JP Morgan Expects Brent Crude to Average $83 in 2024
JP Morgan has forecast an average price for Brent crude of $83 per barrel next year amid a stable market. The forecast is based on the analysts’ expectations of resilient demand for oil in the United States, strong demand growth in emerging markets, and stability in European markets. For 2025, JP Morgan analysts said they expected an average Brent crude price of $75 per barrel. As with many others, the forecast is based on expectations of substantial energy efficiency gains and growth in EV sales at the expense of internal combustion engine vehicles, leading to lower demand for fuels. At the same time, the bank also expects a weakening of jet fuel demand after the recent surge. In terms of total demand, for this year JP Morgan analysts expect growth of 1.9 million bod, weakening to 1.6 million bpd in 2024. “Despite sustained economic headwinds, we see demand … underpinned by robust EM, resilient US and weak but stable Europe,” the bank’s analysts wrote. “Demand composition will likely flip, with two-thirds of demand gains set to come from the overall economic expansion, while continued normalization of jet fuel would contribute the rest.” On the supply side, JP Morgan expects growth in non-OPEC production, which could undermine the cartel’s efforts to keep prices above a certain level. If non-OPEC supply growth is strong enough, it could push Brent below $70 per barrel. In this context, JP Morgan’s analysts said they expected OPEC+ to keep the lid on production to support prices. Meanwhile, prices fell earlier today, reversing gains made on Monday after a report saying OPEC+ was considering additional production cuts to push prices higher. Despite these plans, traders appear focused on demand uncertainty once again. Goldman Sachs had said on Monday that it was reasonable to expect deeper OPEC+ cuts when the cartel meets next, on November 26.
Plans afoot to build strategic natural gas reserve
India is drawing up a plan to build a strategic natural gas reserve with a capacity to store up to 4 billion cubic metres (BCM) of imported gas, which can be used in case of supply emergencies and to smoothen the domestic market, according to people familiar with the matter. After oil minister Hardeep Singh Puri recently gave a green signal to the idea of setting up the gas reserve, the oil ministry directed Oil and Natural Gas Corp (ONGC), Oil India and GAIL to jointly prepare a detailed feasibility report on the same, people said. The companies are expected to submit the report in three months. India has evaluated building strategic gas storage in the past as part of its energy security plan but didn’t go ahead with it due to its prohibitive costs. The geopolitics-driven frenzy in the global gas market last year, which disrupted India’s gas imports and forced some factories to cut production, has brought a strategic policy rethink, people said. The 3-4 BCM gas storage capacity being targeted now can cost $1-2 billion to build, the person cited previously said. India, which consumed 60 BCM of natural gas last fiscal year, aims to increase the share of gas in its energy mix to 15% by 2030 from the current 6%. A large multi-location storage, a well-laid pipeline network, and a mature gas exchange can help develop the domestic gas market. Large gas storage can also help India become the regional hub and supply to neighbouring countries like Sri Lanka, Bangladesh and Myanmar in the future, the person said. The feasibility report will present cost estimates, probable locations, construction timelines, and the business and financial models for the reserves, he said. Depleted wells of ONGC and Oil India could be used for the storage, he said, adding that ONGC has already identified two such wells in Gujarat while Oil India is aiming to do the same in the North East. The report is expected to suggest the most optimal storage model and answer questions on whether a strategic or commercial model or a mix of both would be suitable for the country. It would also offer details on the commercial model and the government support needed to make it financially viable, the person said. Who can be permitted to invest in such storage and how they can recover their investments will also be part of the report. India aims to become a gas-based economy, and, with gas consumption expected to balloon in the future, it would need storage to tide over the short-term market challenges. The country imports about half the gas it consumes. Major gas-consuming economies like Europe and China have large artificial gas storages, which help manage domestic demand.
Supreme Court upholds gas power plant’s entitlement to fixed charges
The Supreme Court of India (“Supreme Court”) in the case of Maharashtra State Electricity Distribution Company Limited v. Ratnagiri Gas and Power Pvt. Limited & Ors. upheld the decisions rendered by both Central Electricity Regulatory Commission (“CERC”) and the Appellate Tribunal for Electricity (“APTEL”) that Ratnagiri Gas and Power Pvt. Limited (“RGPPL”) is entitled to fixed charges for the duration the Maharashtra State Electricity Distribution Company Ltd. (“MSEDCL”) did not schedule electricity from RGPPL. MSEDCL did not schedule power from RGPPL (for a certain duration) as RGPPL executed an alternate arrangement with Gas Authority of India Ltd. (“GAIL”) for supply of Recycled Liquefied Natural Gas (“RLNG”), without taking MSECCL’s permission. RGPPL declared capacity for its gas power plant based on RLNG (to be) supplied by GAIL. The issue before CERC, APTEL and Supreme Court was whether MSEDCL should pay fixed charges to RGPPL for capacity declared based on RLNG (to be) supplied by GAIL. CERC and APTEL recognized that this alternate arrangement was executed due to shortage of domestic gas supply since September 2011. Both CERC and APTEL held that provisions of the power purchase agreement (“PPA”) between MSEDCL and RGPPL allowed RGPPL to declare capacity based either on liquid gas or RLNG and it was only for payment of variable charges that MSEDCL’s permission was required for executing agreements for gas supply/transport.
CONCOR ties up Indraprastha Gas to explore possibility of LNG/LCNG infra at terminals
Railway PSU Container Corporation of India Ltd has signed an agreement with Indraprastha Gas Ltd to explore the possibility of setting up LNG or LCNG infrastructure at its terminals in Uttar Pradesh and Gujarat. This strategic partnership aims to revolutionise the logistics sector replacing diesel with natural gas, the Container Corporation of India Ltd (CONCOR) said in a statement. “CONCOR and IGL have signed a memorandum of understanding (MoU) to explore the possibility of setting up LNG/LCNG infrastructure within the premise of CONCOR terminals. Initially, both LNG and LCNG facilities shall be installed at Dadri (Gautam Budh Nagar) terminal of CONCOR,” the statement said. CONCOR and IGL also agree to explore the possibility of transportation of LNG in future through railway rakes from LNG terminals near sea ports like Dahej in Gujarat to the desired locations within India. The MoU signifies the commitment of both CONCOR and IGL to reduce carbon emissions and promote a cleaner, greener future for the transportation industry. LNG trucks emit significantly lower levels of greenhouse gas emissions compared to conventional diesel trucks, contributing to a cleaner environment and aligning with global sustainability goals. As part of the MoU, both entities shall jointly examine the possibility of using LNG-fired engines in place of existing diesel-fired engines, in various terminals of CONCOR. Sanjay Swarup, Chairman & Managing Director CONCOR said, “CONCOR is dedicated to embracing innovative solutions that not only enhance operational efficiency but also align with our responsibility towards the environment. The partnership with IGL for LNG truck refuelling is a testament to our commitment to a greener future. K K Chatiwal, Managing Director, IGL, stated, “This collaboration marks a significant step forward in our commitment to environmental sustainability. By creating the required LNG infrastructure, we aim to set new benchmarks for eco‐friendly transportation in the industry.”
ONGC Set To Resume KG Basin Production In Boost For India’s Energy Self-Reliance
The state-owned Oil and Natural Gas Corporation will start production of crude oil from its flagship deep-water project in Krishna Godavari Basin next week. The production will help India save nearly Rs 110 billion per year. India imports 85% of its crude oil requirements and about half of its natural gas needs. ONGC also plans a capital expenditure of Rs 1000 billion for petrochemical projects by 2028-2030. The investment would be used for two separate projects. The movement in KG Basin is considered very significant, say top officials of the Ministry of Petroleum and Natural Gas. The production from its much-publicised, deep-sea asset is expected to be a shot in the arm for the explorer and help reverse the low productions bothering the state-owned hydrocarbon behemoth. The increase in domestic output will also help save outflow of precious foreign exchange on import of crude oil. At current Brent crude price of $77.4, this output alone will save Rs 290 million every day (at Rs 83.29 to $1) or a staggering Rs 106 billion on an annual basis. Initially, oil production from the basin was scheduled to start from November 2021, but the deadline was delayed several times. In short, this will be ONGC’s first significant oil producing asset on the East Coast. The KG-DWN-98/2 block has a number of discoveries that have been clubbed into clusters. It is situated 35-km off the coast of Andhra Pradesh in Bay of Bengal with water depths up to 3,200 metres. The discoveries in the block are divided into three clusters — 1, 2 and 3. Cluster 2 is being put to production first. Besides crude oil output, 7-8 mmscmd (million metric standard cubic metres per day) of gas will start to flow from the middle of calendar 2024. The hydrocarbon giant, it is reliably learnt, will press in service as many as 75 rigs. ONGC plans to start producing from 3 to 4 wells in the initial phase, when the production could be 8,000 to 9,000 barrels per day. The company actually aims to drill 541 oil wells in FY24, up from 461 wells drilled in the last fiscal. The production from the KG-DWN-98/2 block will add to India’s domestic production and help reduce the dependence on imports to some extent. India currently produces approximately 600,000 barrels of oil per day. Thus, at peak, the cluster-2 project will account for 7% of India’s output. This is the start and peak oil production of 45,000 barrels per day is expected sometime in financial year 2024-25, said a top ministry official. At the peak output of 45,000 barrels per day, this will be the third most prolific offshore asset for ONGC after Mumbai High and Bassein & Satellite fields, both on the West Coast, the official said. With a combination of fresh output and enhanced recoveries, ONGC group’s oil production is likely to rise to top 25 million tonnes in FY25 compared to 21.5 million tonnes in FY23. ONGC has seen a fall in its crude oil output as most of the assets are mature and natural decline has set in. Even as ONGC is investing in technology for enhanced oil recovery and improved oil recovery, the commencement of output from new assets like the KG block will certainly reverse the trend of falling output. In Q2, ONGC’s consolidated net profit soared 142.4% at Rs 165.53 billion. Earlier, ONGC had announced that it will bring in an equity partner in ONGC Petro additions Ltd. or OPaL by financial year 2026-2027. ONGC had then said it wants to infuse Rs 183.65 billion in OPaL, and make OPaL a joint venture. OPaL is a joint venture between ONGC, GAIL (India) and Gujarat State Petroleum Corporation Ltd.
India sets first benchmark price for biomass pellets
India has rolled out its first benchmark price for biomass pellets to promote capacity additions and encourage co-firing with coal. November 21, 2023: India’s power ministry has announced a benchmark price of 2.27 rupees/1,000 kcal ($0.027/1,000 kcal) for non-torrefied biomass pellets applicable to northern India excluding the national capital region. The pellets should have moisture content below 14pc and a gross calorific value between 2,800-4,000 kcal/kg. The price excludes goods and services tax and transportation costs, the ministry said recently. The price, set up on the recommendations of a price benchmarking committee, is set for a year effective 8 November. Thermal power plants in the region are advised to adhere to this benchmark price. The ministry amended a policy for the country’s utilities to co-fire biomass with coal in June, by delaying the start date and announcing the setting up of a committee to implement price benchmarking and biomass purchases. Indian utilities in the original policy, announced in October 2021, were told to co-fire 5pc biomass from October 2022, in a move aimed at reducing coal consumption and curbing pollution. Co-firing was originally set to increase to 7pc from October 2023 for two categories of power plants — those with a bowl mill or with a ball and race mill. The revised policy, announced by the power ministry on 16 June, requires all coal-based thermal power plants with bowl mills to use a minimum 5pc blend of biomass pellets made primarily from agricultural residue with effect from the start of India’s 2024-25 fiscal year from 1 April, increasing to 7pc from the start of 2025-26. Plants with ball and race mills should co-fire the same percentages of torrefied biomass pellets made from agricultural residue during the same timeframe. The policy for co-firing will be valid for 25 years or until the useful life of a power plant, whichever is earlier, the power ministry previously said. The extent of co-firing will be reviewed periodically. India has surplus biomass supplies of about 230mn t/yr, largely from agricultural residue, the power ministry previously said. The surplus has prompted the country to look at the potential for exporting biomass. The government amended its trade policyin February this year to allow exports of biomass, as the country eyes more investment in biomass manufacturing capacity and technology.