Massive 15% natural gas price hike on anvil; households’ kitchen, auto fuel budget may take a hit
A natural gas price hike to the tune of a massive 15% may be on the cards, as the government has decided to raise the price of domestically produced natural gas to $3.50 per million metric British thermal units for the next six-month period, CNBC Awaaz reported citing sources. This could raise domestic cooking gas for households and CNG bills for automobile users. Earlier this year, the government raised domestic natural gas price by 6% to $3.06 per million metric British thermal units, applicable for the current six-month period Apr-Sep 2018. The revised prices are based on the government’s formula and calculated on gross calorific value basis. The 15% rise is indeed massive, and the the increase in prices of natural gas has a strong likelihood of it leading to rise in prices of PNG (piped domestic cooking gas) and CNG (auto fuel), as it will put pressure on margins of the retail fuel distributors, fertiliser makers and power producers, which use natural gas as feedstock. Fertiliser and power companies also import LNG (liquefied natural gas) in addition to buying the domestic gas, and pool the prices to calculate their overall costs. This may provide some cushion to their margins, as they would look to increase the mix of imported LNG, depending on its prices in the international open markets. The government had approved a new formula in October 2014 to set the price of the natural gas produced at the domestic fields and revise it every six months based on the movement in prices in the US (Henry Hub), the UK (National Balancing Point), Canada (Alberta) and Russia. The latest potential hike in natural gas prices is also seen to boost the profits of oil marketing companies ONGC and Oil India. According to a recent Jefferies report, though the contribution of gas business is less on the revenue and operational front, a $1 per mmBtu rise can lift the earnings per share of ONGC and Oil India by at least 10%. Ben Lovejoy Womens Jersey
Gasoil emerges as winner as India tweaks oil product yields
Refiners in India have strategically altered their oil products output to maximize gasoil yields, as new cokers and robust margins in international markets have provided them an opportunity to lift both output and exports of the middle distillate. Traders and analysts said the growth in gasoil production, which has risen by an unusually high rate of 8% year on year in the first seven months, would maintain a similar momentum for the rest of the year. But exports could slow during the rest of the year as domestic demand recovers after the monsoon season. “India’s gasoil exports have been rising this year as refiners have raised output of the product over gasoline due to attractive margins,” said Lim Jit Yang, director for Asia at S&P Global Platts Analytics. “Furthermore, India’s domestic gasoline demand was growing at a very strong pace of nearly 10% year on year over January-July, while gasoil demand growth was more modest at 6% over the same period. This also helped gasoil exports,” he said. The Asian gasoil swap crack — the spread between the front-month 10 ppm sulfur gasoil derivative and front-month Dubai crude derivative — is currently hovering at a three-month high, reflecting the strength in the gasoil market. At the Asian close Tuesday, the gasoil crack stood at $16.48/b, up from $15.97/b seen a week ago, and up 14% from the start of the month. MIDDLE DISTILLATE FOCUS On the production side, gasoil’s gain has been gasoline’s loss. India’s gasoil production rose by 171,000 b/d to 2.3 million b/d over January-July, a year-on-year growth of 8%. On the other hand, gasoline output in the same period rose by 31,000 b/d to 911,000 b/d, a year-on-year growth of only 3.5%. “There has been a significant shift in overall product yields, away from fuel oil to maximize middle distillates,” said Senthil Kumaran, senior oil analyst at Facts Global Energy. Cokers at Bharat Petroleum Corporation Limited’s Kochi refinery and Indian Oil Corporation’s Paradip refinery have ramped up to their full rates this year, while Chennai Petroleum Corporation had added a coker earlier this year as well. “This reduced fuel oil output, while boosting production of distillates. Temporary length in gasoil resulted in higher gasoil exports by India over H1 2018. Also, crude runs have been consistently rising since the beginning of this year, largely due to recent expansions at BPCL and stable operations at Paradip,” Kumaran added. India’s refinery runs averaged 5.2 million b/d over January-July, a growth of about 5.2% year on year. “Diesel yields have increased due to several coker additions. Stronger markets this year compared to gasoline has also incentivized refiners to maximize diesel production. This trend will continue through 2020,” said Nevyn Nah, oil products analyst at Energy Aspects. EXPORT OUTLOOK Analysts said the trend of higher gasoil production could continue in the near to medium term as domestic demand is expected to remain robust over the next year. India is scheduled to hold general elections in 2019, when demand for diesel normally shoots up. Gasoil consumption growth is expected to be particularly strong in Q4 2018, with provincial elections planned in some states. Analysts added that a force majeure at Reliance and ongoing maintenance at the Bina refinery of Bharat Oman Refineries would result in a pull back in gasoil supplies over the next few months. In addition, Nayara’s Vadinar refinery is expected to shut mid-November for maintenance. “With all these developments, we expect gasoil exports to trend lower moving forward,” FGE’s Kumaran said. Platts Analytics’ Lim said: “India’s demand for diesel is expected to pick up after the monsoon season, and exports of the product are likely to ease.” India’s domestic demand for diesel witnesses a seasonal downturn during the monsoon season, when traveling is reduced due to heavy rains and hydro power generation is used instead of diesel. Sean Weatherspoon Womens Jersey
IOC will commission Ennore-Manali LNG pipeline on schedule by end of 2018
Indian Oil Corporation (IOC) today said it has lined up Rs 220 billion capex plan for the current fiscal year and will commission the Ennore-Manali LNG pipeline on schedule by the end of the year. Sanjiv Singh, the chairman of the nation’s largest oil marketing company, said the board has approved a capex plan of Rs 220 billion for FY19, of which around Rs 60 billion will be towards upgrading refineries to meet BS-VI emission norms. Addressing reporters after the AGM here, Singh also said the company is confident of commissioning the over Rs 40 billion, the 1,170-km-long pipeline linking its Ennore LNP terminal near Chennai to Manali in Himachal in 2018. The over Rs 5,000-crore LNG terminal at Ennore will be commissioned as scheduled by October, he added. “More than 50 percent work on the pipeline is already completed and we have tied up with all our target customers in Manali and most of them in Chennai region as well, Singh said. On crude imports from Iran, Singh said there is no clarity how the sanctions will pan out from November 4 and accordingly they have tied up many national oil marketing companies to ensure that crude supplies are not disrupted. “We don’t procure crude from private suppliers. We have sounded out enough national oilcompanies for supplies to source oil depending on the impact of the US sanctions on Tehran,” he said. He also denied that IOC has reduced its intake from Iran as saying on a net-net basis there is no cut-down. “There could have been some fluctuations in some months but overall we are procuring as per our contracts,” said Singh. Giving a break-up of the capex plan, finance director AK Sharma told PTI that around Rs 60 billion will go into refinery upgrades to meet the BS-IV emission norms, Rs 40 billion into marketing of which half will be used to procure new LPG cylinders and around Rs 30 billion into new businesses like biofuels, and Rs 10 billion into Paradeep petrochemicals expansion among others. On fundraising plans, though Sharma said the company does not need any funds now, towards the end of the fiscal year, they will hit international bond markets along with a domestic debt market, as the firm has not tapped it for long. According to the annual report presented to the shareholders today, the company sought shareholders’ approval for raising around Rs 200 billion through an NCD issue this year. The company has around Rs 530 billion of debt as of June, of which 70 percent are forex loans. The chairman also said, IOC, which was the first oil company to set up an electric vehicle charging station a few years ago in Nagpur, will increase its footprint more. But he did not offer more details. On new businesses, especially after entering the city gas distribution arena on its own after the last month’s auctions, he said IOC is very bullish about this segment and will invest over Rs 150 billion into this vertical over the next three years. It can be noted that IOC has a joint venture with Adani group for city gas distribution and at the auctions last month it has on its own won rights to seven cities, including Coimbatore and Salem in Tamil Nadu and Guna in MP. Together with its JV partner Adani, it has marketing rights in nine more cities, including Allahabad. He also said in the medium term, the company expects around 15 percent profit to come from the gas business, and 15-20 percent from petrochemicals vertical. On the ethanol plant, Singh said the first 100 tons per day plant in Panipat, with an investment of Rs 5 billion, will be commissioned over the next two years. The company has also taken land for two more biofuel plants in UP and Gujarat, he added. Jake Rudock Womens Jersey
IOC eyes 52,000 fuel retail outlets in 3 years
State run-Indian Oil Corporation aims to almost double its fuel retail network to 52,000 outlets over the next 3 years from 27,000 now. IOC, India’s largest fuel retailer, accounts for 44% of the market despite the entry of private sector in the segment. “IOC is also investing in the retail segment. With over 50,000 new fuel stations and LPG distributorship coming up in the next few years, benchmarking to global standards and generating additional revenue streams from non-fuel business is an idea worth exploring by oil marketing companies,” chairman Sanjiv Singh said. The company’s executives said that the three state-run oil marketing companies are likely to add 50,000 fuel retail outlets over the next three years, of which 25,000 would be by IOC while the rest will be split equally between Bharat Petroleum Corporation and Hindustan Petroleum Corporation. This will help the company maintain its market share. “The company aims to double its refining capacity to 140 million tonne per annum by 2030, and has accordingly undertaken brownfield expansions at Chennai Petroleum Corporation, and is also preparing to set up a 9 million tonne per annum refinery at Nagapattinam in Tamil Nadu,” Singh said. IOC, which sources a substantial share of crude for running its refineries from Iran, is awaiting the Indian government’s decision on imports from the country. The US has told all countries, including India and China, to stop their oil imports from Iran by November 4 or face sanctions. “Iran imports are suitable for us as they offer us good terms and conditions. We will be perfectly fine with whatever the government will decide. We have other options available and the flexibility with other countries to source crude,” Singh said. IOC is upbeat on gas marketing business and has plans of investing on infrastructure to support it. “Investments close to Rs 20,000 crore are being envisaged in city gas distribution alone over the next five to eight numbers,” Singh said. Martavis Bryant Jersey