Petrol, diesel prices cut again as global oil rates soften
A day after keeping petrol and diesel prices unchanged, the oil marketing companies (OMC) on Tuesday reduced fuel prices further in line with the downward movement of global oil and product prices. Accordingly, the pump price of petrol and diesel was cut 15 paise per litre to Rs 101.49 a litre and Rs 88.92 a litre respectively in Delhi. Across the country as well fuel prices were cut between 10-20 paise per litre but its retail rate varied depending on the level of local taxes in states. Petrol prices in Mumbai and Kolkata, are now at Rs 107.53 and Rs 101.82 per litre respectively while in Chennai, petrol is priced at Rs 99.20. In the Tamil Nadu capital, petrol price fell by almost Rs 3 per litre on August 14 after the state government cut VAT on the fuel. Similarly, diesel prices in Mumbai, Chennai and Kolkata are now at Rs 96.48, Rs 93.52 and Rs 91.98 per litre, respectively. This cut in fuel prices had come amid declining global crude oil prices. The October contract of Brent crude oil on the Intercontinental Exchange (ICE) was trading at $65.18. The pump prices of auto fuels have been static since July 18. The long price pause for auto fuels came after fuel prices increased for 41 days in the current financial year. The 41 increases have taken up petrol prices by Rs 11.44 per litre in Delhi. Similarly, diesel rates have increased by Rs 8.74 per litre in the national capital.
China’s Sinopec adds new tanks at east China gas receiving terminal
China’s Sinopec Corp said on Tuesday it has completed adding two new tanks for liquefied natural gas at its receiving terminal in the eastern province of Shandong, two months ahead of the winter heating season starting mid-October. The tanks, each sized 160,000 cubic meters, were ready for use this month since construction began in November of 2018, bringing the terminal’s annual handling capacity to 7 million tonnes, or equivalent to 9.6 billion cubic meters a year, Sinopec said. This would be 17 per cent more than its current annual capacity of 6 million tonnes. The state oil and gas major also said it is aiming to double the Qingdao terminal’s capacity to 14 million tonnes annually by end of 2023, making it the largest in the country by then.
India’s Oil & Gas sector has acquired good foundations, but difficult challenges lie ahead
India’s growth story has been and will remain energy hungry. This is despite the substantial energy efficiency gains that the country has witnessed. Trends in the energy sector on commodity availability and prices are of enormous consequence from energy security and national security standpoints. Sustainable development is the top order of business for countries and organisations worldwide. India, on its part, has been making concerted efforts towards energy transition and natural resources conservation by steadily adopting cleaner and greener energy choices. Seen from the contexts of growth and sustainability, the energy transition holds great implications for India. Much has been written on India’s continued need for burning coal for power, even as the renewable energy capacity gets built up. That remains a clear reality irrespective of the global climate dynamics and associated politics. The picture on oil and gas is less clear and considerably trickier, given the global dynamics of the sector and India’s import dependence. India’s oil and gas demand has been growing steadily over the years, and the trend is likely to continue. According to the BP Energy Outlook 2020, even in “Rapid Transition scenario” India’s oil demand is expected to remain around 5.2 million barrels per day, while gas demand could grow ~6X to 332 billion cubic meters by 2050. That makes India vulnerable to energy shocks more than other major countries given the large imports: ~85 per cent of oil and ~ 50 per cent of natural gas. There are good reasons to worry. Global energy commodity prices have been hardening in recent months. With the fall in global oil and gas investments due to environmental concerns (and related activism) there is a strong possibility of further increase in prices. If this happens, then it will push up fuel prices and affect the economy at large. Even the present petrol prices having crossed Rs. 100 per litre in several parts of India is causing significant angst and political challenges. If global investments in new exploration and production remain muted and that indeed leads to price shocks, India really needs to get its act right to secure her own growing needs and security interests. Securing new investments in domestic Upstream Oil and Gas In India, the upstream oil and gas sector is largely dominated by two public sector entities and two private sector majors. In the past, the country has not been providing a welcoming environment for Exploration and Production (E&P) majors, which resulted in the exit of several key multinationals operating in this space. However, in the past six years, through sustained efforts of the Union Petroleum Ministry, India’s image on business friendliness has improved substantially. That said, it has not led to new overseas majors investing in India, especially in the present investment environment in the E&P sector globally. Given India’s realities on increasing consumption and import dependence, it is essential to think radically for securing new investments in domestic upstream. The following need to be explored on priority: – Free up oil and gas pricing totally including in the residual parts that remain price controlled on natural gas. – Liberalise the fiscal regime by removing royalties on production from new finds. The focus must be on increasing production rather than enhancing the Government’s direct fiscal stake. The indirect benefits to the government and to the economy will far outweigh the fall in the direct gains. – Bring the sector fully in GST ambit (in particular natural gas needs to be brought on priority) to prevent break in the GST chain and the corresponding inefficiencies that this causes. – Improve the data regime for exploration including through additional surveys commissioned by the Government and also attracting risk capital and skills into the exploration segment. – Bring a suitable Production Linked Incentive (PLI) scheme for the oil and gas sector. The current PLI scheme of the Central government, while suited for manufacturing, it is not so for E&P. – Aggressively market offerings to target new capital for new finds, production enhancement from mature fields and monetisation of unmonetised discoveries (with a full package on offer on above lines). – Bring institutional financing support (like reserve-based lending) for E&P companies especially the new / small entrants and also making processes simpler (e.g., digitally enabled single window clearance with defined timelines) – Ensure easy extension of tenure of E&P contracts without onerous terms (instead incentivising them for additional production during the extended life). – Revisit the PSU operating structures to make them nimble and efficient as asset managers and induct private sector partners to enhance production. This would be to mutual benefit. Indeed, there is a need to throw open the sector totally to new capital, new ideas and indeed the new India. Simultaneously, the E&P companies need to be mandated to decarbonise their production methods as much as possible. This will partially deflect the concerns on environmental impacts of oil and gas production. Downstream Oil & Gas: Decarbonising and digitalising for a sustainable future The anticipated growth in oil and gas consumption in India provides a long runway to its downstream companies to prepare for the eventual decarbonisation. However, through this period, given the heightened sensitivities on environment and climate, these companies could face sustained pressure from stakeholders. Making a simultaneous move towards decarbonisation and building in circular economy principles at the core of their approach is well advised. The refining slate should be designed or modified for maximum flexibility to make inter fuel choices without significant challenges or disruptions. The strategy should provide for integrated flexible facilities to move seamlessly towards oil to chemicals and petrochemicals. Fuel retailers should have a process in place, with decarbonisation and circular economy as core design principles. The R&D division of a major Indian PSU has done some excellent work on producing ethanol from refinery fuels, converting used plastics to bitumen, etc. Besides mandating this practice, refineries should also start moving to green fuels including renewable energy and green hydrogen over the next decade, while further scaling the blending
Gas pipelines: Cheaper energy basket in offing
With the country aiming to increase the share of gas in its energy basket to 15% by 2030 from the current level of 6%, 15,369 km of pipelines are under various stages of construction at present. Taken together with the 17,126 km of existing pipelines, these would help create a basic national gas grid in the country. India’s annual gas consumption is expected to increase by 25 billion cubic metres (bcm) in the 2020-2024 period, which translates into a 9% annual average growth rate, the International Energy Agency (IEA) said in a recent report. Though gas is cheaper than other fossil fuels, gas pipelines require high capex and longer gestation periods. The order of magnitude cost of a trunk gas pipeline can be placed in the range of Rs 60-70 million/km, says Gaurav Moda, energy leader at EY India. “Gas pipeline projects take time to build up to their economic operation capacities and this period could be five years or even more,” he adds. The 3,546-km-long Jagdishpur-Haldia-Bokaro-Dhamra natural gas pipeline, being built by GAIL Ltd as part of the Pradhan Mantri Urja Ganga project, is the largest pipeline project being executed. Aimed at supplying gas to eastern India, it is estimated to cost Rs 129.40 billion. The project has been facing delays, mainly due to issues relating to handing over of land for right of use (Rout) acquisition, farmer agitations, and clearances from forest and revenue departments, besides fixation of compensation rates by state governments. Debases Mishap, leader of energy, resources and industrial products at Deloitte India tells FE a “centralised team to coordinate with the states on Rout issues will go a long way” in expediting the pace of pipeline construction. “Further, the petroleum ministry and NHAI can join hands to create gas pipeline corridors, which would expedite implementation,” he adds. The Urea Gang network would be connected with a spur line to the Dhamra-Haldia and the Barauni-Guwahati line. Subsequently, this network would be connected to the 1,656-km north east gas grid pipeline project being implemented by Indradhanush Gas Grid Ltd. The estimated cost of the north east grid project is Rs 92.65 billion. Pipeline laying work for the Guwahati-Numaligarh-Gohpur-Itanagar section of this project commenced in December, 2020 and it is scheduled to be ready by March, 2024. Other major gas pipelines being built include the 1,755-km Mumbai-Nagpur-Jharsuguda pipeline across Maharashtra, Madhya Pradesh, Chhattisgarh and Odisha, the 391-km Kakinada-Vizag-Srikakulam line and the 525-km Kakinada-Vijayawada-Nellore line in Andhra Pradesh, the 741-km Jaigarh-Mangalore line across Maharashtra, Goa and Karnataka, the 317-km Kanai Chhata-Shrirampur line in West Bengal and the 690-km Srikakulam-Angul line across Andhra Pradesh and Odisha. At the same time, experts point out that gas demand in the country has been weaker than expected. “We don’t have significant gas being consumed in the power sector and it was only in 2018-2019 that multiple city gas distribution bids were conducted, creating the need to connect different cities with gas pipelines,” Mishra says. Natural gas is seen as a ‘bridge’ or ‘transition’ fuel as it is cleaner than traditional fuel sources. However, owing to its carbon-intensive nature, natural gas would come under the scanner if nations want to pursue ‘deep decarbonisation’ goals, rendering gas pipeline assets stranded. If the country wants to stay on the two-degrees-Celsius pathway — which would limit global warming to 2 degrees Celsius by 2100 — the optimal share of natural gas in the Indian energy basket by 2050 is estimated at 18%. “This (18% share) would ensure that India can reap the benefits of low natural gas prices without locking itself down with potentially stranded assets and staying on low carbon pathway,” the Council on Energy, Environment and Water said recently.
FM Sitharaman announces Rs 6000 billion asset monetisation pipeline
Finance Minister Nirmala Sitharaman on Monday announced a Rs 6000 billion National Monetisation Pipeline (NMP) that will look to unlock value in infrastructure assets across sectors ranging from power to road and railways. She also said the asset monetisation does not involve selling of land and it is about monetising brownfield assets. Projects have been identified across sectors, with roads, railways and power being the top segments. “NMP estimates aggregate monetisation potential of Rs 6000 billion through core assets of central government over the four-year period from FY 2022 to FY 2025,” she said. “Ownership of assets will remain with the government and there will be a mandatory hand-back.” Asset monetisation will unlock resources and lead to value unlocking, she said. Union Budget 2021-22 had identified monetisation of operating public infrastructure assets as a key means for sustainable infrastructure financing. Towards this, the Budget provided for preparation of a ‘National Monetisation Pipeline’ of potential brownfield infrastructure assets. NITI Aayog in consultation with infra line ministries has prepared the report on NMP. The aggregate asset pipeline under NMP over the four-year period is indicatively valued at Rs 6000 billion. The estimated value corresponds to 14 per cent of the proposed outlay for Centre under the National Infrastructure Pipeline (Rs 43000 billion). The end objective of this initiative is to enable “infrastructure creation through monetisation” wherein the public and private sector collaborate, each excelling in their core areas of competence, so as to deliver socio-economic growth and quality of life to the country’s citizens, she added.
Why are oil & gas companies exploring green energy options?
State-owned Oil and Natural Gas Corporation is considering inorganic investments to reach a target of 10 GW of installed renewable energy capacity by 2040. Other oil and gas PSUs are also investing in renewable energy. Why are oil and gas companies investing in renewable energy? Global moves to reduce carbon emissions to slow down climate change have led to oil and gas companies around the world investing in renewable energy to reduce their carbon footprint and diversify offerings. State-owned upstream and downstream oil and gas companies are also taking part in energy investments to help achieve the government’s ambitious renewable energy targets. India is targeting 450 GW of installed renewable energy capacity by 2030 up from about 100 GW currently. What are some of the renewable energy investments by Indian companies? India’s largest upstream oil and gas company, ONGC, is targeting 10 GW of renewable energy capacity by 2040, up from 178MW of renewable energy capacity at the end of FY20. ONGC Chairman Subhash Kumar recently said the company was looking at acquisitions to help achieve its renewable energy targets. India’s top natural gas company, GAIL, is also looking at acquisitions to augment its 130 MW renewable energy portfolio. The company is aiming at reaching 1 GW of renewable capacity within 3-4 years. Downstream players have also started investing in renewable energy and electric charging infrastructure, with an eye on a potential shift towards electric mobility. Indian Oil Corporation Ltd, India’s largest refiner, had a total installed renewable energy capacity of about 233 MW at the end of FY21. It has also set up 257 electric charging and battery swapping stations at 29 retail fuel outlets. Sources at IOCL said the results of its battery swapping stations were positive and that the company was looking at a potential joint venture (JV) with Sun Mobility to provide battery swapping on a larger scale in the future. IOC is also setting up the first green hydrogen plant in India in Mathura. IndianOil also has a JV with Israel-based battery technology startup Phinergy to develop aluminium-air technology based battery systems for electric vehicles and stationary storage. Hindustan Petroleum Corporation Ltd has tied up with Tata Power to set up electric vehicle charging at various retail points around the country. It has also set up about 133 MW of renewable energy capacity, including about 100 MW of wind energy capacity. Bharat Petroleum Corporation Ltd had installed renewable energy capacity of 43 MW at the end of FY20.
Oil India can’t be judge in its own cause, will reconstitute panel: SC on Baghjan oil well tragedy
The Supreme Court on Monday said that it will re-constitute a committee set up to suggest remedial actions after assessing the environmental damage caused by the PSU following a major fire in Assam’s Baghjan oil well saying “Oil India cannot be a judge in its own cause”. A bench of Justices DY Chandrachud and M R Shah asked law officers — K M Nataraj and Aman Lekhi — to go through the suggestions given by petitioners on the names of experts and it will re-constitute a committee. “We will re-constitute the committee and it will be headed by Justice B P Katakey. Oil India cannot be judge in its own cause. We will delete the names of representatives of Oil India and instead incorporate some experts, who will be associated with the work of assessing the damage and providing remedial compensation on account of the loss which has been caused to the environment, including the loss of biodiversity as a result of the blowout which took place at the oil field of OIL,” the bench said. Well number 5 at Baghjan in Tinsukia district, had been spewing gas uncontrollably and it caught fire on June 9 last year, killing two of OIL’s fire fighters on the site. The top court said that on August 26, the court will take up the matter as first item and pass the orders with regard to the same. Senior advocate Siddharth Mitra, appearing for petitioner activist Bonani Kakkar, said that four out of six experts who have been suggested are well conversant with the subject matter, having been associated with the work of the Committee constituted by the National Green Tribunal (NGT). The committee is headed by Justice B P Katakey. During the hearing, the bench told Additional Solicitor General Aman Lekhi that how can a representative from Oil India be in a panel to assess the damage, when the damage is alleged to have been caused by the Public Sector Undertaking (PSU). “Suppose there is a chemical industry responsible for a gas leak or any other incident. Now, when one has to assess the damage caused to the environment or to biodiversity, can that company be part of the committee. Of course it can be heard by the committee but cannot be part of that committee,” the bench told Lekhi. Mitra said that no funds have been given for the restoration of the environment ever since the incident took place. “It is undisputed that people have been given compensation to those who got displaced but as far as environment and biodiversity damage is concerned, not a single penny has been given,” he said.
Vedanta makes gas discovery in Gujarat
Billionaire Anil Agarwal’s Vedanta on Monday said it has made a natural gas discovery in a block in Gujarat that it had won in the open acreage licensing policy (OALP) round. In a regulatory filing, the firm said it has “notified the DGH and Ministry of Petroleum and Natural Gas on August 23, 2021, of a gas and condensate discovery (named ‘Jaya’) in its exploratory well Jaya1 (earlier Jambusar-Updip-1), drilled in OALP Block CB-ONHP/2017/2 in Bharuch District of Gujarat.” The approval of the management committee has also been sought. The block was awarded to the company in October 2018 and is one of the 41 areas awarded to it in OALP-I round of bidding. The company holds 100 per cent participating interest in the block. Jaya-1 (earlier Jambusar-Updip-1) is the third well drilled in Gujarat and the second hydrocarbon discovery notified by the company under the OALP regime. “Further evaluation will be carried out to assess potential commerciality of the discovery,” it said.