GAIL infuses Rs 2,100 crore in JBF Petrochemicals
India’s largest gas firm GAIL has infused Rs 2,100 crore in insolvent private-sector chemical company JBF Petrochemicals Ltd that it had acquired in bankruptcy proceedings. The firm had in March won bankruptcy court approval for taking over JBF. In a stock exchange filing, GAIL (India) Ltd said it has “infused Rs 2,101 crore (equity – Rs 625 crore and debt – Rs 1,476 crore)” in the committed bankruptcy resolution plan. “Accordingly, JBF has become a wholly-owned subsidiary of GAIL with effect from June 1, 2023,” it said. GAIL had outbid a consortium of Indian Oil Corporation (IOC) and Oil and Natural Gas Corporation (ONGC) in the insolvency process run by IDBI Bank to recover Rs 5,628 crore of dues to financial and operational creditors. JBF Petrochemicals was incorporated in 2008 to set up a 1.25 million tonne per annum capacity purified terephthalic acid plant at Mangalore Special Economic Zone. IDBI and other banks had lent JBF money to build the PTA plant for USD 603.81 million with technology support from BP and 50,000 tonnes per month of the feedstock of paraxylene from state-controlled chemical producer OMPL. The plant, which is a backward integration project for JBF Industries’ polyester plants, was commissioned in 2017 but stopped operations after the company defaulted on its loans in the same year. The default led to the lenders dragging it to corporate insolvency and bankruptcy (IBC). Lenders and operational creditors, including employees, claimed Rs 7,918 crore in dues but only Rs 5,628 crore in dues, including Rs 712 crore towards operational creditors were admitted. Initially, three parties – a consortium of IOC-ONGC, MPCI Pvt Ltd and GAIL – submitted bids in August 2022 to acquire JBF. They were asked to improve their financial proposals and cure defects. At the last date on September 22, 2022, revised resolution plans were received only from the IOC-ONGC consortium and GAIL, the NCLT order said. GAIL has an existing petrochemical plant at Pata, Uttar Pradesh, with a polymers production capacity of 8,10,000 tonnes per annum. It is aiming to build a propane dehydrogenation plant in Usar, Maharashtra, by next year, which will have a nameplate capacity of 5,00,000 tonnes a year of polypropylene.
India’s Imports Of Russian Oil Hit A Record High
India’s oil imports from Russia continue to surge as cheaper Russian crude exports find more and more buyers in the world’s third-largest crude oil importer. India shattered its previous records of imports of Russian crude and took in May 1.96 million barrels per day (bpd) of crude from Russia—an all-time high, according to data from energy cargo tracker Vortexa. India’s Russian oil imports alone were higher than the 1.74 million bpd in India’s combined imports from the next four largest suppliers – Iraq, Saudi Arabia, the United Arab Emirates (UAE), and the U.S. Russian oil accounted for a massive 42% of all Indian crude imports, compared to negligible volumes India had imported before the Russian invasion of Ukraine. A year since the war began, India has turned from a marginal buyer of Russian crude to the most important market for Moscow’s oil alongside China. Indian refiners, not complying with the G7 price cap and looking for cheap opportunistic purchases, have snapped up many of the Russian Urals cargoes, which used to go to northwest Europe before the EU embargo. Record imports of cheap Russian crude into India have undermined OPEC’s share of supply so much that OPEC’s share of all Indian oil imports has hit the lowest in at least 22 years. Russia has been India’s top crude oil supplier for months now and overtook Iraq as the top supplier for the 2022/2023 fiscal year. Russia accounted for nearly a fourth of India’s crude oil imports in 2022/2023 as the world’s third-largest crude importer welcomed on average 1.6 million bpd of Russian crude out of a total of 4.65 million bpd of imports. In recent months, India’s spot purchases of crude from the Middle East have fallen, as cheaper Russian spot barrels are making their way to Indian refiners. Indian Oil, the largest refiner in the country by capacity, is committed to its term deals with Middle Eastern producers, but spot purchases from the Middle East have dropped amid the Russian competition, Shrikant Madhav Vaidya, chairman of Indian Oil, said last month.
Russia’s share in oil imports at record 42%
Russian oil accounted for 42% of India’s total crude imports in May, up 15% month-on-month, defying analysts’ expectations of a slowdown due to the Chinese competition. India imported a record 1.96 million barrels per day (mbd) from Russia in May, according to the energy cargo tracker Vortexa. This was more than the combined imports of 1.74 mbd from the next four largest suppliers – Iraq, Saudi Arabia, the UAE and the US. Supplies from Iraq, the UAE and the US increased marginally in May but Saudi exports to India fell nearly a fifth month-on-month. India’s overall crude imports expanded 1.5% in May. “India has wrestled more Russian crude supplies from its strongest contender, China, in May and could possibly set new records again in June/July with refiners’ voracious appetite for the discounted barrels,” said Serena Huang, an analyst at Vortexa. Chinese imports of seaborne Russian oil increased 6.5% month-on-month to 1.4 mbd in May while European imports rose 72% to 355,000 barrels per day (bpd). China also imports a substantial volume from Russia using pipelines. The share of Urals in India’s imports of Russian crude remained steady at 71% in May. Urals is the flagship Russian crude that has almost always been available below the G7 price cap of $60 per barrel. Imports of Varandey and Sokol, two other Russian grades, increased in May. Urals is currently trading around $56 per barrel while Sokol is available for around $62. Indian refiners have been paying in US dollars for Russian oil priced below the G7 cap while using the UAE’s Dirham for higher-priced trades. India’s imports of refined products from Russia increased 40% to 174,000 bpd, with private refiners importing almost all of it. Naphtha, diesel and petrol accounted for less than 40% of the imported refined products. India’s fuel exports to Europe fell 12% to 236,000 bpd on lower overall demand in the continent and higher supplies from the US. India’s exports to the US more than doubled to 118,000 bpd from 50,000 bpd, spurred by the summer driving season in the world’s largest oil consumer.
U.S. Crude Joins Biggest Oil Benchmark
Starting today, U.S. oil will be part of the Brent crude basket that underlies the world’s most traded benchmark contract. It will be the first non-European grade included in the basket, highlighting the change that the U.S. shale revolution brought about for the global oil market. “Since the restart of U.S. crude exports in 2015, WTI Midland has become a baseload grade for European refiners and a core part of the North Sea oil market,” Vera Blei, who is in charge of oil market price reporting at S&P Global Platts, said in 2020. At the time, she added that the inclusion of WTI to the Brent basket “would provide additional volume and ensure the continued robustness of Dated Brent for the next decade and beyond.” Bloomberg reported on the ratings agency’s plans to include U.S. crude in the Brent benchmark three years ago, but these plans understandably lost the spotlight to Covid. But now that the pandemic is not the number-one news everywhere, S&P Global Platts’ plans re-entered the news space and, beginning today, the change is a fact. Brent used to be made up of five oil grades, produced at five North Sea fields: Brent, Ekofisk, Troll, Forties, and Oseberg. But the combined production of these five fields has fallen to less than 700,000 bpd from some 850,000 bpd in late 2020. Meanwhile, U.S. crude oil sold abroad has soared by more than 700% in less than ten years. From about half a million barrels daily right after the export ban was lifted at the end of 2015, to date, U.S. crude oil exports have expanded to over 4 million barrels daily. U.S. crude arriving in Europe specifically has topped 1 million barrels daily, reaching 1.25 million bpd in March. This is unlikely to change anytime soon as the EU, to its own displeasure perhaps, still uses quite a lot of oil and has to get it from somewhere that is not Russia. What better source than the U.S.? “WTI Midland is the best candidate for this because it already has a fairly similar refining slate to most of the North Sea grades,” said S&P Global’s director for crude and fuel oil markets in April, speaking to Reuters. It is also the best candidate because its production has been growing strongly in the past decade, unlike the production of Brent, Ekofisk, Troll, Forties, and Oseberg. By including WTI Midland in the Brent basket, S&P Global will make that basket more accurately representative of the physical oil trade situation. The more interesting part, however, is how the addition of WTI Midland would affect prices. Some analysts argue that, because it is cheaper, the addition of the U.S. crude will bring overall Brent prices down with it. Others note that the addition would increase the influence of U.S. events on global oil prices. “Bottom line for Brent is that it will be much more influenced by U.S. fundamentals such as Strategic Petroleum Reserve releases and Permian production,” Rebecca Babin, senior energy trader at IBC Private Wealth US, told Reuters in April. “Once you become a benchmark, you have influence over all the other grades of crude,” Surrey Clean Energy director Adi Imsirovic told the Wall Street Journal this week. This influence will continue, not only because there is now a U.S. crude grade added to the Brent benchmark. It is because U.S. oil production, even at a slower growth rate, will continue to be much stronger than European production. After all, Britain’s potential future Prime Minister just vowed to ban new oil and gas licensing for the North Sea if his Labour Party wins the next elections. Perhaps in the future, Brent crude will become even more international.
Saudi Aramco cuts June propane price by $105/mt to $450/mt
Saudi Aramco has cut June propane price by $105/mt month on month to $450/mt. This is on the back of ample supplies in Middle East and US and low petrochemicals demand from China, according to reports. This would be implemented in India from July. Hence, July propane would become cheaper by 17-18 percent versus Gujarat gas.
Nepal and India agree to construct two petroleum pipelines for smooth supply of petroleum products
An agreement has been reached between Nepal and India for the construction of two important pipelines in the ongoing India visit of Prime Minister Pushpa Kamal Dahal ‘Prachanda’. India would provide around Rs 17 billion for the same. Two petroleum pipeline projects would be constructed while it while Nepal has to construct a storage facility at its own investment. The government of Nepal has put the construction of petroleum pipeline in top priority in order to reduce huge chunk of money the country has been spending in supply of petroleum products. Two petroleum pipelines– from Siliguri of India to Jhapa, Nepal; and from Amalekhgunj of Bara to Lothar of Chitwan would be constructed for easy and smooth supply of petroleum products. Similarly, a storage would be constructed in Jhapa. Although Nepal Oil Corporation and Indian Oil Corporation had been holding discussions for the construction of the pipelines for long, no agreement was reached in this regard. An agreement has been reached in the government-level to forward these projects in course of India visit of Prime Minister Dahal now. According to Executive Director of Nepal Oil Corporation, Umesh Prasad Thani, two pipelines and a terminal of Jhapa would be constructed by India at grants. The NOC had been saying that Siliguri-Jhapa, Amalekhgunj-Lothar petroleum pipelines and storage facilities in Jhapa and Chitwan would be constructed and study for the same had already been conducted. It is believed that the construction of projects would be accelerated after today’s agreement. The total cost of these four projects is equal to Rs 17 billion as per the report jointly prepared by NOC and IOC in 2021. However, the cost may increase slightly due to price hike at international level. According to NOC, the distance of Amalekhgunj-Lothar pipeline is 62 kilometer while Siliguri-Jhapa pipeline is 50 kilometer. The capacity of Jhapa storage facility would be 42,000 kilolitres and of Lothar terminal 103,150 kilolitres.