Government Hikes Price Of Domestic Natural Gas For September
The central government raised the price of domestic natural gas on Thursday to $8.60 per million metric British thermal units for September, from $7.85 per mmBtu in August. The gas produced from the nomination fields of Oil and Natural Gas Corp. and Oil India Ltd. will have a ceiling of $6.50/mmBtu, according to a notification by the Petroleum Planning and Analysis Cell. On April 8, the Ministry of Petroleum and Natural Gas linked the price of natural gas produced from legacy nomination fields of ONGC, OIL, and the New Exploration Licencing Policy blocks to the Indian crude basket. The price of natural gas from these fields was fixed at 10% of the monthly average of the Indian crude basket. Earlier, the gas prices were reviewed every six months under the New Domestic Natural Gas Pricing Guidelines, 2014, which were based on volume-weighted prices prevailing at four global gas trading hubs. These guidelines have now been rationalised due to the significant time lag and high volatility in gas prices. Gas produced by ONGC and OIL from their nomination blocks will be within the floor and ceiling prices, and gas produced from new wells or well interventions in the nomination fields of ONGC and OIL will be allowed a premium of 20% over the price under the administered price mechanism.
RIL’s biogas entry ticks all the boxes on green investment
Reliance Industries Limited (RIL) Chairman and Managing Director Mukesh Ambani has made positive announcements on Monday for the biogas sector. The company plans to establish 100 Compressed Biogas (CBG) plants in the next five years, using 5.5 million metric tons of agro- and organic waste annually. The impact will be huge considering it will help reduce nearly two million tonnes year-on-year of carbon emissions, apart from producing 2.5 million tonnes of organic manure. This would also result in India having to import 0.7 million metric tonnes per annum less of LNG, saving crucial forex reserves of roughly Rs 15 billion. Reliance Industries Limited (RIL) Chairman and Managing Director Mukesh Ambani has made positive announcements on Monday for the biogas sector. The company plans to establish 100 Compressed Biogas (CBG) plants in the next five years, using 5.5 million metric tons of agro- and organic waste annually.
Adani Total’s Dhamra LNG Terminal Will Achieve Peak Capacity By 2024, Says CEO
Adani Total Ltd.’s Dhamra LNG Terminal is equipped to perform at peak capacity since it got commissioned, according to Chief Executive Officer Satinder Pal Singh. However, peak performance is contingent on sufficient sourcing and downstream evacuation by users, Singh told BQ Prime. “We expect the terminal to achieve full capacity around end of 2024, when connectivity to all major consumption centers will be completed. The 6.50 million tonne LNG capacity at Dhamra Port is one of the largest in India and first on the east coast. Which are the sectors and companies you have tied up with for the LNG supply? Satinder Pal Singh: Adani Total Pvt.’s Dhamra LNG terminal is designed to import, store, re-gasify and safely send out up to 6.5 million tonne per annum in this current initial phase. At this time, we have two users in the form of Indian Oil Corp. and GAIL India Ltd., who have substantially subscribed capacity on a long-term basis. Both users will source LNG and market gas for their captive and third-party use. IOCL has its refineries at Paradip, Haldia, Barauni, and Guwahati. The revival of brownfield fertiliser plants in Sindri, Barauni and Gorakhpur will act as consumption centres. Also, industries and city gas distribution companies in the region will be supplied from Dhamra by the users. As this is the only terminal in east India, all eastern demand for LNG will be met most efficiently from this terminal.
Why the India-UAE deal to trade in local currencies matters
With India and the UAE starting to settle bilateral trade in their respective currencies, the move is set to further strengthen economic relations between the two countries and could provide a significant boost to exports from Asia’s third-largest economy, analysts say. Last month, India signed an agreement with the UAE to allow it to settle trade in rupees instead of US dollars — which is widely used for India’s trade settlements. This move aims to lower transaction costs by cutting expenses that accompany payments made in foreign currencies and the uncertainty created for businesses by fluctuating exchange rates. The Indian rupee hit a historic closing low of more than 83 against the US dollar two weeks ago. Foreign exchange costs present a significant expense for India in terms of its crude oil imports. The country is the world’s third-largest importer of the commodity and it pays for oil imports in the US currency, which has fluctuated a lot in recent quarters. “There are many benefits to such a development,” says Ratnadeep Roychowdhury, co-head, private equity and sovereign wealth funds, at Indian law firm Nishith Desai Associates. “It protects the bilateral trade from geopolitical risks and currency fluctuations. It strengthens the trading relation and underlines each country’s commitment to the other. Moreover, it helps both countries to de-risk their dependence and exposure to the reserve currencies in use today.” The pact will have a “major impact” as “the removal of hedging costs should make [India’s] export pricing more competitive”, he added India is the UAE’s second-largest and the UAE is India’s third-largest trading partner. Bilateral trade between the two countries increased by 16 per cent to $84.5 billion between April 2022 and March 2023 from $72.9 billion in the previous financial year, according to Indian government data. However, India has a trade deficit with the UAE, which stood at $21.62 billion in the last financial year. While India’s major import from the UAE is oil, its exports to the country include jewellery, refined petroleum products, food, textiles, and machinery. The first crude oil transaction under the local currency settlement (LCS) system took place this month between Abu Dhabi National Oil Company (Adnoc) and the Indian Oil Corporation, according to the Indian embassy in the UAE. The transaction involved the sale of about a million barrels of crude oil, settled with Indian rupees and UAE dirhams, it said. The new payment option “symbolises the deep-rooted trust and strategic partnership between India and the UAE”, says Swati Babel, a cross-border trade finance business specialist.
Money Manager Sees $120 Oil Surprising Bears
Crude oil prices could be on track to hit $100 and even $120 per barrel, which calls for aggressive buying moves into the oil market now, Cole Smead, president and portfolio manager at Smead Capital Management, told BBN Bloomberg on Wednesday. China’s underwhelming economic performance is as bad as it gets and still, oil prices have not fallen apart, Smead told BBN Bloomberg, arguing about his commodity strategy. The weakness in China’s economy is not driving oil prices currently. The crucial factor for oil is the ongoing supply cuts, he added. The supply side calls for faster price moves higher than the market has been probably expecting, according to Smead. “There should be money being thrown around trying to take advantages because if we wait back to a $100 or $120 a barrel, I think people are going to feel ‘Gosh, I really missed that,” he told BBN Bloomberg. So far this year, concerns about China’s economy have stopped any sustained oil price rallies in their tracks. The chances of a ‘soft landing’ in the United States have increased, analysts and the Fed say, but concerns continue about the need of more Fed hikes to fight inflation. The Chinese weakness has made the market take a wait-and-see approach to find if China’s policies to revive its real estate sector and consumer confidence are yielding results. Market participants expect additional stimulus and other measures from China to put its economic growth and industrial production on track to meet the authorities’ 2023 targets. At the same time, the supply cuts from the OPEC+ alliance have started to tighten the market, analysts say. The cuts from OPEC+ and Saudi Arabia, coupled with expected continued strength in demand, are set to result in inventory draws for the rest of the year, supporting oil prices, according to analysts and forecasting agencies.
India’s diesel shipments to Singapore reached record highs in August, while those to Europe decreased
Due to lower freight costs and low inventory levels in the Asian oil hub, India’s diesel shipments to Singapore are expected to reach a 19-month high in August and surpass 330,000 metric tonnes, according to traders and experts. On the other hand, while shipments to the east are more profitable, the nation’s petroleum exports to Europe for August are anticipated to drop to their lowest levels this year, according to one ship tracker, although that condition may not persist. As a result of the increase in Indian diesel exports to Singapore, which will partially offset the decline in exports from refiners in northeast Asia, particularly China, the region’s high refining margins will be capped. In contrast, the decrease in imports from the South Asian country will help to strengthen the margins of European refiners. According to shiptracking data from Refinitiv, Vortexa, and Kpler, India is on schedule to send Singapore between 330,000 and 439,000 tonnes of diesel in August. Serena Huang, the head of Asia-Pacific analysis at Vortexa, said that the volume is at its highest level since January 2022. “The seasonal lull in India’s gasoline and diesel domestic demand due to the monsoon has seen the country raising its clean product exports for August to date,” she said, referring to refined products such as diesel, jet fuel, and gasoline. According to statistics from Sparta Commodities, freight rates for the India-Singapore route were around $21 per tonne less expensive than those for the India-northwest Europe route in July, down from $14 per tonne in mid-July, making it more profitable for sellers to transport cargoes east.
PNGRB re-evaluating performance bank guarantee rule
The Petroleum and Natural Gas Regulatory Board (PNGRB) is re-evaluating a rule on performance bank guarantees for city gas companies that has benefited the likes of Adani Gas, Indian Oil and GAIL. The current rule allows the downstream regulator to reduce the performance bank guarantees (PBG) required of city gas licensees to 40% of the initial amount after they have completed their minimum work programme (MWP). Recently, PNGRB allowed a reduction in the PBG by GAIL Gas Ltd and Indian Oil Adani Gas Pvt Ltd after the two entities completed their MWP in their respective licensed areas of Bengaluru and Daman. After having allowed some city gas companies to benefit from this rule, the regulator is now having a rethink as several companies, which have completed MWP, have queued up with their requests for PBG reduction, according to people familiar with the matter. “A differentiated approach is needed,” a source close to PNGRB said. Companies that have submitted high-value performance bonds need some relief as their increased financial cost could escalate cost for gas consumers, he said, adding that the companies that have submitted small amounts of PBG do not have a strong case for relief. “How will PNGRB enforce the licensing rules for the rest of the contract period if their PBG is reduced to a very small amount?” he added.
GAIL eyes stake in US LNG projects
GAIL is scouting for a stake in LNG (liquefied natural gas) projects in the US and long-term supply deals as the state-run utility expects gas transmission volumes to rise on the back of expanding pipeline network. The company also plans to spend Rs 300 billion in the next three years on expanding its pipelines, city gas network and petrochemicals capacity, chairman Sandeep Kumar Gupta told shareholders on Wednesday. GAIL has teamed up with Greenline, a company backed by Essar group’s venture capital arm Exponentia Ventures, which is pioneering use of LNG for fuel line heavy-duty commercial vehicles. The company has issued EoI (expression of interest) for equity in LNG liquefaction terminal along with about a million tonne per annum from the US, Gupta said, adding talks are on with major suppliers for long-term contracts. Simultaneously, GAIL is connecting gas from new fields and upcoming LNG import terminals into its pipeline network.
Vedanta seeks minimum USD 9.5 for Rajasthan gas
Billionaire Anil Agarwal’s Vedanta Ltd is seeking a minimum of USD 9.5 for the natural gas it produces from its Rajasthan block, according to a tender floated by the firm for the sale of the fuel. Vedanta sought bids from users for 0.6 million standard cubic meters per day of gas it plans to produce from the RJ-ON-90/1 block in the Barmer basin of Rajasthan in three months beginning October 1. Gas extracted from below ground is used to produce electricity, make fertilizer, turned into CNG to fire automobiles, or piped to household kitchens for cooking purposes. In the tender, Vedanta asked users to quote a variable ‘P’ that they are willing to pay over and above 14.5 per cent of Brent crude oil price. At the current Brent price of USD 84 per barrel, the base comes at USD 12.18 (14.5 per cent of USD 84). Users have to quote a ‘P’ over and above this price. Gas price will be calculated as lower of Platts LNG WIM (the price of liquefied natural gas delivered on India’s west coast) and 14.50 per cent of Brent Price + P, it said. “Notwithstanding the value calculated (through the formula), the Sales gas price for any month shall not be lower than USD 9.5 per million British thermal unit,” the tender said.
India’s July Russian oil imports dip; Saudi import down to 2-1/2-year low
India’s July crude oil imports from Russia dipped for the first time in nine months, while inbound shipments from Saudi Arabia tumbled to their lowest in 2-1/2 years following OPEC+ cuts, tanker data from trade and industry sources showed. Both China and India, the world’s biggest and third-biggest oil importers, cut imports from Russia and Saudi Arabia in July after prices rose and as the two oil producers reduced output and crude oil shipments. Saudi Arabia volunteered to cut output by another 1 million barrels per day (bpd) from July through September, and Russia will reduce exports in August by 500,000 bpd, part of a deal among members of the Organization of the Petroleum Exporting Countries and its allies, a grouping know as OPEC+, to curb supplies and support prices. India’s overall imports also declined 5.2% from June to 4.4 million bpd oil in July, the data showed, as several refining plants are shut for maintenance during monsoon season. Russian oil imports declined 5.7% to 1.85 million bpd and Saudi shipments fell by 26% to 470,000 bpd, the data showed