India’s fuel demand fell 15.6% y/y in August
India’s fuel demand fell 15.6% in August compared with the same month last year. Consumption of fuel, a proxy for oil demand, totalled 14.39 million tonnes, data from the Petroleum Planning and Analysis Cell (PPAC) of the oil ministry showed Sales of gasoline, or petrol, were 7.5% lower from a year earlier at 2.38 million tonnes. Cooking gas or liquefied petroleum gas (LPG) sales decreased 5.1% to 2.28 million tonnes, while naphtha sales fell 6.6% to 1.07 million tonnes. Sales of bitumen, used for making roads, were 21.5% up, while fuel oil use edged up 0.4% in August.
Turkey seeking better terms to renew gas supply contracts
Turkey expects gas suppliers to offer more competitive pricing and flexibility if they want to renew long-term contracts totalling 16 billion cubic metres a year, a senior energy ministry official said. More than a quarter of Turkey’s long-term gas contracts expire next year, including imports via pipeline from Russia’s Gazprom and Azerbaijan’s SOCAR and a liquefied natural gas (LNG)deal with Nigeria. Competition from cheap U.S. LNG and the potential for Turkey to start its own gas production in the Black Sea have changed market dynamics, the Turkish ministry official told reporters. “Old-fashioned” gas contracts, which are often indexed to oil prices and commit buyers to penalties if they do not buy their full quota, no longer match market realities, he said, and prices should be set against those at major gas hubs. “We started to discuss whether we are going to renew (or)whether we are going to find an alternative supply,” said the official, who spoke at a briefing on condition of anonymity. The decision would depend on whether suppliers “approach with same old habits – no flexibility, not very competitive price offers”. In that case “I don’t think we will see the existing contracts continue,” he said. Turkey relies on imports for nearly all its oil and gas needs. In the first half of this year imports from Russia and Iran fell back, while supplies from Azerbaijan increased and purchases of U.S. gas rose sharply. “The U.S. all of a sudden became the second largest (LNG) supplier to the Turkish market in the first part of 2020,” the official said. “The main reason was they were very competitive.” BLACK SEA GAS While Turkey’s gas consumption is likely to increase, despite a drive for renewable energy and alternatives such as nuclear power, last month’s discovery of a major gas field in the Black Sea opens the way for domestic production. Turkey says the field contains 320 billion cubic metres of recoverable gas, and Energy Minister Fatih Donmez said last month that data suggested more will be found as drilling continues deeper under the sea bed. “Most likely there is an upside potential and we will announce it hopefully soon,” the official said. “The timeline will be most likely in October, because we are trying to analyse two additional potential reserve areas” under the current level. President Tayyip Erdogan said in August Turkey would start pumping gas from the Black Sea discovery by 2023 – a symbolic date marking the 100th anniversary of the Turkish republic – but the official said full production would take longer. “The timeline we announced is for the first gas delivery,” he said. “It’s not going to be the plateau production, which will take at least an additional two or three years.” While that timeline is ambitious for an offshore gas field lying under 2,000 metres of water, the official said Egypt had brought gas onstream from its Mediterranean Zohr field with comparable speed, and two factors would work in Turkey’s favour. The quality of gas from the Sakarya field in the Black Sea was good, meaning there was no need for huge investment in gas processing, and Sakarya lies just 170 km (106 miles) from an existing pipeline along the Black Sea coast, he said.
Gujarat: Low gas prices fire up power plants
Plummeting gas prices due to the glut caused by the Covid-19 pandemic have fired up gas-based power plants in the country, many of which have been idle due to viability issues. For the April to July period, these plants have shown an increase of 3,331 million units generated, or about 19.4%, compared to the corresponding period last year. With the low prices, Gujarat seems to have emerged as one of the biggest beneficiaries. In the April to July period this year, 20,477.31 million units (MU) of power were generated from gas-fired plants across the country compared to 18,146.72 MU in the same period in 2019, Central Electricity Authority (CEA) data shows. In Gujarat, the state-run gas power units, many of which had shut operations, have been revived over the past few months. In the April to July period, the state-run projects produced 3,939 MU of power compared to 447 MU in the corresponding period last year. “Gujarat has been the biggest beneficiary as a large number of state-owned gas-fired projects have been revived recently. There has been an overall glut in the international gas markets due to lockdown in many countries. We have taken advantage of situation and booked spot LNG cargoes in advance,” said Saurabh Patel, Gujarat energy minister. As a result, many state-run plants, lying idle for a few years, are now running at about 50% capacity, according to Patel. The state booked 11 spot cargoes from April to October at low prices ranging $2.25 per million British thermal unit (MBTU) to $3.5 per MBTU. “Gas-fired energy has become cheaper compared to coal. The cost of generation had come down to Rs 2.7 per kilowatt hour (unit) for gas-based units compared to thermal where the cost is more than Rs 3 per unit,” said Patel. For privately run projects in Gujarat, the generation is up marginally at 3,733 MU in April-July period compared to 3,350 MU last year. India has a gas-based power generation capacity of 25,000MW of which about 7,700MW is based in Gujarat. The state power units contribute one-fourth of Gujarat’ capacity. Gas prices that were around $5-6 per MMBTU last year dipped to an all-time low of $2 dollars in the April to July period this year. In last fortnight, prices have again shot up to about $4 per MMBTU. “Although gas generation using oil-linked LNG contracts would still cost Rs 5.5/kwh, gas pooling may reduce the cost of gas for power plants, thus increasing PLFs and gas consumption,” according to an August 27 report by Motilal Oswal.