India turns a deaf ear to West for paying Russia more for its own gains
A resurgent, pricier Brent Crude means India is lapping up more Russian oil, despite the latter trading well above the Western price cap of $60. A fragile global economy is worryingly staring at the prospects of a recession, and analysts say there is more tightness ahead in the oil market. And India, the third-biggest buyer of oil, cannot afford that. Indian oil minister Hardeep Singh Puri said on October 3 that India will not buy Russian oil if it breaches the Western cap. In December, the Group of 7 countries and various others implemented a maximum price of $60 per barrel for Russian crude oil. While buyers can pay more, they would lose access to essential services provided like insurance by companies in the countries that signed the agreement. The objective was to ensure the continuous flow of Russian oil while also reducing the Kremlin’s revenue by pressuring it to accept reduced prices. ET reported recently that with China seeing a lower intake of Russian oil, Indian refiners bought more of the Russian supply. India is currently buying Russian oil at nearly $80 per barrel, around $20 above the G7-imposed price cap. Russia supplied 1.57 million barrels per day in September, up from 1.44 mbd in August, and increased its share in Indian crude imports to 38 per cent from 33 per cent a month earlier, according to energy cargo tracker Vortexa. Expensive, but still cheaper India has long argued that since it is a matter of energy security, it would purchase any oil that is cheaper, a stance it has relied on ever since it upped its reliance on Russia for oil. Since mid-July, Russia’s primary export grade Urals, has been trading at levels exceeding the Western price limit of $60 per barrel due to production reductions implemented by Organization of Petroleum Exporting Countries and its allies led by Russia, known as OPEC+. Reports say that production cuts mean discounts on Urals have narrowed, yet make for a better proposition given the expensive alternatives. Brent crude prices went up to $95 a barrel in recent weeks, a rise of about 27 per cent since the end of June. India, like many other developing nations has made its dismay clear. Puri has long called for OPEC+ to consider how their policies affect oil-consuming countries. “The opening position with any producing country – they will tell you, ‘we don’t deal with prices,’ to which my response is that: if you deal with the amount of energy that you release – or stocks that you release – you may not want to, but you do affect prices.” Despite the deep squeeze in the oil market, “OPEC+ has the right policy,” news agency Bloomberg quoted United Arab Emirates Energy Minister Suhail al Mazrouei as saying on Monday. Saudi Arabia said on Wednesday it will keep its extra 1 million bpd production cut in place until the end of 2023, while Russia said separately it will maintain its reduction of 300,000 bpd until the end of December, thereby tightening the market further. A costlier brent: calamity The global economy has remained wary of a probable recession of late due to geopolitical developments and monetary tightening. Furthermore, a resurgent crude could make central bankers’ jobs even more difficult, something that the Reserve Bank of India recognises. The Rupee has been losing its value against the dollar steadily. Reports say that when it comes to the Rupee, oil is even more expensive than when it hit $150 a beryl in 2008. If the Brent were to get any more expensive, the dollar would lead to a rise in the USD, making RBI’s fight against inflation tougher. For most of 2022 and 2023, India has bought Russian oil at heavy discounts. But those discounts have now weakened. Reports say that Russian flagship Urals crude was selling at around $40 barrels below Brent. Ural is now selling at around just $10 under. For RBI Governor Shaktikanta Das & co, the situation is already getting a tad complex. A stronger dollar could also lead to demand destruction, something that the Indian officials have alluded to. “High prices lead to demand destruction,” Pankaj Jain, secretary at the Ministry of Petroleum and Natural Gas said in an interview recently. “Our viewpoint is we are finding these prices difficult to pass, difficult to continue to meet our energy needs. Higher Brent impacts India’s current account deficit (CAD) as well. Since large payments have to be made in dollars to buy crude, the rupee takes a hit vis-a-vis the US dollar. According to recent data from the RBI, India’s CAD increased significantly, soaring seven times to reach $9.2 billion during the April-June quarter. This is a substantial rise from the previous quarter, which recorded a CAD of $1.3 billion. The ongoing rise in oil prices and a decrease in global market demand, which has led to a slowdown in exports, are anticipated to affect India’s fiscal math further.
IndianOil GPS Renewables Partners To Setup Compressed Biogas Plant
GPS Renewables, a Bengaluru-based biofuels technology Company, has entered into a strategic partnership with the Indian Oil Corporation (IOCL) to set up Compressed Biogas Plants (CBG Plants). Under the agreement, subject to approval from NITI Aayog and DIPAM, both entities would have a 50:50 equity stake in the proposed joint venture. GPS Renewables, through its project development arm GPSR Arya, aims to expand BioFuel projects across India. Currently, GPSR is incubating projects nationwide, with a particular focus on the northeast and southern states, where biogas projects are less prevalent. From incubating one of India’s largest biogas plants in Indore to becoming a leading name in the industry, this partnership with IOCL signifies a significant step forward. Speaking on the partnership, Mainak Chakraborty, CEO and Co-Founder of GPS Renewables, said, “This proposed joint venture with Indian Oil Corporation is a significant milestone in our commitment to advancing biofuel technology. Together, we aim to accelerate the deployment of Compressed Biogas Plants across the country, bringing us closer to a greener, more sustainable future. We look forward to working hand in hand with IOCL to swiftly establish multiple projects, demonstrating the maturity of the biogas sector.”
Russia’s diesel export curbs can be a windfall for India
The diesel export ban by Russia opened a unique opportunity for India to shore up export revenues in times of falling global merchandise trade and rising crude oil prices. The benefit may be felt in managing the current account deficit, which was 1.1 percent in June and was expected to be wider. The export of refined petroleum products at a premium may help arrest the trend. Bloomberg reported on September 30 that “Russia plans to reduce diesel exports from its key western ports to almost nothing next month (October)”. Notably, October is the peak winter stocking period which lasts up to the first or second week of November. The ban came on the back of a cut in crude production by the Organisation of the Petroleum Exporting Countries (OPEC) in July. Crude prices (WTI) last reached a decadal high of nearly $116 a barrel on June 6, 2022. However, it failed to hold the peak and declined steadily to settle at around $70 a barrel during the June quarter of this fiscal. India played a crucial role in bringing down the prices in 2022 by buying Russian crude at a deep discount, ignoring the US sanction. Elevated Prices The situation has been in reverse gear lately. Firstly, the reopening of China (after prolonged Covid lockdowns) and fast growth in India increased the oil demand. The discount on Russian crude was reduced dramatically. The production cut by OPEC made the market tighter. Crude is now nearing the $100 a barrel mark.
Hydrogen buses can pave the way for energy security in India’s heavy-duty mobility sector
India aspires to be energy-independent by 2047, the centenary year of its freedom. This entails a promising multiple fuels policy and ambitious targets for electric vehicles as well as ethanol blending in petrol and biodiesel. The recent launch of hydrogen buses or Fuel Cell Electric Vehicles (FCEVs) by Union Minister Hardeep Singh Puri further strengthens India’s vision of energy security. In order to achieve the net-zero target by 2070, almost 95 per cent of road freight must move to electric and/or hydrogen. In this article, we calculate the potential of hydrogen in India’s mobility sector and how it can learn from the electric vehicle (EV) roll-out. Not just India, but the world is also rapidly experimenting with hydrogen in mobility. Europe is planning 1,200 hydrogen buses and 150 hydrogen trucks by 2025 under various schemes. In Asia, China is leading deployment and plans to add 50,000 fuel-cell electric vehicle (FCEVs) by 2025 using heavy national incentives and state policy support. South Korea and Japan aren’t far behind with targets for hydrogen cars and buses. There is an opportunity here for India’s National Green Hydrogen Mission, which targets the production of 5 million metric tonnes of green hydrogen per year by 2030. Beyond mobility, hydrogen could find potential use in refineries, fertilisers, city gas sectors, steel production and shipping. Is there substantial potential for FCEVs in the mobility sector? EVs have achieved cost and functional parity for small and light commercial vehicles such as three-wheelers in passenger and freight segments, but the heavy-duty sector remains a concern. Road freight accounts for 35-40 per cent of India’s total on-road carbon emissions, using up 25 per cent of the oil imports.
Gas price drop to make industrial users shun dirtier fossil fuels, says Indian Gas Exchange head
The head of India’s only gas trading platform is optimistic that the drop in prices this year will encourage industrial users in the country to switch from dirtier fossil fuels. Trading volumes on the Indian Gas Exchange are set to rise due to a greater availability of cheaper supplies, Chief Executive Officer Rajesh Kumar Mediratta told Bloomberg Television in an interview. The bourse is looking to offer some longer-duration contracts to help buyers access gas at set prices, he said. Coal-reliant India has a target to increase the share of gas in its energy mix to 15% by the end of the decade, from about 6% now. Both spot LNG and gas from Indian deep water fields are traded on the bourse. Local prices of domestically-produced gas have fallen, partly due to a drop in the Asian benchmark that has more than halved this year. Indian consumers from power plants to petrochemical facilities are highly price-sensitive as gas competes head-to-head with cheaper and dirtier alternatives. But, the government has been active in supplying cheaper gas to households, fuel stations and industrial users. Demand in the country, the world’s fourth-biggest LNG buyer, is expected to rise as pipeline infrastructure is expanded.
Oil Prices Tumble As The EIA Reports A Significant Gasoline Build
Crude oil prices continued to move lower despite the Energy Information Administration report that inventories had shed 2.2 million barrels in the week to September 29. This compared with a draw of the same size estimated for the previous week by the EIA. A day earlier, the American Petroleum Institute reported an estimated inventory decline of 4.2 million barrels for the last week of September. In fuels, meanwhile, the EIA reported mixed inventory changes, but it was a build in gasoline and fears of weakening gasoline demand that traders paid attention to. Gasoline inventories added a substantial 6.5 million barrels for the week to September 29, which compared with a build of 1 million barrels for the previous week. Gasoline inventories are now 1% above the five-year average for this time of year. Gasoline prices fell alongside oil prices on Wednesday morning, trading at $2.238. Gasoline production averaged 8.8 million barrels daily last week, which compared with 9.1 million barrels daily for the prior week. Middle distillates fell by 1.3 million barrels in the week to September 29, which compared with a moderate build of 400,000 barrels for the previous week. Middle distillate production last week averaged 4.7 million barrels daily, which compared with 4.9 million bpd for the previous week. Oil prices were already under pressure from a more expensive greenback combined with a pessimistic outlook for the global economy to pressure benchmarks. A tight market combined with the OPEC+ decision to maintain its production cuts failed to counter bearish sentiment. The downward pressure on prices, which began last week with profit-taking from institutional investors, appears to have built some serious momentum. Brent oil has now fallen below $88 and WTI is down below $86, marking a dramatic shift in sentiment from when traders were calling for triple-digit oil prices last week.
Reliance Industries Presents Removable Energy Storage Battery
India’s oil-to-telecoms conglomerate Reliance Industries presented on Wednesday a removable battery for energy storage that could be used for electric vehicles and for powering appliances via an inverter, company officials told Reuters. Reliance Industries, chaired by Indian billionaire Mukesh Ambani, has ambitious plans to grow in the ‘New Energy’ business with battery storage, renewable power generation, solar module manufacturing, fuel cells, and electrolyzers. The executives at Reliance Industries who spoke to Reuters didn’t announce details such as when the company could start selling such removable multi-purpose batteries. Reliance Industries will look to partner with EV makers although it doesn’t plan to go into EV manufacturing, according to a presentation at the event at which the removable battery was unveiled. In recent years, the group’s subsidiary Reliance New Energy Ltd (RNEL) has acquired sodium-ion battery technology company Faradion Ltd. for an enterprise value of $121 million (£ 100 million) and Lithium Iron Phosphate (LFP) batteries provider Lithium Werks for $61 million. Lithium Werks provides cobalt-free and high-performance LFP batteries. Battery storage and technology is one of the areas of focus for Reliance’s new energy business. Other recent investments include a stake in an energy storage company, the acquisition of solar cells and panels and polysilicon manufacturing firm REC Solar Holdings AS, and investments in collaboration for developing hydrogen electrolyzers. Reliance Industries said in early 2022 it would invest as much as $76 billion in green energy projects in India over the next 15 years. Reliance had already announced the year prior a commitment to invest more than $10 billion in three years in a new business unit that would build solar modules, battery storage, electrolyzer, and fuel cell factories. “We have a 15-year vision to build Reliance as one of the world’s leading New Energy and New Materials company,” Ambani said at the company’s 2020 annual general meeting.
Saudi Arabia And Russia Will Not Alter Voluntary Oil Supply Cuts
Saudi Arabia and Russia, the key OPEC+ partners, will be keeping their oil supply cuts in November despite the recent crude oil price rally. Hours before a regular OPEC+ panel meeting, Saudi Arabia said early on Wednesday it would continue cutting an extra 1 million barrels per day (bpd) from its crude oil production in November and December, and Russia said in a separate statement it would continue to reduce oil exports by 300,000 bpd until the end of the year. The near-simultaneous announcements from the two leaders of the OPEC+ alliance did not surprise the market, although some analysts have suggested that the Kingdom could begin easing the cut sooner than oil market participants believe as the world’s top crude oil exporter wouldn’t risk demand destruction through too high prices. Saudi Arabia continues with the extra 1 million bpd cut in November and December and thus the Kingdom’s oil production will be approximately 9 million bpd until the end of the year, the Saudi Ministry of Energy said as carried by the official Saudi Press Agency. “This voluntary cut decision will be reviewed next month to consider deepening the cut or increasing production,” the agency noted. At the same time, Alexander Novak, Russia’s Deputy Prime Minister and top oil representative of the country at OPEC+ meetings, said in an official statement that Moscow would continue with the 300,000-bpd cut to oil exports by the end of the year. Russia also said it would review the decision next month after analyzing the market. Both Saudi Arabia and Russia reiterated today that the ongoing oil supply cuts are aimed at keeping “stability and balance on the oil markets.” The announcements came only hours before the Joint Ministerial Monitoring Committee (JMMC) of OPEC+ meets for a regular discussion of the oil market developments in recent weeks. Expectations were that no changes would be made to decisions about supply during the meeting.
IndianOil to invest over Rs 26 billion to set up greenfield units, expand facilities in northeast
Indian Oil Corporation Limited (IOCL) has firmed up plans to pump in over Rs 26 billion in setting up several greenfield units and expanding its facilities across the northeast over the next few years, a senior company official said. The board of Indian Oil has already approved various new projects, while some are in the process of getting the nod, with the leading energy firm in talks with the local governments in Meghalaya, Mizoram and Manipur to finalise land parcels for the greenfield units. “Northeast is one of the most important regions for Indian Oil and much focus is given here by the top management. We have planned to augment our operations by enhancing refining as well as petroleum, oil and lubricant (POL) storage capacities,” Indian Oil’s Executive Director (Indian Oil-AOD) Ganesan Ramesh told PTI in an interview. The company is at present carrying out nearly a dozen projects, both greenfield and brownfield, across the region, entailing a total investment of Rs 26.12 billion, he said. “We have a major project coming up in the POL segment — a greenfield depot at Sekerkote in Tripura at an investment of Rs 6.56 billion,” Ramesh said. Another project, for which the board has given its nod, is the expansion of the Betkuchi POL depot in Guwahati at a cost of Rs 2.77 billion. IOC plans to increase the storage intake to 54,000 kilolitres from the existing 25,000 KL, install new fire water tanks and other facilities. It has already acquired an additional 10.67 acres of land to expand the Betkuchi plant. “Indian Oil has plans for capacity expansion of its refineries at Guwahati and Digboi with project costs of Rs 4.12 billion and Rs 7.68 billion, respectively. Expansion of the Bongaigaon refinery is also envisaged under the North East Hydrocarbon Vision 2030, and currently land acquisition process is under progress,” the official said. He said the company has decided to revamp the Dimapur depot in Nagaland, and the board approval is in the process for an estimated expenditure of Rs 2.31 billion. “Land is being finalised for setting up of greenfield POL depots at Umran in Meghalaya and Sihhmui in Mizoram to provide fuel security for these states. We are also in talks with the Manipur government for a wagon receipt facility at our Imphal depot,” Ramesh said. In order to ramp up the LPG bottling infrastructure in all the northeastern states, the PSU major has lined up a few projects, he said. “A new 30 TMTPA (thousand metric tonnes per annum) LPG bottling plant is being set up at Umiam, Meghalaya at an approved cost of Rs 755.4 million. There is another plan for a new 30 TMTPA bottling plant in Mualkhang, Mizoram at an estimated cost of Rs 1.93 billion,” Ramesh said. IOC has a total bottling capacity of 692 TMTPA across its 10 LPG plants in the northeast. It has 871 distributors with 9.1 million active customers out of the total LPG customer base of 11.2 million in the region, transforming it into 81.2 percent of the total connections. In the northeast, Indian Oil is the market leader in the POL segment with the highest market share of 64.4 per cent in petrol and 64.5 percent in diesel, Ramesh said. It has a robust marketing infrastructure with around 1,427 retail outlets and 467 superior kerosene oil (SKO) dealerships, which are supported by 10 bulk storage depots or terminals, he added.
No, crude prices are not headed for $150 a barrel
Now that oil has hit $95 a barrel, analysts have started to forecast higher prices. Estimates go all the way up to $150 a barrel, as in the case of JP Morgan’s energy analysts. This is followed by sympathetic projections of the likely impact on India’s macro fundamentals. It’s time we put a lid on this line of punditry. Oil prices are not going to go crazy. The first reason is that US President Joe Biden trails his likely opponent Donald Trump by 10 percentage points in the run up to the 2024 election, according to a recent Washington Post-ABC poll. While the poll has been widely panned, there is every reason for President Biden to work a little harder to make himself more agreeable to the most important Joe in an election year – the average Joe. That means containing the price of gasoline at the filling station.