India’s ONGC sells 3rd Oct-loading Sokol crude cargo at steady premium
Indian oil explorer ONGC Videsh has sold a cargo of Russian Sokol crude at a premium of about $5.75 a barrel to Dubai quotes via a tender, two trade sources told Reuters on Wednesday * Oil major Chevron is believed to be the buyer of the 700,000-barrel cargo, the sources said, declining to be identified as they were not authorised to speak to media on the matter * ONGC offered the cargo to load between Oct. 25 and Oct. 31 * Earlier this month, ONGC sold its second cargo to be loaded over Oct. 12-18 at a premium of about $5.65 a barrel to Dubai quotes * Companies do not typically comment on such transactions
Reliance-BP Plc joint venture eyes opportunity in EV charging points across petrol pumps
Reliance Industries Ltd (RIL) has entered into a joint venture(JV) with UK’s petroleum giant BP plc with plans to operate a nationwide network of petrol pumps in India. The newly formed JV will have a 51% ownership stake by RIL while BP will own the rest, and the duo may roll out Electric Vehicle (EV) charging stations on their proposed petrol pumps in India. RIL which currently has over 1,400 operational pumps in India, will hand over the ownership to the JV and has plans of expanding to over 5,000 energy station in the next 5 years. Mukesh Ambani’s RIL will be looking to take advantage of the government’s efforts to push EV acceptance in the mainstream market, as the Union Budget announced earlier this year had a gamut of benefits to encourage EV adoption in India. Finance Minister Nirmala Sitharam had announced an outlay of Rs 100 billion working towards the government’s goal of achieving 15% electric vehicle adoption in five years. Apart from the additional income tax rebate of Rs 1,50,000 to EV buyers, GST rates on both EVs and their chargers/components were reduced to 5%. RIL would be leveraging its partnership with BP to foray into developing a much-needed EV infrastructure in India as the latter have the experience of operating EV charging stations in its local market (United Kingdom). BP, a traditional hydrocarbons producing company blitzed into the electric vehicle ecosystem after it acquired UK’s biggest EV charging station operator Chargemasters which runs a 7,000 strong network of EV charging stations across the UK under its brand name Polar. It provides subscription-based access to these charging stations by providing a smart card with plans costing around £8 per month. Notably, this move comes on the heels of Ambani’s announcement at RIL’s 42nd annual general meeting on August 12, that the company will sell a 20% stake in its oil and petrochemicals business to Saudi refinery giant Aramco for $15 billion ( around Rs 1000 billion). RIL’s dilution of stake in the traditional petrochemical business and entry into EV infrastructure points towards the diversification of RIL’s businesses as Ambani readies the conglomerate for the future ahead.
GAIL to invest ₹450 billion in expansion of pipelines, city gas network
State-owned gas utility GAIL India Ltd will invest over ₹450 billion over the next five years to expand the National Gas Grid and city gas distribution network, its chairman Ashutosh Karnatak said on Tuesday. “At present, your company is expanding the natural gas pipeline network by executing more than 5,700 kilometers of major projects,” Karnatak said at the company’s annual general meeting of shareholders here. GAIL currently operates 11,000-km of pipeline network and markets two-thirds of all natural gas sold in the country. “Investments worth over ₹450 billion are envisaged in coming few years, across major cross country pipeline projects along Urja Ganga Project, Koch-Kootanad-Bangalore-Mangalore, Indradhanush North East Gas Grid and other crucial pipelines connecting supply and demand centres envisaged under the National Gas Grid,” he said. Later talking to reporters, he said the investment would span over the next five years. Of this, ₹320 billion would go into pipeline laying and another ₹120 billion in city gas distribution (CGD) networks for retailing of CNG to automobiles and piped natural gas to household kitchens. Investments would also go into the expansion of petrochemical plants. GAIL is looking to put up 400 CNG stations and give out a record 1 million piped natural gas (PNG) connections to household kitchens in the next 3-5 years. It is rapidly building infrastructure to support the government push towards a gas-based economy by raising the share of natural gas in the energy basket to 15 percent by 2030 from current 6.2 per cent. The company is building a 2,655-km gas pipeline from Jagdishpur in Uttar Pradesh to West Bengal and Odisha. “Around 1,050 km of pipeline projects along Varanasi-Dobhi-Patna/Barauni, Auraiya-Phulpur and other last-mile connectivity were completed during the 2018-19 fiscal,” he said at the AGM. Jagdishpur-Haldia & Bokaro-Dhamra Natural Gas Pipeline (JHBDPL) project, also known as the ‘Pradhan Mantri Urja Ganga’ project, was inaugurated by Prime Minister Narendra Modi in July 2015. The pipeline would be extended to Guwahati by laying an additional 750-km line. At Guwahati, it would interconnect with the upcoming 1,500-km ‘Indradhanush’ pipeline network conceived to operate in northeast by the public sector oil and gas majors. “Your company has recently been authorised by (regulator) PNGRB to lay the 600 km Srikakulam-Angul natural gas pipeline through the recently-concluded bidding process. This limb is expected to be an important segment of the National Gas Grid and enhance your company’s coverage of natural gas markets along the eastern coast as well,” he said. Karnatak said the company’s board has approved the utilisation of existing assets and premises of LPG plant at Usar in Maharasthra by converting it into 500,000 tonnes polypropylene complex at an investment of around ₹88 billion. “This is first of its kind project in India,” he said, adding GAIL Board has also approved setting up of 60,000 tones polypropylene unit at the existing petrochemical facility at Pata in Uttar Pradesh. Polypropylene is used in a variety of applications, including packaging of consumer products, plastic parts of various industries including the automotive industry, special devices like living hinges, and textiles.
A $4 billion bet by Asia’s richest man is hurt by too much gas
A global glut in natural gas is threatening to undermine a $4 billion investment by Reliance Industries Ltd. aimed at boosting profits at the world’s largest oil refining complex. The project made all the sense in the world when energy magnate Mukesh Ambani’s conglomerate announced it in 2012: convert petroleum coke, or petcoke, one of the cheapest and dirtiest refinery by-products, into gas needed to power the massive Jamnagar complex on India’s west coast. Then it hit about three years of delays, and global gas markets crashed amid growing supplies of liquefied cargoes from the U.S., Australia and Russia. The 10 synthetic gasifiers that make up the project are now finally commissioned. But the imported LNG they’re meant to displace has fallen from about $15 per million British thermal units in 2012 to less than $5. And that price slump has reduced the project’s viability, according to a person with knowledge of the company’s finances. Reliance predicted in 2014 that the project would boost Jamnagar’s refining margins by as much as $2 a barrel. Now, Mumbai-based brokerage Centrum Broking Ltd. sees an uplift of about $1.30 to $1.50 a barrel by the 2021-2022 fiscal year, according to a July 21 report by analysts Probal Sen and Akshay Mane. “It’s not the most conducive environment to bring the petcoke project on stream,” said Somshankar Sinha, head of India equity research at Jefferies Financial Group Inc. “The LNG surplus has caused prices to fall much more than the usual decline in summer months,” the Mumbai-based analyst added. Jefferies said it expects a full ramp-up of Reliance’s project in the financial year 2021. Project Status The gasifiers, originally scheduled to begin operations in 2016, are now in the final stages of being stabilized and integrated with other facilities, with an expected increase to full capacity in March, according to people with knowledge of operations, who asked not to be identified as the information isn’t public. Reliance has said the units are still profitable at current LNG prices and it will cut down on imports of the fuel when they come online. “Whenever it comes, gasification will be cost-effective,” Joint Chief Financial Officer V. Srikanth said in Mumbai last month. With the plant still not fully operational, the company is still importing LNG, recently picking up several cargoes for delivery between July and October. Meanwhile, it has also been selling petcoke, according to a trader who distributes the product. Reliance spokesman Tushar Pania didn’t respond to an email seeking comment. Refining Returns A recovery in LNG prices “should aid economics for the gasifier,” according to Centrum Broking, even as LNG prices are set to stay low due to surging supplies from producers such as the U.S. shale drillers. Based on the forward curve for Asia’s dominant LNG benchmark for supplies in Japan and South Korea, the super-chilled gas is priced at between $5.50 and $8 per million Btu from 2020 to 2023. Prompt LNG prices are pegged at around $4.70 per MMBtu. Low LNG spot prices could encourage Reliance to take more spot volumes in the coming quarters, although the company won’t shift its long-term strategy away from eliminating petcoke residue, said Senthil Kumaran, a Singapore-based analyst at industry consultant FGE. The payoffs from Reliance’s investment in gasifiers, however, “won’t be as rich as it was originally thought,” he added.
India to achieve highest-ever ethanol blending in petrol this year
India’s average blending of ethanol in petrol is expected to reach a record-high of 5.8 per cent in 2019, as a result of a surplus sugar season and stronger incentives to convert excess sugar to ethanol, United States Department of Agriculture’s Foreign Agriculture Service said in a recent report. The report titled India Biofuels Annual 2019 added that biodiesel blending in diesel will remain muted at 0.14 per cent due to limited supply, insufficient feedstock, supply-chain constraints and restriction on imports. “A surplus sugar season coupled with a stronger financial incentive to convert excess sugar to ethanol should help the oil marketing companies (OMCs) procure upwards of 2.4 billion litres in 2019. As a result, India will be able to achieve its highest fuel ethanol market penetration at 5.8 per cent, compared to last year’s record of 4.1 per cent,” the USDA report said. It further added that in theory, all ethanol available in 2019, if used completely for Ethanol Blending Programme, would meet a 6.6 per cent blend rate. India’s National Biofuel Policy 2018 has stipulated an ethanol blending target of 10 per cent by 2022 and 20 per cent by 2030, while biodiesel blending target has been set at 5 per cent by 2030. According to the report, ethanol consumption for fuel and non-fuel use will outgrow production for the fifth consecutive year, more so in 2019 due to the upsurge in demand of fuel ethanol for blending with petrol. In 2019, supply to industrial and potable sectors will be limited by higher prices, which would lead to more demand being met by imports as compared to the previous year. India’s total ethanol consumption in 2019 is predicted to rise 22 percent to a record 3.8 billion litres, as compared to 3.1 billion litres consumed a year ago. Also, ethanol production is expected to reach 3 billion liters in 2019, 11 percent higher as compared to 2.7 billion liters produced in 2018. According to the report, India’s five-year average ethanol consumption growth of 14 percent, has been outperforming the country’s five-year average production growth of 8 percent. “Both have risen, but in response to different drivers: The rise in fuel prices coupled with very attractive purchase price of ethanol is driving ethanol consumption; consecutive year bumper harvests is supporting production growth,” the report read. The report highlights that the US will continue to be the largest ethanol supplier and India’s ethanol imports from the country are likely to grow upwards of 750 million liters (mostly denatured), the highest recorded in a decade. In spite of a steady increase in ethanol production, India remains a net importer of ethanol (for all end uses). Moreover, for the sixth consecutive year US will remain the single-largest ethanol supplier to India. The Directorate General of Foreign Trade (DGFT), the government body responsible for regulation and promotion of foreign trade, last month declared biofuel as a restricted commodity, the import of which would require a license from DGFT. According to the report, import license requirement for importing ethanol (for non-fuel use) is most likely to delay imports, if not stop them altogether. Moreover, a few bulk importers may use current stocks and are likely to make fresh purchase agreements to cover for the lapse or procedural delay in the coming months since local demand is strong. India has about 330 distilleries, which can produce over 4.8 billion litres of rectified spirits (alcohol) per year. Of this total, about 166 distilleries have the capacity to distil 2.6 billion litres of ethanol (denatured and undenatured) to be used in fuel, industrial chemicals, and beverages. According to oil ministry’s latest monthly report, OMCs have floated a tender for 329 crore litres of ethanol of supply year 2018-2019. OMCs have allocated 269 crore litres against the offers received. They have received close to 150 crore litre of ethanol up to 29 July 2019. The government has in the past few years has come up with various policy initiatives in order to incentivize the production of ethanol through various sources. The Cabinet Committee on Economic Affairs (CCEA) in February 2019 approved ‘Pradhan Mantri JI-VAN Yojana’ for providing financial support to integrated bioethanol projects using lignocellulosic biomass and other renewable feedstock. Under the scheme; 12 commercial scale and 10 demonstration-scale second-generation (2G) ethanol projects will be provided a viability gap funding (VGF) support in two phases, with a total financial outlay of Rs 1,969.5 crore for the period from 2018-19 to 2023-24. Moreover, CCEA in March 2019 approved funds amounting to Rs 2,790 crore towards interest subvention for extending loan amount of Rs 12,900 crore by banks to the sugar mills under ‘Scheme for extending financial assistance to sugar mills for enhancement and augmentation of ethanol production capacity’ for 268 applications, in addition to Rs 1,332 crore already approved by CCEA in June 2018. Also, the government which has started administering the price of ethanol, has set an ex-mill price of ethanol derived out of C-heavy molasses to Rs 43.70 per litre, for the ethanol supply period between 1 December 2018 to 30 November 2019, as compared to a price of Rs 40.85 per litre in the corresponding period a year ago. OMCs under the National Biofuel Policy 2018 have agreed to sign ethanol purchase agreements (EPAs) with 2G ethanol suppliers for a period of 15 years to provide a secure market to private stakeholders and support 2G ethanol initiatives.