China May See An Unprecedented Drop In LNG Imports Next Year
China became the world’s largest importer of liquefied natural gas last year. But in a completely different energy market this year, China will likely cede the title to Japan, as Chinese imports of LNG are set for the largest-ever annual plunge since China started importing the super-chilled fuel in 2006. Weakening gas demand in China, increased domestic production of natural gas, policies to support coal as the “energy security” tool, and of course, the much higher spot LNG prices this year, have all combined to reduce Chinese purchases of LNG so far in 2022, consultants Wood Mackenzie said in an analysis this week. Wood Mackenzie expects China’s LNG imports to drop to 69 million tons (Mt) this year, which would be an unprecedented 14% annual decline—the steepest drop since China first imported LNG back in 2006. According to WoodMac, China’s gas demand fell by 5 percent year over year in the second quarter due to high gas import prices, economic slowdown with COVID-related lockdowns, warmer winter than usual, and support for ‘cleaner’ coal as Chinese authorities have been prioritizing energy security since the power outages last autumn. So far this year, China has stayed away from costly spot LNG cargoes as prices soared with the energy crisis last autumn and the Russian invasion of Ukraine, which sent Europe racing to buy LNG to replace as much Russian pipeline gas as soon as possible. The altered energy markets have upended Chinese LNG import policies, too. In 2021, China was the biggest buyer of LNG in the world, and the United States was the largest supplier of spot LNG volumes to China, the EIA said earlier this year. From February to April 2022, Chinese imports of LNG from the U.S. plunged by 95% compared to the same period in 2021. So far this year, the United States has sent the occasional LNG cargo to China, but most American exports have headed to Europe, which is paying more for spot LNG supply. Europe is pricing out Asia for spot deliveries and is turning to LNG, mostly from America, to cut its still heavy dependence on Russian gas. At the same time, China is buying more LNG from Russia, which the West doesn’t want to touch. High spot LNG prices and lackluster demand due to China’s zero-COVID lockdowns have significantly reduced Chinese appetite for spot U.S. LNG this year. Chinese firms have signed several long-term agreements for U.S. LNG, joining the trend of buyers returning to long-term deals to avoid costly spot LNG supply in a market where Europe is scrambling to secure volumes to avoid a winter of rationing and industry collapse. “Chinese buyers have minimised their exposure to costly spot LNG. Spot purchases were muted, and reportedly, some Chinese players resold cargoes into the European market,” Wood Mackenzie research director Miaoru Huang said. High spot prices and weaker demand from the power sector as coal is being prioritized are set to lead to the biggest Chinese LNG import decline on record. “In 2015 China’s LNG imports declined for the first time but by 1% only. Japan will move back to becoming the world’s largest LNG importer this year,” Huang said. Unwavering support for coal is also denting Chinese gas demand, the WoodMac analysts say. “China is unlikely to change its coal policy as the backstop of energy security in the near future. National policy is unlikely to encourage gas demand in a significant manner due to concerns over supply chain pressure and affordability,” Huang noted. China has been putting more emphasis on energy security since the autumn of 2021. Earlier this year, just after the Russian invasion of Ukraine, China said it would continue to maximize the use of coal in the coming years as it caters to its energy security, despite pledges to contribute to global efforts to reduce emissions.
NTPC And Indian Oil Sign Agreement For Powering IndianOil Refineries With Renewable Energy
NTPC and IndianOil signed an agreement for the formation of a joint venture company for meeting the power requirements of upcoming projects of IndianOil refineries on July 18, 2022, at New Delhi. Unified in the purpose of increasing the usage & capacity of renewable energy sources in the country, the state-run corporations teamed up setting-up renewable energy-based power plants for IndianOil Refineries. Shri. Gurdeep Singh, CMD, NTPC said, “The joint venture between the two energy majors for a common purpose is a classic example of teamwork and collaboration for others to follow”, Shri. Shrikant Madhav Vaidya, Chairman, IndianOil, said that “It is indeed a powerful statement, as two fossil fuel giants of the country – IndianOil & NTPC join hands for changing their path towards green energy”. He further added that “the two Maharatna PSUs can now leverage their capabilities to push forward the green growth agenda”. Going forward NTPC Green Energy Limited (NGEL), a wholly owned subsidiary of NTPC, will form the JV Company for supply of RE-RTC power to IndianOil. NGEL will be an umbrella company for consolidating NTPC’s total renewable energy businesses. IndianOil plans to meet the additional power requirement of its refineries using round-the-clock renewable energy to the tune of 650MW by Dec 2024 through this JV.
Explained: Why India has cut windfall tax on diesel, aviation fuel exports
With crude oil prices easing amid fears of a global recession, the Indian government has cut the recently imposed cesses and levies on diesel and aviation turbine fuel (ATF) and removed the cess on exports of petrol, effective Wednesday. What are the duty cuts? Additional excise duties equal to Rs 6 per litre on exports of petrol have been removed, while that on diesel exports has been cut to Rs 11 per litre from Rs 13 per litre earlier. Also, the cess by way of special additional excise duty (or windfall tax) on domestic crude being sold to domestic refineries at international parity prices has been cut to Rs 17,000 per tonne from Rs 23,250 per tonne, while the export duty on ATF has been lowered by Rs 2 to Rs 4 per litre. The government has also exempted petrol, diesel and ATF from levy of duties when exported from refinery units located in Special Economic Zones. What was the reason for the extra levies? With an aim to address the issue of fuel shortage in the country, the government had on July 1 imposed special additional excise duty on export of petrol and diesel. Cesses equal to Rs 6 per litre on petrol and Rs 13 per litre on diesel were imposed on their exports. The government also imposed a cess of Rs 23,250 per tonne (by way of special additional excise duty) or windfall tax on domestic crude being sold to domestic refineries at international parity prices. Earlier, Revenue Secretary Tarun Bajaj had said the increase in the duty will also be applicable to SEZs, but the export restriction will not be applicable. The Finance Ministry did not give a timeline for continuation of the levy but had said it will assess the situation every 15 days to review the impact of these duty changes. Starting June, fuel pumps across the country have been reporting fuel shortage, leading to their closure. The situation of fuel shortage at pumps peaked during the middle of June, resulting in the government issuing a statement on the matter. The statement assured of enough fuel available in the country and asked oil marketing companies to ensure their fuel pumps remain open. Global prices Global crude prices had risen and domestic crude producers were making windfall gains. Private oil marketing companies were exporting petrol and diesel to foreign countries like Australia for better realisation. The shortage of fuel at retail outlets was because oil marketing companies were not willing to sell the commodity at a loss since prices had not increased despite rising crude and depreciating rupee – these two factors had led to oil marketing companies losing Rs 20-25 per litre on diesel and Rs 10-15 per litre on petrol.