GAIL India to see higher realisation as PNGRB hikes tariff: Kotak Institutional Equities
With the Petroleum and Natural Gas Regulatory Board (PNGRB) raising unified tariff for the national gas grid, Kotak Institutional Equities sees higher realisation for GAIL India. PNGRB raised the unified tariff for the national gas grid by approximately 10 percent to Rs 81 per mmbtu with varying increases of 1 percent, 5 percent, and 15 percent for zones 1, 2, and 3, respectively. At revised volume projections, GAIL India can realise even higher, approximately Rs 66 per mmbtu as compared with Rs 64 per mmbtu earlier, as it now projects less volume in zone-2 and higher volume in farther zones, highlighted Kotak Institutional Equities.
Inside Qatar’s multi-billion LNG expansion
In the heart of the Arabian Gulf, amidst the shimmering skyline and ambitious visions, lies a nation that has carved its path to global prominence through its abundant natural resources. Qatar, a small peninsula, has long been synonymous with energy wealth, thanks to its vast reserves of natural gas. Now, as the world grapples with an energy crisis amid a rapidly evolving global energy market, Qatar is positioning itself as a key player in meeting the rising demand for cleaner energy sources. In recent years, Qatar has embarked on an ambitious journey to expand its gas production capabilities and significantly increase its Liquid Natural Gas (LNG) export capacity. This strategic shift not only reflects Qatar’s sharp understanding of global energy trends but also underscores its commitment to long-term economic prosperity. When the Russia-Europe conflict triggered an energy crisis, Qatar’s Energy Minister Saad Al-Kaabi declared that Qatar would stand in “solidarity with Europe” and not divert gas supplies from the continent even for financial gain. Over the past year, Qatar has fulfilled its pledge. While the US supplied more than half of Europe’s LNG imports, Qatar redirected significant flexible volumes to the European market. “As one of the largest producers of LNG, Qatar will make a significant impact on the dynamics of global LNG markets with its ambitious expansion plans,” notes Rawan Oueidat, CFA, Corporate Ratings at S&P Global Ratings. Qatar’s plan to inject billions of dollars into its LNG sector and increase gas production capacity by 64% is poised to have far-reaching consequences for global markets, she adds. Oueidat explains that by 2027, QatarEnergy plans to expand Qatar’s LNG production about 64% to 126 mtpa (equivalent to approximately 3.1 million barrels [bbl] of oil equivalent per day) from about 77 mtpa currently, through the North Field East and the North Field South expansions. “This should help the company perform its critical role for the government’s long-term development strategy and should keep positioning Qatar as a large supplier of the global gas market,” Oueidat adds. As Qatar’s LNG expansion unfolds, the global LNG markets can expect a more stable supply outlook and increased diversification. Qatar’s long-standing expertise in LNG production, coupled with its strategic vision, positions the country as a key player in meeting the world’s growing energy demands. Although recent events have demonstrated that the demand for LNG remains strong and there will be an increase in capacity in all the major markets, Deloitte’s Holliday notes that the long-term future of LNG will likely depend on external factors, including geopolitical disruptions and the energy strategies taken by some of the major economies across the globe.
LPG shipments to draw customs duty of 15% & farm cess of equal amount
The Centre has raised the basic customs duty on domestic LPG to 15% from 5%. It has also imposed an Agriculture Infrastructure and Development Cess (AIDC) of 15% on the import of LPG cylinders However, the basic customs duty hike will not be applicable to imports of liquefied propane, liquefied butane and mixture of liquefied propane and liquefied butane by Indian Oil Corporation Ltd, Hindustan Petroleum Corporation Ltd and Bharat Petroleum Corporation Ltd for supply to household domestic consumers, a Central Board of Indirect Taxes and Customs notification said. Import of domestic LPG sold to household consumers by state-owned oil marketing companies. The customs duty rate will be 15% for other importers of domestic LPG.
Oil Prices Inch Higher In Cautious Response To Saudi And Russian Cuts
Crude oil prices moved modestly higher in Asia pre-noon trade today following the news that Saudi Arabia would extend its voluntary oil production cuts through August. The Kingdom would produce some 9 million bpd of oil in August—the same level it aims for this month—and could further extend the reduction beyond August, the Saudi Press Agency reported earlier this week. On the same day, Russia announced it would cut its oil exports by half a million barrels daily next month. “As part of the efforts to ensure a balanced market, Russia will voluntarily reduce its oil supply in August by 500,000 barrels per day by cutting its exports to global markets by that quantity,” Deputy Prime Minister Alexander Novak said in a brief statement. The Saudi announcement was not unexpected, which is part of the reason it did not result in any sharp changes in oil prices. The Russian update may have surprised but not enough to start any significant price rallies. Trader sentiment appears to be strongly bearish as traders focus on economic updates from major consuming countries such as China, the United States, and the European Union. These updates seem to point to weak oil demand, prompting in turn skepticism about oil prices. “Fundamentals are not having as much influence on price direction as one would expect. Instead, the uncertain macro outlook is what the market is focused on,” Warren Patterson, the head of commodities strategy at Dutch ING, said in a note. Noting that the Saudi cut extension was largely expected and that, if the Saudis had failed to extend it this could have pushed prices lower, Patterson also said “This leaves the Saudis in a difficult spot for the next few months, as they will have to be careful how they wind down this supply cut in the current environment.”
India refiners start yuan payments for Russian oil imports: Sources
Indian refiners have begun paying for some oil imports from Russia in Chinese yuan, sources with direct knowledge of the matter said, as Western sanctions force Moscow and its customers to find alternatives to the dollar for settling payments. Western punishments over Russia’s invasion of Ukraine have shifted global trade flows for its top export, with India emerging as the largest buyer of seaborne Russian oil even as it casts about for how to pay for it amid shifting sanctions. The U.S. dollar has long been the main global oil currency, including for purchases by India, but now the yuan is playing an increasingly important role in Russia’s financial system because Moscow has been frozen out of the dollar and euro financial networks by international sanctions. China has also shifted to the yuan for most of its energy imports from Russia, which overtook Saudi Arabia to become China’s top crude supplier in the first quarter this year. “Some refiners are paying in other currencies like yuan if banks are not willing to settle trade in dollars,” said an Indian government source. Indian Oil Corp, the country’s biggest buyer of Russian crude oil, in June became the first state refiner to pay for some Russian purchases in yuan, three sources familiar with the matter said. At least two of India’s three private refiners are also paying for some Russian imports in yuan, two other sources said. All the sources declined to be named because of the sensitivity of the matter. None of India’s private refiners – Reliance Industries Ltd, Russia-backed Nayara Energy and HPCL Mittal Energy Ltd – responded to requests for comment. Indian Oil also did not reply to a request for comment. It could not immediately be determined how much Russian oil Indian refiners have bought with yuan, although Indian Oil has paid in yuan for multiple cargoes, sources said. The rise in yuan payments has given a boost to Beijing’s efforts to internationalise its currency, with Chinese banks promoting its use specifically for Russian oil trade. Since the imposition of sanctions on Moscow, Indian refiners have mostly bought Russian crude from Dubai-based traders and Russian oil companies such as Rosneft, the Litasco unit of Russian oil major Lukoil, and Gazprom Neft, according to shipping data compiled by Reuters. Indian refiners have also settled some non-dollar payments for Russian oil in the United Arab Emirates’ dirham, sources have said. “First preference is to pay in dollars but refiners sometimes pay in other currencies such as dirham and yuan when sellers ask them,” said the government source, who did not elaborate further and declined to identify any Indian companies paying in yuan for Russian oil. India’s oil and finance ministries, which had previously been trying to convince Russia to accept rupees for oil payments, did not respond to requests for comments. Reuters reported in March, citing government officials and banking sources, that India had asked banks and traders to avoid using the yuan to pay for Russian imports because of long-running political differences with China. It was not immediately clear whether recent purchases represent a change in that view. India’s imports from Russia rose to a record in May, with Russian crude oil accounting for 40% of India’s overall oil imports compared with 16.5% a year earlier, denting purchases from Iraq and Saudi Arabia. SANCTIONS MINEFIELD While Western sanctions against Moscow are not recognised by India and its purchases of Russian oil may not violate them, Indian banks are wary of clearing payments for such imports. In May, State Bank of India, the country’s top lender and a key banker for state refiners, rejected IOC’s planned payment in dollars for a cargo delivered by Rosneft, two sources said. The cargo was loaded on tanker NS Bora, handled by Dubai-based Sun Ship Management, an entity connected to Russia’s largest state shipping company, Sovcomflot , which the European Union sanctioned in February and the United Kingdom in May. In June, IOC used ICICI Bank, a private-sector Indian lender, to settle this trade with Rosneft by paying in yuan to Bank of China , two sources with direct knowledge of the matter said. One private refiner has also been using the same mechanism for payments for Russian oil, one of the sources said. Since then, IOC has used the same method to pay with yuan for other cargoes from Rosneft, one of the sources with direct knowledge of the matter said. “Whenever IOC will face problems it would push for payment in yuan,” the person said, adding that IOC had asked Rosneft to consider supplying oil in vessels not managed by sanctioned entities. Rosneft did not reply to a request for comment. Another state refiner, Bharat Petroleum Corp Ltd, is also exploring yuan payment for Russian oil, a separate source said. “Many traders (sellers) are insisting for yuan payments,” the source said. BPCL, ICICI, State Bank of India and Bank of China did not respond to requests for comment.
IEA Warns Of A Spike In Energy Prices This Winter
Energy prices could spike again this winter, the head of the International Energy Agency has warned. Speaking to the BBC, Fatih Birol said that if China’s economic recovery from the pandemic accelerated later this year and the winter in the northern hemisphere was harsher than last year’s, prices would rise. If that happens, governments would need to step in again and subsidize energy consumption, he said. “In a scenario where the Chinese economy is very strong, buys a lot of energy from the markets, and we have a harsh winter, we may see strong upward pressure under natural gas prices, which in turn will put an extra burden on consumers,” Birol told the BBC. What’s more, Birol said he could not rule out blackouts in the winter, which could be “part of the game”. Last month, the head of Germany’s energy regulator issued a similar warning for winter 2023/24. Speaking to local media, Klaus Mueller said the energy crisis in Europe was not over yet and if the winter was cold, supply could fall short of demand. “When it comes to storage (tank) filling, we are now at a different level to last year … But the biggest factor remains the weather,” Mueller said in early June, as quoted by Reuters. “The energy crisis is not over yet,” he added. China remains the single biggest factor that will influence energy prices for the remainder of the year. So far, its economic recovery has been bumpier than initially expected, and this has led to lower energy prices on world markets. But industrial activity might yet accelerate with the help of government support, and this would push prices higher for all buyers. Add to this the doubtful likelihood of a repeat of last year’s unusually warm winter and the potential for energy price—and supply—uncertainty rises significantly.
India’s Russian oil imports climb to new peak as limit nears
India imported a record volume of crude from Russia in June as the country nears the limit of its buying splurge from the major oil producer. Daily volumes climbed to 2.2 million barrels a day in June, rising for a 10th month, Viktor Katona, the head of crude analysis at Kpler told Bloomberg. According to the data from the analytics firm, Russian purchases once again exceeded the combined shipments of Saudi Arabia and Iraq. Earlier, Kpler reported that Moscow accounted for 46% of India’s oil imports in May, a staggering leap from less than 2% before the invasion of Ukraine. India has stepped in from the wings to prop up the Russian economy. India emerged as a key consumer of Russian oil following the invasion of Ukraine, but the nation’s buying could be near its limit due to infrastructure issues and the need to maintain good relations with other suppliers. Kpler said imports may dip next month because of lower Russian supply. State-owned Indian Oil has been the biggest buyer of Russian crude over the past two months, followed by Reliance Industries Ltd., according to Kpler. Overall, India’s imports of Urals hit another record of 1.5 million barrels a day in June, the analytics firm said. The average cost of Russian crude delivered to Indian shores was $68.21 a barrel — while Saudi oil stood at $86.96 – in April.
Why The U.S. Has Become The Blackout Capital Of The Developed World
Rolling blackouts, freezing homes and skyrocketing electricity prices. A few decades ago, power outages in vast swathes of the United States were relatively rare and would normally be seen as black swan events. Unfortunately, mass blackouts have now become a regular feature of modern American life. Power outages have increased 64% from the early 2000s while weather-related outages have soared 78%. According to one analysis, the United States now records more power outages than any other developed country, with people living in the upper Midwest losing power for an average of 92 minutes every year compared to just 4 minutes in Japan. Climate change and extreme weather events are largely to blame for this sad state of affairs. But the U.S. is not an exceptional case, with Europe feeling the adverse effects of a rapidly changing climate just as keenly as, if not worse than, the U.S. A closer look at the problem reveals that one fuel could be at the center of the conundrum: natural gas. Over the past two decades, the shale revolution unlocked a deluge of cheap natural gas, and made it easier for the country to transition from coal-fired generation to natural gas plants. Indeed, natural gas is widely touted as the ‘bridge fuel’ as the world gradually moves away from coal as the primary fuel used to generate electricity to renewables thanks to natural gas having a much cleaner emissions profile than coal. Gas now makes up ~41% of U.S. power generation, more than double its share in Europe’s energy mix at 19.6%. The harsh reality is that natural gas plants, even relatively modern ones, are proving to have the worst failure rate when faced with extreme weather compared with other generation methods. During last year’s Arctic Blast, gas units accounted for 63% of the failures while representing just 44% of the total installed capacity. The country’s vast network of gas plants and pipelines–the largest in the world–and the regulations that govern them simply were never designed or built without the realities of extreme weather in mind. Gas facilities aren’t uniformly winterized, with many relying on single gas pipelines for supply. Meanwhile, many generators lack the ability to burn an alternate fuel or keep back-up gas on hand in case of emergencies. More alarmingly, even the best gas generating facilities are showing a large degree of vulnerability. PJM Interconnection LLC is the operator of the country’s largest power grid, serving 65 million people in 13 states and Washington, DC, or about a fifth of Americans. The firm’s grid is generally considered to be one of the most reliable in the country thanks to its ample operating reserves and rich shale gas deposits. During the winter blast on Dec. 23, 2022, PJM called a “maximum generation emergency action,” meaning standby plants were supposed to run ramp up to full power. Whereas nearly 20% of those gas plants ran at 100% or more for at least an hour, more than 20% never got above even half capacity while many dropped to 0% output at some point during the emergency. PJM spokesperson Susan Buehler has conceded that generation performance during the storm “was not acceptable,” and added, “What we need, and what we are working on with all of our stakeholders, regulators and policymakers, is for all of our resources to perform when called upon.” Mind you, PJM actually performed better than many neighboring grids, many of which reported widespread electricity interruptions or blackouts, leaving one to wonder how the country’s multiple, highly fragmented and aging grids will manage to stay afloat as Americans continue to consume ever increasing amounts of electricity. During the crisis, a large number of new-model combined-cycle gas plants failed, with some reporting mechanical issues, failures to start due to according to people familiar with the operations and official filings. Others couldn’t get the fuel frozen wells, falling pipe pressure or compressor station failures. Others failed to get gas because they are supplied by utility pipelines that prioritize households and businesses first. “That’s a crisis that’s coming. It’s coming a lot closer and a lot nearer and a lot faster than even I thought a year ago when I first said we’re facing a reliability crisis,’’ Mark Christie, a member of the Federal Energy Regulatory Commission, has told Bloomberg. More Renewables And Grid Upgrades Some experts suggest that extending the existing gas infrastructure can help solve the problem. Many, however, believe that grid upgrades and incorporating more renewable energy is the long-term solution. For decades, the United States has been relying on an aging electrical grid that’s increasingly unstable, underfunded and incapable of taking us to a new energy future. Despite being the wealthiest country in the world, the U.S. only ranks 13th in the quality of its infrastructure. Indeed, our power grid is the weakest link in the ongoing energy transition. A study by UC Berkeley and GridLab found that it will be economically feasible for renewable energy to power 90% of a reliable grid by 2035, while only depending on natural gas for 10% of annual electricity production. Unfortunately, whereas renewable power sources have grown dramatically in recent years, our aging electrical grid is simply incapable of fully integrating them into our energy use, leading to so much potential power wasted. But, as is usually the case, the biggest challenge remains funding: a Wood Mackenzie analysis has estimated it would cost a staggering $4.5 trillion for the US. to fully decarbonize, including constructing and operating new generation facilities; investing in transmission and distribution infrastructure, making capacity payments, delivering customer-facing grid edge technology and more. Suddenly, the $13 billion that the Biden-Harris Administration, through the U.S. Department of Energy (DOE), has allocated to upgrading the national grid looks puny.
Is OPEC Locked Into Supply Cuts With Oil Below $75?
As oil prices hover underneath the $75 for a Brent barrel, OPEC has likely found itself stuck with the extra supply cuts it took on—mainly Saudi Arabia—a hedge fund manager told Bloomberg on Friday. “It would be too damaging to prices to remove it at this time, given the fragility of sentiment,” hedge fund manager of Black Gold Investors LLC said. Earlier this month, Saudi Arabia voluntarily agreed to downsize its production targets by another 1 million barrels per day for the month of July—although it could be extended. Oil prices reacted by jumping up, but the effects were not long-lasting. Today, crude oil prices are lower than they were prior to the announced cut, putting OPEC in a tricky position. In the runup to the OPEC meeting, Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman warned traders once again against taking a speculative bet against oil. He made similar threats back in 2020. “I’m going to make sure whoever gambles on this market will be ouching like hell,” he said at the time. Indeed, OPEC’s cuts they announced back in April hurt short sellers when prices rallied. This time, however, the warning ahead of time likely muted the response to Saudi Arabia’s generous production cut. OPEC—most importantly Saudi Arabia—is working against disappointing economic data out of China. Brent prices are just a hair under $75 per barrel today, but recent estimations from the International Monetary Fund suggest that Saudi Arabia’s fiscal breakeven for crude oil is more than $80 per barrel. Saudi Arabia’s extra cuts go into effect in July, and prices could tick up as supply tightens. After all, the IEA has predicted that crude oil supply will exceed demand by 2 million bpd in the second half of this year.
Petrobangla seeks Tk71.81 billion loan to foot LNG import bills
State-owned Petrobangla, the oil gas and mineral corporation of Bangladesh, has sought a loan of Tk71.81 billion from the finance ministry to meet the cost of liquefied natural gas (LNG) import until next September. The cash-strapped corporation wrote a letter in the last week of May, mentioning that its loss amounted to Tk254.80 billion from 2018 to May this year and it now needs the loan to foot LNG import bills. The amount was over Tk80 billion in just one year from May 2022 because of the surge in global LNG spot price. A finance ministry official told The Business Standard, on condition of anonymity, that an inter-ministerial meeting would be convened to discuss Petrobangla’s loan proposal. “Before that, a comprehensive analysis will be conducted on Petrobangla’s overall income and expenditure data, including the status of the gas development fund, the company’s accumulated liabilities, and operating costs,” the official said, adding that a decision on the loan approval will require “some time.” According to Petrobangla sources, the corporation has also spent almost the entire amount deposited in the Gas Development Fund to meet the cost of LNG import due to the rise in prices in the international market. Out of the total Tk190 billion from the fund, only Tk15 billion is left now. The government has provided a subsidy of Tk220 billion to Petrobangla since 2018. The budget for the last financial year included an allocation of about Tk 60 billion for LNG. It has been fully paid, added the officials.