Japan To Step Up Investment In LNG
Japan will increase investments in the production of liquefied natural gas abroad to secure supply, the country’s industry minister said today. “Russia’s invasion of Ukraine has intensified competition for purchasing LNG, raising concerns about stable supply of the fuel for Japan,” Koichi Hagiuda told media, as quoted by Reuters. “The government needs to come to the forefront to secure LNG through cooperation with the private sector,” the top official added. Hagiuda also noted that global investment in liquefied natural gas production had declined amid efforts to decarbonize economies even though demand, especially in Asia, was on the increase. While its demand for LNG grows, however, Asia has witnessed increased competition for the commodity from Europe amid the energy crunch and uncertainty about future supplies amid the growing alienation between the EU and Russia over Ukraine. The latest developments pushed LNG prices even higher, dampening Asian demand for the superchilled fuel. Europe is now the top destination of record-high U.S. LNG exports, while price-sensitive developing economies in the Asia Pacific are steering clear of the spot market and switching to coal and oil products as the price of LNG is unsustainable for them. Japan, meanwhile, remains one of the top destinations for Russian liquefied natural gas. The country has stakes in two projects there, Sakhalin-1 and Sakhalin-2, and has said it had no intention of following Western supermajors and ending its presence in Russian energy. These projects “are essentially important for energy security because the projects allow Japan to procure supplies below the market price, especially amid current high energy prices,” Hagiuda said earlier this week, as quoted by Natural Gas Intelligence. Nikkei Asia reported this month that if Japan exits Sakhalin-2, it could end up paying some 33 percent more for LNG imports annually. Japan is the biggest LNG importer globally in terms of capacity, with over 227 million tons annually.
Russia Says Some Buyers Agreed To Rubles-For-Gas Payments
Some of Russia’s natural gas customers have agreed to pay in rubles for Russian gas, Deputy Prime Minister Alexander Novak said on Friday. Last month, Vladimir Putin said that “unfriendly” nations should pay in rubles for natural gas. Russia had set a March 31 deadline for the countries it considers “hostile”—including the United States, all EU member states, Switzerland, Canada, Norway, South Korea, Japan, and many others—to start paying in rubles for natural gas. The EU has rejected Putin’s demands for payments in rubles, while Russia did not immediately cut off the gas supply to Europe after April 1, partly because it is dependent on revenues from gas and partly because payments for gas delivered after April 1 are not due until later this month or early May. The Kremlin has signaled the gas-for-rubles demand is just the beginning of a switch to the Russian currency for Russian exports. “We expect the decision [to switch to rubles] from other importers,” Novak was quoted by Reuters as saying at an energy ministry in-house magazine. The Russian official, however, did not disclose which buyers had agreed to pay in rubles for gas. Armenia, for example, has already started paying in rubles for Russian gas, Armenian Economy Minister Vahan Kerobyan told Russian outlet RBC in an interview published on Friday. According to the Armenian minister, the pricing of the gas is being made in U.S. dollars, but the actual payment is now being made in Russian rubles. In the EU, Hungary—whose Prime Minister Viktor Orban has been in close ties with Putin for a decade—said last week that it was ready to pay in rubles for Russian natural gas. With comments from officials over the past week, Hungary has broken ranks with the EU, which has been seeking to present a unified front in the face of Putin’s demands for rubles for Russian gas.
Fuel demand to spike 5.5 per cent this fiscal
The demand for fuel in the country in FY2023 is estimated to spike by over 5.5 per cent despite high crude prices and inflationary pressures in the economy, according to estimates by the oil ministry. With crude prices ruling above the $100 per barrel, pressure is rising on the government to undertake another excise duty cut for petrol and diesel to rein in the runaway fuel prices and ease the burden on consumers. The projected increase in fuel demand is likely to provide some cushion for the government to achieve its budget targets despite the cut in excise duty, analysts said. The overall petroleum product consumption in the country is estimated to grow 5.5 per cent to 214,488 thousand metric tonnes in FY2023 compared with the revised estimates of the last fiscal. The pick-up in the economy and the forecast of a normal monsoon is likely to boost demand for fuel, analysts said. While the consumption of petrol is expected to grow by 7.8 per cent to 33,323 TMT, diesel consumption is expected to grow by about 4 per cent to 79,283 TMT during the current fiscal, the PPCA data showed. The government has collected Rs 3910 billion in excise duty, which was marginally lower than the revised estimate of Rs 3940 billion due to duty cuts before the assembly polls to tame inflation. For FY2023, the 2022 Budget has pegged excise collections at Rs 3350 billion. In November last year, the government reduced the excise duty on petrol by Rs 5 per litre and on diesel by Rs 10 per litre. Some states had also reduced VAT that further helped reduce petrol, diesel prices. The government earns Rs 27.90 per liter on petrol and Rs 21.80 per liter on diesel from excise duty. Sales dip in April India’s fuel sales fell in the first half of April as a record rise in prices in a short 16-day period dented demand, preliminary industry data showed on Saturday. Petrol sales fell almost 10 per cent in the first half of April when compared with the same period in the preceding month, while diesel demand slid 15.6 per cent. Cooking gas LPG, which had consistently shown growth even during the pandemic period, saw a 1.7 per cent month-on-month fall in consumption between April 1 and 15. With benchmark Brent prices over $111 per barrel and the Russia-Ukraine conflict continuing to rise geo-political tensions, Opec has estimated that the oil demand to be muted in 2022 due to slowdown in economic growth and new variant of coronavirus impacting China. The India Meteorological Department has forecast a fourth successive year of normal monsoon, which is expected to mitigate some inflationary pressure, especially being witnessed in certain food commodities. In March, the retail inflation rate climbed to nearly 7 per cent triggering fears of an imminent rate hike by the RBI in its next MPC meeting. The present inflationary pressure has made this year’s monsoon season crucial for propelling growth not just for the agriculture sector but for the whole of India Inc. Aditi Nayar, Chief Economist, ICRA said: “The encouraging forecast of a normal monsoon in 2022 coupled with healthy reservoir levels in all the regions augur well for a timely onset of kharif sowing. However, a good monsoon may not be able to douse the prices of those items that are currently pushing up food inflation in India such as edible oils.”
Oil ministry freezes gas allocation, prices of CNG, PNG spike
The Oil Ministry has stopped making fresh allocation of natural gas from domestic fields to the city gas sector, threatening the viability of Rs 2000 billion investment planned in the sector besides leading to a hike in CNG and piped cooking gas prices to record levels, sources said. Despite a decision of the Union Cabinet to give 100 per cent gas supply under ‘no cut’ priority to the city gas distribution (CGD) sector, current supplies have been maintained at March 2021 demand level. Besides, the process of allocating gas on a six-monthly average drawl also is punishing the CGD entities driving growth. CGD operators have been requesting the ministry to maintain the gas supply to the sector under no cut category with the last two months’ average to ensure the demand for both CNG and piped natural gas (PNG) for homes is fully met but the ministry has not made any fresh allocation for over a year now, three sources aware of the matter said. Besides the shortfall in the allocation, the prices of APM gas for CNG and PNG have been revised from $2.90 per million British thermal unit to $6.10, an increase of 110 per cent. While the demand has grown at a rapid pace in existing cities with CNG networks and supplies starting in newer areas, lack of allocation from domestic fields meant that operators bought imported liquefied natural gas (LNG) at prices that were at least six times the domestic rate. Result – CNG prices have risen by 60 per cent or by over Rs 28 per kg in one year and PNG by over a third. Sources said this has put a question mark on the economic viability of the entire CGD sector, putting at risk the planned Rs 2000 billion investment in expansion into newer cities as high prices bring the CNG at almost par with diesel and petrol, eroding the incentive for users to convert vehicles to the cleaner fuel.
Petroleum Minister Urges States To Cut VAT To Bring Down Fuel Prices
Hardeep Singh Puri on Thursday said the Union government has been appealing to states to cut VAT on petrol and diesel for giving relief to consumers Amid outcry over high fuel prices, Union Petroleum and Natural Gas Minister Hardeep Singh Puri on Thursday said the Union government has been appealing to states to cut VAT on petrol and diesel for giving relief to consumers. Asked by reporters about the rising prices of petrol and diesel, the minister said, “Our effort is to keep the prices under control, therefore the Centre slashed excise duty on petrol and diesel last year and asked the state government to do the same.