ONGC to invest Rs 1 lakh cr in energy transition, targets net-zero by 2038
India’s top oil and gas producer ONGC will invest Rs 1 lakh crore by 2030 on energy transition projects as it targets net zero carbon emissions by 2038, its chairman Arun Kumar Singh said on Monday. The firm joins fellow state-owned oil and gas firms Indian Oil (IOC), Hindustan Petroleum (HPCL), GAIL and Bharat Petroleum (BPCL) in preparing roadmaps for net zero emissions as part of the nation’s commitment to deal with the climate challenge. Net-zero for a company means achieving a balance between the quantum of greenhouse gases it places into atmosphere and the amount it takes out. “We have done our internal workings and are now confident that we can achieve net-zero for Scope-1 and Scope-2 emissions by 2038,” Singh told reporters here. The company is planning to scale up electricity generation from renewable sources from 189 MW to 1 GW by 2030. It already has 5 GW of project planned in Rajasthan and is scouting for a similar capacity, he said adding ONGC would also look at offshore wind farms. It is also looking at setting up a 1 million tonne per annum green ammonia plant at Mangalore. “Overall, the investments will be of the order of Rs 1 lakh crore,” he said. The company reversed the declining trend of oil and gas production in 2022-23 and is now looking at raising output with projects both on the east and west coast. ONGC produced 19.584 million tonne (MT) of oil in 2022-23, up from 19.545 MT of previous year. The output is likely to rise to 21.263 MT in the current fiscal (April 2023 to March 2024), to 21.525 MT in 2024-25 and 22.389 MT in the following fiscal. Natural gas output is slated to rise from 20.636 billion cubic meters (bcm) in 2022-23 to 23.621 bcm in 2023-24, 26.08 bcm in the following year and 27.16 bcm in 2025-26. This rise in output is due to projects the firm is implementing on both the east and west coast to raise productivity from current fields and bringing new discoveries into production. As much as Rs 61,200 crore is being invested in 14 development and nine infrastructure projects including KG gas field and rejuvenation of existing producing fields like Mumbai High North and Heera. Singh said ONGC has planned a capital expenditure of Rs 30,125 crore in 2023-24, almost same as Rs 30,208 crore spent in the previous fiscal year. The company, which has 1.62 lakh square kilometer of acreage, is looking to take the acreage to 5 lakh square kilometer by acquiring one lakh square km every year, spending Rs 10,000 crore annually on exploration.
Solar Is Cheapest Energy Source Says IEA
Solar power has been touted as the cheapest available source of energy for several years now. Solar power proponents have been talking about the consistent decline in the cost of raw materials and panel production. They have also talked about LCOE. The levelized cost of energy is a metric that fans of wind and solar like to cite often. It is calculated using a simple formula where you divide the sum of cumulative costs for an energy project over its lifetime by the amount of total energy the project will generate over its lifetime. With this formula, wind and solar do look cheaper than gas-fired power plants or nuclear, which require a lot more in upfront investments. But what the LCOE formula does not account for is the fact that wind and solar do not generate electricity around the clock. That’s one major cost that is getting overlooked. Another substantial cost related to renewables that gets overlooked on a regular basis is the need for storage capacity to offset the intermittency problem. First, there is no such storage capacity available that could solve the problem in its entirety, and this already means solar is not as cheap as suggested by its LCOE. Second, available storage technology is rather expensive, piling on more additional costs, also overlooked by the LCOE formula. Yet, according to the International Energy Agency, as cited by Energy Intelligence, even when factoring in the cost of intermittency, solar remains cheaper than all other sources of energy, and specifically those generated using oil, gas, and coal. Apparently, this is true even when calculated not on an LCOE basis but on the basis of something called a value-adjusted LCOE that takes into account the dispatchability of fossil fuel generation and its positive effect on its competitiveness. The reason that the IEA has reached that conclusion is a simple one: cost assumptions. It is based on cost assumptions for solar power generation costs versus fossil fuel costs by the International Energy Agency, an enthusiastic cheerleader for a complete energy transition to a wind, solar, and hydrogen dominated grid, who has concluded that solar is the cheapest form of energy available. All told, the IEA calculates that on a value-adjusted basis—and with cost assumptions in place—solar comes in at $60 per MWh while gas is $20 more expensive at $80 per MWh. This, of course is a very different gap than the one that opens up with a simple LCOE calculation: $25 per MWh for solar and $110 per MWh for gas. But even that gap is misleading. With all the above in mind, one cannot help but wonder why governments are distributing billions of dollars in subsidies for solar power. Many perhaps also wonder why the countries with the highest ratio of renewable power generation capacity in their energy mix also have some of the highest electricity prices per capita. If solar power is the cheapest kind around, why is Africa not rushing to harness its enormous solar power potential? Why are solar developers not flocking to Africa where so many people have no access to electricity and would greatly benefit from such a cheap source of it? The answer to the above questions reveals yet another regularly overlooked cost associated with presumably cheap solar power: transmission. Africa—and other parts of the world—does indeed have huge potential for solar power generation. What it often lacks is the transmission infrastructure. It also lacks enough paying clients for that cheap solar. Even countries far ahead of African states on the road to windization and solarization have trouble with their grid, by the way. The United States alone would need billions in investment to upgrade the grid to accommodate the wave of new wind and solar capacity coming online. There is also the question of balancing the grid. What most people don’t know because they don’t need to know it is that any electrical grid is a fine-tuned symphony of electrical flow that needs to remain in balance at all times. Sharp jumps and drops in that flow are not something a grid can handle easily. A surge in wind and solar generation makes grid balancing a lot more challenging—and costly. In the UK, for instance, wind turbines have to be turned off on the windier days because they produce more electricity than the grid can handle. This turning off costs money. A lot of it. The Czech Republic had to turn off solar farms over Easter this year because they were generating more electricity that the grid could handle. Other countries have had to do it, too. Because that’s how solar works – it generates electricity when the sun shines and if there’s more sun than there is demand for electricity, the grid risks tipping off balance and grid operators can’t allow that. On the surface, then, solar could be cheaper than everything else. The deeper you look, however, the more additional costs you uncover. Add them all up, and it becomes clear why the cheapest of the cheap still needs so much in direct government subsidies to keep going.
Asian Oil Imports Set For A Rebound In May
Crude oil imports into Asia this month are expected to rise by 8.6% on the month as refineries in China and India exit maintenance season, Reuters’ Clyde Russell reported today, citing data from Refinitiv. The rebound follows a decline in Asian crude imports in April when the total dropped to the lowest in seven months. The numbers sparked concern about the outlook for oil demand as Chinese economic indicators also suggested a less smooth than expected post-pandemic recovery. Yet it seems the biggest reason for the decline was refinery maintenance, based on the strong rebound expected for this month when Refinitiv estimates total Asian imports would hit 27.73 million barrels of oil daily. For China specifically, the data service provider expects oil inflows at a rate of 11.96 million barrels daily, up by as much as a million barrels daily from April. Imports from Russia are seen hitting 2 million barrels daily, up from 1.74 million bpd last month. Almost the same amount of Russian crude is seen going to India this month, at 1.97 million bpd. Imports from Saudi Arabia, the subcontinent’s second-largest supplier are seen falling to 570,000 bpd from 690,000 bpd in April, and so are imports from Iraq—India’s number-three supplier. Meanwhile, Reuters’ Russell notes that India’s future fuel exports may be under threat as EU officials get uncomfortable that the fuels EU countries buy from India are probably produced from Russian crude. Just how serious this threat is, however, is yet to be seen because there are not a lot of alternative suppliers of the amounts of fuel the EU still consumes despite its green push. China’s fuel exports are also set for a decline, but for a different reason: the exhaustion of the first batch of export quotas for the year. Russell noted that a further rebound in local demand will also lead to lower exports.
Gas price plunge brings relief to Europe
European gas prices have plunged to the lowest since mid-2021, when Russia was just beginning to squeeze supplies before its invasion of Ukraine, helping to reverse a surge in inflation and bring relief to consumers. The slump gas futures are down by two-thirds already this year hasn’t just eased the pressure on household budgets. It also undermines one of the biggest bargaining chips held by President Vladimir Putin the ability to squeeze the region’s gas supplies. With some traders predicting short-term prices could even go negative at times this summer, the picture couldn’t be more different from May last year. Back then, futures were quadruple what they are now and countries were forced to revive coal generation to keep the lights on after Russia slashed gas supplies. There were also worries about shortages and whether Europe would be able to build gas storage levels before winter. Now, stockpiles are above average and might even be filled during the summer, and ahead of schedule.
Natural Gas Prices Could Fall Below Zero In Parts Of Europe
As tepid demand for gas from power generation and industry has sent European natural gas prices into a freefall in recent weeks, traders and industry officials are not ruling out the possibility that Europe may see a brief dip to below zero for day-ahead prices in some markets this summer. The combination of ample inventories at the end of a mild winter, steady imports of LNG, and weak demand has led to eight consecutive weeks of weekly losses in European benchmark natural gas prices, the longest weekly losing streak in more than six years. While the benchmark price is unlikely to drop below zero, some regional day-ahead natural gas prices in Europe could see sub-zero prices briefly this summer, if demand remains weak and renewable power generation holds high, traders and industry officials at the E-World energy fair in Essen, Germany, told Bloomberg. “Individual regional gas markets in Europe could go negative when you have hours and days with renewable production,” Peder Bjorland, vice president for gas trading and optimization at Norway’s energy giant Equinor, told Bloomberg. “There is quite a big distance from the price level we see now and to the single-digit and negative prices, and a lot can happen on that route,” Bjorland added. The front-month futures at the TTF hub, the benchmark for Europe’s gas trading, crashed by 10% on Thursday to settle at $26.78 (24.94 euros) per megawatt-hour (MWh), the lowest price since the start of the energy crisis in the autumn of 2021. The price trend in European natural gas prices is in stark contrast with last year, when benchmark prices soared to as much as $322 (300 euros) per MWh in August, after Russia slashed supply via pipelines and governments and industry were spooked by potential gas shortages in the winter. Thanks to milder winter weather, reduced consumption on EU level, and demand destruction in industry from the high energy costs, Europe made it through the 2022/2023 winter without gas shortages or gas rationing. Currently, gas inventories are comfortably high for this time of the year. As of May 24, natural gas storage sites in the EU were 66.71% full, according to data from Gas Infrastructure Europe. The level of gas in storage is the highest for this time of the year in at least a decade. Europe could fill up inventories as early as September, well ahead of the winter, analysts have told Bloomberg. Demand for natural gas in Europe is now weak after the winter heating season ended and peak summer power demand is yet to begin. Gas consumption from industry, which went through a very rough patch last autumn and winter, is also weak. Despite falling gas prices, industrial consumption of the fuel is not taking off, although it is possible that large industrial energy consumers wait for a further drop in gas prices, analysts say. Further price declines could put a floor under prices as more power plants could switch to gas from coal, Goldman Sachs said earlier this week. “This substitution process can work as a temporary floor to gas prices until industrial demand and Asia LNG imports start to improve more visibly, which in our view will ultimately pull gas prices higher into late-summer,” Goldman’s analysts wrote in a note carried by Bloomberg. The near-term outlook on natural gas prices in Europe looks bearish. But things could swiftly turn if demand spikes in summer heatwaves with low wind speeds that could cripple wind power generation. Industrial customers could also start using more gas if prices continue to fall, ultimately supporting the prices. A recovery in Asian demand for LNG could also result in higher European prices as Europe will have to compete with Asia for spot cargoes.
Efforts on to put pressure on India for importing Russian oil amidst Ukraine conflict
India’s import of oil from Russia has become a major irritant for certain constituencies in the United Kingdom and the United States, the two countries that are leading the charge against Russia with Ukraine in the war. As per official data, in March 2022 India was importing 0.4 million oil barrels a day from Russia, which now stands at 2.1 million a day, an increase of 425%. Sources in diplomatic circles told The Sunday Guardian that a sustained effort was going on to force India to stop it from buying Russian oil. These efforts were being made at multiple levels in London and Washington, including by trying to put pressure on the Rishi Sunak and Joe Biden governments to use their influence on Delhi. Members of Parliament, media houses and lobbying organizations are being involved in these efforts so that a public perception against India is built on “supporting Russia’s war on Ukraine”. To be sure, India, on multiple public forums, has stated that it wants the existing world order to be respected and war should cease immediately. Unlike countries like China and Pakistan, it has not supported any of the two sides despite pressures and pulls from various quarters. Sources told The Sunday Guardian that recently a fake narrative was pushed among UK’s parliamentarians that India was selling Russian oil to Britain at a premium. However, later it emerged that since December 2022, when the UK banned Russian oil from entering its territory, the import of oil from India by Britain has neither increased nor decreased. As per regulations in place in the UK, if Russian-origin oil is substantially refined in the importing country (India), and a new product is formed, then the UK companies, public and private, are allowed to buy the same. But, as data shows, India has not increased its oil export to the UK despite a substantial increase in imports from Russia. This suggests that this increased import was being used to add to India’s strategic oil reserves. These reserves are in place to cater to domestic demand in times of crisis, both man-made and natural. In February, Finance Minister Nirmala Sitharaman had announced that India would be purchasing Rs 50 billion worth of crude oil for its national strategic reserves. India’s strategic petroleum reserves get supplied from the Abu Dhabi National Oil Company (ADNOC) under an agreement between ADNOC and the Indian Strategic Petroleum Reserves Ltd (ISPRL), signed in January 2017. The ISPRL is an Indian government-owned company mandated to store crude oil for the country’s emergency needs. These strategic crude oil facilities, that hold about 37 million oil barrels, are spread across four locations in India and can sustain at least 10 days of normal consumption, which is 4.7 million barrels per day on a normal day. India oil companies hold reserves for more than 60 days as per normal consumption rate.
ONGC puts a date to start of KG gas, seeks $12 price
India’s top oil and gas producer ONGC has finally put a date for the much-awaited start of production from its KG basin gas field as it sought USD 12 price for the fuel it plans to deliver from June 15. Oil and Natural Gas Corporation (ONGC) will produce 0.4 million standard cubic metres per day – a fraction of the planned output from the block that sits next to Reliance Industries’ prolific KG-D6 area in the Bay of Bengal, from June 15 and will ramp it up to 1.4 mmscmd by February 5, 2024, according to tender document the firm floated, seeking bids for gas sales. ONGC’s director for production Pankaj Kumar had in March told PTI that the firm will start production of oil from KG-DWN-98/2 or KG-D5 block in the Krishna Godavari basin by May or June this year. A small amount of gas will also flow with the oil that comes out of the reservoir lying several hundred metres below the seabed. The company has now sought bids from users like city gas operators that sell CNG to automobiles and piped cooking gas to households, companies using gas to produce fertiliser or make electricity, LPG producers and traders, for the gas that will flow from June 15. ONGC asked companies to quote a premium ‘P’ that they are willing to pay over and above the rate arrived at by calculating 14 per cent prevailing Brent oil price plus USD 1 per million British thermal unit, the document showed.