Romanian government softens bank tax, removes gas price cap for industry
Romania’s government softened a tax on the financial assets of banks and eliminated provisions that threatened the independence of monetary policy on Friday, but it upheld taxes on energy and telecoms companies it first approved in late December. The Social Democrat-led cabinet upset markets when it introduced the measures without public debate or impact assessment at the end of 2018. Stocks plunged and the leu hit record lows. Standard & Poor’s briefly considered downgrading Romania’s credit rating outlook . The government initially wanted to tax progressively all bank financial assets if money-market interest rates exceeded 2 percent. On Friday, it decoupled the tax from market rates, lowered it and excluded several types of assets, including state treasuries and loans to public administration. But the government also said all energy companies except state-owned coal-fired power plants will pay a turnover tax of 2 percent. Producers will sell electricity and gas meant for households at capped prices until February 2022, but the government removed the gas price cap for industrial consumers. Separately, the cabinet raised the pre-tax rate of return for power and gas distributors to 6.9 percent until 2024, which it said will encourage investment in distribution networks. The government said the measures were intended to lower borrowing costs and energy tariffs for households. Romania will hold four elections this year and next. But experts said raising the rate of return for energy distributors was likely to raise final household bills, defeating the purpose of the price caps forced on producers. Friday’s decree also postponed imposing higher share capital requirements for mandatory private pension funds until the end of December. The seven funds were introduced 11 years ago to reform the country’s communist-era, pay-as-you-go pension system. They now hold assets worth 10.2 billion euros ($11.43 billion) for just over 7 million contributors. The government wants them to increase their share capital by an overall 800 million euros, which has prompted the European Commission to warn of potential market exits. The funds have asked the government to lower the requirements, while the government has said it would like them to invest in infrastructure projects. Negotiations between the funds and officials are likely to continue.
Indonesia gas utility builds LNG terminal for East Java distribution
* Indonesia’s state-controlled gas utility company PT Perusahaan Gas Negara (PGN), in cooperation with state port companies, is building a small terminal for liquefied natural gas (LNG) distribution in East Java, the company said in a statement on Friday * The terminal is targeted to start operation in the fourth quarter this year, the statement said * For the early phase, the East Java LNG terminal will have a regasification capacity of just 30 billion British thermal units (btu) per day, or about 30,000 cubic feet a day, although the company plans to expand that “based on energy demand growth in East Java and surrounding areas” * The terminal is expected to improve PGN’s distribution network in East Java for both its industrial-based and household customers, as well as for power generators.
India’s target of raising natural gas share in energy mix to 15 per cent too ambitious?
India’s target of increasing the share of natural gas in its overall energy basket to 15 per cent by 2030 along with the planned shift to a gas-based economy may turn out to be too ambitious, a comprehensive review of projections and opinion from key stakeholders and experts on the matter shows. The review covered leading analysts covering the oil and gas sector and projections made by the likes of International Energy Agency (IEA), Organization of Petroleum Exporting Countries (OPEC) and multinational oil and gas behemoths like BP and Shell apart from the heads of two large oil and gas PSUs. Analysts from consultancy firms KPMG, PwC and WoodMac and ratings agency ICRA believe the target to raise the share of natural gas to 15 per cent may not be achieved because of the bleak outlook for gas-based power plants and inadequate domestic supply of natural gas coupled with infrastructure and fiscal barriers plaguing the sector. According to the World Oil Outlook 2018 report by OPEC, the share of natural gas in the country’s overall energy mix is projected to go up to 7.7 per cent by 2040, far below the target. The World Energy Outlook 2018 report of the International Energy Agency (IEA) also projects the natural gas’ to go up to 8 per cent by 2040 under the New Policy Scenario, 7 per cent by 2040 under Current Policy Scenario and 16 per cent by 2040 under the Sustainable Development Scenario. Similarly, BP’s Energy Outlook 2019 has projected India’s natural gas share to go up to 8 per cent by 2040. Shell LNG Outlook 2019 and WoodMac have also projected that the share of gas will hover between 5 per cent and 10 per cent by 2035. “Increasing the share of natural gas to 15 per cent in the overall energy basket by 2030 is a daunting task. The power sector has been the major driver of natural gas consumption in countries where the share in the energy basket is high. Until and unless major reforms on gas-based power generation take place increasing the share to 15 per cent by 2030 will be difficult,” K Ravichandran, Senior Vice President at ICRA told ETEnergyWorld. BC Tripathi, Chairman and Managing Director at state-owned utility GAIL had shared similar views speaking on the topic of increasing the share of natural gas at Petrotech 2019 last month. “To bring the share of natural gas to 15 per cent by 2030 will be challenging if an integration of power and gas does not take place,” Tripathi had said. He added that globally the share of natural gas in the overall energy mix is 24 per cent and around a third of the demand comes from gas-based power plants. “India will have to increase its electricity generation from gas based power plants if it needs to increase the share of natural gas in the country’s overall energy mix,” he had said. India had a gas-based power generation capacity of around 24,867 Mw at the end of September 2018 and around 57 per cent of this – 14,305 Mw — has been classified as stranded, according to a Parliamentary Panel report on the status of implementation of gas-based power plants. As many as 31 gas-based power plants with a cumulative debt of Rs 18,431 crore are stranded. Developers had invested Rs 4-5 crore per MW on these projects and around 70-80 per cent of this capital cost has been financed by banks using public money, the report said, adding that the gas power plants ran at less than 23 percent Plant Load Factor last financial year. At the heart of the problem lie the projections made by the oil ministry on natural gas supply from KG D6 field, which prompted a lot of investors to set-up gas-based power plants across the country in anticipation of robust domestic gas supply from the field, the report noted. “The peak flow of the gas in D-6 fields was expected to be about 80 MMSCMD, by the end of the year 2009, and to increase further in subsequent years. With the expectation of considerable increase in the volume of production from this field, a number of gas based plants were taken up for implementation in the country even without firm allocation of gas to them.” Power secretary had told the Parliamentary Panel. SBI Chairman Rajnish Kumar had last year said there is no future of gas-based power plants in the country and the bank may have to write-off its investments in the sector. He was replying to a question on the future of gas based power plants in the country posed by the Parliamentary panel. “For gas-based power plants, honestly, if I have to submit, there seems to be no solution. It is because even when the gas was at around 2.5 Dollars, even then these plants had viability issue. When these plants were set up, the underlying assumption was that the domestic gas from the Kaveri Basin will be available at a cheap price. Based on that, all these investment decisions were taken,” Kumar said. Kumar also said an earlier subsidy scheme using the Power System Development Fund (PSDF) to help gas-based power plants did not have the desired impact. However, despite the less then desired impact of the scheme, the government seems to be inclined towards introducing a similar scheme again. ET reported in January the government is working on a Rs 18,000 crore subsidy scheme under which it proposes to offer imported gas at subsidised rates to stranded and under-utilised power projects. A high-level empowered committee has asked power and oil ministers to jointly frame a scheme for revival of gas-based power plants on the lines of the earlier e-bid RLNG scheme, it said. The proposal is now likely to be discussed by the ministries and put before a group of ministers headed by finance minister Arun Jaitley. India’s total installed power capacity stood at 345 Gigawatt (GW) at the end of September 2018. Of
Romanian govt to eliminate gas price cap for industrial consumers
Romania’s government will maintain a 2 percent tax on turnover for all energy companies except coal-fired power plants and will still cap gas prices for households but not for industrial consumers, Prime Minister Viorica Dancila said on Friday. Initially, the government wanted to cap gas prices at 68 lei ($16) per megawatthour until Feb. 2022 for households as well as a list of 83 industrial consumers, according to energy regulator ANRE.
India raises natural gas price for April-September by about 10 per cent
India has raised the price of its locally produced gas by about 10 percent to $3.69 per million metric British thermal units (mmBtu) for the April-September period, compared with the previous six months, a source aware of the development said. India has also set the ceiling price for gas to be produced from difficult fields at $9.32 per mmBtu for April-September, up about 21.5 percent from $7.67 per mmBtu in the previous six months, the source told Reuters on Friday. The government will formally announce the revised prices later in the day, the source said. The prices will be applicable on gross heat value basis. The increase in natural gas prices means higher prices for gas for fertilizers, automobiles and households. Higher gas prices, however, will lead to higher earnings for state-owned Oil and Natural Gas Corp Ltd and Oil India Ltd.