India extends transmission fee waiver for green hydrogen plants -source
India has extended a waiver of transmission fees for renewable power to hydrogen manufacturing plants commissioned before January 2031, as it aims to become the world’s cheapest producer of the fuel, a government official said. The move is expected to cut the cost of green hydrogen – hydrogen produced by splitting water using electricity from renewables – by a fifth. The move will make more green hydrogen manufacturing projects eligible for the 25-year waiver of transmission charges, previously available for projects set up before July 2025, said the source, who declined to be identified because he is not authorised to speak to media. Building large-scale hydrogen and ammonia projects takes three to four years, and it was unlikely many would be commissioned by June 2025, the government official said. The country’s goal is to produce green hydrogen at the lowest rate in the world, at $1-$1.50 per kilogram, down from the present $4-$5 per kilogram. Reliance Industries and Adani Enteprises have announced cost targets of $1 per kg by 2030. Larsen & Toubro, Indian Oil, NTPC, JSW Energy, ReNew Power and Acme Solar are a few other prominent Indian companies that have announced plans to make green hydrogen. Renewable energy, including transmission, makes up 65%-70% of the cost of producing green hydrogen, according to industry estimates. The inter-state transmission charges range from 1-2 rupees per unit of power transmitted. Every one rupee decrease in renewable energy costs reduces the cost of green hydrogen by 60 Indian rupees ($0.73), the official said. The ministry for new and renewable energy did not immediately respond to an email seeking comment. India’s hydrogen mission is estimated to require investments worth 8 trillion Indian rupees ($98 billion) by 2030, including 125 gigawatts of non-fossil-based generation capacity and new transmission lines. India also plans to give green hydrogen producers incentives worth at least 10% of their costs under a $2 billion scheme set to begin before the end of June. The country opposes diluting the definition of green hydrogen to include fuel produced from low carbon energy, as some developed nations have proposed in G20 meetings, Power and Renewable Energy Minister R K Singh recently told Reuters.
Citi Bucks The Bullish Trend, Bets Oil Prices Will Fall
Citigroup has bucked the bullish oil price forecast trend in analyst circles, expecting oil prices to dip instead of rally further despite OPEC+’s efforts in that direction. The bank’s commodity chief Ed Morse noted that China’s post-pandemic recovery was progressing more slowly than initially expected and that could affect demand patterns, ultimately hurting prices. We’re waiting to see what’s really happening with the economy, but it is a slower recovery,” Morse told Bloomberg. “If anything, that will be an end-of-year phenomenon.” What’s more, Citi believes that traders may be underestimating additional oil output potential in Venezuela and Iraq, which, if it materializes, would offset some of the latest OPEC+ cuts. In fairness, Iraq is one of the participants in the latest round of cuts, committing to reduce its oil production rate by 211,000 bpd. Venezuela, for its part, just reported higher oil exports for March after the end of a review into past deals after it emerged that many of the oil cargoes sent overseas had not been paid for. The country exported more than 700,000 bpd of crude last month, mainly thanks to more cargoes being lifted by Chevron, which was recently allowed by the White House to return to Venezuela. Besides Citi, Morgan Stanley is also bearish on oil even after the OPEC+ cuts. In fact, the bank reduced its oil price target after the OPEC+ announcement, arguing that the latest move of the cartel was a probable admission from the biggest producers that demand may not be doing too well in the coming months. “OPEC probably needs to do this to stand still,” Martijn Rats, chief commodity strategist at Morgan Stanley, said. However, the decision “reveals something, it gives a signal of where we are in the oil market. And look, let’s be honest about this, when demand is roaring…then OPEC doesn’t need to cut,” Rats noted.
India’s fuel demand rises 5% in March year on year
India’s fuel consumption, a proxy for oil demand, rose 5% year on year in March, data from the oil ministry’s Petroleum Planning and Analysis Cell (PPAC) showed on Monday. Consumption totalled 20.50 million tonnes. Sales of gasoline, or petrol, rose 6.8% to 3.1 million tonnes while cooking gas, or liquefied petroleum gas (LPG), sales fell 2.7% year-on-year to 2.41 million tonnes. Sales of bitumen, used for making roads, jumped 16.5% month-on-month, and fuel oil use increased more than 2% in March, compared with February.
India remains top destination for Russian Urals oil in April
India remains the main destination for Russia’s seaborne Urals oil, with about 70% of such exports heading to the country, Reuters monitoring and data from two industry sources showed on Monday. Attractive prices for Urals mean good margins for Indian refiners while term contracts between Russian and Indian companies and lower freight rates are also helping keep supplies elevated, one of the sources said. Last month Russia’s Rosneft and Indian Oil Corp announced a supply deal for up to 1.5 million tonnes of Russian oil (11 million barrels) per month from April 1. Urals oil shipments to China, meanwhile, have not increased significantly in April. In the first ten days of the month just one 100,000-tonne cargo was fixed for shipment to the country’s ports, although traders noted that Chinese refineries were asking for late April-early May loading cargoes. Some 280,000 tonnes of Urals will be sent to China from the Al-Hoceima ship-to-ship (STS) facility off the coast of Morocco, to which the oil was supplied in March. “China is buying Urals, but not as actively as was expected,” a trade source involved in Russian oil trading said. “Refiners in other Asia-Pacific countries are also interested, but many are still afraid of sanctions, so marketing is slow,” they added. Urals deliveries to STS facilities in the Mediterranean continue to decline, with no cargoes shipped so far in April. Russia’s Gazpromneft shipped 140,000 tonnes of Urals from Novorossiisk to Myanmar in April, having supplied it for the first time in March.
Oil turmoil: How do Indian markets react when Brent tops $100?
Life is just one darned thing after another. Investing even more so, going by recent events. Just when it seemed the after-shocks of the global banking crisis had subsided, markets were hit by another thunderbolt – this time from the OPEC+ cartel. The Organization of the Petroleum Exporting Countries (OPEC) and their allies, including Russia, on April 2 stunned global markets by announcing production cuts of about 1.16 million barrels per day (bpd). This was on top of the 2 million bpd cuts declared in October 2022. The latest OPEC decision along with Russia’s voluntary production cut of 500,000 barrels per day will take a total of 3.66 million barrels off the market — roughly 3.6 percent of the total world supply. As investors scrambled to digest the latest geopolitical flashpoint, global oil benchmark Brent shot up over 6 percent on April 3 – the biggest one-day jump in a year — to about $85 per barrel. Financial analysts, who just a few days back were wagering on softer crude prices amid the banking crisis, suddenly saw their rosy projections being ambushed by reality.
ONGC To RIL’s Short-Term Realisations May Take A Hit On New Gas Pricing Norms
Revised norms for legacy administered price mechanism fields will impact the short-term realisation of upstream companies even though it be higher than the historical average, according to analysts. The revision is expected to eventually provide stability to upstream companies—such as Oil and Natural Gas Corp. Ltd., Oil India Ltd. and Reliance Industries Ltd.—and city gas distribution firms to withstand extreme price volatility witnessed in the past. The price of APM gas—that was linked to four global gas hubs—had seen extreme volatility in the last seven to eight years. It touched a low of $1.5 per metric million British thermal unit in 2015 and 2021, and witnessed a high of $8.57 per mmBtu for the six-month period ending March 2023. Global gas prices have seen greater volatility since February last year on account of the ongoing Russia-Ukraine conflict. However, under the revised norms, the prices have been linked to 10% of the average of the Indian basket of imported crude. It will have a floor price of $4 per mmBtu and a ceiling of $6.5 per mmBtu. “This would balance the interest of domestic gas producers, in case of extreme volatility, while incentivising the city gas consumers.” said Crisil Ratings in a note. The net realisation, or average selling price per unit, for upstream oil and gas companies like Oil and Natural Gas Corp. is expected to fall by $2 per mmBtu or Rs 6 per standard cubic metre. But it would continue to remain above historical averages, ICICI Securities said in a report. Similarly, for Reliance Industries—which doesn’t have many legacy fields—the decline in realisation will be on account of reduction in the price of high-pressure high-temperature gas on April 1. “RIL’s net realisation is expected to come down by $0.35 per mmBtu or Rs 1/scm, but would still continue to remain above historical averages,” the ICICI Securities report said. The price of HPHT gas was reduced to $12.12 per mmBtu from $12.46 per mmBtu on April 1 by the Ministry of Petroleum and Natural Gas. However, the price of HPHT gas will not be part of the new norms and it will be reviewed separately. According to Nirmal Bang, the decision to withdraw windfall tax was intended to compensate PSU upstream companies for a cut in gas realisation in the event of new natural gas pricing norms. “Any future levy of additional excise duty/cess on motor spirit and high speed diesel, in the event of a secular decline in crude oil, could also improve the savings on CNG versus alternative auto fuels. Such a penal tax could be justified by the government on the grounds of penalising polluting fuels as well as to shore up revenues,” it said in a report. For PSU upstream companies, this policy change is more structural and shows the government’s intent to make ONGC and OIL’s gas business sustainable, said Sabri Hazarika, senior oil analyst with Emkay Global Financial Services. The $4 per mmBtu floor price is higher than the $3-3.5 per mmBtu production cost, while the $0.25 annual escalation in cap would aid in gas markets’ complete deregulation in the long run, Hazarika said.
ONGC To RIL’s Short-Term Realisations May Take A Hit On New Gas Pricing Norms
Revised norms for legacy administered price mechanism fields will impact the short-term realisation of upstream companies even though it be higher than the historical average, according to analysts. The revision is expected to eventually provide stability to upstream companies—such as Oil and Natural Gas Corp. Ltd., Oil India Ltd. and Reliance Industries Ltd.—and city gas distribution firms to withstand extreme price volatility witnessed in the past. The price of APM gas—that was linked to four global gas hubs—had seen extreme volatility in the last seven to eight years. It touched a low of $1.5 per metric million British thermal unit in 2015 and 2021, and witnessed a high of $8.57 per mmBtu for the six-month period ending March 2023. Global gas prices have seen greater volatility since February last year on account of the ongoing Russia-Ukraine conflict. However, under the revised norms, the prices have been linked to 10% of the average of the Indian basket of imported crude. It will have a floor price of $4 per mmBtu and a ceiling of $6.5 per mmBtu. “This would balance the interest of domestic gas producers, in case of extreme volatility, while incentivising the city gas consumers.” said Crisil Ratings in a note. The net realisation, or average selling price per unit, for upstream oil and gas companies like Oil and Natural Gas Corp. is expected to fall by $2 per mmBtu or Rs 6 per standard cubic metre. But it would continue to remain above historical averages, ICICI Securities said in a report. Similarly, for Reliance Industries—which doesn’t have many legacy fields—the decline in realisation will be on account of reduction in the price of high-pressure high-temperature gas on April 1. “RIL’s net realisation is expected to come down by $0.35 per mmBtu or Rs 1/scm, but would still continue to remain above historical averages,” the ICICI Securities report said. The price of HPHT gas was reduced to $12.12 per mmBtu from $12.46 per mmBtu on April 1 by the Ministry of Petroleum and Natural Gas. However, the price of HPHT gas will not be part of the new norms and it will be reviewed separately. According to Nirmal Bang, the decision to withdraw windfall tax was intended to compensate PSU upstream companies for a cut in gas realisation in the event of new natural gas pricing norms. “Any future levy of additional excise duty/cess on motor spirit and high speed diesel, in the event of a secular decline in crude oil, could also improve the savings on CNG versus alternative auto fuels. Such a penal tax could be justified by the government on the grounds of penalising polluting fuels as well as to shore up revenues,” it said in a report. For PSU upstream companies, this policy change is more structural and shows the government’s intent to make ONGC and OIL’s gas business sustainable, said Sabri Hazarika, senior oil analyst with Emkay Global Financial Services. The $4 per mmBtu floor price is higher than the $3-3.5 per mmBtu production cost, while the $0.25 annual escalation in cap would aid in gas markets’ complete deregulation in the long run, Hazarika said.