Dharmendra Pradhan meets Andhra CM, Governor in Amaravati
Union Petroleum and Natural Gas Minister Dharmendra Pradhan on Friday met Andhra Pradesh Chief Minister Y S Jagan Mohan Reddy at the Secretariat here. The Union Minister also met Andhra Pradesh Governor Biswabhusan Harichandan during his visit. Sharing the details of the meeting, Pradhan tweeted, “Met Governor of Andhra Pradesh Biswabhushan Harichandan on my visit to the state today.” “Informed him about various oil and gas projects being undertaken in Andhra Pradesh, especially in KG Basin which has a huge potential to help meet India’s future gas demand,” he added.
India on course for lowest fuel demand growth in 6 years
Growth in demand for fuel in India is on course to fall to its lowest in at least six years as the economy slows and after heavy rains impacted gasoil consumption, which accounts for about two-fifth of the nation’s overall fuel use. In the fiscal year to March 2019, fuel demand rose by 3.4 per cent, the lowest in five years. During April-September, consumption of refined fuels – a proxy for oil demand – rose 1.4 percent from a year ago, according to government data. “It means in the next few months (in this fiscal year) fuel demand need to grow by 3 per cent-4 percent to reach last year’s levels, which looks unlikely,” M.K Surana, chairman of state-run Hindustan Petroleum Corp told a news conference. HPCL controls about a quarter of India’s retail fuel market. Slowing economic and industrial activity has already led some global agencies to cut their fuel demand forecast for India. The International Energy Agency expects oil consumption growth to drop to 170,000 barrels per day (bpd) in 2019, the slowest since 2014. Asia’s third-largest economy expanded by just 5 per cent in the June quarter, its slowest pace since 2013, and the International Monetary Fund has cut its growth forecast for this fiscal year to 6.1 per cent from an initial 7 per cent. Industrial output shrank at its fastest rate in more than six years in August, and passenger vehicle sales slumped 23.7 per cent in September, the eleventh straight month of declines. “Diesel (growth) is a concern, petrol is not,” Surana said, adding gasoil demand should pick up now because the monsoon season was over. Heavy rains impact road transportation, construction and industrial activity and, by extension, demand for diesel. Surana said lower demand for diesel has dragged down overall fuel demand growth, notwithstanding rising consumption of liquefied petroleum gas, jet fuel and gasoline. In April-September, annual diesel demand grew by just 1 per cent while gasoline demand rose by 9 per cent. Last year, diesel demand grew by 3 per cent. “Definitely I don’t think it will be 3 per cent in this year, it will be lower than that”, Surana said.
ONGC sells January Russian Sokol crude at high premium
Indian oil explorer ONGC Videsh sold one cargo of January-loading Russian Sokol crude at a premium of around $9.25 a barrel to Dubai quotes, hovering around its highest level since September 2013, two traders said on Friday * The buyer of the cargo was likely trading house Glencore * ONGC offered the 700,000-barrel cargo to load over Jan. 4-10 * Prior to this, ONGC sold one cargo of December-loading Russian Sokol crude at a premium of around $9.20-9.25 a barrel to Dubai quotes
IndianOil delivers first parcel of low sulphur marine fuel
Indian Oil has emerged as the first company to deliver the parcel of 0.5 per cent sulphur380 CST marine fuel oil to international ship. The company has thus complied with International Maritime Organisation guidelines which require all the seagoing tanker vessel to switch over to marine fuel having a sulphur content of 0.5 per cent from January 1, 2020, against the current limit of 3.5 per cent. The company in a statement issued here said that the first bunker sales of this very low sulphur fuel oil (VLSFO ) in India were made during this week from Kochi and Kandla. In Kochi, supplies were made to the international tanker MV UACC Ras Tanura sailing to South Africa. Indian Oil is also planning bunker fuel deliveries at the ports of Mumbai, Mangaluru, Tuticorin, Chennai, Visakhapatnam, Paradip and Haldia by mid-November. VLSFO with 0.5 per cent is produced from sweet crude oil grades and complies with ISO 8217:2017 RMG380 standard. As part of the company’s commitment to safeguard the environment and to reduce pollution, Indian Oil had become the first company to implement the guidelines by starting deliveries ahead of the mandated schedule.
Rebooting What’s Possible in India’s Gas Market
India is something of a conundrum for global LNG players. I recently returned from a week in Delhi, just as the capital was making headlines for one of the worst episodes of air pollution, while the country’s energy mix remains dominated by cheap domestic coal. At the same time, gas price sensitivity continues to stymie investment and contracting negotiations. Progress has been made with LNG import terminals but delays to pipeline infrastructure and convoluted gas allocation policies frustrate demand growth. And of course, India’s infamous bureaucracy and pace of decision-making could test the patience of even a Hindu saint. In this environment, most of the world’s major LNG suppliers have only modest exposure to India. In comparison to China, where Shell, Total, ExxonMobil, BP and PETRONAS combined have over 30 Mtpa of contracted supply, their India portfolios amount to only something like 5 Mtpa of SPAs. Strategies for cracking the Indian gas market have proven elusive. This is now set for change. BP, Total and ExxonMobil have all announced recent deals and investments with Indian partners, suggesting that Big Oil is rethinking what is achievable in the country. Moving from a passive LNG contracting model or upstream entry through a traditional PSC, I see the Majors now pushing to ‘make it happen’ in India. This India reboot reveals new thinking, investing through the value chain, targeting specific sectors and building strong local partnerships. This is driving deal-making that is both innovative and that works for both Indian partners and consumers. India overtakes South Korea as world’s third-largest LNG market by 2030 Yes, India is challenging. But the outlook for gas and LNG demand growth remains robust. New regasification and downstream network connections are (slowly) unlocking latent gas demand and although we’re unlikely to see government’s target of a 15% share of the primary energy mix for gas by 2030 being met, opportunities are aplenty. LNG imports rose by 14% year-on-year in 2018 to reach 22 Mtpa, around 56% of total demand, and we expect them to climb to 40 Mtpa by 2030 and then 70 Mtpa in 2040. At this rate of growth, India will overtake South Korea as the third-largest Asian LNG market by 2030 and be as important as Japan by 2040. Now is the time for reboot It is this scale of growth that is now leading to a reboot of what is achievable in India – 28 Mt of uncontracted LNG demand by 2030 tends to do this (I’m excluding the September 2019 Petronet LNG MOU with Tellurian here). In addition to pursuing their own pre-FID LNG projects, Shell, Total, PETRONAS, ExxonMobil and BP have also built up long LNG offtake positions to expand their portfolios over the past two years. Combine this with a moderating Chinese LNG demand growth through 2019, and the importance of India becomes easy to understand. Rising competition is also a factor. US project developers have made inroads into India and with its growing portfolio of flexible, low-cost supply, Russia’s NOVATEK is aggressively targeting Indian buyers, signing MOUs in September 2019 with H-Energy and Petronet LNG. And of course, India is inevitably a major target for Qatar’s uber competitive and proximate mega train expansions. ‘Making it happen’ in India It’s been a busy few months for the Majors in India. Back in June, BP announced FID on the MJ project in the offshore KG D6 block with local partner Reliance Industries. The project is the third phase of the KG D6 integrated development plan and sees BP cement its place as the largest foreign player in India’s upstream sector. With the partners committing to around US$5 billion of investment across the three phases of KG D6, the plan will ultimately see 1 bcfd of gas supplied into the domestic market as the phases come onstream 2020-2022. Undoubtedly the strength of Reliance as a local partner is encouraging BP that things can get done in India. Also looking to get things done in India is Total. The company announced in October the acquisition of 37.4% stake in domestic player Adani Gas. The deal will act as a means for Total to supply portfolio LNG into India (particularly additional Mozambique trains in future) and to access the Adani Gas pipeline network and domestic end-users through its expanding domestic distribution and retail networks. As with BP/Reliance, a strong local partner with established relationship and an ability to manoeuvre bureaucracy will be critical to future success. Two separate preliminary partnerships were also announced in October by ExxonMobil with both ONGC and Indian Oil. The ONGC deal aims at closer collaboration on upstream investment, for example joint bidding on blocks. The second deal with IndianOiI will explore ways to lower the cost of gas delivered to the Indian market. These are further examples of Majors looking to build strong local partnerships, and with FID expected on Rovuma LNG in Mozambique in Q1 2020, India will be a key target market for ExxonMobil. Challenges and risks exist but opportunities abound India doesn’t come without risk and the list is long. How quickly can reform take place? Can India really afford LNG? Will partnerships stick? Could gas get squeezed between cheap coal and low-cost solar in the power sector? Might Qatari LNG stitch up the Indian market? How durable are long-term contracts? I could go on. But I always return to scale and opportunity. A reboot of what is possible in India is now firmly underway.
Brazil govt says need to learn lesson after most blocks unawarded in oil auction
One of the last big pre-salt rounds in Brazil finished on Thursday with only one block awarded, in another blow for authorities who have been criticized over the high cost of access to the areas. State-run Petrobras and a unit of China National Petroleum Corp were awarded the Aram block, the round’s most promising area, after submitting an offer with the minimum profit oil allowed. In a press conference following the auction, Brazilian authorities expressed disappointment. Decio Oddone, the head of Brazilian oil regulator ANP, said he expected at least three of the oil blocks to receive offers, adding that the rules for auctions needed to be changed. Brazilian Mines and Energy Minister Bento Albuquerque said the country needed to learn a lesson from this year’s auctions.
BPCL privatisation: Pradhan says no role of govt in business; competition to benefit consumers
Days before the Union Cabinet takes up a proposal to privatise state-owned BPCL, Petroleum Minister Dharmendra Pradhan on Thursday said the government has ‘no business to be in business’, and cited examples of telecom and aviation sectors where opening up had led to increased competition and price cuts to the benefit of consumers. Refusing to comment specifically on the possibility of government selling its 53.29 per cent stake along with management control in oil marketing and refining firm Bharat Petroleum Corp Ltd (BPCL) for about USD 10 billion (around Rs 70,900 crore), he said the role of the government should be to create policy framework guarantees “affordability, accessibility, sustainability and security” of fuel to consumers. “When Prime Minister (Narendra Modi) says the government has no business to be in business, it is not a slogan. It is a philosophy,” he said. “Our PSUs have done a commendable job in the building modern India and ensuring availability of fuel to the common man. But the common man will benefit most from the competition.” Pradhan said telecom and aviation sectors are shining examples of what competition can do for consumers. Opening up of these sectors to private players had led to a crash in phone call rates and internet charges as well as provided the wider options to travelers to choose from affordable airfare. “This democracy is committed to the common man of the country. We have to create ease of living through more open and process-driven regulation. Product is important, who is running it is not important,” he said. He refused to be drawn into timelines for stake sale in BPCL, the country’s second-biggest state-run oil refining and marketing company. It is being speculated that the Union Cabinet may take up a proposal to privatize BPCL as early as next week. Stake sale in BPCL is critical for the government to meet its disinvestment target of Rs 1.05 lakh crore set for the current fiscal year.
IGL second quarter net profit doubles to Rs 416 crore
City gas distributor Indraprastha Gas Limited (IGL) today said its consolidated net profit for the September quarter doubled to Rs 416 crore on the back of improved volume and value of sales. The company’s revenue from operations increased 19 per cent to Rs 1,873 crore during the second quarter (July-September) of the current financial year. Overall sales volumes during the quarter rose 12 per cent to 605 million standard cubic meter (mmscm) while the value of sales during the quarter jumped 19 per cent to Rs 1,866 crore, as compared to the corresponding quarter last fiscal. “Total gross sales value during this quarter is Rs 1,866 crore registering a growth of 19 per cent over sales turnover of Rs 1,564 crore shown in Q2 of FY19. Product wise, CNG recorded sales of Rs 1,438 crore, registering a growth of 22 per cent and PNG recorded sales of Rs 428 crore registering a growth of 10 per cent over the previous year,” the company said.
Spain becomes Europe’s cheapest gas market on flood of low-cost LNG
The Spanish gas market has become the cheapest in Europe for the first time, distorted by an influx of low-priced liquefied natural gas (LNG) cargoes that keep arriving in the country despite subdued demand. Gas prices in Spain – Europe’s major LNG market – usually hold a premium over prices on some major European gas markets because the country imports gas from fewer supply sources. But in the past week Spanish gas prices for day-ahead, weekend and December delivery dropped to the lowest level across the continent as once expensive LNG has been trading lower than gas on some European gas hubs this year, flooding markets including Spain. “Plenty of LNG is coming to Spain but (it) looks like no one wants to buy gas (on the domestic market). It’s terrible,” an industry source in Spain said. The day-ahead contract on Spanish gas hub PVB was around 1.3 euros below Europe’s benchmark Dutch gas price on Thursday, a gas trader said. Spanish December delivery gas was around 0.37 euro cheaper, while the weekend contract was more than 2 euros cheaper, according to another source. Spain has imported 14.24 million tonnes of LNG this year so far, a 50% increase from the same period in 2018, Refinitiv data shows. Spot LNG arriving to the country now was purchased at least one or two months ago. “Price gave incentive to importers to do so (at that time). The problem is that if demand is not strong, the system is unable to cope, so the price collapses,” one gas trader said. Traders pointed out that power prices are low in Spain and said that strong wind is decreasing demand for gas in power generation now. Gas storage in Spain is almost 95% full, a situation similar to most European gas markets. LNG stocks have also been high, with importers holding off on processing the liquid earlier this year, awaiting higher prices and creating a block in the supply chain. As more cargoes arrive in the country now, LNG has to be re-gasified and sent to the gas system to give room for new arrivals, which is leading to an oversupply on the Spanish market. Looking forward, traders forecast a more balanced situation in the first quarter of 2020 as the LNG influx may reduce slightly, while demand is likely to rise. “Having (Spanish gas hub) PVB at a great discount to Dutch or French (gas) will impact future imports of LNG in Spain,” one trader. “Importers will have to price this possibility as a risk, therefore potential future bids will be lower and probably that will impact on how competitive the Spanish importers can be.”