India to chart its own course of energy transition: Dharmendra Pradhan
India will chart its own course of energy transition in a responsible manner even as it is said to be a key driver of global energy demand in coming decades, Oil Minister Dharmendra Pradhan said on Tuesday. As the world battles alarming rates of carbon emission threatening the environment?, countries around the globe face pressure to reduce hydrocarbon use and switch to greener sources such as renewable power and electric vehicles. Speaking at a ministerial dialogue at India Energy Forum by CERAWeek, Pradhan said India is the third largest energy consumer in the world in absolute terms after the US and China. However, per capita energy consumption in India is only about one-third of the world’s average. “This makes it imperative to ensure energy justice to all, which essentially means access to energy in an affordable and sustainable manner,” he said. Given its huge energy appetite and growth potential, India will be the key driver of global energy demand in the coming decades, he said. “In fact, it will experience the fastest growth in energy consumption among all large economies. To meet this huge demand, India would need a healthy mix of all commercially viable energy sources.” No single source can meet the energy demand, he said. “India will chart its own course of the energy transition in a responsible manner and would greatly influence global energy transition,” he said. Energy sector, he said, will be fuelling India’s journey towards the goal of a USD 5-trillion economy. Giving a glimpse of India’s path of energy transition, Pradhan said the share of renewable in electricity capacity has significantly gone up now to 22 per cent from around 10 per cent in 2014-15. Also, the ethanol blending percentage in petrol has risen from 0.67 per cent in 2012-13 to close to 6 percent now. “Finally more than 95 percent households now have access to LPG, making their kitchens smoke free,” he said. “We are preparing for a low-carbon energy future underpinned by our government’s aim to set up 450 GW of renewable energy capacity by 2030. As the penetration of variable renewable energy grows in the mix, it will be important for us to consider back-up, dispatchable generation sources in our national electricity plan,” he said. Natural gas, he said, offers an option of a balancing fuel. It “has proven capability to complement renewables.” Similarly, the fuels of the future will have the greatest impact in choices for transport where several fuels will be in play, both in absolute and hybrid ways. This preferred spectrum of transportation fuel would be comprised of conventional hydrocarbon, LNG, CNG, and electric energy, he said. LNG as a transportation fuel for the long haul and heavy-duty transport like Railways offers tremendous potential, he added. “Today there are proven technologies to use coal in a cleaner and more sustainable way. We are setting up a fertilizer plant in Odisha which would be first of its kind in terms of using coal gasification technology. We also have technologies to extract coal bed methane,” he said. Energy has become an essential commodity in bilateral trade engagements with several key trading partners and in positioning India as an important strategic player in global energy landscape, he added.
Global oil majors see surge in Indian demand for natural gas
Global oil and gas majors are looking to India, the world’s third biggest oil importer, to buy some of their excess liquefied natural gas (LNG) as the South Asian nation improves its gas infrastructure and strives to reduce emissions. Spot LNG prices have more than halved since last year due to oversupply as producers battle for market share. The Indian market looks set to grow, however. The country is investing $60 billion in gas infrastructure, including setting up cross-country pipelines and LNG import terminals to connect gas-starved regions to supply hubs. Oil Minister Dharmendra Pradhan has said that by the end of Prime Minister Narendra Modi’s current term in 2024, India will be ready with a cross-country natural gas grid. “India is emerging as a major demand centre for gas. India is going to be a very exciting market … We see it as an important energy market for decades to come,” Peter Clarke, senior vice president of global LNG at Exxon Mobil Corp told Reuters at the India Energy Forum by CERA Week, on Monday. Exxon signed a memorandum of understanding with India’s biggest state-owned oil refining company Indian Oil Corporation Ltd on Monday to explore “new models of delivering cost-effective natural gas in India.” “We see great potential here,” Bill Davis, lead country manager of South Asia at ExxonMobil, said in a statement. Exxon also has a deal to supply LNG to Petronet LNG Ltd, India’s biggest gas importer, under a long-term agreement from its Gorgon Project in Australia. India currently consumes 166 million standard cubic metres per day (mscmd) of gas out of which half is met through LNG imports, according to government data. India’s current gas consumption is not a true reflection of its demand potential as the nation lacks infrastructure to transport gas. Most of its LNG import infrastructure is located in the western part, leading to higher gas consumption there compared with the rest of country. Total SA said on Monday it was buying a 37.4 per cent stake in private Indian gas distribution company Adani Gas Ltd. The French company also said it would explore opportunities in Adani Group’s LNG terminals in the east and west coast. “We want to bring competitive LNG to India,” said Total Chief Executive Patrick Pouyanne. Pouyanne added that one of the reasons Total recently bought a major LNG project offshore Mozambique was because the project was “perfectly positioned to deliver LNG to India very efficiently.” Total has committed to investing $600 million in India’s gas business and “there is more to come,” Pouyanne said. India’s gas demand is expected to double to 75 billion cubic metres by 2030, energy consultancy firm Wood Mackenzie said on Monday. LNG will account for half of this demand, or equivalent to 10 per cent of today’s global LNG market, the consultancy firm said. Global majors are also bullish on India’s domestic gas production and hope it will complement imported LNG to meet the growing need of cleaner fuels than coal and oil. India allows companies to charge higher prices for natural gas produced from difficult and challenging fields. “I believe that there is close to 100 tcf (trillion cubic feet) of natural gas resources yet to be found below ground here in India,” said Bob Dudley, CEO of British oil firm BP Plc. BP, in a tie up with Reliance Industries, is investing $5 billion in India’s east coast to produce gas starting in April or May 2020, he said. “That in itself can meet half of the natural gas demand out to 2050,” Dudley added, referring to India’s gas reserves.
No choice but to invest in oil: Shell CEO Ben van Beurden
Royal Dutch Shell still sees abundant opportunity to make money from oil and gas in coming decades even as investors and governments increase pressure on energy companies over climate change, its chief executive said. But in an interview with Reuters, Ben van Beurden expressed concern that some shareholders could abandon the world’s second-largest listed energy company due partly to what he called the “demonisation” of oil and gas and “unjustified” worries that its business model was unsustainable. The 61-year-old Dutch executive in recent years became one of the sector’s most prominent voices advocating action over global warming in the wake of the 2015 Paris climate agreement. Shell, which supplies around 3% of the world’s energy, set out in 2017 a plan to halve the intensity of its greenhouse emissions by the middle of the century, based in large part on building one of the world’s biggest power businesses. Still, the amount of carbon dioxide emitted from Shell’s operations and the products it sells rose by 2.5% between 2017 and 2018. A defiant van Beurden rejected a rising chorus from climate activists and parts of the investor community to transform radically the 112-year-old Anglo-Dutch company’s traditional business model. “Despite what a lot of activists say, it is entirely legitimate to invest in oil and gas because the world demands it,” van Beurden said. “We have no choice” but to invest in long-life projects, he added. Shell and its peers have long insisted that switching away from oil and gas to cleaner sources of energy will take decades as demand for transport and plastics continues to grow. Investors have warned, however, that oil companies often rely on forecasts that underestimate the pace of change. Shell plans to greenlight more than 35 new oil and gas projects by 2025, according to an investor presentation from June. Oil and gas remain the backbone of profits for Shell, the largest listed company on London’s main FTSE index . While oil and gas account for the entirety of Shell’s free cashflow today, it foresees a gradual diversification over the next two decades. Oil and gas are each still expected to provide a third of free cashflow, however, with the rest coming from power and chemicals. Many oil and gas projects such as gas-processing plants, deepwater platforms or chemical plants take billions of dollars to develop and operate for decades. “RED HERRING” Shell, like many rivals, has become more selective in its investments as the outlook for oil prices and demand remains unclear. It targets new projects that can be profitable at oil prices of $20 to $30 a barrel and which emit relatively low greenhouse emissions. Oil is trading at around $60 a barrel. “We can sustain an upstream portfolio all the way into the 2030s if there is an economic rationale for doing that and a societal rationale for doing that,” van Beurden said. “Fortunately enough, we have more of those than we have money to spend on them.” Van Beurden rejected as a “red herring” arguments that Shell’s oil and gas reserves, which can sustain its current production for around eight years, would be economically unviable, or stranded, in the future. A lack of investment in oil and gas projects could lead to a supply shortage and result in price spikes, he said. “One of the bigger risks is not so much that we will become dinosaurs because we are still investing in oil and gas when there is no need for it anymore. A bigger risk is prematurely turning your back on oil and gas.” Shell plans to increase its annual spending to around $32 billion by 2025 from the current $25 billion, with up to one tenth allocated to renewables and the power business. The company, the world’s largest dividend payer, plans to return $125 billion to shareholders in the five years to 2025. On liquefied natural gas, of which Shell is the world’s biggest trader, van Beurden said the market would exhibit oversupply in the near term. “But (LNG) demand will continue to grow at a pace that is roughly four times that of oil,” he said. Shell has become a focal point of environmental protests, particularly in Europe, with regular demonstrations outside its London headquarters and the British National Theatre dropping Shell’s sponsorship in recent months. At the same time, investors have sharply increased their scrutiny of companies’ environmental performance. Amid growing uncertainty over future demand, the share prices of Shell and its peers have underperformed relative to other sectors. Van Beurden expressed concern that some investors could ditch Shell, acknowledging that shares in the company were trading at a discount partly due to “societal risk”. “I am afraid of that, to be honest,” he said. “But I don’t think they will flee for the justified concern of stranded assets … (It is) the continued pressure on our sector, in some cases to the point of demonisation, that scares asset managers.” “It is not at a scale that the alarm bells are ringing, but it is an unhealthy trend.” Van Beurden put the onus for achieving a transformation to low-carbon economies on governments, warning that not enough progress had been made to reach the Paris climate goal of limiting global warming to “well below” 2 degrees Celsius above pre-industrial levels by the end of the century. “Can that happen? I think it can … Increasingly society is not putting up with the fact we are not making enough progress.” Delaying implementation of the right climate policies could result in “knee-jerk” political responses that might be very disruptive to society, he said. “Let the air out of the balloon as soon as you can before the balloon actually bursts,” van Beurden said.
ONGC free to sell stake in HPCL: Dharmendra Pradhan
Amid reports of ONGC’s inability to derive any benefit out of its HPCL acquisition, Oil Minister Dharmendra Pradhan on Monday said the state-owned firm was free to sell its stake in the oil refining and marketing company. In its most expensive acquisition ever, Oil and Natural Gas Corp (ONGC) last year paid Rs 36,915 crore to buy government’s entire 51.11 per cent stake in Hindustan Petroleum Corp Ltd (HPCL). Despite being the majority stakeholder in the company, ONGC has only got one member on the board and virtually no say in the management. HPCL didnt even recognise ONGC as its promoter for almost one-and-half-years before a Securities and Exchange Board of India rap forced it to list its majority owner as a promoter. Since acquiring the stake, ONGC has only been able to appoint one director to that firm’s board. HPCL head Mukesh K Surana continues with the title of Chairman and Managing Director despite corporate governance structure mandate of only one chairman in a group and subsidiaries being headed by managing directors or chief executive officers (CEOs). When asked if the government had given ONGC nod to sell stake in HPCL, Pradhan told reporters that “These are market decisions. They are autonomous companies. They are free to take their own decision at appropriate time.” ONGC had hoped that the addition of an oil refining and marketing company would make it a vertically integrated oil and gas company when it had acquired government stake in HPCL in January last year. However, no tangible synergies have flowed to the company. The acquisition turned ONGC from a zero-debt company to a firm with no cash and a huge debt pile. Sources said, since the government had repealed the acts that nationalised HPCL and Bharat Petroleum Corp Ltd (BPCL), ONGC is now free to sell the stake. The board of ONGC has on at least one occasion debated on the logic of retaining the stake in HPCL when no synergies were flowing, they said. HPCL by virtue of being 51.11 per cent owned by a state-owned firm had continued to be classified as a public sector undertaking. But with the act that promised its nationalised PSU character no longer there, it can be sold in parts or full to a strategic investor, they said. The government had in 2016 repealed the legislations that had nationalised HPCL and BPCL. The Repealing and Amending Act of 2016 had annulled “187 obsolete and redundant laws lying unnecessarily on the statue-book” including the Act of 1970s that had nationalised HPCL and BPCL. HPCL was incorporated in 1974 after the takeover and merger of erstwhile Esso Standard and Lube India through the Esso (Acquisition of Undertaking in India) Act passed by Parliament. The Supreme Court had in September 2003 ruled that BPCL and HPCL can be privatised only after Parliament amends a law it had previously passed to nationalise the two firms. Besides others, the 2016 legislation approved by the Parliament listed repealing in “the whole” The Esso (Acquisition of Undertakings in India) Act, 1974, The Burmah Shell (Acquisition of Undertakings Act, 1976 and The Caltex [Acquisition of Shares of Caltex Oil The whole] Refining (India) Ltd and of the Undertakings in India of Caltex (India) Ltd] Act, 1977. The Supreme Court had in September 2003 cited the Esso (Acquisition of Undertaking in India) Act and the Burmah Shell (Acquisition of Undertaking in India) Act, 1976 and Caltex (Acquisition of Shares of Caltex Oil Refining India Ltd and all the Undertakings in India for Caltex India Ltd) Act, 1977 to rule that the government cannot privatise HPCL and BPCL without approaching Parliament for changing the Nationalisation Act.
Indian Oil Corp, ExxonMobil sign MoU for collaboration in LNG business
American oil and gas firm, ExxonMobil, on Monday said it has signed a memorandum of understanding (MoU) with Indian Oil Corporation (IOC), India’s largest fuel retailer, to expand liquefied natural gas (LNG) initiatives in the country. “What really matters is how we accelerate India’s access to affordable, cleaner energy. We see great potential here, and are delighted to join forces with IndianOil to unlock lasting value for India,” said Bill Davis, lead country manager, South Asia at ExxonMobil in a statement. The MoU was signed between IOC and ExxonMobil India LNG Ltd, an affiliate of ExxonMobil. “This initiative focuses on exploring new models of delivering cost-effective natural gas in India where it is most needed to complement traditional pipelines,” the company said in a statement. It added that the MoU builds on the long history of productive cooperation between IOC and ExxonMobil in the LNG space.
Total, RIL unlikely to bid for BPCL; BP wants to see whats on offer
French energy giant Total SA as well as oil-to-telecom conglomerate Reliance Industries are unlikely to bid for acquiring India’s second biggest oil refining and marketing company BPCL, while UK’s BP plc said it wants to see what is on offer before deciding to bid. The government is looking at selling its 53.29 per cent stake in BPCL to a strategic investor in the biggest privatisation bid in the history of India. BPCL has a market capitalisation of Rs 1.05 lakh crore and its acquisition together with the mandatory open offer to minority shareholders would cost upwards of Rs 82,000 crore. On a visit here to attend an industry conference, Total Chairman and CEO Patrick Pouyanne said the company was interested in investing in downstream petrochemicals and retailing market in India but was “not interested in Indian refineries”. The French giant announced buying 37.4 per cent stake in Adani Gas – which retails CNG to automobiles and piped cooking gas to households besides developing import terminals and a national chain of petrol stations. Reliance, which operates the world’s biggest refinery complex at single site, too is unlikely to bid as it is already in talks to sell out a fifth of its oil-to-chemicals business to Saudi Aramco to cut down high debt it had taken for its foray in telecom business, sources said. It is unclear if Saudi Aramco, which is keen to enter the world’s fastest growing energy market, will bid alone or with some other partner such as Abu Dhabi National Oil Co (Adnoc). BP chief executive Bob Dudley said it was “early days” for the privatisation of BPCL. “We need to see what is on offer,” he said. On September 30, a group of secretaries on disinvestment gave its approval for to sell government’s entire 53.29 per cent stake in BPCL, which is likely to be completed by March 31, next year. BPCL is the country’s the second-largest state-owned refining and marketing firm, accounting for 15 per cent of total installed refining capacity. In addition, it markets 21 per cent of petroleum products consumed in the country by volume as of March this year. It operates four refineries at Mumbai, Kochi in Kerala, Bina in Madhya Pradesh and Numaligarh in Assam with a combined capacity to convert 38.3 million tonnes of crude oil into fuel. It has 15,078 petrol pumps and 6,004 LPG distributors. India has a total refining capacity of 249.4 million tonnes and 65,554 petrol pumps and 24,026 LPG distributors.
Cabinet to consider splitting GAIL, pipeline business not to be sold before 2022
The Union Cabinet may by next month consider a proposal to hive off state-run gas utility GAIL (India) Ltd’s pipeline business into a separate entity but its sale to a strategic investor may not happen before 2022, sources privy to the development said. GAIL is India’s biggest natural gas marketing and trading firm and owns more than two-thirds of the country’s 16,234-km pipeline network, giving it a stranglehold on the market. Users of natural gas have often complained about not getting access to GAIL’s 11,551-km pipeline network to transport their fuel. Sources said to resolve the conflict arising out of the same entity owning the two jobs, bifurcating GAIL is being considered. A proposal is likely to be moved before the Union Cabinet for transferring the pipeline business into a 100 per cent subsidiary, they said adding the proposal may be considered and approved by the Cabinet this month or latest by November. After the Cabinet approval, a consultant will be appointed to transfer the pipeline business into a separate subsidiary. This would take 8-10 months to accomplish, they said. However, selling off the pipeline subsidiary to a strategic investor is not likely before 2022 as the thinking in the government is that the gas market will not be mature before that and state support would be needed for GAIL to accomplish building a national gas pipeline grid. GAIL will continue to own the marketing business as also the stakes in liquefied natural gas (LNG) terminals. Previously, the government was considering transferring marketing business into a separate subsidiary for a sell-off at a later date but now a hive off of pipeline business is being considered. GAIL has multiple long-term contracts to import gas in its liquid form (LNG) from countries such as the US and no strategic buyer would like to take the responsibility of those, particularly when the fuel is available at a cheaper price in the spot or current market, the sources said. They said it is now being considered that GAIL continues with the marketing business that would include all the sale contracts as also city gas retailing. Post-2022, the pipeline business can be sold to a strategic investor such as Canadian asset management company Brookfield that recently bought a 1,480-km pipeline owned by Mukesh Ambani’s Reliance Industries (RIL). The sources said the strategic partner will operate the pipelines and give access on a non-discriminatory basis to any entity wanting to transport gas either from a natural gas field or an LNG import terminal to consumers. GAIL already keeps separate accounts for its gas pipeline and marketing businesses, making it easier to split them into two entities. By unbundling GAIL and opening the sector, the government hopes to increase gas use to 15 per cent of the energy mix by 2030 from current 6.2 per cent. When talk of splitting first started in January last year, Oil Minister Dharmendra Pradhan had stated that GAIL should focus on laying pipelines, suggesting hiving of the marketing business. Incorporated in August 1984 by spinning off the gas business of ONGC, GAIL owns and operates over 11,500-km of natural gas pipelines in the country. It sells around 60 per cent of natural gas in the country. The sources said the oil ministry has not been very happy with GAIL’s performance in building the pipeline network. Besides, there is a possible conflict of interest in its role as an infrastructure provider and carrier. GAIL did not start executing the Rs 12,940 crore Jagdishpur-Haldia and Bokaro-Dhamra pipeline until the government agreed to give 40 per cent of the project cost as a grant from the budget. The pipeline takes the gas to Prime Minister Narendra Modi’s constituency, Varanasi. Plans to split the company had been discussed more than a decade back too but these did not materialise. The sources said refiners Indian Oil Corp (IOC) and Bharat Petroleum Corp Ltd (BPCL) had in 2017 evinced interest in acquiring GAIL to expand their gas marketing business. GAIL also owns a petrochemical plant at Pata in Uttar Pradesh, which too could be sold to either IOC or BPCL. The company had in the past resisted the split on grounds that it’s gas marketing and transmission businesses operate at arm’s length and hence do not need to be separated. GAIL’s marketing business formed 76 per cent of its 2018-19 total sales and about 30 per cent pre-tax profit. The government has a 54.89 per cent stake in GAIL India.