploration and production, it halted the pace of its international expansion as a response to the oil price slumping from USD 140 per barrel to under USD 40. “National oil companies (NOCs) worldwide strived to cut costs, adjust growth strategies or sell assets since the 2014-16 collapse in oil prices, just as oil companies without state sponsors have done,” the rating agency said in a report. The decline in oil prices did not significantly affect Oil and Natural Gas Corporation (ONGC), which saw its consolidated EBITDA for 2015-16 decline by only 16 per cent compared to the same period three years earlier. Moody’s said this because ONGC’s share of India’s fuel subsidy burden offset that decline. “ONGC was more exposed to the decline in natural gas prices, which nearly halved in India during that period as gas prices fell internationally,” it said. Despite the oil price decline, ONGC did not reduce its capital spending on exploration and development, Moody’s said. “However, the company halted the pace of its international expansion from early 2014 to mid-2016, when it resumed overseas acquisitions, including its completion of a 26 per cent stake in CSJC Vankorneft, the owner of (Russia’s) Vankor Field and North Vankor license, for USD 1.9 billion (after adjusting for cash profits),” it said. All of ONGC’s overseas acquisition activity has been in line with the Government of India’s strategic objective of ensuring energy security for the country, which relies on imports for nearly 80 per cent of its oil consumption. Moody’s estimated a capex of USD 7-7.5 billion for ONGC in the year to March 2019. This compares to USD 5.6 billion spending in 2014-15 and USD 12.3 billion in 2017-18. ONGC’s spending in 2017-18 was higher because of one-off acquisition of the government’s stake in Hindustan Petroleum Corp Ltd (HPCL). To help improve the vertical integration profile of its business, ONGC in January acquired 51.1 per cent of HPCL, India’s third-largest refining and marketing company, from the government for Rs 369.15 billion. The government sold the stake to help reduce its fiscal deficit. In the report that examined how changes in policy and structure since the oil price collapse will affect some of the largest NOCs worldwide, Moody’s said NOCs globally have adjusted to a more moderate band of oil prices since the transforming price collapse of late 2014 to early 2016. “Every NOC’s own circumstances depend on a host of factors, such as the strength of support from its government sponsor, and the company’s ability to control local markets,” it said. Alex Tuch Womens Jersey
500 days and a billion barrels of lost oil pushes crude to USD 80
It has taken 500 days and the sacrifice of almost a billion barrels in lost oil output for the global crude market to eradicate a deep supply surplus, but oil prices have now hit OPEC heavyweight Saudi Arabia’s desired level of $80 a barrel. Brent crude futures reached an intraday high of $80.18 on Thursday, breaching the $80 a barrel level for the first time since November 2014. A vast overhang of unwanted crude stocks has now vanished, investors are buying into the oil price rally more than at any time in the last four years and market watchers are beginning to talk again about oil prices returning to $100 per barrel and more. Renewed U.S. sanctions on Iran that could seriously hamper the country’s oil exports, along with involuntary output declines in big producers such as Venezuela, Mexico and Angola have contributed to the bounce in the price. Led by Saudi Arabia, the Organization of the Petroleum Exporting Countries and 10 of its partners including top producer Russia have cut their crude output by a joint 1.8 million barrels a day since January 2017. The oil price has risen by $50 since hitting a 13-year low of $27 a barrel in January 2016 and has gained 50 percent in the last 12 months alone, reflecting both concern over geopolitics and confidence in a more favourable balance between supply and demand. The premium of the benchmark Brent crude futures contract is at its largest in years over those for delivery further ahead, reflecting investors’ and traders’ belief that supply will fall short of demand for some time to come. Saudi Arabia is said to favour an oil price of around $80, or even $100 a barrel, as it gears up to float part of state oil company ARAMCO. But OPEC and its cohorts may end up being victims of their own success. The International Energy Agency on Wednesday warned global demand growth will almost inevitably slow given how much the oil price has risen. Meanwhile, the rise in the U.S. dollar since the start of the year may curb the purchasing power of major importing nations to buy crude, especially since many, such as India and Indonesia, no longer offer drivers such as generous fuel subsidies. OPEC also has a headache in the form of rival supply from outside its club, namely from the United States, which is on course to become the largest producer in the world by the end of this year, with output set to top 11 million bpd. OPEC’s supply cuts have been swamped by the increase in U.S. output, led by production from shale fields and this, along with the higher price, has made the major forecasting agencies — the IEA, OPEC itself and the U.S. Energy Information Administration — far more cautious. So while $80 might be Saudi Arabia’s purported magic number, its spell might prove short-lived. David Mayo Authentic Jersey