CBDT Grants Tax Exemption to Petroleum and Natural Gas Regulatory Board Effective from AY 2024-25
On November 12, 2024, the Central Board of Direct Taxes (CBDT) issued a notification granting tax-exempt status to the Petroleum and Natural Gas Regulatory Board (PNGRB) under section 10(46A)(b) of the Income-tax Act, 1961. This exemption is set to be effective from the assessment year 2024-25, allowing the regulatory board relief from income tax, provided it continues to fulfill its statutory functions as outlined in the Petroleum and Natural Gas Regulatory Board Act, 2006. The PNGRB, which holds a vital role in the regulation of India’s petroleum and natural gas sector, will benefit from this exemption by reallocating resources toward enhancing its regulatory infrastructure and oversight capabilities. The notification (No. 118/2024) specifies that PNGRB’s tax-exempt status will remain valid as long as it maintains its constituted role and objectives under the 2006 Act. This move underscores the government’s commitment to bolstering the regulatory framework for energy resources, aligning with the broader economic goals of sustainable and secure energy management. By supporting regulatory bodies with tax exemptions, the government aims to enhance sectoral stability, ensuring that resources are directed towards regulatory functions rather than tax liabilities. For industry stakeholders, this announcement reaffirms the government’s proactive measures to strengthen the energy regulatory landscape. Analysts view this tax exemption as a positive step, promoting regulatory robustness and contributing to India’s energy security goals.
OPEC+ Faces Double Trouble: China Demand Weakness and Trump’s Policies
The OPEC+ group has struggled to manage oil supply and prices this year. First, there was overproduction from several members, undermining the cuts from the other producers in the pact. Then came the summer and the first actual consumption data for the first and second quarters of the year, showing that China’s oil demand growth is nowhere near OPEC’s expectations. Toward the end of the year, just as the cartel and its allies announced they would postpone the start of the easing of the production cuts to January 2025, they now have the wildest card on the market of all—President-elect Donald Trump. China’s weak oil demand has already thrown OPEC+ off track in its supply-management policies and continues to defy OPEC forecasts with underwhelming crude consumption and imports. The group now has to contend with some policies President-elect Trump has promised to introduce, including easier permitting for fossil fuel projects, import tariffs, and a more rigid stance toward Iran. China Weakness China has already undermined the OPEC+ alliance’s policy. The group is cutting production, but demand has been weaker than expected amid slower Chinese economic growth, the property crisis undermining construction activities and diesel consumption, and the surge in electric vehicle (EV) sales and registrations of LNG-fueled trucks. OPEC has been wrong-footed by the surge in electric mobility in China, the International Energy Agency (IEA) said in its World Energy Outlook 2024 report last month. In October, OPEC cut its 2024 global oil demand forecast in the third consecutive monthly report, citing actual consumption data so far this year and expectations of slightly lower demand in some regions, including China. In each report since August, OPEC has signaled that its estimates of Chinese oil demand growth were too optimistic when it published the first outlook for 2024 in July 2023. Despite the optimistic long-term view, OPEC’s short-term demand outlook on China has been revised down, again. Weaker-than-expected oil consumption in China and rising electric vehicle sales will continue to weigh on the world’s oil demand growth going forward, according to the IEA’s Executive Director, Fatih Birol. “This year, global oil demand is very weak, much weaker than previous years, and we expect this will continue because of one word — China,” Birol told Bloomberg in an interview last month. China’s official crude oil import data hasn’t been encouraging for OPEC, either. Although imports are not all the crude China consumes, the import trends in the world’s top crude importer have weighed on oil prices. The latest Chinese data showed another month of lower crude oil imports compared to the same month of 2023. In October, China imported 10.53 million bpd of crude oil, per data from the General Administration of Customs. This was the sixth consecutive month in which crude cargo arrivals have lagged behind the imports in the same months of 2023. And imports were 9% lower compared to October 2023 and 2% below the import level of 11.07 million bpd in September 2024. Trump Uncertainties Apart from China, OPEC+ will now have to navigate uncertainties and risks to oil demand and supply with the incoming American president. President-elect Trump is expected to step up sanctions on Iran, an OPEC member exempted from the production cuts, which earlier this year saw its exports hitting a six-year high. Lower Iranian supply could be bullish for oil prices if demand holds. But other policies Trump has floated, such as 10% tariffs on all U.S. imports and a 60% tariff on imports from China, could undermine global economic growth, leading to lower global oil demand overall. OPEC+ can ill-afford weak global oil demand growth if it wants to return 2.2 million bpd of supply to the market next year. Tariffs could slow U.S. and global economic growth, reducing oil demand by as much as 500,000 bpd in 2025 – one-third of Wood Mackenzie’s current projection for global oil demand growth next year. “This has the potential to soften oil prices by US$5 to US$7/bbl from current levels, assuming no other risks such as an escalation in Israel-Iran hostilities,” Simon Flowers, chairman and chief analyst at WoodMac wrote last week.
Biofuel Blending Could Save India ₹910 billion On Imports: Union Minister Hardeep Singh Puri
Union Minister for Petroleum and Natural Gas, Hardeep Singh Puri, has stated that biofuel blending could save India 910 billion rupees on import expenses, with these savings benefiting the agricultural sector. Inaugurating the 27th Energy Technology Summit in Bengaluru, he noted that India ranks second globally in biofuel blending and is on track to achieve a 20 per cent biofuel blending target by next year, ahead of schedule. The Minister emphasised that as Indian refineries transition to green energy, the country is advancing toward its green hydrogen goals. He highlighted that India’s energy demand is expected to grow 2.5 times by 2047, with a current crude oil refining capacity of 400-450 million metric tons annually-about one-third of the global average. Achieving the 2070 net-zero emission target, he added, will require doubling efforts in energy security, sustainability, and technological innovation. The three-day Energy Technology Meet, organised by the Centre for High Technology and Indian Oil Corporation Limited, has drawn 1,200 participants, with 60 papers to be presented and 23 exhibitors showcasing the latest technologies. The Minister also awarded the Petroleum and Natural Gas Ministry’s 2023-24 best energy-efficient technology awards.
Trump Factor: Decoding the potential impact on crude prices and India’s oil economy
Energy markets are attempting to understand the implications of Donald Trump’s presidency on oil and gas prices. Analysts predict that his actions could significantly influence global crude oil prices, with an 80% likelihood of a decline. However, there are a few factors that could drive prices higher. Moreover, experts believe that although most of Trump’s policies are likely to have a bearish impact on prices, there is significant upside potential in his focus on ‘increased drilling’ and trade policies. Trade-related uncertainties and tensions continue to pose challenges for crude oil prices, particularly affecting energy prices in the US. There may be counterproductive effects on US exports resulting from the tariffs imposed on imports. “US oil production means a well drilling cost requirement of $64/ bbl. Hence the degree of “Drilling” would be muted. Going forward, in a couple of years these costs could scale up to $67 and $70 range as per the forward prices,” said NS Ramaswamy, Head CRM & Commodities of Ventura Securities. On the other side, Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services pointed out that since Trump is pro-fossil fuel, his regime is likely to give tax incentives for capital investment in the exploration and production of fossil fuels. This policy will keep crude prices soft, he opined. “Since US is the largest producer of crude in the world now, OPEC is not as powerful as it used to be. This trend will accelerate with the potential to bring crude prices further down, going forward,” said Vijayakumar. What does softening of crude prices mean to India? Overall, declining crude prices can lead to various advantages for India, such as reduced import expenditure, decreased inflation, improved profit margins for industries, and enhanced performance in Indian stock markets. “Softening crude price will be a macro positive for India which will help us to keep the current account deficit and fiscal deficit down, thereby imparting macro stability to the economy. An added positive is that this will lower inflation thereby enabling the MPC to cut rates early in 2025. Industries such as paints, tyres, adhesives and aviation, which use crude derivatives as inputs, will gain from the potential decline in crude prices,” said Dr. V K Vijayakumar. However, in this case (Trump presidency), according to a few experts, India finds itself in a dilemma; if the trading range stays between $65 and $70, it may persist with imports from Russia. Continuing these imports could have repercussions on fiscal policy. With Trump likely to maintain a strong relationship with India, this could contribute to inflationary pressures. In any case, the status of our currency remains uncertain.
WTI Breaks Below $70 as Demand Concerns Drive Bearish Sentiment
West Texas Intermediate broke below $70 per barrel on Monday as Hurricane Rafael weakened to a storm that is unlikely to cause any damage to U.S. oil production in the Gulf of Mexico. Separately, oil benchmarks got depressed by trader pessimism about Chinese oil demand after the country’s ruling party announced its latest stimulus package, which underwhelmed, according to Reuters. At the time of writing, Brent crude was trading at $73.30 per barrel while WTI had dropped to $69.69 per barrel. “The market will now shift focus to the Politburo meeting and Central Economic Work Conference in December, where we expect more pro-consumption countercyclical measures to be announced,” ANZ analysts wrote about China. Beijing on Friday announced additional stimulus measures that focused on the real estate sector and consumer demand for goods. Apparently, this was not good enough for oil analysts. “The crude market has hit a fair value and feels incredibly comfortable at the $70 level,” Chris Weston, head of research at Pepperstone Group, told Bloomberg. “Granted, we have US election risk that could impact growth expectations, but we’re not expecting that battle to bite and impact this week.” China, of course, remains in the focus of traders’ attention as the second-biggest consumer of the commodity and top importer. Just last week, Vitol’s head of research noted that this focus will remain in place as China continues to drive growth in oil demand thanks to petrochemicals. These, Giovanni Serio said, will replace transport as the main source of demand growth in the coming years. “The growth just next year is entirely capable of satisfying the total demand globally for plastics,” Serio said at the FT Asia Commodities conference, as quoted by Reuters. “There is no doubt that this is going to be the driving force of oil demand in China and globally because it is less of a decarbonisation story in that space,” he added.
Russia explores plan to merge Rosneft with Gazprom subsidiary and Lukoil, WSJ reports
Russia is working on a plan to merge state-backed Rosneft Oil, opens new tab with Gazprom Neft, opens new tab and Lukoil, opens new tab, creating the world’s second-biggest crude oil producer, the Wall Street Journal reported on Friday. Talks between executives and government officials took place over the past few months, and a deal may or may not happen, the newspaper said, citing people familiar with the matter whom it did not identify., opens new tab with Gazprom Neft, opens new taband Lukoil, opens new tab creating the world’s second-biggest crude oil producer, the Wall Street Journal reported on Friday. Talks between executives and government officials took place over the past few months, and a deal may or may not happen, the newspaper said, citing people familiar with the matter whom it did not identify. A combination of Rosneft, Gazprom, opens new tab subsidiary Gazprom Neft and Lukoil, would be second to Saudi Arabia’s Aramco, opens new tab and could pump almost three times U.S. oil producer Exxon’s, opens new taboutput, the report added. There are some obstacles, including opposition from some Rosneft and Lukoil executives and the problem of collecting funds to pay Lukoil shareholders, the report said. Lukoil, Rosneft, Gazprom and the Kremlin did not immediately respond to Reuters requests for comment, while Gazprom Neft could not immediately be reached.
India Now Biggest EU Fuel Exporter, Russian Oil Refinement Loophole
India’s export of fuels like diesel to the European Union jumped 58 per cent in the first three quarters of 2024, with a bulk of them likely coming from refining discounted Russian oil, according to a monthly tracker report. The EU/G7 countries in December 2022 introduced a price cap and an embargo on the imports of Russian crude oil in a bid to cripple Kremlin’s revenue and create a vacuum in its funding for the invasion of Ukraine. However, a lack of a policy on refined oil produced from Russian crude meant that countries not imposing sanctions could import large volumes of Russian crude, refine them into oil products and legally export them to the price-cap coalition countries. India has become the second biggest buyer of Russian crude oil since the invasion, with purchases rising from less than one per cent of the total oil imported in the pre-Ukraine war period to almost 40 per cent of the country’s total oil purchases. The rise was primarily because Russian crude oil was available at a discount to other internationally traded oil due to the price cap and the European nations shunning purchases from Moscow. Fuel exports were, however, at full price. “Capitalising on the refining loophole, India has now become the biggest exporter of oil products to the EU. In the first three quarters of 2024, exports to the EU from the Jamnagar, Vadinar (in Gujarat) and new Mangalore refinery – which are increasingly reliant on Russian crude – saw a 58 per cent year-on-year rise further,” the Centre for Research on Energy and Clean Air (CREA) said its latest report. Reliance Industries Ltd has oil refineries at Jamnagar while Russia’s Rosneft-backed Nayara Energy has a unit at Vadinar. Mangalore Refinery and Petrochemicals Ltd (MRPL) is a subsidiary of the state-owned Oil and Natural Gas Corporation (ONGC). This, it said, amplified “the fact that EU Member States continued imports are expanding the refining loophole and Russian revenues from crude exports to third countries”. Europe typically imported an average of 1,54,000 barrels per day (bpd) of diesel and jet fuel from India before Russia’s invasion of Ukraine. This has almost doubled. While CREA did not give an absolute number for imports, the European think tank had in a previous report stated that Euro 8.5 billion of price cap coalition countries’ imports of oil products in 13 months to December 2023 were made from Russian crude. These imports in 13 months were equivalent to 68 per cent of the EU’s annual commitment to aid Ukraine between 2024 and 2027. “In the 13 months since the oil price cap took effect (in December 2022), over one-third of India’s exports of oil products to sanctioning countries was derived from Russian crude (EUR 6.16 billion or USD 6.65 billion),” the Finland-based CREA had said in the previous report. While there are no restrictions or sanctions on buying/using Russian crude oil and exporting fuels like diesel derived from it, the Group of Seven (G7) rich nations, the European Union and Australia – called the price cap coalition countries – first set a crude price cap of USD 60 per barrel starting December 5, 2022, and later on products like diesel to keep the market supplied while limiting Moscow’s revenue. CREA in the latest report said India, the world’s third largest oil-consuming and importing nation, in October bought Euro 2 billion worth of crude oil from Russia, down from Euro 2.4 billion in the previous month. “China has bought 47 per cent of Russia’s crude exports (in October), followed by India (37 per cent), the EU (6 per cent), and Turkey (6 per cent),” it said. “India was the second-largest buyer of Russian fossil fuels in October, contributing 19 per cent (EUR 2.6 billion) to Russia’s monthly export earnings from its top five importers. An estimated 77 per cent of India’s imports (valued at EUR 2 billion) comprised crude oil.” In September, India contributed 21 per cent (EUR 2.8 billion) to Russia’s monthly export earnings from its top five importers. Almost 85 per cent of India’s imports (valued at EUR 2.4 billion) comprised crude oil. “From December 5, 2022, until the end of October 2024, China purchased 46 per cent of all Russia’s coal exports, followed by India (17 per cent), Turkey (10 per cent), South Korea (10 per cent), and Taiwan (5 per cent) to round off the top five buyers list,” the agency said. India is more than 85 per cent dependent on imports to meet its crude oil needs. In October, the discount on Russian Urals grade crude oil increased 77 per cent to an average of USD 5.14 per barrel compared to Brent crude oil. The discounts on the ESPO grade narrowed by 5 per cent and traded at an average discount of USD 4.58 per barrel, while that on the Sokol blend widened by 8 per cent to USD 6.77 a barrel. According to CREA, 34 per cent of Russian seaborne crude oil and its products in October were transported by tankers subject to the oil price cap. The remainder was shipped by ‘shadow’ tankers and was not subject to the oil price cap policy. Cargoes of Russian crude can access western services like insurance and shipping only if sales are capped below USD 60 a barrel. To circumvent this, a dark or shadow fleet of oil tankers emerged. The shadow fleet consists of second-hand decrepit oil tankers with opaque ownership structures that make it difficult to ascertain who controls them or forces them to follow Western laws.
India Defends Propping Up Russian Oil – Prices “would have hit the roof”
India, the world’s third largest oil importer and consumer, has become the top buyer of discounted Russian sea-borne oil shunned by Western countries since Ukraine’s invasion began in early 2022. Before that, India bought little oil from its long-running defence partner, Russia. New Delhi has repeatedly defended its purchases from Russia as necessary to keep prices in check in the developing country of 1.42 billion people. “What many around the world don’t seem to realise is that global oil prices would have hit the roof if India had not bought oil from Russia,” India’s oil minister, Hardeep Singh Puri, wrote on X late on Friday. “We owe it to our citizens – India will buy oil from wherever our companies get the best rates.” India’s crude oil imports from Russia rose by 11.7% to about 1.9 million barrels per day in September, accounting for about two-fifths of the South Asian nation’s overall crude imports in the month. Russia was followed by Iraq and Saudi Arabia as India’s biggest suppliers.
Northeast gas grid to be operational by 2026: Indian Gas Exchange CEO
Ongoing work for Northeast Natural Gas Grid are as per the schedule and will likely be operational by 2026 according to Rajesh K Mediratta, Managing Director and CEO of Indian Gas Exchange (IGX). India’s northeast region has tremendous potential in the production of natural gas. The region has a deposit of 6 million MMSCMD Natural Gas which can be monetized by the existing producers, said Mediratta, addressing the ‘Gas Market Development for North East’, where leading energy producers and stakeholders participated in Guwahati. “This (grid) will add to the country’s energy security as IGX will help Gas producers to monetise stranded gas who can sell the surplus gas to the other regions,” Mediratta added, as per a statement by the gas exchange
Bangladesh said to scrap Darshan Hiranandani’s gas supply plan, India unlikely to intervene
India is aware of reports that Bangladesh has cancelled a proposed agreement with the Darshan Hiranandani-led H-Energy group to supply gas, but New Delhi is unlikely to intervene in the matter. The Mumbai-based company was to supply regasified liquified natural gas (LNG) to the energy deficient neighbour. The Bangladesh newspaper The Business Standard reported in April that state-owned Petrobangla is close to signing agreements on import of regasified LNG from an Indian private company through a cross-border pipeline. However, a recent report on Twitter suggested that the Bangladesh government is planning to cancel the project and imports after a US company, Excelerate Energy, which already has operations in Bangladesh, showed an interest in expanding its supplies to the country. ‘New Delhi is aware’ New Delhi is “aware” of the reports concerning the Hiranandani-led H Energy and Bangladesh, said a senior official in the know of the developments. “The (Indian) government would not intervene in this matter. It concerns with a private company. There are several other significant issues that can be taken up,” the official added.