NTPC wants to be India’s largest green hydrogen producer
Whilst coal might currently be king in India, there’s a new zero-emission energy source on the horizon for the country: green hydrogen. As the world’s third-largest emitter of greenhouse gases (GHGs) – after China, the world’s largest emitter, and the US – the world is watching to see what happens to India’s energy mix as it will have global repercussions. Energy is at the heart of India’s development and the country has high aspirations as it strives to create a better life for its population of almost 1.4 billion people, and reach a net-zero emissions energy system by 2050. By 2030, New Delhi research institute TERI (The Energy and Resources Institute) says hydrogen can start to compete with fossil fuels in certain industrial applications, if given enough government support. In a report published in December 2020, TERI says the costs of green hydrogen will fall by more than 50% by 2030, making it competitive with hydrogen from fossil fuels. Additionally, The Potential Role of Hydrogen in India highlights that demand for hydrogen in India can grow five-fold by 2050. According to Mint, India produces around 5 million tonnes of hydrogen annually and it’s expected that the country may see a green hydrogen demand of 16,000 tonnes per annum by 2024, and one million tonnes by 20301. One company eyeing this green hydrogen opportunity is India’s top electricity generator NTPC, which generates a quarter of India’s power. The state-owned utility has embarked upon an aggressive and ambitious renewables journey in which it will move away from coal-based projects in favour of green hydrogen. “NTPC is targeting to be the largest green hydrogen producer and provider in India,” Mohit Bhargava, Executive Director of NTPC, told H2 View recently when we sat down with him to film an exclusive webinar. “With the continuous addition of NTPC’s renewable capacity and the floating of our dedicated subsidiary NTPC REL, we see green hydrogen to be a means of harnessing the renewable power we produce. The available green hydrogen will provide a sustainable solution for transport and mobility, backup power systems, chemical feedstock and gas blending applications. This will drive India’s mission to fulfil the sustainable development goals (SDGs) targets.” NTPC is taking steps now to green its energy portfolio and has set a 60GW renewable energy capacity target by 2032, which would constitute nearly 50% of its overall power generation capacity. “We are also looking at how we can use renewables not only to supply electricity directly to the consumers, but also to use green electricity to produce green hydrogen. This could be a very important pillar in terms of decarbonising not only the power sector in the country, but also decarbonising other important sectors like mobility, oil and gas, fertiliser,” Bhargava explained. “In the next 10 to 12 years we hope to have a total renewable installed capacity of about 60GW, which would be almost equal to our conventional capacity, by 2032. And a substantial part of this would be utilised to produce green hydrogen, and subsequently the derivatives which could be green ammonia and green methanol, depending on how we are able to build the use cases.” H2 View understands that NTPC is planning to use around 5GW of the renewable energy capacity for green hydrogen applications, but Bhargava said this could be revised with the evolving of the technology in the country. “It’s difficult to give a number because much of what is happening on the hydrogen side now is more in terms of pilot projects. So we [NTPC] haven’t actually set a clear number as of now, but on the basis of what’s happening today and how the overall power consumption and the possibility of renewable coming to the grid happens, we could have anything from 10-20% at least of this capacity which could be used for green hydrogen,” Bhargava explained. “But like I said, this is not a number frozen by us and this will be dependent on how we are able to actually get people on board to buy green hydrogen or green ammonia or green methanol.” Hydrogen in the Himalayas NTPC is behind India’s maiden initiative to run hydrogen-powered cars and buses, and the power generator has chosen two locations for pilot projects: New Delhi, India’s capital, and Leh, the largest town of the union territory of Ladakh, a mountainous, semi-autonomous region sandwiched between the Himalayan and Karakoram mountain ranges. Green hydrogen refuelling stations are set to be established at both locations. Leh has a cold desert climate with long, cold winters from late November to early March during which minimum temperatures reach well below freezing for most of the season. The town also gets occasional snowfall during winter. But it’s not just its climate that makes Leh an interesting and unique choice for a hydrogen pilot project, it’s also the fact it’s situated at an altitude of 3,500m. “We feel that hydrogen-based mobility could be a solution which works there [in Leh] because what we have seen there in these extreme conditions, even the electric vehicles based on batteries, they get discharged very fast and the output is much lower as compared to the battery-electric vehicles (BEVs) operating anywhere else. So hydrogen appears to be a good option,” Bhargava told H2 View. “At both of these locations [Leh and New Delhi] we will be supplying green hydrogen, which is very important because NTPC is committed to green hydrogen only. We’re not evaluating any other shade of hydrogen for our movement forward. In both these locations it will be green hydrogen, so this will be effectively zero emission mobility. “In Leh, we feel hydrogen makes good sense and it will help to remove the dependence on diesel, which is highly emitting in this very pristine environment. In Delhi, we hope to demonstrate that hydrogen-based buses are a good fit for zero emission mobility, particularly if we are looking at intercity drives which are like 300-400km, which can be easily undertaken with hydrogen buses. We have issues on
Oil Min Puri dials UAE for affordable oil prices
As fuel prices climbed to a record high, India’s new Petroleum Minister Hardeep Singh Puri has started dialling oil-producing nations to impress upon them for a need to make prices affordable for consumers. Puri, who last week called Energy Minister of Qatar, on Wednesday dialled his counterpart in the UAE, Sultan Ahmed Al Jaber. “Conveyed my desire to work closely with UAE and other friendly countries to bring a sense of calm, predictability and realism among other suppliers in the energy market to make it more affordable for consumers,” Puri tweeted. The rebound in international oil prices from lows hit in May on the back of demand recovery has sent petrol and diesel rates to a record high in India. Petrol has crossed the Rs-100-a-litre mark in more than one and a half dozen states and union territories, while diesel is being sold at over Rs 100 a litre in Rajasthan and Odisha. “Had a warm courtesy call with HE Dr. Sultan Ahmed Al Jaber, UAE Minister of Industry and Advanced Technology and MD & Group CEO of @AdnocGroup. Discussed ways and means to invigorate the vibrant bilateral strategic energy partnership between India and UAE,” Puri said. India, which imports 85 per cent of its oil needs, has long pressed producers’ cartel OPEC and its allies, called OPEC+, to phase out its production cuts and allow oil prices to come to reasonable levels. The world’s third-largest importer has many times called on OPEC to price oil at reasonable levels that support growth and stop propping up prices with its output cuts. The UAE is a member of OPEC but has had a falling out with the grouping over production quotas at the meeting of the alliance earlier this month. “We agreed to take the bilateral energy engagement to greater heights and also to diversify into new areas in the context of the fast-evolving global energy transition,” Puri said in the talks with his UAE counterpart. OPEC, Russia and several other allies in a production accord could not reach an agreement earlier this month on output quotas for August and possibly beyond. Expectations were that the alliance may agree to raise production by 500,000 to 700,000 barrels per day but the decision was postponed as the UAE differed on the baseline for such output increase. Puri, who took over the reins of the petroleum ministry on July 8, on last Saturday called Qatar’s Minister of State for Energy Affairs Saad Sherida Al Kaabi to discuss further ways of strengthening mutual cooperation in the hydrocarbon sector. “Discussed ways of further strengthening mutual cooperation between our two countries in the hydrocarbon sector during a warm courtesy call with Qatar’s Minister of State for Energy Affairs who is also the President & CEO of @qatarpetroleum HE Saad Sherida Al-Kaabi,” Puri had tweeted on July 10. Puri, a former diplomat, is widely expected to smoothen flared tensions with oil-producing nations in general and Saudi Arabia in particular. In March, Puri’s predecessor Dharmendra Pradhan and Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman had an unpleasant exchange over oil prices. The Saudi Arabia minister responded to Pradhan’s repeated pleas for a reasonable price, by saying India should tap into its reserves of crude that it bought cheaply in 2020 during the market crash. Days later, Pradhan termed the statement an “undiplomatic response from a friendly nation”. Since then, the petroleum ministry has asked refiners to look at sources outside of the Middle East for buying oil. India is the world’s third-largest consumer of crude and OPEC nations such as Saudi Arabia have traditionally been its principal oil source. But OPEC and OPEC+ ignoring its call for easing of supply curbs, had led India to tap newer sources to diversify its crude oil imports. As a result, OPEC’s share in India’s oil imports has dropped to about 60 per cent in May from 74 per cent in the previous month. The two sides have somewhat patched up relations, with Saudi Arabia and the UAE supplying critical medicine, oxygen and equipment to help India battle its second wave of coronavirus infections.
Saudi-UAE deal to be a bullish catalyst for oil, says Goldman
Goldman Sachs expects an oil supply agreement between Saudi Arabia and the United Arab Emirates to be a bullish catalyst for prices over coming months as the U.S. investment bank maintained its summer Brent price forecast at $80 per barrel. Saudi Arabia and the UAE have reached a compromise over OPEC+ policy, an OPEC+ source told Reuters on Wednesday, in a move that should unlock a deal to supply more crude to a tight oil market. “Such an agreement would help bridge the (modest) divide between both countries and help remove the (low probability) OPEC+ tail risks of a potential price war or insufficient production growth,” the bank said in a note on Wednesday. “We believe that risks to our bullish oil price forecasts are skewed to the upside, with the catalyst for such a move higher shifting from the demand to the supply side.” Goldman expects $2 to $4 per barrel upside risk to its $80 per barrel summer forecast and $75 per barrel for its 2022 Brent price forecast. The bank also noted that a lack of an Iran nuclear deal would increase its 2022 price forecast by $10/bbl. Iran and global powers have been negotiating since April to lift sanctions on Tehran, which have hit its economy hard by cutting its vital oil exports. Brent futures slipped 0.6% to $74.32 a barrel on Thursday, while U.S. West Texas Intermediate crude was trading around $72.61.
Oil cos to strengthen profits even as consumers suffer from rising fuel prices
The oil price rise may be hitting consumers hard, but oil companies are making the most from the current situation, strengthening their margin on the sale of petrol and diesel and jacking up profits. At the current historic high of fuel price levels in the country, the margin taken by the oil marketing companies (OMCs) on retail sale of petrol and diesel has touched a high of around Rs 3 per litre. What this means is that while rising fuel prices burn a bigger hole in the consumer’s pocket, the OMCs are increasing their earnings and getting a lift in the current difficult environment created by the Covid-19 pandemic. According to a research report from ICICI Direct, all oil marketing companies are expected to strengthen their earnings in April-June quarter of FY22 on the back of rising marketing margin and improved gross refining margin. Though profit of companies is expected to fall quarter-on-quarter due to exceptional gains made by some of the companies in the January-March period, as on a YoY basis, they would make more money in Q1. As per the brokerage report, privatisation-bound BPCL is expected to report net profit of Rs 2,307.7 crore as the company reported exceptional gains of Rs 6,993 crore in Q4FY21. Similarly, HPCL is expected we to report robust profit in Q1 at Rs 1,520.7 crore. Though this is down 49.6 per cent QoQ, it is still very good considering that Q1 also saw the most devastating phase of the Covid virus that disrupted economic activity and resulted in fall in marketing volumes for fuel marketers. With regard to IOC, the estimate is it’s profit PAT is estimated at Rs 5,480.3 crore, down 37.6 per cent QoQ but the company would improve gains due to rise in marketing margin during the quarter. For all the OMCs the gain is coming in the wake of regular revision of retail price of petrol and diesel from the beginning of the financial year on April 1. Since then, pump price of petrol had increased by up to Rs 11 per litre while diesel by Rs 9 per litre. As per analysts, this may have hurt fuel consumers but has pushed up marketing margins for OMCs back to about Rs 3 a litre. This means companies are gaining more than expected from the rise .
Hardeep Puri moves to temper Opec ties in search of oil market calm
Barely a week into his new job as India’s oil minister, Hardeep Singh Puri has jumped into the rough and tumble of international oil diplomacy in search of market calm as fuel prices soar at home. On Wednesday, Puri called up Sultan Ahmad Jaber, the head of Abu Dhabi National Oil Company and industry minister of United Arab Emirates, the rising star of Opec that has caused a split in the grouping by challenging Saudi Arabia’s supremacy and sent oil prices racing. But unlike in the past, the former diplomat was measured in conveying New Delhi’s concerns over the recessionary impact of high oil prices on global economic recovery and demand, which will ultimately hurt producers. “Conveyed my desire to work closely with UAE and other friendly countries to bring a sense of calm, predictability and realism among other suppliers in the energy market to make it more affordable for consumers,” Puri tweeted. “We agreed to take the bilateral energy engagement to greater heights and also to diversify into new areas in the context of the fast-evolving global energy transition,” he told Jaber, underlining New Delhi’s desire to expand traditional oil ties with Abu Dhabi as it sets itself up as a tech centre and a Gulf economic power. Puri had last week dialled his Qatari counterpart and head of Qatar Petroleum Saad Sherida Al-Kaabi. Similar calls are expected with others in the coming days. These calls are aimed at smoothening ruffled feathers and protecting bilateral ties from getting trapped in the cracks in Opec, which accounts for 70-80% of India’s oil imports. Though India has close ties with West Asian Opec members, its approach towards the grouping in recent times has been muscular when it came to oil prices. The world’s third-largest oil consumer has been almost single-handedly pressing for market stability and softer prices, leveraging its market size. Things had come to a head after Saudi Arabia led the grouping to extend last year’s production cut deal, sending oil prices racing. As pump prices soared, Puri’s predecessor Dharmendra Pradhan accused the grouping of “backtracking on its promise (to raise output as economies open up after the 2020 lockdowns)”. This led to a war of words, uncharacteristic of international diplomacy, with Saudi oil minister Abdulaziz Bin Salman, who said “India should use cheap oil it had bought when prices had crashed”.
Oil and gas companies facing impact from Covid-led demand disruption
The revenue for Oil and Gas companies is estimated to decline in the first quarter (April-June 2021) owing to the second wave of COVID-19 led state-wise lockdowns impacting demand. The lower marketing sales volumes for Oil Marketing Companies (OMCs) and lower gas volumes for City Gas Distribution (CGD) companies is likely to be offset by an improvement in realisation for upstream companies during the quarter. “In turn, we expect Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) for oil and gas companies under our coverage to decline by around 2 per cent quarter-on-quarter in first quarter 2021-22,” equity reseach firm HDFC Securities said in a note. The Gross Refining Margin (GRM) for Indian Oil (IOC) is set to decline to $1.4 per barrel in the June quarter, from $2.5 per barrel recorded in the fourth quarter last financial year, owing to negative cracks from naphtha, Fuel Oil and LPG offsetting increase in spreads of gasoline, ATF and gasoil. The second wave of COVID-19 has also impacted demand leading to a drop in refining throughput and planned shutdown undertaken by HPCL, apart from marketing volumes falling during the quarter. The average Brent price is up 13 per cent quarter-on-quarter to $68.4 per barrel in the first quarter and marketing margins are up around 10 per cent quarter-on-quarter owing to improvement in margins for diesel and petrol. In the upstream industry the revenue of Oil and Natural Gas Corporation (ONGC) and Oil India (OIL) are expected to improve by 11 per cent and 22 per cent owing to the jump in crude oil prices and higher gas volumes for OIL.