What does the govt’s move to increase bioethanol in petrol mean?
We examine key challenges to raising the ethanol blending level for petrol from around 5 per cent currently to the targets set by the central government. The government has set targets of 10 per cent bioethanol blending of petrol by 2022 and to raise it to 20 per cent by 2030 under the ethanol blending programme to curb carbon emissions and reduce India’s dependence on imported crude oil. 1G and 2G bioethanol plants are set to play a key role in making bio-ethanol available for blending but face challenges in attracting investments from the private sector. We examine key challenges to raising the ethanol blending level for petrol from around 5 per cent currently to the targets set by the central government. What are 1G and 2G biofuel plants? 1G bioethanol plants utilise sugarcane juice and molasses, by products in the production of sugar, as raw material, while 2G plants utilise surplus biomass and agricultural waste to produce bioethanol. Currently, domestic production of bioethanol is not sufficient to meet the demand for bio-ethanol for blending with petrol at Indian Oil Marketing Companies (OMCs). Sugar mills, which are the key domestic suppliers of bio-ethanol to OMCs, were only able to supply 1.9 billion litres of bio-ethanol to OMCs equating to 57.6 per cent of the total demand of 3.3 billion litres. Why are Indian plants not able to meet the demand for bio-ethanol? Experts point out that many sugar mills which are best placed to produce bioethanol do not have the financial stability to invest in biofuel plants and there and there are also concerns among investors on the uncertainty o the price of bio-ethanol in the future. “In general, the sugar sector has its own balance sheet issues,” said Shishir Joshipura, CEO and MD of domestic biofuel technology provider Praj Industries, noting that sugar mills have had to pay high prices for sugarcane set by the government even when there have been supply gluts. The prices of both sugarcane and bio-ethanol are set by the central government. An expert at a leading OMC, said the price of obtaining agricultural waste required for the production of bio-ethanol at 2G plants was currently too high for it to be viable for private investors in the country. The expert noted that state governments needed to set up depots where farmers could drop their agricultural waste and that the central government should fix a price for agricultural waste to make investments in 2G bioethanol production an attractive proposition. The three state-run OMCs Indian Oil Corporation Ltd., Bharat Petroleum Corporation Ltd. and Hindustan Petroleum Corporation Ltd. are currently in the process of setting up 2G bio-ethanol plants
Domestic gas prices may fall further in October
Sources in the government said that Covid-19 has severely impacted demand conditions in the market and has also affected gas prices globally. Gas prices have fallen by over 50 per cent in last few months and continued to remain suppressed CNG and piped natural gas prices could fall further this festive season, with price of domestically produced gas expected to come down in October by about 20 per cent to less than $2 per million British thermal unit. Sources in the government said that Covid-19 has severely impacted demand conditions in the market and has also affected gas prices globally. Gas prices have fallen by over 50 per cent in last few months and continued to remain suppressed. This has paved the way for further reduction in domestic gas prices that are revised twice every year – on April 1 and then on October 1. Following global developments, prices had already fallen sharply in last two revision cycles and if the trend continues, it would be third consecutive cycle of gas price fall in the country. In April this year, the price of natural gas was cut by 26 per cent, bringing it to $2.39 per MBtu. Reduction in gas prices is good news for consumers as it would have impact on CNG prices that is used for transportation and also piped gas supplies to households. Lower gas prices would also lower the cost for power projects being run on domestic gas and fertiliser plants. But they spell bad news for state-owned oil and gas producer ONGC as it would mean further suppressed margins and losses. The company is set to lose close to Rs 60 billion on low gas prices this year, brokerages have said.
Asia to import record LPG in 2020 as pandemic boosts demand for protective gear, cooking
Asia will likely import record volumes of liquefied petroleum gas (LPG) in 2020 as firms snap up the fuel to make petrochemicals used in protective gear against the coronavirus, while households under lockdown ramped up purchases for cooking. The region will buy some 67-69.5 million tonnes of the gas from abroad this year, surpassing last year’s record, analysts from consultancy firms IHS Markit, FGE and Wood Mackenzie said. That would represent a 1-3 per cent increase on 2019 import volumes. Strong Asian demand could weigh on supplies in coming months just as Europe is likely to step up purchases of the fuel for heating in winter, an industry source in Singapore said. While supply was hit by a cut in commodity production in the second quarter, output has recovered some ground since then. “We expect (LPG) import demand to increase in 2020 over 2019 with stronger demand in both residential and petrochemical sectors,” said Rui Hou, research analyst of Wood Mackenzie. He Yanyu, IHS Markit’s executive director of natural gas liquids research, said some 33 million tonnes of LPG had already been imported in the first half of 2020. In total, Asia would get some 52 per cent of its LPG supplies this year from the Middle East, 35 per cent from the United States and the rest from countries including Canada and Australia, said He. LOCKDOWNS BOOST COOKING While lockdowns and travel restrictions to curb the spread of the pandemic crushed appetite for oil products such as jet fuel and gasoline this year, there was growing demand for LPG as a cooking fuel in places like India and Indonesia, as more people stayed at home. India, Asia’s second biggest importer of LPG, is expected to buy a record 15.8 million tonnes of LPG from abroad this year, a 9 per cent rise from 2019, data from FGE showed. The country’s imports had surged 16 per cent in the first half of 2020 compared to the same period last year after the government said it would provide free LPG fuel for cooking for three months until June. Although India has overbought the fuel, the backlog could clear by September, with demand set to rise ahead of the Hindu festival of Diwali or Deepavali in November, industry sources said. “In general we should continue to see strong demand from India but maybe after a slight slowdown as stocks are absorbed,” said Alexander Booth, head of research at data intelligence firm Kpler. This sentiment was shared by consultant Jeslyn Chua at FGE. “We believe the Indians will definitely be back for October delivery (cargoes) given that their inventories would be drawn down by then. On top of that, the Indians will need to prepare for Deepavali,” she said. Another country which uses LPG predominantly as a cooking fuel is Indonesia, Asia’s fifth largest LPG importer. Indonesia’s LPG imports are expected to hit 6.1 million tonnes this year, a 7 per cent rise from 2019, and a record high volume for the country, said Chua. “The demand in the rest of Asia is largely being driven by good petrochemical demand, primarily to satisfy the explosion in global PPE (personal protective equipment) requirements,” said Kpler’s Booth. “There is no reason to think this will disappear quickly.”
IOC nears first deal to export fuels to Mauritius -sources
Indian Oil Corp, the country’s top refiner, is close to winning its first contract to export up to 720,000 tonnes of clean products to Mauritius under an annual deal from November, two sources familiar with the matter said. IOC will supply 205,000 tonnes of 95 RON gasoline, 235,000 tonnes of 10 parts per million (ppm) gasoil, 175,000 tonnes of jet fuel and up to 105,000 tonne of marine gasoil, sources said. The sources did not wish to be identified as they are not authorised to speak to media. IOC and State Trade Corporation of India did not respond to Reuters email seeking comments.