Economic Survey: India’s oil production falls by 6%, gas by 5% in FY 20
India saw its oil production fall by 6% and natural gas production drop by 5% in 2020 on the back of Covid-19 pandemic, said the Economic Survey. The third-largest energy consumer in the world after the USA and China, India’s indigenous crude oil production declined to 32.17 Million Metric Tonnes (MMT) in FY20 as against 34.20 million metric tonnes in FY19. “The decline in production is mainly on account of the spread of Covid-19. Therefore, production is expected to return to normalcy given the economic recovery,” said the Economic Survey. The Indian energy consumption basket is primarily dominated by Coal and Crude Oil. Of the total crude oil and condensate production, 64.1% was from Oil and Natural Gas Corporation, 9.7% from Oil India Ltd and 26.2% from the Production Share Contract (PSC) regime. Natural Gas production on the other hand saw a drop of 5% during FY20, at 31.18 Billion Cubic Meters (BCM) as against 32.87 BCM in FY19. “Of the total production of natural gas, 76.1% was from ONGC, 8.6% from Oil India and 15.3% from the PSC regime. During April-December 2020, gas production was 21.13 billion cubic metres which was 11.3% lower than the production during the same period in FY20,” the Survey said. In the April-December period of FY 2021, overall consumption of all petroleum products has fallen by 12.6% but has recovered to 87.2% of the consumption, which was prevalent during the same period last year, said Care Ratings in a report, adding that consumption of petroleum products has been increasing as the economy has been easing restrictions and opening up. Production of refinery products/petro products has fallen by 13.5% during April-December FY21. With the outbreak of the Covid-19 pandemic across the world and consecutive nationwide lockdown imposed in the country, Indian refineries have been operating at reduced capacities. Fall in demand has led to refiners trimming their capacity utilisation in order to remain afloat and protect their margins. On Friday, state-run Indian Oil Corp Ltd said its profit more than doubled for the third quarter, at ₹49.17 billion against ₹23.39 billion a years ago. This was helped by an increase in the value of its inventory due to a jump in crude oil prices.
IOC to make aviation fuel for trainer aircraft in India from next year
In a bid to make flying training more affordable in India, the government has decided Indian Oil Corp (IOC) will produce AvGas under the “atmanirbhar Bharat abhiyan.” Aviation Gas (AvGas) is currently imported for trainer aircraft and increases the operating costs for flying training organisations (FTO) and loss of foreign exchange. This, in turn, leads to higher charges for wannabe pilots. “IOC has taken an in-principle decision to produce AvGas indigenously under the atmanirbhar Bharat abhiyan. They are likely to produce the same at Paradip Refinery, tentatively by March 2022. A detailed technical analysis is currently underway. Domestic production of AvGas will help reduce the cost of flying training, improve the financial sustainability of Indian FTOs and help make India a global flying training hub,” said a senior aviation ministry official.
IOC to expand Chennai refinery in JV with CPCL; to spend Rs 31,500 cr
State-owned Indian Oil Corporation (IOC) will expand its Chennai refinery at a cost of Rs 31,500 crore through a joint venture with its subsidiary and strategic financial investors, Chairman Shrikant Madhav Vaidya said on Friday. IOC and its subsidiary Chennai Petroleum Corporation Ltd (CPCL) will hold a 25 per cent stake each in the joint venture that will set up the 9 million tonnes a year refinery. The remaining 50 per cent equity would be with financial investors, he told reporters here. “The board of the company at its meeting today (Friday) approved setting up a grassroots 9 million tonnes a year refinery at Nagapattinam in Tamil Nadu,” he said adding that the unit will be built in 48 months from investment approval. IOC plans to pull down the 1 million tonnes per year Nagapattinam refinery of its subsidiary CPCL and build a brand new 9 million tonnes unit. Asked about the participation of the National Iranian Oil Company (NIOC) in the project, he said the refinery will be set up as a joint venture of IOC and CPCL and balance with strategic and financial partners. “NIOC continues to be an investor in CPCL,” he said. NIOC holds 15.4 per cent in CPCL and was previously keen to participate in the expansion project. However, US sanctions on Iran had put constraints on that. NIOC’s investment in CPCL had been made several years back and that as such will not draw any impact of US sanctions but the impact of fresh investments in the company need could have risked sanctions. After the US reimposed full economic sanctions against Iran beginning November 5, 2018, and ended waivers six months later, India has stopped buying oil from its third-largest crude oil supplier. Prior to the waivers ending on May 2, India paid Iran for oil purchases in rupees. These rupee payments are made into a UCO Bank account of NIOC. The government had allowed NIOC to use the money it got in the UCO Bank account for paying for commodities Iran buys from India as well as for direct investments in Indian projects. Naftiran Intertrade, the Swiss subsidiary of NIOC, holds a 15.4 per cent stake in CPCL. Whether the same money could be invested by NIOC as its share of the equity portion of the expansion project was debated. IOC holds a 51.89 per cent stake in CPCL. The expansion was to originally cost Rs 27,460 crore but is now estimated to cost Rs 31,500 crore. He said the project will be funded in a 2:1 debt-equity ratio. CPCL also plans to build a petrochemicals plant of about 4,75,000 tonnes per annum capacity. A detailed feasibility report for the expansion project is underway. CPCL, formerly known as Madras Refineries Ltd, was formed as a joint venture in 1965 between the Government of India, AMOCO, and NIOC having a shareholding in the ratio of 74 per cent, 13 per cent, and 13 per cent. In 1985, AMOCO disinvested, following which the government held 84.62 per cent and NIOC 15.38 per cent. The government later disinvested 16.92 per cent of the paid-up capital. The company was listed in 1994. IOC acquired the government’s holding in 2000-01 and holds 51.89 per cent stake in CPCL while NIOC has 15.40 per cent. CPCL has two refineries with a combined refining capacity of 11.5 million tonnes per annum. The Manali refinery has a capacity of 10.5 million tonnes per annum and is one of the complex refineries in the country. Its second refinery is located in Nagapattinam at Cauvery Basin. This unit has a capacity of 1 million tonnes per annum. CPCL refineries produce LPG, petrol, kerosene, aviation turbine fuel (ATF), diesel, naphtha, bitumen, lube base stocks, paraffin wax, fuel oil, hexane, and petrochemical feedstocks.
EOGEPL dispatches first CNG to Bengal gas and company for Kolkata
Essar Oil and Gas Exploration and Production Limited (EOGEPL), an investee company of Essar Capital, today announced it has dispatched the first Compressed Coal bed Methane (C-CBM) natural gas cascade truck for Bengal gas company’s maiden CNG station to be supplied by state-run gas major GAIL (India) Ltd. The C-CBM natural gas cascade truck was flagged off by Satyabrata Bairagi, CEO, Bengal Gas Company and Santosh Chandra, CEO, EOGEPL from EOGEPL’s gas compressor facility at Durgapur today to the CNG station to be commissioned in Kolkata, the company said in a statement. “This is a momentous occasion for us at EOGEPL. Our CMB gas, clean and green fuel is a turning point towards helping the state in its journey to reduce air pollution amongst the community,” Santosh Chandra, CEO, EOGEPL said. The company said Essar Capital’s investments in EOGEPL are focused on clean energy and CBM gas is seen as a key green fuel. “The GAIL Urja Ganga gas pipeline, when commissioned next month will eventually become the energy lifeline of homes and industries in West Bengal and EOGEPL is committed to provide uninterrupted gas supply to the customers,” Chandra added. The Kolkata city gas distribution network is being developed by Bengal Gas Company which is a joint venture between GAIL India and Greater Calcutta Gas Supply Corporation.
Weak diesel demand signals a slow rebound for industrial India
It’s set to be a slow crawl back to pre-virus levels for Indian energy demand with diesel, the most-used fuel, holding back the recovery. While demand for diesel, which accounts for around 40% of Indian fuel use in a normal year, rebounded quickly after the world’s biggest lockdown was imposed in March, the recovery has since slowed. The annual growth rate for diesel consumption won’t get back to pre-virus levels until the year ended March 2022, said Mukesh Kumar Surana, chairman of Hindustan Petroleum Corp. Used in factories, construction and agriculture as well as powering the truck and bus fleets, diesel is a bellwether of industrial activity in India and its tepid recovery reflects an economy still struggling to shake off the crippling effects of the pandemic. Gasoline demand, by contrast, is being buoyed by people opting to use private cars and motorcycles to avoid being exposed to Covid-19. “The recovery in diesel demand is lagging behind gasoline, and the trend is likely to persist through most of the first half of 2021,” said Senthil Kumaran, head of South Asia oil at industry consultant FGE. “Demand for diesel will average about 5% lower than year-ago levels in the coming months.” Consumption of diesel in the first quarter will be only 3.9% higher from a year earlier, when the national lockdown was imposed, according to FGE. Motor fuel demand will climb 12.5% over the same period. The year got off to a shaky start with fuel sales falling in the first two weeks of January from a month earlier and diesel showing the biggest drop. Farmer protests have affected the movement of vehicles in some states and damped consumption, while record high fuel prices have also dented demand. Only around three-quarters of India’s trucking fleet is operational, according to Naveen Gupta, secretary general of the All India Motor Transport Congress that represents about 10 million truckers. “Operating costs are at an all-time high because of high diesel prices, but freight has not increased,” he said. There are signs, however, that the economy of India — the world’s third-biggest oil importer — is starting to perk up after shrinking by a forecast 7.7% last year. Seven of the eight high-frequency indicators tracked by Bloomberg News held steady in December and one deteriorated. Finance Minister Nirmala Sitharaman is expected to announce generous public spending and measures to put more money into the hands of average Indians when she unveils the federal budget on Monday. Diesel demand should also improve a bit during crop harvesting in March and April, HPCL’s Surana said. After slumping around 15% last year, full-year diesel consumption will exceed that of 2019 by 3.3%, according to Bloomberg calculations based on figures from FGE and the oil ministry. Gasoline demand, meanwhile, will be about 11% higher this year than in 2019. Overall, consumption of major fuels — diesel, gasoline, jet fuel, liquefied petroleum gas, naphtha and fuel oil — should increase by around 14% this year from 2020, FGE’s Kumaran said. Indian oil demand “definitely”recover to 2019 levels by the fourth quarter, he said. However, R. Ramachandran, the former refineries director at Bharat Petroleum Corp., said that greater use of fuels like liquefied natural gas and compressed natural gas in transport means diesel is unlikely to be as dominant in the Indian energy mix as it was before Covid-19. “We are witnessing exceptionally good demand for gasoline,” said Ramachandran, who has almost four decades of experience in the Indian oil industry. “But don’t expect diesel to recover to the growth rates of the past.”
Soaring fuel prices to lend wheels to CNG adoption in India: CRISIL
The soaring prices of petrol will lead to an increase in adoption of compressed natural gas (CNG) driven vehicles in India as the price differential between the cost of running a petrol-driven car versus CNG has widened to 44%, according to a research report. The price of petrol has breached Rs 85 a liter in New Delhi as excise duty rose by Rs 13 to Rs 32.98 per litre in 2020. In calendar 2021, CRISIL Research expects Brent crude to rise by about 23% year-on-year to an average $50-55 per barrel from $42.3 per barrel in 2020, as economic activity recovers globally. “Tax now accounts for over 60% of the retail selling price of petrol, compared with 47% in 2019. Given that the government has to find the money to ramp up public spending – and is also promoting usage of cleaner fuels – it is unlikely that the tax on petrol will come down to previous levels anytime soon,” said Hetal Gandhi, Director, CRISIL Research. Domestic gas prices are expected to rise similarly by over 20% to $2.5-3.5 per million British thermal unit (mBbtu) in 2021 from $2.45 in 2020. However, the absolute price differential between petrol and CNG retail prices will remain wide because of higher taxes on the former. “CNG was always cheaper than petrol, but the price differential between the two has widened rapidly in the past two years. Today, the cost of running a CNG car is (about) 44% less than a petrol variant, if you consider the CNG price of (approximately) Rs 42.7 per kilogram in New Delhi,” said Mayur Patil, Associate Director, CRISIL Research. The consumption of CNG in India has grown at a compounded annual rate of about 11% over the past three years and is expected to grow at a compounded annual rate of 25% between 2021 and 2923, according to the research agency. The sharp spike in the prices vehicles, especially diesel cars, in 2020 due to upgrade to BS-VI emission norms also pushed commercial car fleet operators towards CNG from diesel. The government is also ramping up city gas distribution (CGD) networks, which would further help increase CNG consumption.