Russia’s Oil Exports Still Strong Despite Sanctions
Russia’s crude oil producers managed to export 7.32 million barrels per day of crude oil and crude oil products in February, Kpler data showed, indicating to some that the ban on Russian seaborne crude shipments into Europe and the price cap mechanism have done little to curb the flow of Russia’s crude. The 7.32 million barrels per day of crude oil exported from Russia in February is largely on par with that exported in December, shortly after the crude sanctions went into effect. But that comparison is based on a December that saw Russia’s exports lower due to weather-related disruptions, pushing some shipments into January. Russia’s January petroleum exports increased as a result, and now February’s exports have fallen back to December levels. And once again, inclement weather has restricted the amount of crude Russia has been able to export this month, with the port of Novorossiysk “repeatedly shut down this month.” Kpler crude analyst Viktor Katona told Bloomberg. For March, Russia has stated its intention to cut its crude oil production by 500,000 barrels per day, and India is facing increased scrutiny from financiers to prove that its crude oil purchased from Russia was purchased below the $60 price cap, Bloomberg noted. Earlier this week, new calculations from the Institute of International Finance, Columbia University, and the University of California determined that Russia took in more money in the weeks that followed the oil price cap than the cap allowed. On average, the calculations show that Russia sold its crude oil for about $74 in the four weeks following the December 5 price cap. The authors of the published analysis called for “further investigation of these transactions and reinforces the need for stepped-up enforcement.”
GAIL (India) follows Reliance: Plans to replace naphtha with ethane imported from the US
Following in the footsteps of Reliance Industries Ltd (RIL), GAIL India Ltd (GAIL), plans to import ethane from the United States to replace natural gas and naphtha as feedstock for its petrochemical facilities. Moving in this direction, GAIL and the Central Board of Direct Taxes (CBDT) entered into a landmark advance pricing agreement (ArA) for determining the transfer pricing margin payable on its long-term LNG sourcing contract from the USA for five years. Now, GAIL (India) seeks to import ethane from countries that have surplus availability, in an attempt to diversify the feedstock and save revenue outgo on regular basis. The public sector gas supplier aims to develop export terminal infrastructure through waterborne transportation to India and then transport it further through its own pipeline systems to demand centers. Reports said that GAIL (India) has already invited quotations for a 20-year contract period beginning mid-2026 for which the company is all set to hire very large ethane carriers (VLECs) to import ethane from the United States. The VLEC, the very large vessel, has the capacity to carry between 80,000 – 99,000 cubic meters of ethane and is intended to pick up cargo from the United States ports of Marcus Hook, Nederland, Morgan’s Point, or Beaumont and to deliver it on Dahej, and Hazira in Gujarat or Dabhol in Maharashtra. Also, GAIL (India) is aiming to build another unit at Usar in Maharashtra in addition to its petrochemical facility at Pata, close to Kanpur and Uttar Pradesh. After the government shifted gas supplies from the plant to municipal gas suppliers, GAIL India had to reduce its transport through Pata. This had an effect on its profitability and prompted the company to move towards ethane as a feedstock supplement. Experience at Reliance Industries Mukesh Ambani-led Reliance Industries Ltd (RIL) is reported to have saved around US$450 million annually by switching to ethane from propane and naphtha used in the manufacturing of ethylene. The company began importing US feedstock in 2017 after announcing ambitions to produce ethane in 2014. According to reports, RIL used six VLECs to transport 1.6 million tonnes of ethane which the company imports every year. At RIL, ethane decreased the company’s use of naphtha by around 5,000 tonnes and also allowed the company to export additional feedstock (naphtha). Annually, RIL uses 2.5 million tonnes of naphtha as feedstock in petrochemical crackers. In fact, ethane production in North America is projected to increase sustainably and significantly due to the shale gas revolution which eventually produces an abundance of liquefied natural gas (LNG) and liquefied petroleum gas (LPG). With steam crackers, ethane is largely used as a petrochemical feedstock to make ethylene. Beginning with ethylene, a variety of articles such as packaging films, wire coatings, squeeze bottles, plastics, and synthetic rubber can be products. Reliance abundantly uses ethane at its crackers in Nagothane in Maharashtra, Dahej, and Hazira in Gujarat.
Govt bans 25-year-old oil tankers, bulk carriers, and other ships from Indian waters
The government has decided to ban 25-year-old oil tankers, bulk carriers, and general cargo vessels, both Indian registered and foreign flagged, from calling Indian ports to load and unload cargo as it looks to encourage a younger fleet to improve safety, meet global rules on ship emissions and protect the marine environment from pollution during mishaps. The age restriction, though, will only be applicable to Indian and foreign flag vessels that require a license from the Directorate General of Shipping (D G Shipping) under Section 406 and 407 of the Merchant Shipping Act, 1958. Further, the age limit will also be applicable to vessels granted exemption from licensing requirements under Section 406 and 407 of the M S Act, commonly referred to as Cabotage rules. Section 406 prescribes that “no India ship and no other ship chartered by a citizen of India or a company or a cooperative society shall be taken to sea from a port or place within or outside India except under a license granted by the Director General under this section”. According to Section 407 of the M S Act, “No ship other than an Indian ship or a ship chartered by a citizen of India or a company or a cooperative society shall engage in the coasting trade of India except under a license granted by the Director General under this section”. In the case of gas/chemical carriers, fully cellular container vessels, cement carriers, harbour tugs (those operating within ports), specialised vessels such as diving support, geo-technical, pipe laying, seismic survey, well simulation and accommodation barge, the age limit for operations has been set at 30 years. For dredgers, the maximum age limit for operations will be 40 years. For offshore fleet, anchor handling tugs and tugs involved in long tow, non-self-propelled ocean-going cargo carrying barges and any other vessels, the age cap will be 25 years, according to a 24 February order written by the Director General of Shipping (D G Shipping) seen by ET Infra. Offshore fleets equipped with Dynamic Positioning 2 or DP 2 that are above 25 years will be permitted to operate up to 30 years. The age norms will not be applicable to passenger vessels, FSRU, FPSO, and Drilling/Production units certified under MODU/ISPS Code. All ‘Existing Vessels’ regardless of the age, affected by the maximum age prescribed, will be allowed to operate up to three years from the date of the order. An ‘Existing Vessel’ is defined as a vessel already registered under the Indian flag on or before the date of issuance of the order, and a vessel for which, a Memorandum of Agreement to acquire had been entered into and at least l0 percent of the purchase price of the vessel is deposited by the buyer on or before the date of the order. Vessels acquired/to be acquired under the Indian Controlled Tonnage regime would also be treated on par with Indian flag vessels. Foreign flagged vessels requiring licence under Section 406 and 407 of the M S Act and already engaged in charter on the day of the order, will also be allowed to operate up to three years from the date of the order or until the charter period, whichever is earlier. Second hand ships, across categories, of 20 years and above cannot be acquired by Indian entities and registered under the Indian flag. The general trading license of ships will be withdrawn when they reach the prescribed age limit for operations. The D G Shipping has also stipulated various compliance checks on quality and safety of new ships, second hand purchases and existing vessels based on age slabs. The age and other qualitative parameters will also apply to foreign flag vessels requiring licence under Section 406 and 407 of M S Act for operating within the Exclusive Economic Zone of India whether chartered by an Indian entity or otherwise. In such cases, the maximum age of the vessel shall be calculated on the date of commencement of service or carriage of cargo. The age of the vessel will be computed from the ‘Date of Delivery’ as mentioned in the Cargo Ship Safety Construction Certificate or any other Statutory Certificate issued under the International Maritime Organisation(IMO) Convention/Code. “Quality tonnage is paramount for safe and secure expansion of the maritime sector and to achieve sustainability in ocean governance. The safety of life at sea and ships depends on the quality of tonnage registered under the flag of a country,” according to D G Shipping, India’s maritime regulator. “The average age of the world fleet is on the declining trend, (but) the average age of the Indian tonnage is on the increasing trend over the years,” the DG Shipping said. The International Maritime Organisation, the U N body that regulates global shipping, has adopted an initial strategy for reduction of GreenHouse Gas emissions. To achieve the targets defined by the IMO, vessels need to be transformed to run on alternate fuels and age norms will assist in ensuring gradual phasing out of fossil fuel ships and entry of alternate/low carbon energy efficient ships, it said. Prior technical clearance is not required for acquisition of vessels below 25 years of age, according to the existing guidelines on registering ships under the Indian flag. Such clearances, though, are mandated for vessels of 25 years and above. The age norms are being introduced to improve the quality of Indian tonnage and supplements a government plan to promote flagging of ships in India. In 2021, the government unveiled a subsidy scheme for Indian flag ships for moving state-owned cargo. Under the subsidy scheme, Indian fleet owners get a 5-15 percent extra on charter rates, depending on age slabs, on ships registered in India after February 1, 2021. The government has budgeted a corpus of Rs16.24 billion to be disbursed as subsidy for moving crude oil, LPG, coal, and fertiliser cargo for state-run firms, over five years, to boost Indian tonnage. The absence of age norms has allowed Indian charterers (those
After Ethanol, policy support for Biogas
The government is planning to replicate the success of ethanol in compressed biogas(CBG) by offering capital support for biomass aggregation, laying of gas pipelines, and mandating natural gas marketers to blend 5% biogas by 2027, according to people familiar with the matter ndia achieved an ethanol blending average of 10% in 2021-22 from 1.5% in 2013-14, riding a raft of policy interventions that encouraged investments in new supplies and ensured full offtake. The ethanol story has emboldened the government to plan a similar policy push for a wider adoption of CBG. The oil ministry is preparing a cabinet proposal aimed at enhancing the supply of biogas, its assured offtake and easy evacuation to the customers, one of the people said. The proposed scheme will provide capital support for biomass aggregation, manure handling and laying of the pipeline used for evacuating biogas. To ensure that all the biogas produced by CBG plants is sold, the government will mandate city gas distributors to sell biogas equal to at least 5% of the total volumes they market. The mandate will be implemented in phases, with city gas players required to blend at least 1% by 2023, 3% by 2024 and 5% by 2027, the person said. City gas companies or any other entity laying the pipeline from a CBG-producing facility to the natural gas grid or any customer will also be subsidised for the same, he said. There will be open access for CBG, which would allow a producer in one city gas area to sell its output to a customer in another area, he added. This would ensure CBG producers are able to sell all their supplies at remunerative rates. At present, 37 CBG plants have begun operation and produce a small amount of gas. Indian Oil, HPCL, BPCL, and Gail have issued about 3,800 letters of intent (LoIs) to companies planning to set up CBG production plants, which means an assured offtake of biogas by oil & gas companies. About 25,000 tonnes per day of CBG will be produced if all the LoIs were to lead to production facilities. Offtake guarantees by oil marketing companies, remunerative prices set by the central government, widening of the raw materials basket used in production and capital support for setting up production facilities were some of the key measures that helped boost the supply of ethanol.
Pumping up the price: Why are petrol prices still so high in India?
Petrol prices remain high across India with the price being close to 100 rupees per litre in New Delhi, the nation’s capital. The petrol hike has made citizens miserable as they find it difficult to afford essential commodities and transportation in their day to day lives. These soaring gas prices remain high and keep rising despite India announcing that it is getting oil at a cheaper price from Russia. What is the current context of gasoline prices in India? How is the petrol price calculated in the first place? And will Indians see any respite at petrol pumps anytime soon? Prior to the pandemic, in 2020, an owner of a two-wheeler was paying approximately INR 900/- for a full tank of fuel. Today that cost is around INR 1500/-. To make things worse, petrol prices in India have been on the rise in recent months. According to the Ministry of Petroleum and Natural Gas, the average retail price of gasoline in India was Rs. 89 per litre in February 2023. This is a one rupee increase from the previous year, when the average retail price was Rs. 88 per litre. Why is the price increasing at all?! The factors driving this increase include a rise in international oil prices, fluctuations in the exchange rate between the Indian Rupee and the US Dollar, and changes in taxes and duties levied by the government. Refining costs also play a role in determining gasoline prices. That’s a lot of complicated terms at once. What do all of them mean and how is the price of petrol determined? The price of gasoline in India is determined primarily by 4 factors: International oil prices- this refers to the price of crude oil, which is the primary component of petrol. The price of crude oil is influenced by global supply and demand, geopolitical tensions like the Russia-Ukraine conflict, and changes in the market due to the ongoing COVID-19 pandemic. The exchange rate between the Indian Rupee and the US Dollar also affects the price of gasoline in India as oil is priced in US dollars. At present, a weaker Rupee is increasing the cost of importing oil into India, leading to higher gasoline prices. Here’s an example. Suppose you go to the mall and spend INR 5000/- on shopping. Your total expense for the day is not just 5000 rupees. Keep in mind your uber also cost you INR 200/- to get to the mall and to come back home. In actuality, your total expenditure for the day was INR 5400/-. Refining costs also play a role in determining gasoline prices. The cost of refining crude oil into gasoline can be impacted by changes in the cost of raw materials, labor, and energy. Taxes levied by the Indian government also have a significant impact on the retail price of gasoline in India. Taxes and duties account for more than 50% of the retail price of gasoline in the country. This means if your petrol bill is 1000 rupees, over 500 rupees are because of taxes and duties.
Tellurian faces new setback as LNG project financing looms
Tellurian Inc is facing a new setback in a long-running effort to advance a $12.5 billion US liquefied natural gas (LNG) export project. Commodities trader Gunvor Ltd can walk away from a 10-year, about $12 billion commitment to buy LNG if Tellurian’s Driftwood LNG project lacks a financial go-ahead, project financing and a full construction authorization by Feb. 28. A Gunvor exit, the project’s third since September, will not be a fatal blow. Tellurian has changed its mind on selling equity in the plant to customers and has missed several go-ahead targets while chasing potential investors, said analysts. Tellurian and Gunvor spokespeople declined to comment ahead of the deadline. The timetable is unlikely to be met, said Alex Munton, global gas and LNG director at energy consultants Rapidan Energy Group. Tellurian needs one or more equity investors to win customers and secure project financing, he said. “Banks are telling Tellurian we want to see a lot of equity put in” by investment-grade partners that can help shoulder the plant’s costs. “The real hammer blow for these projects is the cost of capital,” said Munton. Cost of capital has climbed with interest rates. Lavish executive pay, missed financial investment decisions and recent departures have unnerved customers. Two board members, Claire Harvey and James D. Bennett, abruptly resigned last month. Neither “was ever comfortable with the risk profile and strategic direction of the Company,” Tellurian said in a securities filing. A Gunvor departure would follow prior exits by Vitol Inc and Shell Plc. But Indian gas distributor GAIL (India) Ltd this month proposed buying an up to 26 per cent stake in a US LNG project, offering a ray of hope for Tellurian. GAIL asked for proposals and said it would also consider a long-term purchase agreement. The tender could be a negotiating tactic as GAIL looks to pit US LNG suppliers against existing Qatari and Russian LNG suppliers, said Rapidan’s Munton. Driftwood LNG needs to raise $1.5 billion in mezzanine financing, $7 billion in project debt, and about $3.2 billion in equity, co-founder Charif Souki said in a Feb. 14 broadcast. A number of banks would be “happy to participate” in the project debt, Soukisaid, adding “the time could not be better to get something like this done” with equity investors.