Budget: Govt puts off equity infusion in state oil companies to next fiscal
The government has pushed its plan to infuse equity into Indian Oil, Bharat Petroleum, and Hindustan Petroleum to the next fiscal year and slashed the proposed amount by half to ₹15,000 crore, according to the budget document. This means the planned rights issue by Indian Oil and BPCL will be deferred to the next fiscal year. Similarly, the preferential allotment plan by HPCL, where the government doesn’t have a direct equity stake, will also get delayed. The government has also scrapped its plan to spend ₹5,000 crore on filling the strategic petroleum reserve (SPR). Crude oil has been very volatile this fiscal year and is currently trading around $80 per barrel, making it harder for officials to make purchase decisions. For the next fiscal year, the government has allocated ₹15,000 crore for equity infusion into state oil companies and ₹400 crore to pay for the construction of new SPRs. No allocation has been made for filling SPR. In the current year’s budget, the government had allocated ₹30,000 crore for equity infusion into oil marketing companies and ₹5,000 crore for the purchase of crude oil to fill the SPR. Strong profits at oil companies this fiscal year made the government change its mind on equity infusion, according to multiple people familiar with the matter. Indian Oil, BPCL, and HPCL have reported a combined profit of ₹69,000 crore for the nine months ended December as against a loss of ₹18,600 crore in the year-earlier period. The public aim of the planned equity infusion has been to help state companies pursue energy transition projects. However, it has been widely believed that it is no more than state support to companies that incurred losses in the previous fiscal year due to their inability to raise domestic pump prices in line with international rates. But with oil companies flush with cash now, the argument for fund infusion has weakened. Oil companies themselves have not been too eager to receive equity infusion from the government. Equity also needs to be serviced and oil companies can easily borrow from the market at competitive rates, many executives had previously told ET.
Export of petroleum products falls to 15-month low in Jan
India’s export of petroleum products fell to a 15-month low at 1.02 million barrels a day in January as the escalating tensions over the Red Sea prompted exporters to hold back shipments last month, data from data intelligence firm Kpler showed. January export volumes were the lowest since October 2022, when the country’s export of refined oil products stood at around 887,000 barrels a day, it added. Moreover, India’s shipments to Europe declined in January as many tankers had opted for the longer route via the Cape of Good Hope for the delivery, resulting in higher shipping costs. Africa’s Cape of Good Hope shipping route can extend voyages for up to 14 days or beyond. “To take just one specific example, the route from Jamnagar to Rotterdam takes 24 days via the Suez Canal and 42 days via the Cape of Good Hope,” Viktor Katona, lead crude analyst at Kpler said. The United Arab Emirates, Netherlands, and Malaysia were among the top buyers of Indian petroleum products in January including diesel, jet fuel, gasoline, and naphtha among others. While UAE imported 103,690 barrels a day of refined fuels from India last month, Netherlands imported 75,411 barrels a day. Indian exports to Malaysia stood at 64,098 barrels a day. Even with Russian oil cargoes departing from North Sea and Black Sea ports taking the Suez Canal-Red Sea route to India and China, its major buyers, have been secured so far, India’s exports have been hit transiting the Suez Canal. The country’s export of petroleum products to Europe had dropped to just 100,000 barrel a day from 350,000-400,000 barrel a day in November and December, Katona had said. “Many tankers have instead opted for the longer route via the Cape of Good Hope for the delivery which has resulted in increased shipping costs,” he said. The shipping cost has increased by 60-70%.
Biden Admin Announces Freeze On LNG Exports For Up To 15 Months
The Biden Administration has announced a freeze on LNG export permits for 15 months to non-free trade agreement countries, arguing this period will be used to evaluate the impacts of LNG exports on energy costs, U.S. energy security and climate change. The move is likely to impact India if the freeze extends beyond a couple of months. For India, the US is the third largest importer of LNG. In September 2023, India imported 24,452 million cubic feet (MCF) of natural gas from the U.S., a steep jump from zero MCF in February 2016. India’s import of LNG from the US has jumped multiplefold post-COVID-19 era. Informed sources said there might be an impact on the export of LNG from the U.S. to India if the freeze extends beyond a couple of months The Department of Energy, in a statement last week, said that a temporary pause on pending applications will not affect already authorised exports, which total 48 Bcf/d. It will also not impact our ability to supply U.S. allies in Europe, Asia or other recipients of already authorised U.S. exports. “This administration is committed to the affordability of energy and economic opportunities for all Americans; strengthening energy security here in the US and with our allies; and protecting Americans against climate change and winning the clean energy future,” said U.S. Secretary of Energy Jennifer M Granholm. “This practical action will ensure that DOE remains a responsible actor using the most up-to-date economic and environmental analyses,” she said. However, 18 Republican Senators in a letter to the Biden Administration on Thursday opposed such a move. “American LNG exports have enhanced our geopolitical influence and international energy security across the board since 2016. In addition to Europe, US LNG has a significant impact on energy security in Asia. Japan and South Korea have been the top two destinations for importing US LNG,” wrote the 18 Republican Senators led by James Lankford, Cynthia Lummis, and Bill Cassidy. “Taiwan also imports U.S. LNG, and India is rapidly increasing its imports as well. According to EIA, the four Asian countries accounted for one-fifth of U.S. LNG exports between January and October of 2023. Stable and secure supplies of U.S. LNG are critical to their energy security,” the 18 Senators wrote. The Biden Administration, they alleged, has already made a habit of slow-walking LNG permits, with the average permit taking more than 400 days, a large escalation from the 60 days of the Trump Administration and 90 days of the Obama Administration. “LNG exports from the United States are also uniquely suited to decrease global emissions. Both China and India, two of the largest polluters globally, are top destinations for US LNG exports. Efforts to limit the export of LNG from the United States thus directly undermines the ability to reduce emissions through the use of clean-burning natural gas,” they said. Limiting US LNG exports does not have any impact on the world’s demand for natural gas. Instead, countries, including Russia and Iran, will simply produce more energy that is subject to less stringent environmental regulations. As a result, limiting American LNG exports in the name of stopping climate change could do just the opposite and add to global emissions, Senators wrote. However, climate change leaders across the U.S. have applauded the Biden Administration for such a freeze. “This decision is a major win for communities and advocates that have long spoken out about the dangers of LNG and makes it clear that the Biden administration is listening to the calls to break America’s reliance on dirty fossil fuels and secure a livable future for us all. Strong leadership, that rejects fossil fuel industry fear-mongering, is our best bet to protect communities and ensure energy is affordable,” said Ben Jealous, executive director, Sierra Club.