Australia trims resources revenue outlook on weaker coal, LNG exports
Australia has pared its forecasts for mining and energy export revenue this year, as liquefied natural gas (LNG) and metallurgical coal earnings are forecast to be slightly weaker than earlier expected. Total earnings from mining and energy exports are forecast to fall 12% in the year to June 2021 to A$256 billion ($180.71 billion) from a record high of A$290 billion a year earlier, the Department of Industry said in its latest quarterly report. “In 2020-21, relatively weak resource and energy commodity prices — with the notable exception of gold and iron ore — and lower coal export volumes are expected to drive a sizable fall in export earnings,” the government said. The forecast for 2020-21 is down A$7 billion from the government’s previous outlook in June because of weaker than expected energy exports and stronger than expected gains in the Australian dollar, it said. Earnings from metallurgical coal are forecast to drop by a third to A$23 billion in 2020-21 on lower prices and weaker output from major miners. That is A$2 billion lower than the government’s previous outlook. LNG revenue is expected to slump 35% to A$31 billion in 2020-21 from a year earlier. That is A$4 billion lower than the government’s previous forecast, partly due to problems at two of the country’s 10 LNG export projects. Amid the collapse in global growth from the coronavirus pandemic, Australia’s resources earnings have been shored up by iron ore, helped by supply disruptions in Brazil caused by the pandemic and solid demand from China. “There is little immediate prospect for a major change in these dynamics,” the government said. It sees iron export earnings slipping to A$97 billion this year from last year’s record A$102 billion, with iron ore prices expected to fall from around $100 a tonne in the December quarter to around $80 a tonne by the end of 2021.
BPCL executive says privatisation will unlock value for company
Privatisation of Bharat Petroleum Corp will unlock value by increasing investment and technology, its chairman told a shareholders meeting on Monday. “This (privatisation) is expected to unlock tremendous value through sharpening of professionalism, improvement in efficiencies, increased investments, access to advanced technologies and newer global markets and product diversification, thus propelling future growth,” K Padmakar said. The government is targeting that sale of its 53.29 per cent stake in BPCL in this fiscal year ending March 2021. But the privatisation could spill over into the next fiscal year, according to a government document and sources.
Domestic gas prices may rise as govt explores floor price mechanism
CNG and piped natural gas prices could face an increase this festive season if the government implements a new floor price mechanism for gas produced from domestic fields by companies such as Oil and Natural Gas Corporation (ONGC). Sources said the petroleum ministry is considering a proposal under which domestic gas will have a floor pricing that would prevent fuel prices from crashing below an identified threshold in the current subdued market conditions and insulate oil and gas explorers like ONGC from a tariff crash. Talks are on to link gas prices with price Japan-Korea Marker, a benchmark index used to determine LNG tariff in North Asia with a discount. With JKM prices hovering over $ 5 million British thermal units (mmBtu) even with day $ 1 mmBtu discount, the Indian gas floor price under this formula will be close to $ 4 mmBtu. This is much higher than the government administered price of $ 2.39 mmBtu for the April-October, 2020 period. And if implemented, it could increase the cost for all gas consumers. “Nothing has been finalised on having a gas floor price as of now. A panel in the petroleum ministry is looking at various options and the best course would be adopted that has little impact on consumers but also supports oil and gas companies with remunerative and sustainable gas prices.” The average cost of gas production for the country’s largest public sector oil company ONGC is about $3.7/mmBtu, much higher than the current regulated price of natural gas at $2.39/mmBtu. This is expected to fall further to about $1.9/mmBtu for the next six months beginning October 1 under the current formula, sources said. Lower gas prices is bad news for ONGC as it would mean further suppressed margins and losses. The company is set to lose close to Rs 6,000 crore on low gas prices this year, brokerages have said. Brokerages have put ONGC’s FY22E gas price at US$3.6-4.2/mmbtu depending on discount to JKM price if the new floor price is implemented. With Low L NG liquefaction capacity addition ahead, JKM spot futures for FY22-FY26E are expected at US$5.2-5.8/mmbtu vs US$4.7-4.1/mmbtu in FY20-FY21E. Oil minister Dharmendra Pradhan had said earlier that India will phase out price controls in natural gas and make it market-linked soon.
Oil heavyweights Saudi Arabia and Russia look ready for a showdown
Exporting Countries have both resumed cutting their forecasts for this year’s oil demand. In the past two months, the IEA has trimmed its forecast by 400,000 barrels a day, while OPEC has reduced its own by 500,000 barrels.By Julian Lee Oil producers could be set for another showdown before the end of the year, with heavyweights Saudi Arabia and Russia holding different views on how to approach the halting recovery in oil demand. Renewed restrictions on travel and social gatherings across Europe, along with the tapering of state support packages for companies, are having a chilling effect on demand for crude, just as the OPEC+ group of oil producers, who cut production by a record 9.7 million barrels a day in May, begin to contemplate the next easing of limits on their output. We should all remember what happened last time they couldn’t agree on what to do. The International Energy Agency and the Organization of Petroleum Exporting Countries have both resumed cutting their forecasts for this year’s oil demand. In the past two months, the IEA has trimmed its forecast by 400,000 barrels a day, while OPEC has reduced its own by 500,000 barrels. And they may have further yet to fall. Neil Atkinson, the IEA’s Head of Oil Industry and Markets Division, said at a Bloomberg event on Thursday that the agency is “more likely to make a downgrade than an upgrade” to demand forecasts in its next monthly report. The biggest headwind to oil demand comes from reduced trade, weakened economies and the knock-on effects of business closings and job losses, Standard Chartered analysts, including Emily Ashford and Paul Horsnell, said in a report last week. At a time when oil demand was meant to be recovering, it now seems to be going into reverse again. A new round of work-from-home advice and restrictions on social activities, triggered by a rise in virus infections in Europe, are set to collide with a reduction in economic support measures. U.S. oil consumption faces similar obstacles, with government support under the Coronavirus Aid, Relief, and Economic Security Act coming to an end on September 30. Even Asia isn’t immune, with Thailand the only country that’s close to seeing a V-shaped recovery in oil demand, according to Standard Chartered. Of course, it’s not all about demand. The room available for additional supply from the OPEC+ countries also depends on how much oil is coming from elsewhere. And there is at least as much uncertainty on this front as there is with demand. There are fears — or hopes, if you’re a rival oil producer — that output from U.S. shale deposits is set for another big drop in the coming weeks and months. Well completions in the U.S. are now so low that large monthly declines in production may be imminent, Emily Ashford warned last week. More robust monthly data from the U.S. Energy Information Administration show that this year’s drop in domestic crude production has been both steeper and deeper than their preliminary weekly data suggested. Another drop in U.S. production would leave more room for the OPEC+ group to raise its own output. But there are problems within the group itself, as I wrote here. While overall compliance with the promised output cuts has been unusually good — thanks in part to the no-nonsense attitude of Saudi Arabian energy minister Prince Abdulaziz Bin Salman — a few countries are still struggling to implement their cuts in full. And then there’s Libya, which remains outside the group’s supply deal and is creating another big source of uncertainty. The political truce in the OPEC member’s long-running civil war could allow it to boost exports, adding to global supply at an inconvenient time for the rest of the group. The state oil company is predicting supply could quickly rise to 260,000 barrels per day from about a third of that level. Goldman Sachs reckons exports could reach double that by the year’s end. Even the world’s biggest oil traders — including Vitol Group, Trafigura Group and Mercuria Energy Group — don’t have a united view on the outlook for oil over the coming months. Mercuria co-founder and CEO Marco Durnand says “we do not need the extra oil” that the OPEC+ group is planning to pump from January. Trafigura executives are also downbeat. But Vitol has a starkly more bullish view than its rivals. With so much uncertainty, it’s little surprise that tensions are emerging within the OPEC+ group. Saudi Arabia wants, above all, to prevent oil prices from slipping, and its energy minister says the OPEC+ producer group will be “proactive and preemptive” to stop supply from running ahead of demand. He wants to make oil traders “as jumpy as possible.”
A match made in Houston: United States has energy resources, India has a huge market
India’s quest for energy security offers limitless possibilities to U.S. companies and has the potential to oil the engines of economic growth in both India and the United States. As we slowly move toward opening up, the partnership has the potential to play an important role in economic recovery. The energy market in India is vast and growing rapidly. It is the world’s third-largest producer of electricity and set to be the largest energy market before 2030. The IEA’s World Energy Investment 2019 report highlights that among major markets, energy investments in India have grown the most over the past three years, with an investment of $85 billion. India offers a huge market; the United States is abound in energy resources and leading technologies including in natural gas and solar — the complementarities and synergies are striking. Numbers speak for themselves. There has been an increase of 93 percent in the hydrocarbons trade between India and the United States in the last two years; it reached $9.2 billion in 2019 and 2020. India is now the fourth largest international market for U.S. crude oil and the fifth largest for U.S. liquefied natural gas. Indian firms have concluded several contracts for sourcing crude from the United States and are expanding their investments in the U.S. energy sector, creating jobs and economic opportunities. While crude oil and liquified natural gas transactions have been impressive, it is important to note that these comprise only one of the four pillars of U.S.-India energy cooperation. The other pillars — power and energy efficiency, renewable energy and sustainable growth — are equally critical. Underlying all of these is innovation. Indian and U.S. entities are also working together to advance cooperation in civil nuclear energy. Cooperation with the United States in the natural gas sector is a priority for India. As India evolves into an increasingly gas-based economy, natural gas infrastructure — pipeline networks, city gas distribution grids and LNG terminals — is being ramped up across the country. Significant opportunities exist for the U.S. companies in LNG bunkering, container development, petrochemicals and biofuels.India is primed for investment of $118 billion in oil and gas exploration, and natural gas infrastructure, including urban consumer gas distribution networks over the coming five years. For U.S. investors and energy companies with their global footprint, India is the new frontier. Under the U.S.-India Gas Task Force, several partnerships have been underway. Notable ones include collaboration between the respective regulatory entities on information exchange, between Bloom Energy and Indian Oil on fuel cell technology, and among ExxonMobil, Chart Industries and IOCL on stimulating LNG demand. Indraprastha Gas Limited and Agility Fuel Solutions LLC and Gasway USA Inc. have agreed to explore the viability of advanced clean fuel systems. ExxonMobil and GAIL are now engaged in commercial dialogue to enhance India’s natural gas access to advance LNG as fuel in heavy vehicles. The list continues to expand. As India builds strategic petroleum reserves at home, India is also looking to lease crude storage capacities in the United States. An agreement for cooperation in this area was signed in July 2020. For clean energy, India is the new home. Buoyed up by the current progress, India is well on the target to create 175 gigawatt capacity from renewables by 2022. The United States and India are working to strengthen power grids and distribution utilities for clean, affordable and reliable energy access. Under the ‘Ujjwala Yojana’ (the Hindi word ‘ujjwal’ denotes brightness or optimism) over 80 million economically underprivileged families have been provided subsidized cooking gas cylinder connections over the past four years. This program has had a positive ecological impact and provided preventive health benefits to homemakers, many of them women. India and the United States are collaborating on several R & D initiatives. This focuses on smart grids and energy storage, so as to enhance efficiency and reliability of the electric grid. Other areas of collaborative research encompass advanced coal technologies for power generation and hydrogen production, including carbon capture, use and storage The U.S. Development Finance Corporation’s $600 million financing facility announced for renewable energy projects in India is bound to spur growth in the sector. In an uncertain world, the key to effective partnerships between nations is reliability, trust and long-term commitment. The India-U.S. strategic energy partnership touches all three aspects. The pandemic has only reminded us of the need for more focused and expeditious action to galvanize economic growth through mutually beneficial collaborations.
Oil minister Dharmendra Pradhan wants tourist towns to run on clean fuel
Oil minister Dharmendra Pradhan on Sunday proposed to make major tourist destinations switch completely to clean fuels with a view to weaving sustainability into tourism. Addressing a function organised to mark the World Tourism Day, Pradhan said switching 100 per cent clean fuels will further help protect monuments and ensure a cleaner environment for the tourists. Pradhan’s proposal build on his ministry’s ongoing efforts to expand city gas (CNG and PNG) network in 400 districts, which will wean public transport away from diesel to clean-burning natural gas. The government recently launched plans to fully power Konarak, which hosts the famous sun temple in Pradhan’s home state Odisha, with solar power.
Govt notifies norms for alternative fuels to promote sustainable transportation
The Road Transport and Highways Ministry has notified regulations for various alternative fuels to further promote sustainable transportation, Union Minister Nitin Gadkari said on Sunday. “After testing use of H-CNG (18 per cent mix of hydrogen) as compared to neat CNG for emission reduction, the Bureau of Indian Standards has developed specifications of hydrogen-enriched compressed natural gas (H-CNG) for automotive purposes as a fuel,” the Road Transport, Highways and MSME Minister said in a tweet. The notification for amendments to the Central Motor Vehicles Rules 1989, for inclusion of H-CNG as an automotive fuel has been published, the minister tweeted. It is a step toward an alternative clean fuel for transportation, he added.