India still a bright spot for LNG in a subdued market
The recent drop in the Platts West India marker to a near two-year low, expectations of a ramp-up in operations at Dhamra LNG terminal and the hot weather will likely keep spot LNG procurement supported in India, despite a rise in domestic natural gas production, industry sources told S&P Global Commodity Insights. “LNG procurement should mostly not be that much affected by domestic gas production because demand has also grown,” a domestic Indian-gas source said. According to S&P Global seaborne data, India’s LNG imports rose to 2.02 million mt in April from 1.94 million mt in March and from 1.70 million mt in April 2022. The International Energy Agency, or IEA, in May revised upwards India’s natural gas consumption for 2023, with the agency predicting a 4% year-on-year increase due to a modest recovery in the power sector and continued growth in industrial activity and city gas sectors. “Out to 2030, we expect gas demand to grow by 3.4% on an annual basis. This will be primarily led by gas demand growth in the city gas sectors, industries and feedstock for fertilizer plants,” Zhi Xin Chong, Director, Gas, Power, and Climate Solutions at S&P Global said. With the CGD rounds now covering 98% of India’s population, many companies are now investing in developing new infrastructure to reach out to this customer base. “We expect gas demand in this sector to continue its rapid growth especially with the expansion of pipelines in the East Coast of India,” Chong said. Gas production increases Gas supply continues to grow as Reliance Industries Limited-BP start up production from the MJ gas fields, developed in the KG-D6 block. In an operational update in April, RIL said that production from KGD6 rose 13.8% year on year to 42.9 Bcfe in January-March. With incremental gas production from MJ field, along with ongoing production from R Cluster and Satellite Cluster fields, output at KG-D6 is expected to reach about 30 MMSCMD in FY24, it added. ONGC, which contributes two-thirds of the country’s oil and gas output, has stepped up discussions with ExxonMobil, Equinor, the American oil services conglomerate Baker Hughes, and French research organization Instituted Français du Pétrole on various issues such as technology and deepwater collaboration. “Energy security is geography dependent…ONGC invests $ 3.5 billion to keep up production,” ONGC Chairman and CEO Arun Kumar Singh said in February. Meanwhile, sources noted that softer WIM LNG prices were also likely to spur demand in India even as other Asian countries reel from excess stock amid muted demand. Platts assessed WIM for June slipped below $10/MMBtu this month. The marker reached a near two-year low on May 5, when it was assessed at $9.638/MMBtu and was last assessed at $9.775/MMBtu May 11. “India can buy cargoes as the price is now below the Brent-linked prices. We have an old contract with Brent slope that is higher…so the price range currently makes sense for us,” an industry source said, adding that $10.5/MMBtu could be a key level for most of the Indian importers, given the current crude oil prices. The forward curve for JKM suggests that weakness in LNG prices will continue to sustain, with the August derivative price assessed at $11.25/MMBtu and September derivative at $12.35/MMBtu on May 11 at Singapore close. Surge in tender activity Bharat Petroleum Corporation Limited, or BPCL, has recently awarded its LNG tender for delivery on June 14 to Dahej. Most of the volume is expected to be used in its refinery, industry sources said. An industry source said that BPCL may bring out a RLNG tender to market some volume from the tender that it awarded. The source added that if such a RLNG tender is successful, more LNG buy tenders may be in the plans. Meanwhile, the Reliance-BP consortium carried out an e-auction for sale of 6 MMSCMD on April 12. “The entire volume was sold and Gas sale purchase agreement (GSPA) under execution with successful bidders,” RIL said in a statement. Domestic gas market participants are also eyeing the Reliance-BP auction on May 19 that seeks bids for up to 6 million standard cu m/day for a tenure of three to five years. In April, Petronet LNG awarded a mid-June cargo tender and Indian Oil Corp. awarded two cargoes for delivery in May-June and end June-early August.
BPCL to invest Rs 52, 731 crore in expanding capacities
State-owned Bharat Petroleum Corporation Ltd’s (BPCL) board has approved the ethylene cracker project at Bina Refinery including downstream petrochemical plants and expansion of the refinery with capital expenditure of approximately Rs 49,000 crore, the company said. The core component of the expansion projects is the Ethylene Cracker Project, which will drive the production of essential petrochemicals. The project encompasses the establishment of an Ethylene Cracker (EC) Complex, downstream Petrochemical Plants, as well as the expansion of the existing Refinery capacity from 7.8 MMTPA to 11 MMTPA and associated facilities at Bina Refinery. G Krishnakumar, C&MD, BPCL, said, “BPCL has leapfrogged into the world of Petrochemicals as we embark upon the ?49000 Ethylene Cracker project in our Bina Refinery, in step with the expansion of Refining capacity to 11 MMTPA. Combined with our investment in Wind Energy and new age Petroleum Oil Lubricants installations built for sustainable processes, this is a watershed moment in our strategic endeavor to be at the forefront in meeting the rapidly growing demand for energy and Petrochemical products in India.” The board has also approved the setting up of two 50 MW wind power plants for captive consumption, one at Bina refinery in Madhya Pradesh and another at Mumbai refinery in Maharashtra, the company said in an exchange release. The total project cost for two 50 MW wind power plants is approximately Rs 978 crore (Rs 489 crore for each project), it said. Additionally, BPCL is making significant investments in Petroleum Oil Lubricants (POL) and Lube Oil Base Stock (LOBS) installations with receipt pipelines at Rasayani in Maharashtra. This project, with an estimated cost of approximately Rs. 2,753 Crore, aims to augment storage capacity, smoothen the supply-chain and streamline the distribution of essential petroleum products. The company added that these expansion projects align with its vision to diversify and expand in adjacent and alternative businesses to create additional revenue streams and cleaner environment by building the renewable energy portfolio to achieve Net Zero targets in Scope 1 and Scope 2 emissions. “The expansion project at Bina Refinery and the other initiatives demonstrate BPCL’s dedication to meet the evolving energy needs of the nation and ensure energy security and sustainability. These investments will not only strengthen the company’s position in the petrochemical industry but also contribute to the economic growth and development of the regions where the projects are based,” BPCL said.
India Looks To Lock In Long-Term LNG Deals
Major Indian natural gas importers are discussing long-term supply deals with the biggest LNG exporting countries to lock in future supply and avoid volatility and uncertainty in case of spot price spikes, traders and executives tell Bloomberg. India plans to significantly increase its natural gas consumption as it looks to boost its share in the energy mix. But the country and its LNG importers are particularly sensitive to surging spot LNG prices and often retreat from the spot market when prices jump. Such was the case last year when high spot LNG prices priced out many Asian buyers as Europe bid up for supply and became the primary destination of spot LNG cargoes. For most of 2022, India – alongside other countries in South Asia such as Bangladesh and Thailand – withdrew from the spot market due to the record high prices. In India, LNG imports fell by 15.2% in 2022, but the total import costs soared by 44.5% due to high LNG prices, the Institute for Energy Economics & Financial Analysis said in a report in February. This year, the slump in spot LNG prices has encouraged price-sensitive buyers India, Pakistan, and Bangladesh to return to the market looking for cargoes. But it looks like Indian buyers are not willing to take chances on the spot market for years to come. According to Bloomberg’s sources, Petronet LNG, GAIL India, and Indian Oil Corporation are holding discussions with LNG exporters from the United States, Qatar, and the United Arab Emirates (UAE) for supply deals of 20 years. GAIL India, the biggest natural gas company in the country, is even reportedly looking to buy an interest in an LNG export project in the United States. Petronet LNG is in talks with Qatar to secure additional long-term volumes and is also in discussions with several other LNG suppliers, executives at the company told Bloomberg. Petronet LNG’s chief executive Akshay Kumar Singh, told Bloomberg earlier this month, “The lesson learned by the consumers is that they can’t run the business based on spot.”
Rosneft sends JV feelers to PSU refiners for India unit
Russia’s Rosneft has expressed interest in building a greenfield refinery in India in a joint venture with domestic state-owned refiners, according to people familiar with the matter. India’s public sector refiners are separately seeking foreign partners in their pursuit of a scaled-down alternative to the proposed $44-billion west coast refinery that hasn’t taken off for years, they said. The Russian firm is understood to have held preliminary discussions with Indian government officials and executives at state-run refiners regarding a new project in India, the people said. This will be separate from the Gujarat refinery that Rosneft-backed Nayara Energy operates. IOC, BPCL likely candidates for tie-up “Cooperation with Indian companies is being developed in the integral format throughout the whole technological chain, from production to refining and sales of petroleum products,” Rosneft told ET in an email. “Rosneft aims to further expand cooperation with Indian partners. Information on specific plans you will learn later in the relevant company announcements.” The oil ministry didn’t respond to ET’s queries, and neither did the state-owned Indian Oil Corp, Hindustan Petroleum Corp Ltd (HPCL) and Bharat Petroleum Corp Ltd (BPCL). It’s unclear which Indian refiner will end up partnering Rosneft but Indian Oil and BPCL could be the likely candidates. HPCL is overleveraged due to a greenfield refinery it’s building in Rajasthan. Indian Oil is the most upbeat among state firms on adding capacity and already has a crude purchase agreement with Rosneft, while BPCL has a land parcel ready for a refinery in Uttar Pradesh. State refiners have increasingly realised that they need an alternative to the west coast project in which Saudi Aramco had agreed in 2018 to take a 50% stake, people familiar with the matter said. The project is being jointly developed by Indian Oil, BPCL and HPCL. Unavailability of land and Maharashtra political strife may keep the leadership distracted, worsening the project’s prospects, said people familiar with the matter. Overseas partners The government and the state refiners are of the view that India needs to add greenfield capacity to meet future fuel demand, and can’t wait endlessly for the west coast refinery to take off, the person said. Therefore, each state refiner is now planning to move away from the joint venture and evaluate greenfield capacity separately, in partnership with foreign players, he said. More overseas entities are likely to be approached for partnership talks. State refiners plan to keep the majority in any joint venture with foreign firms, as that would help them control crude sourcing strategy as well as product pricing in domestic market, a person familiar with companies’ plans said.
India set for LNG deal-making rush in win for Modi’s gas push
India’s liquefied natural gas buyers are seeking decades-long supply deals to protect them from price surges, a move that will support the government’s plan to boost the fuel’s use. Importers are accelerating efforts to lock in fuel, according to traders and executives. Buyers including Petronet LNG Ltd., GAIL India Ltd. and Indian Oil Corp. are in talks with suppliers in the US, Qatar and the UAE for deals that last for 20 years. The trend is a reversal for the nation, which hasn’t signed a long-term deal since 2021, according to contract data from BloombergNEF. That should help reduce their exposure to the volatile spot market — where prices surged to a record last year and made the fuel too costly for many buyers. It also increases the prospect of imports rebounding in a boost for Prime Minister Narendra Modi’s strategy to more than double the share of gas in the country’s energy mix by the end of the decade to help reduce pollution. “The lesson learned by the consumers is that they can’t run the business based on spot,” Akshay Kumar Singh, chief executive officer of Petronet LNG, said earlier this month. “Going forward, we will be finding a lot of long-term contracts signed by different stakeholders.” India’s consumers — from power plants to petrochemical facilities — are highly price-sensitive as gas competes head-to-head with cheaper and dirtier alternatives, but had become too dependent on the spot market, which was far more expensive than long-term contracts last year. The nation’s LNG imports plummeted by nearly 20% after Russia’s invasion of Ukraine upended the market. While LNG rates have since dropped and India is again purchasing spot shipments, that may not last. Prices are slated to increase in the second half of 2023, impeding demand growth, according to Ayush Agarwal, LNG analyst at S&P Global Commodity Insights. Petronet is in the middle of negotiations with Qatar to extend an existing deal at a lower price and secure additional volumes, according to executives at the firm, who asked not to be named as the talks are ongoing. The company is in talks with several other suppliers, they said. GAIL is looking to purchase a stake in a US LNG export terminal, coupled with a 1 million ton per year deal. About nine suppliers have expressed interest, a senior company official said. GAIL is also in talks with several other suppliers outside of the US, another official said. Spokespersons for Petronet, GAIL and IOC didn’t immediately reply to messages seeking comment on contract negotiations. Even though there is little supply available before 2027 due to a lack of new projects, long-term contracts are still a way to avoid pitfalls in the spot market, Petronet’s Singh said earlier this month. “Business can’t be managed with spot,” Singh said. This year’s import level “all depends on how the prices are hovering in international market. We are keeping fingers crossed.”