India says rectifying oil demand, supply imbalance crucial for recovery
India said Oct. 20 that surging oil prices could potentially create hurdles for a post-pandemic economic recovery, and urged the world’s leading producers to take steps to potentially rectify the current supply and demand imbalances. Speaking at the India Energy Forum by CERAWeek, Indian Petroleum Minister Hardeep Singh Puri said the steep rise in prices was a wake-up call that investments need to flow into the oil and gas sector consistently. “I am sure our friends in OPEC+ will take into account the sentiment voiced in forums like these. We are trying to ensure economic activity, but if high prices undermine that economic activity then economic activity will slow down and demand for oil and gas will also go down,” Puri told the India Energy Forum. Saudi Arabian Energy Minister Prince Abdulaziz bin Salman told the forum that OPEC and its allies do not see any crude oil shortages in the market, dismissing calls from consuming countries to increase supplies to tame rising prices. Dated Brent prices have more than doubled in the last year, with S&P Global Platts assessing the benchmark at $85.03/b on Oct. 19. OPEC+ members are currently adhering to an agreement to increase crude production by 400,000 b/d every month, but key customers, including India, the US and Japan, have complained that the alliance is still holding back too much supply. “The energy markets today are characterized by imbalances. We need to accept that the world needs reliable supply of oil and gas until we can build new energy infrastructure,” Puri said. India’s 2021 oil demand is forecast to grow 295,000 b/d to 4.9 million b/d, which would still be well below 2019 levels. The country is expected to reach a prepandemic level of oil demand in 2022, according to S&P Global Platts Analytics. Adding to the pain Puri said India’s crude import bill, which accounts for about 20% of the country’s overall import bill, had risen to $24 billion in the quarter ended June from $8.8 billion in the same quarter a year earlier. “Those facts speak for themselves. Due to this extreme volatility, prices of fuels, such as petrol and diesel, have rallied to some of the highest levels in the country,” he added. Domestic gasoline consumption had sharply bounced back to a level higher than even prepandemic levels while diesel was also witnessing robust growth, Puri said. “If prices do not remain predictable, stable and affordable, the economic recovery could prove to be fragile.” Platts Analytics expects India’s overall oil demand to pick up after the monsoon season, with the upcoming festive season and an improving economy supporting consumption and pushing up fourth-quarter demand growth by 575,000 b/d quarter on quarter to 5.3 million b/d. He said one of the priorities of the government would be to find ways to boost domestic production of oil and gas. “We are taking action to increase the area under exploration.” Energy transition focus India’s per-capita energy consumption was about one-third the global average, creating the need to invest in building a wide variety of fuels to meet the anticipated growth in consumption, Puri said. “India is focused on moving towards cleaner energy and developing a gas-based economy, while also achieving the 450 GW renewable energy target by 2030. There will be great dependence on domestic resources, such as biofuels, and moving into energy products, such as green hydrogen,” Puri said. New Delhi in June brought forward its target to achieve 20% ethanol blending with gasoline to 2025 from the previous target year of 2030. India’s policy move to achieve a more-than-three-fold growth in ethanol blending rate in gasoline in less than five years looks to be a step in the right direction, but to many market experts and industry leaders, it sounds like an over-ambitious journey. “Biofuels will provide opportunities which would be a win-win situation for all our partners. We are reasonably confident of achieving the target,” Puri said. In addition, the government would be stepping up efforts to move toward Prime Minister Narendra Modi’s vision to become a gas-based economy, under which the country would aim to raise the share of gas in the overall energy mix to 15% by 2030 from the current level of 6%. An estimated investment of $60 billion had been lined up in developing gas infrastructure, which include pipelines, city gas distribution and LNG regasification terminals, Puri said. “Accelerating the gas initiative would also mean initiatives to boost our city gas distribution network in order to expand the use of cooking fuels, as well as initiatives such as LNG trucking,” he added.
Reliance’s oil-to-chemicals business seems to be in the right spot to leverage China’s climate crackdown
Indian oil-to-telecom conglomerate Reliance Industries (RIL) is expected to announce positive business growth especially in its oil-to-chemicals and telecom businesses for the July-September quarter. Analysts expect RIL’s oil-to-chemicals business margins to lift in the coming quarters if China sticks to its climate change goals leading to cut down in their exports of petroleum products. A report by Jefferies said it has a positive stance on RIL as its analysts “see potential for 10-12% upgrade to consensus oil-to-chemicals earnings before interest, taxes, depreciation, and amortisation (EBITDA) estimate for FY22 earnings if China sticks to its climate goals till the Winter Olympics in February 2022.” China is currently struggling with a severe shortage of electricity, which has left millions of homes and businesses struggling with power cuts including chemical manufacturing companies. “With over 50% of its [RIL’s] refinery slate in diesel, RIL’s refining profitability has improved sharply. If these elevated margins sustain till the Winter Olympics in February, RIL’s refining profitability could improve by $0.8 billion over the second half of FY22 earnings,” said a report by Jefferies. Currently, the company has four verticals — oil-to-chemicals (O2C) business that houses its oil refineries, petrochemical plants and fuel retailing business, digital services that comprises telecom arm Jio, retail including e-commerce and new energy.
Modi meets global oil executives, urges to boost local production
India wants to increase domestic oil and gas production after it has undertaken reforms in the sector to attract investment. This comes at a time when the country’s crude oil import bill has zoomed over 3x, compared with 2020-21 when oil prices breached $85 per barrel. Prime Minister Narendra Modi on Wednesday met around 30 senior executives from global oil majors and urged them to boost India’s local production. An official statement said the interaction was attended by industry leaders, including Igor Ivanovich Sechin, chairman and chief executive officer (CEO), Rosneft, Amin H Nasser, president and CEO, Saudi Aramco, Bernard Looney, CEO, BP, Olivier Le Peuch, CEO, Schlumberger, Mukesh Ambani, chairman and managing director, Reliance Industries, and Anil Agarwal, chairman, Vedanta, among others. Modi also talked about the current and potential gas infrastructure development, including pipelines, city gas distribution, and liquefied natural gas regasification terminals India wants to increase domestic oil and gas production after it has undertaken reforms in the sector to attract investment. This comes at a time when the country’s crude oil import bill has zoomed over 3x, compared with 2020-21 when oil prices breached $85 per barrel. Prime Minister Narendra Modi on Wednesday met around 30 senior executives from global oil majors and urged them to boost India’s local production. An official statement said the interaction was attended by industry leaders, including Igor Ivanovich Sechin, chairman and chief executive officer (CEO), Rosneft, Amin H Nasser, president and CEO, Saudi Aramco, Bernard Looney, CEO, BP, Olivier Le Peuch, CEO, Schlumberger, Mukesh Ambani, chairman and managing director, Reliance Industries, and Anil Agarwal, chairman, Vedanta, among others. Daniel Yergin, vice-chairman, IHS Markit, was among the global oil industry experts present at the interaction. Modi listed the upstream oil and gas reforms undertaken in the last seven years. An official statement said these included ones in exploration and licensing policy, gas marketing, policies on coalbed methane, coal gasification, and the recent reform in the Indian Gas Exchange. He added that such reforms would continue with the goal to make India ‘aatmanirbhar’ in the oil and gas sector. Talking about the oil sector, he said the focus has shifted from ‘revenue’ to ‘production’ maximisation. He also spoke about the need to enhance storage facilities for crude oil. He further spoke about the rapidly growing natural gas demand in the country.
India takes a strong stand with OPEC on rising crude prices
“OPEC+ should realise that this is not the right approach, they must step up production. If the demand is going up and you are not increasing production, you are trying to create a gap,” oil secretary Tarun Kapoor said. India is forming a group that brings together state-run and private refiners to seek better crude import deals, oil secretary Tarun Kapoor said on Tuesday, as the country grapples with soaring oil prices. The world’s third largest oil importer and consumer, India depends on imports for about 85% of its crude and buys most of it from Middle East producers. Initially the group of refiners will meet once in a fortnight and exchange ideas on crude purchases. “The companies can form joint strategies and they can even go for joint negotiations wherever possible,” Kapoor, the top bureaucrat in the petroleum ministry, told Reuters. Indian state refiners already jointly negotiate some crude oil purchases. To date the one effort at a joint negotiation bringing together not only state-run but private refiners resulted in a deal that secured supply of Iranian oil at a deep discount. With local gasoline and gasoil prices rising to a record high amid India’s worst power crisis in years, the nation wants to redouble its efforts to buy wisely. India’s trade deficit in September surged to a record $22.6 billion, its highest in at least 14 years, driven by expensive imports. Kapoor said the Organization of the Petroleum Exporting Countries and its allies, together known as OPEC+, should raise production to bring down global oil prices. “OPEC+ should realise that this is not the right approach, they must step up production. If the demand is going up and you are not increasing production, you are trying to create a gap,” he said. “Due to this, prices are going up and that’s not fair”. OPEC+ producers recently agreed to stick to a plan to increase November output by 400,000 barrels per day (bpd) as it looks to phase out output curbs of 5.8 million bpd over time. Kapoor said rising oil prices would prompt oil consumers to “seriously start thinking of shifting to other forms or curtail their demand for OPEC oil somehow”. “These kind of prices are not sustainable.” India is already reducing the share of OPEC oil in its crude mix as refiners, that have invested billions of dollars in refinery upgrades, are tapping cheaper oil. High oil prices are spurring investment in upstream activities, that could lead to higher production from regions other than the Gulf, Kapoor noted.