India explores building liquefaction units in Iraq to convert flared gas into LNG
India has initiated exploratory talks with Iraq to assess the possibility of building facilities to liquefy natural gas that is flared at the West Asian country’s oil and gas facilities, and transporting it as liquefied natural gas (LNG) to India, a senior government official said. The proposal came up during last month’s India-Iraq Joint Commission Meeting in Delhi. India already has strong ties with Iraq, particularly in energy trade with Baghdad being a top source of Delhi’s crude oil imports. Put simply , gas flaring refers to burning of unwanted and unutilised associated natural gas that is produced during oil production and other processes in the oil industry. A major oil and gas producer, Iraq is one of the biggest gas flaring countries as it lacks facilities to capture and process the gas to convert it into fuels or export it as LNG. Iraq flares a lot of gas and we are a large importer of gas. So, we are exploring if our companies can set up plants in Iraq to liquefy that gas into LNG,” said the official, who did not wish to be identified. As per estimates by global agencies, Iraq flares around 50 million standard cubic metres per day (mscmd) of natural gas. In 2022-23, India’s LNG imports stood at 19.9 million tonnes, which is equivalent to 71.6 mscmd of natural gas. The official quoted above however, did not name the Indian companies that may be looking at building liquefaction facilities in Iraq. The estimated timelines are also not clear, considering various impediments, particularly the security situation in Iraq.
Insulating consumers from oil price gyrations key for India’s demand growth: minister
India’s oil and gas consumption is growing at a rapid pace and to ensure that the upward trajectory is sustained it is crucial that domestic consumers remain insulated from surging international oil and gas prices, petroleum minister Hardeep Singh Puri said. “While we talk about growth, we have been mindful of inflation and prices. We have successfully insulated the common man from the surge in international prices, and our policies have ensured sustained availability of fuel at the most reasonable prices,” Puri told a recent industry seminar. Latest data from the Petroleum Planning and Analysis Cell showed that India’s oil demand rose 5.7% year on year to 116.44 million mt, or 5.1 million b/d, in the first half of 2023. India’s diesel demand rose 7.4% in the first half of 2023 from the same period in 2022, while gasoline demand rose 8.2%. Demand for jet fuel and naphtha rose 24.4% and 6.4%, respectively, over the same period. “Refining activities are expected to be robust in the second half of the year, driven by strong domestic demand,” said Sumit Ritolia, refinery economics analyst at S&P Global Commodity Insights. “As we enter the second half of the year, demand typically increases with the start of the festive and wedding season. Additionally, in the first and second quarters of 2024, India will have its central election, and the government is placing significant focus on infrastructure activities, further driving increased demand and consumption,” he added. Economic outlook brightens Puri quoted World Bank’s prediction for a robust 6.3% GDP growth rate for India in 2023-24 (April-March), saying it was a reflection of the country’s robust economic fundamentals. “Our growth, undeniably, has been fueled by our voracious energy consumption, a by-product of rapid urbanization and industrialization,” Puri said, adding that a quarter of the global energy demand growth between 2020 and 2040 was projected to originate from India. “We have not merely survived, but thrived, with the highest growth rate amongst the top five economies worldwide. Even in the face of global slowdown, we are projected to contribute to around 15% of global growth in 2023,” Puri added. As the economy continues to outshine on the global stage, the petroleum sector will continue to play a crucial role in fueling the country’s growth, the minister said. “A growth-energy correlation is manifestly visible as India stands today as the world’s third-largest energy consumer, the third-largest consumer of oil, the third-largest LPG consumer, the fourth-largest LNG importer, the fourth-largest refiner, and the fourth-largest automobile market in the world,” Puri said. He said that New Delhi’s resolve to bring reforms in the energy sector is unwavering, and the cabinet’s recent approval of critical gas pricing reforms is testament to this commitment. “The benefits of these reforms have helped the public, with a noticeable reduction in the average cost of piped natural gas and compressed natural gas,” the minister said. India said in late March that a unified tariff for all interconnected gas transmission pipelines owned and operated by authorized entities — Indian Oil Corporation Limited, Oil and Natural Gas Corporation Limited, GAIL (India) Limited, Pipeline Infrastructure Limited, Gujarat State Petronet Limited, Gujarat Gas Limited, Reliance Gas Pipelines Limited, GSPL India Gasnet Limited and GSPL India Transco Limited — came into effect April 1. The crucial reform has been hailed by many market participants as positive, with the reform set to usher more price transparency, boost gas-related infrastructure, and provide access to remote areas. Supply diversification Puri said India was taking crucial strides towards diversifying its energy supplies and increasing the share of alternate energy sources like biofuels, ethanol and CBG. It was also boosting domestic oil and gas production, as well as setting new energy targets through electric vehicles and hydrogen. “We have diversified our import basket from 27 countries in 2006-07 to 39 in 2023,” Puri said. He added that India increased its ethanol content in petrol from 1.53% in 2013-14 to more than 11.5% by March 2023. India has set a roadmap for ethanol blending, with the aim to achieve a blend comprising 20% ethanol in petrol by fiscal year 2025-26. Puri said E20 was rolled out on Feb. 8, ahead of its April target. The number of outlets retailing E20 stood at almost 600 and will cover the entire country by 2025. “We are relentlessly pursuing these initiatives and targets with the belief that it will usher in a new era of sustainable and secure energy for India, bolstering our economic growth while safeguarding the environment for our future generations,” Puri said.
HPCL gets bids to lease part of Chhara LNG terminal
India’s Hindustan Petroleum Corp Ltd has received six or seven bids from industries to lease a part of its Chhara liquefied natural gas (LNG) import terminal on the west coast, the LNG unit’s chief executive said on Monday. HPCL aims to commission the terminal, with a planned capacity of 5 million metric tons per year (tpy) in the December quarter, K Sreenivasa Rao told reporters at an event. “We have received six or seven bids, and in the next three months, we should be able to decide on the award,” Rao said. HPCL was looking to lease capacity of 3 million tpy to other companies for a period of more than 10 years, he added. The terminal was completed in March, but its commissioning has been delayed as a 40-km (25-mile) pipeline link to an existing network meant for sales to consumers is not yet ready, Rao said. “We hope the 40-km pipeline should be ready very soon.” The terminal will run at about 30% of capacity in 2024 to reach full capacity in four or five years, he said, adding that HPCL has also made provision to double capacity to 10 million tpy in future. India is beefing up its gas infrastructure as Prime Minister Narendra Modi targets an increase in the share of natural gas in its energy mix to 15% by 2030 from about 6.5% now. India’s gas demand is picking up now, as prices have softened, Rao said, following a spike that had damped demand.
Oil & Gas exploration: Govt receives 13 bids for 10 blocks
The government received 13 bids, including three from the private sector, for 10 oil and gas blocks on offer in the latest exploration licensing round where companies had a year to submit their bids, according to a notification by the Directorate General of Hydrocarbons (DGH), which oversaw the process and extended bid submission deadline several times. State-run Oil and Natural Gas Corp (ONGC) placed bids for nine blocks while Oil India, Vedanta, Sun Petrochemicals, and the joint venture of Reliance Industries and BP placed bids for one block each. ONGC would win six blocks without a contest but compete with Vedanta, Sun Petrochemicals, and Oil India in one block each. Reliance-BP joint venture also faces no competition for the block it has bid for in the KG Basin.
Big Oil’s Radical Proposal: Curtail Consumption, Not Production
Last year, in the middle of an energy crunch, European governments called on their citizens to consume less energy. They also lashed out at Big Oil for making billions from the squeeze. Now, Big Oil is the one calling for a reduction in energy consumption. Essentially, supermajors have suggested that people should use less of their products. But they don’t want to slash production. The seemingly paradoxical message came out earlier this week from a conference in Vienna, where OPEC leaders met with their Big Oil counterparts from BP, Shell, and other oil companies to discuss the future of global energy. As might have been expected in this day and age, the message to come out of the gathering was that everyone is committed to a net-zero world in the future but that right now, everyone was committed to ensuring there is enough energy for those who need it, regardless of the source. What was, perhaps, less expected was the reported call from Big Oil for governments to focus on demand reduction rather than supply limitation as a means of enabling that net-zero world. OPEC officials, meanwhile, focused on the importance of energy security as they have done before. “We must do everything we can to reduce emissions, not to reduce energy,” OPEC secretary-general, Haitham al Ghais said, as quoted by Euronews. “There is a misconception going around about reducing production and reducing investment in oil and gas, we do not agree with that message.” One would assume the reason OPEC disagrees with this message is that it would lead to lower profits for its members. But according to Big Oil, the motive for switching from a focus on supply to one on demand will avoid even higher profits for oil producers. Not that the executives put it quite this way. The report on that call comes from Reuters, which was once again refused access to the conference but quoted sources present there. And that call follows statements made by Big Oil executives that they will slow down with their pivot away from their core business. From an activist perspective, Big Oil is trying to justify its renewed focus on oil and gas at a time when oil and gas are making record profits. From an energy security perspective, it is difficult to argue that reducing the supply of a commodity while leaving demand unchanged could only have one result: a sharp rise in the price of that commodity. Of course, there is a case to be made that right now, despite stable and growing demand for oil, prices are depressed—but this is because factors different from oil’s fundamentals are running the show, as it were. These factors include GDP growth in big consumers, inflation, and central bank monetary policy. But there is also the perception that there is an abundant supply of oil that has contributed to the pressure on prices. So, what Big Oil executives are basically saying is that governments—and activists—have got the wrong end of the stick: they are trying to reduce the supply of oil and gas without addressing demand. And that is an approach that is doomed to failure, as we saw last year when the same governments that berated Big Oil for its profits subsidized the consumption of Big Oil’s products to avoid riots on their hands. Meanwhile, at another recent event, other Big Oil executives dared speak a truth that few leaders in the West would even acknowledge in private. That truth amounts to the fact that oil and gas are going nowhere in the next few decades, no matter what green transition plans governments are making. “We think the biggest realization that should come out of this conference … is oil and gas are needed for decades to come,” is how Hess Corp.’s John Hess put it. “Energy transition is going to take a lot longer, it’s going to cost a lot more money and need new technologies that don’t even exist today.” Naturally, this would be a welcome opportunity for a climate advocate to argue that Big Oil is trying to save its bacon when the world is turning vegan, but even that climate advocate would be hard-pressed to explain why, if the world’s moving away from hydrocarbons, China is building coal plants and India is building refineries. The truth is that the world is not moving away from hydrocarbons. Demand for oil has hit 102 million barrels daily. Demand for gas is soaring, too, notably from transition poster continent Europe. U.S. oil consumption is also growing after a drop in 2020—the lockdown year. There may be something, then, in a call for addressing demand for oil and gas instead of calling for less production. But addressing demand with a view to essentially discouraging it will be tricky—and also highly unpopular among voters. Germany is a good example worth studying by other transition-minded countries. It shows that forcing the transition down people’s throats does not usually yield the expected results.
India’s green hydrogen push and challenges
India wants to become a global hub for the production of green hydrogen, manufactured by splitting water molecules using renewable energy. It is an ambitious plan for a country whose hydrogen consumed currently is produced mostly with fossil fuels. Although first production is expected only in 2026, India has been negotiating bilateral agreements with the European Union, Japan and other countries to start exporting the fuel. Below are some details about India’s green hydrogen push and challenges. PRODUCTION TARGET India aims for annual production of 5 million metric tons of green hydrogen by 2030, which would cut about 50 million metric tons of carbon emissions and save more than $12 billion on fossil fuel imports. Indian companies including Reliance Industries, Indian Oil, NTPC, Adani Enterprises , JSW Energy, ReNew Power and Acme Solar have made announcements for setting up a cumulative annual green hydrogen manufacturing capacity of 3.5 million metric tons. As of now, most of the 5 million metric tons of hydrogen consumed in the country is produced with fossil fuels. GOVERNMENT SUPPORT In January, India approved an incentive plan of 174.9 billion rupees ($2.11 billion) to promote green hydrogen. This would be at least 10% of the cost to produce green hydrogen. New Delhi has also extended a waiver of transmission fees for renewable power to hydrogen manufacturing plants commissioned before January 2031.
GAIL to implement Pipeline project as an ambitious project envisioned by Modi
After the commissioning of the 282 km pipeline in Bihar, Natural Gas has now reached North Bengal encompassing the districts of Uttar Dinajpur, Darjeeling, and Jalpaiguri. GAIL (India) Limited is implementing the Barauni Guwahati Pipeline, which is an integral part of the Jagdishpur-Haldia and Bokaro-Dhamra Pipeline as part of the Pradhan Mantri Urja Ganga Project, an ambitious project envisioned by Hon’ble PM Shri Narendra Modi.
India’s gas regulator pitches for building natural gas storage
India should build storage for natural gas to boost the use of cleaner fuel in the country and hedge against global price volatility, A. K. Jain, chairman of the Petroleum and Natural Gas Regulatory Board, said on Monday. He said India should have natural gas storage that allows suppliers to build stocks when prices are low. That will also help in meeting higher demand from the industries, he added. “For market dynamics and supply assurance for the customers to shift to gas, (we) require gas storage,” Jain told reporters at an event. India has 5 million tonnes of strategic petroleum reserves but no storage facilities for natural gas yet.
Saudi-based ITFC signs $1.4bn deal to fund Bangladesh oil imports
The International Islamic Trade Finance Corp., a member of the Islamic Development Bank Group, has signed a $1.4 billion financing plan with the Bangladeshi government to fund the country’s oil imports, the Saudi Press Agency reported on Saturday. The signing took place during a recent official visit by a high-level delegation from Bangladesh to the ITFC headquarters in Jeddah. “This financing plan will enable the Bangladesh Petroleum Company to import oil products from July to June 2024,” the statement on SPA said. The agreement “reflects the successful long-term partnership between the two parties and will contribute to ensuring energy security for one of the fastest-growing economies in South Asia.” It “demonstrates the corporation’s commitment to supporting the economic development of its member states and providing financing solutions that meet the needs of its customers,” the statement added.
Oil Prices Drop From Ten-Week High On Macroeconomic Concerns
Oil prices slipped in Asian trade early on Monday, retreating from Friday’s ten-week high amid profit-taking and continued concerns about the world’s two biggest economies, the U.S. and China. As of early trade in Europe, WTI Crude traded at $73.15, down by 0.96% on the day. The international benchmark, Brent Crude, was down by 0.96% at $77.72. Both benchmarks settled over 2% higher on Friday, to the highest levels in ten weeks. Early on Monday, however, macroeconomic concerns again trumped the ongoing OPEC+ efforts to tighten the physical market. The Chinese post-Covid recovery may have further slowed as evidenced by the steepest drop in the producer price index (PPI) in June since the end of December 2015. Chinese factory gate prices slumped by 5.4% in June compared to the same month in 2022, data from the National Bureau of Statistics showed early on Monday. The drop in producer prices was steeper than analyst estimates and the annual decline in May. At the same time, China’s consumer inflation was flat on an annual basis in June, suggesting that the authorities could consider further monetary stimulus to revive demand. The OPEC+ cuts and the U.S. Administration’s announcement on Friday that it plans to purchase around 6 million barrels of oil for the Strategic Petroleum Reserve (SPR), with delivery scheduled for October and November, limited the oil price declines. So far, the Biden Administration has bought 6.3 million barrels at an average price of $72.67 per barrel, compared to around $95 per barrel that SPR crude was sold for in 2022. “Cuts from both Saudi Arabia and Russia have provided some support, although the market will have to continue to contend with macro uncertainty, which has capped the market over the last couple of months,” ING strategists Warren Patterson and Ewa Manthey said on Monday. “The recent action taken by Saudi Arabia will likely provide some comfort to longs as it sends the signal that the Saudis are committed to putting a floor under the market.” According to IG strategist Jun Rong Yeap, “Hopes for some recovery in the second half of this year may be pinned on expectations for China to bring in more stimulus in the months ahead while US economic conditions retain some resilience.” The oil market will be closely watching this week the U.S. Consumer Price Index (CPI) report for June due out on Wednesday and OPEC and IEA’s monthly reports on Thursday.