Wave of refinery shutdowns may push India into importing fuel next year
A wave of shutdowns will hit Indian state-owned refineries next year as the country prepares for cleaner fuels from April 2020, company officials said, in moves that could temporarily dent oil demand and push up imports of refined fuels. India, the world’s third-biggest oil importer and consumer, has surplus refining capacity and rarely imports gasoil and gasoline. It also means that demand for fuel produced by India’s privately owned refiners will likely climb during the period, as state refiners seek to fill the gap. State refiners – Indian Oil Corp, Bharat Petroleum , Hindustan Petroleum and Mangalore Refinery and Petrochemicals – account for about 60 percent of the country’s nearly 5 million barrels per day (bpd) capacity. The refiners will have to shut gasoil- and gasoline-making units at their plants for 15 to 45 days to churn out Euro VI-compliant fuels from January 2020 to be able to sell them from April of that year. “Next year will be challenging for us as I have to protect my crude throughput and finish the job at the refineries and get ready for Euro VI by April 2020,” said B.V. Rama Gopal, head of refineries at IOC, the country’s top refiner. IOC plans a roughly month-long shutdown of gasoline- and gasoil-producing units at all of its 11 refineries, he told Reuters. Key parts of the refineries requiring a revamp include naphtha hydrotreaters, catalytic reforming units, isomerisation units, diesel sulphurisers and diesel hydrotreaters. In addition, some refiners have to revamp or set up new gasoline treaters, hydrogen production and sulphur recovery units. India has been gradually reducing sulphur emissions from vehicles since 2000, when fuel sold in the country had 500 parts per million (ppm). Motorists in Delhi, which faces major air pollution, moved in April this year to Euro-VI standards, which allow up to 10 ppm sulphur and are known locally as Bharat Stage-VI. HPCL will shut its diesel and gasoline units while upgrading the crude units at its Vizag and Mumbai refineries for 30 to 45 days, its chairman M. K. Surana said. He forecast a slight reduction in the company’s crude intake. “We will take the shutdown in one shot so we don’t have multiple disruptions,” Surana said. Surana and MRPL managing director M. Venkatesh, who intends to shut some refinery units for up to a month, said they see no need to import fuel in 2019 given that state fuel retailers can access robust production at local private refiners. Their view is challenged by analysts who estimate weaker gasoil and gasoline prices would prompt state refiners to import auto fuel instead of going to private peers who levy coastal freight charges on top of normal prices. A similar phenomenon was witnessed when India migrated to Euro IV fuel in phases to April 2017, said Sri Paravaikkarasu, head of east of Suez oil for consultants FGE in Singapore. “There is a high possibility that the lengthy shutdown period could result in a shortage of current Euro IV products in the domestic market. In such an event, Indian NOCs (national oil companies) should turn to the international market for product purchases,” she said. FGE expects India could import 40,000 bpd of gasoline and 70,000 bpd of gasoil for about one quarter in 2019 because of the shutdowns. BPCL, India’s second-biggest state refiner, has upgraded two of its refineries to superior-grade fuels, and is revamping the fire-hit hydrocracker at its Mumbai refinery so it can produce cleaner diesel, its head of refineries R. Ramachandran said. BPCL plans to shut a crude unit and some other secondary units at the Mumbai refinery for maintenance and upgrades next year for 15-20 days to produce cleaner fuels. Ramachandran said there could be a need to import “some additional cargoes but it will not be a major hiccup”. “The shutdowns will be spaced out in a manner to ensure there is enough product in the market. It will be a well-orchestrated exercise,” he said.
Venezuela rejected BP bid to buy Total’s stake in gas block, say sources
Venezuela’s oil ministry last month turned down a proposal by BP to buy Total’s stake in a promising but inactive natural gas project along the maritime border with Trinidad and Tobago, five people briefed on the matter said. BP owns the rights to the Trinidadian side of the gas play. It could have used the output from the neighboring area, the Deltana Platform’s fourth block off Venezuela’s eastern coast, to feed its growing operations on the island, said the people, who were not authorized to speak publicly. The rejection highlights how Venezuela’s socialist government, often hostile to foreign companies, remains an obstacle to investment even as oil majors eye the OPEC nation’s barely tapped gas reserves to expand their liquefied natural gas (LNG) portfolios. The ministry told the parties the area’s reserves needed to be re-estimated, an argument it has used to reject other deals. Two of the people said the deal had been waiting for approval for two years. France’s Total said in a March filing that the sale of its 49 per cent stake was “awaiting approval from the authorities.” Norway’s Equinor owns the other 51 per cent. An Equinor spokesman said it finished exploration drilling 10 years ago, but declined to comment on Total’s plans. Gas investment could help Venezuela, which has the world’s largest crude reserves, compensate for lack of capital for its oil industry, whose production continues plummeting amid a political and economic crisis. Venezuela’s mostly undeveloped gas reserves were 225 trillion cubic feet (TCF) at the end of 2017, compared with Trinidad’s 9.2 TCF, according to BP’s Statistical Review of World Energy. BP and Royal Dutch Shell own stakes in all four of Trinidad’s LNG plants, known as trains. Shell, the world’s largest liquefied gas trader after buying BG Group for $52 billion, is pushing Venezuela to let it produce gas in the offshore Dragon field, close to its Hibiscus platform off Trinidad. “There’s a real shortage of gas supply in the downstream industries in Trinidad,” said Tanvir Malik, a research analyst at the Economist Intelligence Unit. Total’s attempt to sell comes as some Western oil firms seek to shrink their Venezuelan operations as reputational risk grows amid U.S. sanctions and corruption probes linked to government officials and state-run oil company PDVSA. Shell requested approval this year to sell its only crude asset in Venezuela to French firm Maurel & Prom. Total recently downgraded its Venezuelan projects to the lowest investment category, implying it could continue looking for buyers, two company sources said. BP declined to comment. Venezuela’s oil ministry and Total did not respond to requests for comment. NOT ALONE Venezuelan law requires PDVSA to take a majority stake in crude oil joint ventures, but is more flexible with gas, allowing foreign firms to individually operate projects through exploration and production licenses. But ownership changes in gas projects are still subject to regulatory approval, and the government is required to provide an explanation for rejections, said Eugenio Hernandez-Breton, a partner at the Baker McKenzie law firm in Caracas. Under late socialist President Hugo Chavez, PDVSA tried to take control of prominent gas projects, including the Deltana and Mariscal Sucre offshore plays, both close to Trinidad with total estimated reserves of about 22 TCF. Neither project has yet started commercial production due to long delays stemming from lack of funds and disputes over control between PDVSA and the private companies. “It is really difficult for a foreign investor to feel comfortable with Venezuelan laws applied in practice,” Hernandez-Breton said. “We don’t have the financial resources or technical expertise for developing natural gas projects, whereas Trinidad has the expertise and the backing of foreign investors.” While once an afterthought to crude oil, Big Oil is focusing increasingly on natural gas as global demand for less carbon-intensive fuels rises and LNG facilitates international gas trading. Both Shell and BP are ramping up gas operations in Trinidad, one of the world’s top 10 gas exporters. Efforts are under way to reverse the island’s 18 per cent decline in gas output in the past decade. A BP gas platform built by U.S. engineering firm McDermott International in Mexico recently set sail to Trinidad, a McDermott executive told Reuters. PDVSA and Trinidad’s state gas company signed an agreement in August to allow exports from Dragon into Trinidad, without specifying how to finance the construction of a $1 billion pipeline needed to transport the gas.
Italy’s SNAM signs deal with Volkswagen for gas-powered cars
Italian gas group Snam has a deal with Seat, a unit of German car maker Volkswagen , to boost the use of natural gas to power cars, the two companies said on Monday. Snam and Seat will explore ways to develop fuel station networks and create new products. “For SEAT, one out of every five vehicles sold in Italy uses compressed natural gas (CNG),” Seat President Luca de Meo said, adding that the deal would “further enhance the development of CNG in Italy and export this success case to other countries.” Italy has become the leading market for CNG technology, accounting for 55 percent of all vehicles sold in Europe this year powered by the fuel.
Kochi to get more CNG filling stations
With more motorists willing to the adopt vehicles running on compressed natural gas (CNG), public sector oil retailers are planning to set up more CNG filling stations in the city. Officials of the Indian Oil Corporation Ltd (IOCL) and Bharat Petroleum Corporation Ltd (BPCL) said they would commission about 15 CNG bunks in and around the city in the current financial year. A senior official with IOCL said the retailer has identified around 10 locations in the city for setting up CNG stations. “We are planning to install CNG pumps at the existing IOC bunks, mostly along the national highway and the seaport-airport road. The tentative locations include Aluva, Cheranelloor, Kakkanad, Irumpanam, Karingachira etc. We are also waiting for NOC clearance from the district collector and hope to complete the project before March 31,” he said. The BPCL will also open five CNG filling facilities at its fuel stations at Edappally, Vyttila Mobility Hub, Aluva, Thiruvankulam and Kakkanad. “We have applied for clearance from the petroleum and explosive safety organization, Nagpur. The licence to be issued by the district collector is also pending. We hope to commission the stations within three months,” said a BPCL official. The retailers are in talks with Indian Oil-Adani Gas Private Ltd (IOAGPL), which oversees city gas project. The setting up of new filling stations will depend on the gas project by IOAGPL as the natural gas is supplied through their pipelines. Therefore, all the CNG bunks will be in those areas where the gas pipelines are passing through. TOI had earlier reported that the lack of enough CNG bunks has been hindering the people from embracing CNG vehicles. In the light of frequent hikes in fuel prices, vehicle users, especially autorickshaw drivers, have been raising demands for more CNG pumps for its cheap rates and higher mileage compared to fossil fuels. The decision to set up more bunks will give a boost to the shift to CNG vehicles which is less polluting. As of now, there are only four CNG bunks in Ernakulam, which were commissioned in March this year, and are the first of its kind in the state.
London-based Foresight to invest $500 million in India in oil & gas, LNG projects
London-headquartered shipping-to-retail conglomerate, Foresight Group International, today announced it would invest $500 million in India over the next five years in projects across the offshore oil and gas drilling, shipping, ports, and liquefied natural gas (LNG) space. The $1.85-billion group has finalised expansion plan for its shipping division and acquired a Very large Crude Carrier (VLCC) this year, which is currently chartered with oil companies, and has decided to add five more VLCCs in 2019 focused on India’s demand of crude import. Apart from shipping, the company has decided to invest $250 million for development of LNG infrastructure and ports in India under the government’s Sagarmala project that covers the 7,500 kilometre coastline for coastal shipping. This will reduce congestion, pressure on roads of India and would also reduce carbon footprints, the company said. As a first step, the group has strengthened its India office located in Mumbai. “Having this investment done, India will contribute to up to 44 per cent of our global operations and we are bullish to see an increase of 55 per cent increase by 2025. And, by the time the company steps into its centenary in 2084, we are bullish to become a $50 billion International company,” Founder and Executive Chairman Ravi K Mehrotra said. The company has invested $600 million in the past three years in offshore drilling to acquire three new cyber offshore rigs. Two of these are currently working in ONGC and the third rig is getting delivered in January 2019. It will be deployed with Abu Dhabi National Oil Company beginning March 2019. The diversified group has set up an operations base in Dubai, UAE and has present in Europe, UK, China, India, Cyprus and Middle East.