Government extends deadline for eighth oil and gas exploration licensing round amidst investor demands
The government has once again extended the deadline for accepting bids in the eighth oil and gas exploration licensing round, to May 16, the Directorate General of Hydrocarbons (DGH) said on its website. The eighth round under the open acreage licensing policy (OALP) was launched on July 7 last year, with a bid submission deadline of September 6. Since then, the deadline has been extended several times. The last deadline was March 30. The DGH hasn’t given any reason for the extension but the oil ministry officials say the investors are demanding an extension. In the eighth round, ten oil and gas blocks have been offered. In the first seven rounds, 134 blocks have been awarded.
Indian demand for Urals crude keeps Russia’s exports up
India was the biggest buyer of seaborne Urals oil in March and the country’s demand for the grade means Russia has to maintain high exports, two traders said and Refinitiv Eikon data showed on Monday. Refiners in India, which in the past rarely bought Russian oil, because of high transport costs, have emerged as key oil clients for Russia, snapping up crude rejected by the West since the Ukraine conflict began in February 2022. In March, India’s purchases of Urals oil accounted for more than 65% of total seaborne exports of Urals, Refinitiv data showed. Traders said the rising demand from Indian refineries is forcing Russia to support exports despite Moscow’s pledge to cut oil output. Last week, Deputy Prime Minister Alexander Novak said Russia was very close to achieving its target of cutting crude oil output by 500,000 barrels per day (bpd) to around 9.5 million bpd. In April, Russia may continue to maintain high oil exports to meet India’s refiners needs, traders said. Seasonal maintenance on Russia oil refiners will allow the state to do so. Russian Urals oil loadings in March are expected to increase by 4% on February. “India is very actively buying Russian oil, it is profitable compared to alternatives. They ask for serious volumes and we need to deliver,” said a trader in the Russian oil market. Demand from Indian buyers supported prices for Urals oil, traders said. The discount for Urals has declined by about $8 per barrel compared with mid-January, Novak said last week. Traders said the rise in Urals oil loadings has tightened the tanker market, which is already facing constraints because of sanctions. This is why shippers are using Suezmax tankers, designed for the transport of 130,000-180,000 tonnes, to ship 100,000-tonne cargoes from the Baltic ports. At least 11 tankers from the March loading plan that loaded Urals cargoes from Baltic ports were Suezmax size vessels, according to the traders. The cost of freight for Suezmax and Aframax vessels remains the same due to a shortage of Aframax tankers, which typically carry around 70,000 to 120,000 tonnes. The cost of Urals oil transport from Baltic ports to India rose this week to $8.5-8.7 million, two traders said. The freight cost for this route was estimated at $7.9-8 million last week.
Russia says oil sales to India up 22-fold last year
Russian Deputy Prime Minister Alexander Novak said on Tuesday that Russia needed to focus on boosting energy exports to so-called “friendly” countries, as he said Russian oil supplies to India jumped 22-fold last year. Novak said energy revenues accounted for 42% of Russia’s federal budget in 2022 and said the country’s energy industry was sustainable, despite the challenges faced by Western sanctions.
EU Could Let Member States Block Russian LNG Imports
The European Union is considering allowing individual member states to block LNG imports from Russia without slapping sanctions on Russian gas, a draft document seen by Bloomberg News showed on Tuesday ahead of a meeting of the EU energy ministers. The proposal would allow individual member states to prevent Russian LNG exporters from booking capacity at Europe’s LNG import facilities. The push to give EU members the power to temporarily block LNG imports from Russia is led by Russia’s EU neighbors Finland, Estonia, Latvia, Lithuania, and Poland. Even if the mechanism to block Russian LNG without sanctions is endorsed by the EU energy ministers, the individual EU governments would still need to consult with other EU countries, the European Commission, and other EU institutions. The European Commission and some EU members have already called for a reduction of imports of Russian LNG which have jumped since the Russian invasion of Ukraine and the resultant reduction in the supply of Russian pipeline gas. The Spanish government has urged LNG importers not to sign new deals to purchase Russian LNG as the biggest buyer of Russia’s LNG in Europe looks to reduce dependence on Moscow’s gas, sources familiar with the matter told Bloomberg last week. Earlier this month, EU Energy Commissioner Kadri Simson urged all EU member states and all companies not to sign new LNG import contracts with Russia. The European Union has managed to significantly cut its imports of Russian pipeline natural gas over the past year, but now it should stop all LNG imports from Russia, Simson said. While pipeline supply from Russia has slowed to a trickle, Europe has raised imports of LNG, including LNG from Russia. Russia’s LNG supply to Europe jumped by around 20% last year from 2021, according to Refinitiv Eikon data cited by Reuters. All Russian LNG exports rose by 8.6% in 2022 to around 45 billion cubic meters, more than half of which went to Europe, per Refinitiv Eikon’s data.
IndianOil Plans Paradip Petrochemical Project
Indian Oil Corp has granted “stage-one” approval for establishing a petrochemical complex at Paradip, Odisha. The estimated cost for the project is $7.4 billion, making it the state-owned group’s largest-ever investment in a single location. The complex will include a world-scale cracker and downstream units for polymers such as PP, HDPE, LLDPE and PVC, as well as chemicals like phenol and isopropanol. Output from the complex is expected to provide feedstock and vitalize growth in key downstream industries that include plastics, pharmaceuticals, agrochemicals, personal care and paints. Indian Oil did not give a timescale for the project, which it said would be a growth driver for turning the company into a major petrochemical player while also strengthening India’s self-reliance. The oil and gas group is currently building an integrated paraxylene (PX) and purified terephthalic acid (PTA) facility at Paradip, to come on stream in 2024. Technip Energies is providing engineering, procurement, construction and commissioning services on the facility, which will be integrated with the site’s refinery and produce 800,000 t/y PX and 1.2 million PTA.
Gas, makes for a solid climate future
With a growing population of 1.3 billion and rapid urbanisation, India is the third-largest consumer of energy. Currently, 80% of the India’s energy needs are met by coal, oil and solid biomass. Coal largely dominates and accounts for 56% of the total energy mix, maintaining its strong position in power generation and being a fuel of choice for many industries such as iron and steel. Renewables and natural gas take a small share but have started to gain ground. At the same time, India is the third-largest emitter of greenhouse gases, with coal contributing 66% of its CO2 emissions. India is aiming to reduce its carbon footprint by 1 billion tonnes of emissions by 2030 and achieve net-zero emissions by 2070. To move towards this long-term goal, the current energy mix needs to undergo a major shift – reducing our dependability on coal by over 20% and increasing the shares of renewables such as wind, solar, biofuels & small hydro to 10% and natural gas to 15% in 2030. Government of India has also announced plans to develop an integrated hydrogen economy in the same period. Though the hydrogen market is growing rapidly as the government is actively promoting the use of hydrogen across various industries, it is still in its early stages and requires heavy investments in the future. It is a long road ahead before India can switch completely to renewable energy and/or electric mobility. As the country moves towards cleaner sources of energy, natural gas, becomes a critical part of India’s transition strategy – the bridge between the current fossil fuel led energy mix to the zero-emission fuel mix in the future. Piped natural gas (PNG) and compressed natural gas (CNG) can be used to reduce the country’s emissions significantly, without compromising on the energy needs.
India considers strategic LNG reserve to avoid future shortages
India is considering building a strategic reserve of liquefied natural gas to guard against future price spikes or supply shortages after last year’s energy crisis, according to a senior executive at the nation’s top importer. The government has “proposed we should have more storage space for LNG so that when prices are lower we should store, and supply when there is crisis,” Vinod Kumar Mishra, finance director at Petronet LNG Ltd., said in an interview. “We have seen the crisis and it was difficult for the government also to ensure supply.” India curbed LNG imports last year after Russia’s invasion of Ukraine upended the market and sent prices surging. While Prime Minister Narendra Modi’s administration aims to more than double the share of gas in the country’s energy mix, high prices have proved a deterrent for some industries. More governments are looking to set up emergency stockpiles of LNG, similar to the oil industry’s strategic reserves, as the super-chilled fuel becomes a more important element of the global energy mix. Japan — one of the world’s top buyers — said last year that it is considering a similar plan. While no storage targets have yet been discussed, Petronet is adding more tanks at its LNG import terminals to store the imported fuel and is working on a floating import plant in the eastern state of Odisha, Mishra said. Long-Term Deals Last year’s crunch is also prompting Indian buyers to hunt for long-term supply deals, which ensures deliveries to customers at more stable prices, Mishra said. Some of these deals are likely to be sealed in 2023, he said. Petronet is in talks with Qatar to renegotiate its 7.5 million tons-a-year contract that expires in 2028. The New Delhi-based company is looking to expand the contract by as much as 1 million tons, according to Mishra. Still, a recent drop in spot prices — down roughly 80% from August — is reviving demand in purchases for prompt delivery, said Mishra. Prices will need to fall to about $6 to $7 per million British thermal units to accelerate purchases, he added. The Asian spot benchmark closed above $12 on Friday, according to traders. “India’s market is price-sensitive,” said Mishra. “It is not dependent on one kind of fuel. It can switch to any fuel that is cheaper.”
GAIL: Upbeat On Recovery
GAIL’s MD Mr. Sandeep Kumar Gupta expects: 1) Tariff unification to lower risk in the Pipeline business and improve its EBITDA / ROCE by ~45%/200bps respectively. 2) Normalization of prices should lead to pick up in gas demand in India (~6% p.a. growth). 3) To sign new LNG contracts at attractive prices to sell in India. 4) Petrochem, Pipeline, CGD projects are progressing well. Bullish outlook on all segments GAIL MD expects: 1) Volatility in gas prices to subside, thereby aiding volume growth for its core transmission business; should exit FY24 at 120mmscmd (107 mmscmd now); growth thereafter should be 5-6% p.a. 2) 37% higher Pipeline tariff along with growth in volumes should boost gas transmission Ebitda/ROCE by 45% to Rs68-71 billion/10% respectively. 3) To bring (6m MT) US LNG volumes to India for LT sales. 4) Operations at polymer unit (0.8m MT) to stabilize. Efforts are underway to lower the volatility in feedstock costs (ethane sourcing etc.). 5) Implementation of KP Committee report should benefit the LPG segment materially (had to blend expensive LNG). New projects progressing well GAIL appraised that: 1) All its key projects, including PDH-PP, key pipelines and expansion of polymer unit at Pata are progressing well. These are expected to complete in phases through FY25/26. 2) In order to operationalize PTA unit acquired from JBF, the company will necessitate Rs20 billion incremental investments and mark its foray in polyester intermediaries. 3) Completion of Petrochemical projects should de-risk GAIL’s revenue. As such, unified tariff has diluted the risk associated with new pipelines. 4) CGD projects undertaken through various entities like GAIL Gas, IGL are also ramping up well. Payout should hold up GAIL’s management is cognizant of the overall returns to the minority shareholders; management would sustain the pay-out ratio and opportunistically, eye the buy-back as well. Investments in new technologies like green H2 etc., are in early stages but hold promise. Analysts at IIFL Securities upgrade GAIL’s FY24-25 estimated EPS by 22-23% to reflect revised pipeline tariffs, and these remain sensitive to LNG trading/commodity margins.