GAIL, IGL walk away with Reliance gas; bid at USD 11 per million BTU
State-owned gas utility GAIL (India) Ltd and the nation’s largest city gas operator Indraprastha Gas Ltd have walked away with most of the coal seam gas that Reliance Industries Ltd auctioned, sources said. Reliance earlier this month conducted an e-auction for sale of 0.90 million standard cubic metres per day of gas it will produce from coal-bed methane (CBM) block SP (West)-CBM-2001/1 in Madhya Pradesh. Users have been asked to quote a premium they are willing to pay over and above 12.67 per cent of the dated Brent crude oil price, according to a tender floated by the company. The auction saw GAIL and IGL walk away with most of the gas, offering as much as USD 11 per million British thermal unit price, two sources with direct knowledge of the matter said. GAIL won 0.63 mmscmd of gas in the auction while IGL picked up 0.14 mmscmd, they said. In the auction, the gas price was set as higher of 12.67 per cent of dated Brent plus premium ‘V’; or the government-declared monthly price for conventional gas. The government-mandated price for January is USD 7.85 per mmBtu. While Reliance had set the starting bid price of ‘V’ at USD 0.50 per mmBtu, bidders quoted USD 0.78 to walk away with the coal bed gas, they said. At the current Brent crude oil price of USD 80 per barrel, the gas price comes to USD 11 per mmBtu (12.67 per cent of USD 80 is USD 10.1 per mmBtu. Added to this is the bid value of ‘V’ of USD 0.78, which takes the gas price to USD 10.9 per mmBtu). The e-auction happened on February 2. The gas supply in the contract is for 1 to 2 years beginning April 1. The pricing Reliance is seeking is modified from the March 2022 auction. In that auction, it had sought bids at a premium over the base of 13.2 per cent of Brent crude oil price. In March 2022, Reliance sold 0.65 mmscmd of CBM at a USD 8.28 per mmBtu premium over the prevailing Brent crude oil price. Brent oil was trading above USD 115 per barrel at that time. It has now slipped to USD 78 a barrel. Last month, state-owned Oil and Natural Gas Corporation (ONGC) sought a premium over the government-dictated gas price of USD 7.82 per mmBtu for the gas it plans to produce from a CBM block in Jharkhand. ONGC sought bids from users for the sale of 0.05 mmscmd of gas from the North Karanpura coal-bed methane (CBM) block in Jharkhand for three years. Users were asked to quote a premium they are willing to pay over and above the monthly domestic natural gas price that the oil ministry’s Petroleum Planning and Analysis Cell (PPAC) notifies, the tender document showed. PPAC every month declares a price for the majority of domestically produced natural gas. This price is 10 per cent of the monthly average of the basket of crude oil that India imports. For the month of February, this price comes to USD 7.85 per million British thermal units. This price in the ONGc tender was marked as a reserve gas price. While the government sets prices for two-thirds of the gas produced in the country, CBM gas enjoys pricing freedom where sellers are allowed to discover the market rate. Gas extracted from below ground is used to produce electricity, make fertilisers or turned into CNG for sale to automobiles and piped to household kitchens for cooking purposes.
BPCL plans an oil trading desk in Singapore, Dubai
Bharat Petroleum Corporation (BPCL) is planning to open a trading desk in Singapore or Dubai to expand its global reach, sourcing, and trade in crude oil as well as finished products, according to industry officials aware of the development. BPCL will set up the desk this year, sources added. The Singapore desk, sources said, would also help the company trade in energy derivatives and facilitate international financing. In the international oil market, products are bought and sold through trading desks. The desk is manned by a licensed trader and trades take place instantly. BPCL did not reply to an email sent. “BPCL is planning to set up a trading desk as being in the center of action and knowing the ecosystem, helps you clinch better commodity deals,” said an industry official aware of the talks. A trading desk helps companies procure crude oil from the international market on a real-time basis, helping cut import prices by locking in the best price and quality. Officials added that the Russia-Ukraine war disrupted the supply of crude oil in the market, forcing Indian refiners to look for crude sourcing options beyond the Middle East, which has been the major source of oil supplies to Indian refiners.”A trading desk will give BPCL the flexibility to enter and exit markets faster as operations are 24/7. This will enable faster turnaround on crude oil trading and ensure flexibility,” the official added. Last fiscal, BPCL procured 38.2 million metric tonnes per annum of crude for its three refineries in Mumbai, Bina (Madhya Pradesh), and Kochi. The refineries processed five new grades of crude oils which were procured for the first time by BPCL, according to the company’s FY2023 annual report. India is the world’s third-largest consumer of crude oil and depends on imports to meet over 85% of its requirements. India’s public sector refiners Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL), and Hindustan Petroleum Corporation (HPCL) source 70% of crude oil on term contracts and the rest on a spot basis. This helps companies diversify their crude supply basket and address market volatility. Term contracts are long-term oil purchase deals with fixed volumes and pricing and spot contracts are immediate purchases from suppliers.
India fuel demand surges, refiners’ margins to stay strong, mid-single-digit growth in India’s petroleum products: Fitch
India’s demand for petroleum products is expected to increase by a mid-single-digit percentage in the financial year ending March 2024, following a 10 per cent post-pandemic recovery in 2022-23, according to Fitch Ratings, as reported by ANI. Both petrol and diesel sales saw robust 4-6 per cent increases in the first nine months of 2023-24, driven by heightened economic activities in the agriculture and power sectors, as well as a surge in holiday travel and auto sales. Fitch anticipates that Indian refiners’ gross refining margins (GRM) will moderate during 2024-25 from the strong levels expected in 2023-24 but will remain above mid-cycle levels. By 2025-26, a shift closer to mid-cycle levels is foreseen, with resilience bolstered by the escalating demand for end-products. “The gradual normalisation of the crude supply mix away from Russian imports is likely to narrow GRMs, although we expect margins to stay strong, supported by the rising demand for end-products,” the rating agency said. In the upstream segment, domestic oil and gas production has modestly increased, driven by a 5 per cent rise in gas production in the first nine months of 2023-24. “We expect production to continue to rise moderately as technological investments in enhanced oil recovery techniques will offset natural declines,” the rating agency added. Fitch forecasts that the oil and gas sector’s high capex intensity will continue in the medium term, particularly with upstream companies investing in production enhancement.
India and Russia in talks over long-term oil deals – Bloomberg
State oil refiners in India are negotiating long-term agreements for supplies of crude with Russian energy giant Rosneft, Bloomberg reported this week, citing people with knowledge of the matter. According to the report, Indian Oil, Bharat Petroleum, and Hindustan Petroleum are taking part in the discussions, aiming to sign deals for a steady supply instead of one-off purchases, which is expected to make them less exposed to competition. The refiners reportedly want to secure deliveries of around 500,000 barrels per day of Russian oil in the contracts. They also plan to include clauses that would protect them from penalties in case of payment issues and delivery delays. Indian Oil already has a contract with Rosneft from 2020, under which the refiner was to import 2 million tons of Urals grade crude from the Russian company per year. The deal was extended in 2023, with the two companies agreeing to substantially increase oil deliveries and diversify oil grades shipped to India. The other two state refiners do not have existing long-term contracts with Rosneft. Neither company has so far responded to requests for comment. India, the world’s third-largest crude oil importer, has been ramping up imports of Russian oil over the past two years despite Ukraine-related sanctions on Moscow, taking advantage of discounts that Russia offered to secure new markets after losing buyers in the West. Last year, Russia exported an average of 1.75 million barrels of crude to India per day, according to Kepler data analyzed by The Independent, dominating the Indian market as the primary supplier. While there was a drop in India’s imports of Russian oil at the end of last year, reportedly due to payment issues linked with the sanctions, analysts say that Indian demand remains strong. Speaking to RT on the sidelines of India Energy Week on Thursday, Oil Minister Hardeep Singh Puri said that Russian oil currently accounts for 30%-34% of India’s total imports of oil, up from just 0.2% before the start of the Ukraine conflict in February 2022. He pledged that India will continue to buy Russian crude as long as the prices are favorable.