Govt’s 20% ethanol blending in petrol by 2025 will need more sugarcane: Study
The government’s aim to blend 20 per cent ethanol in petrol by Ethanol Supply Year (ESY) 2025 will require more sugarcane utilisation, a report said on Monday. This is also likely to improve sugar inventory level and cash flows of millers, it added. An ESY runs from November to October. India’s aim to blend 20 per cent ethanol in petrol by ESY 2025 — or 9.90 billion litres annually — will require effective utilisation of both grain and sugarcane feedstock to increase its supply, Crisil Ratings said in a report. The annual ethanol production from grains is expected to see a significant increase to 6 billion litre by the next season (this season’s production estimate is 3.80 billion litre), it stated. The balance will have to be produced by processing ethanol from sugarcane, which is viable given the substantial capacity in place, it said. This, in turn, can help optimise the sugar inventory, particularly considering the high carry-over stock expected at the end of the current season owing to the government restriction on diversion for ethanol production and exports, Crisil Ratings said. Blending ethanol will help reduce India’s dependence on crude oil imports. The ethanol blending rate has steadily risen 200-300 basis points each season since ESY 2021, said the report
U.S. LNG Struggles to Balance Growth with Sustainability
The United States became the world’s largest exporter of liquefied natural gas a year ago amid a flood of cheap natural gas from the shale wells of Texas and New Mexico that prompted a series of LNG projects along the Gulf Coast. Lately, however, the industry has started to lose momentum—because of regulations and a federal government that’s all sympathetic ears to climate activists claiming that natural gas is even worse for the atmosphere than coal. In early August, NextDecade announced a $4.3-billion contract with Bechtel Energy to construct the fourth train of the Rio Grande LNG facility. The company planned to make the final investment decision on Rio Grande LNG in the second half of this year. Everything was going well. The project had even seen foreign investors come on board, including Emirati Adnoc and Saudi Aramco. Then, an appeals court canceled the project’s authorization from the Federal Energy Regulatory Commission. The court acted on claims by several environmentalist organizations that said the project—and another one, Texas LNG—would negatively impact the local environment and communities. The environmentalists first approached the Federal Energy Regulatory Commission, which had granted a permit for Rio Grande LNG, but after the commission refused to have another hearing, the green group, led by the Sierra Club, went to an appeals court and that court struck down FERC’s permit—and that’s after NextDecade added a carbon capture and storage system to its original design to make it as low-emission as possible. Rio Grande LNG, then, is being delayed although its first three trains are still under construction. Another LNG project is also being delayed, but that has nothing to do with regulators. It has to do with the bankruptcy of its contractor, Zachry Holdings, which was also announced this month and which has set the Golden Pass LNG project back several months. Per the Financial Times, the contractor fell out with the developers of Golden Pass LNG over the ballooning costs of the project. “LNG plants are energy infrastructure — and building energy infrastructure in America today is hard,” Kevin Brook, managing director of energy research firm ClearView Energy Partners, told the Financial Times. It is indeed hard to build energy infrastructure in America today, especially after the Biden administration imposed what it called a pause on new LNG capacity additions following protests from environmentalists that claimed LNG is worse than coal for the climate. A court then overturned that pause after 16 states sued, claiming that the suspension of new LNG export permits would affect the U.S. economy negatively and interfere with the supply of gas to allies in Europe that were trying to quit Russian gas. Despite that ruling, the U.S. LNG industry growth is losing momentum as regulatory visibility into the future dims and activist pressure increases. There is also a problem with finding long-term investors, it appears. Alaska, for instance, is leading an LNG project that has yet to get off the ground due to a lack of investors. Another project, Tellurian, has been struggling to find investors for its planned Driftwood LNG project, with a price tag estimated at $25 billion. Last month, Australian Woodside Energy struck a deal to acquire Tellurian for $1.2 billion, and that should give Driftwood a second chance as the Australian major seeks to position itself as a “global LNG powerhouse.” Indeed, it is large energy players like Driftwood that could keep the U.S. LNG industry expanding because they are the only ones that can afford the steep price of LNG facilities. Liquefaction projects costs tens of billions in a normal year, and these past two years have seen some pretty significant inflation, which has not exactly made life easier for their developers, as illustrated by the Driftwood LNG saga. The Golden Pass LNG project is led by Exxon, with QatarEnergy also a shareholder. It has a price tag of $11 billion, which is kind of cheap as LNG projects go. The owners have pushed back the start date of the project by six months as they change contractors but there does not seem to be another problem with that project, for now. Rio Grande LNG is in the hands of the judicial system as NextDecade plans to appeal the court’s ruling on the project. The company also warned that the ruling could cast a shadow over the progress of other LNG projects in the country. Demand for LNG on a global scale is pretty healthy and set for sustained growth over the coming years and decades. One reason is the growing demand for electricity, including in the United States itself. The other is the lower emission footprint of natural gas as opposed to cheaper coal. The second reason is not the leading one, as demonstrated by how fast developing nations switched from LNG to coal every time prices on the spot market became too high for them. For LNG developers, it’s a battle of demand versus activism.
Oil Prices Drop as War Premium Evaporates
Crude oil prices slumped today following the news that Israel had accepted a proposal aimed at solving disagreements on a plan for ceasefire in Gaza. Brent crude dropped below $78 per barrel in midmorning Asian trade and West Texas Intermediate slipped below $74 per barrel earlier in the day, with little in the way of bullishness to arrest the slide. “Prices seem to find some headwinds from geopolitical developments in the Middle East and China’s demand outlook,” IG strategist Yeap Jun Rong told Reuters. “A ceasefire deal in Gaza now seems more likely than not, which saw market participants pricing out the risks of geopolitical tensions on oil supplies disruption,” he added. “Lingering Chinese demand concerns have been the key driver weighing on sentiment,” said Warren Patterson, ING’s head of commodities strategy, said as quoted by Bloomberg. “Now the potential for an Israel-Hamas cease-fire has only provided further downward pressure.” Concern about oil demand in China has become the leading bearish factor on the oil market this year. The country, as the world’s biggest oil importer, is seen as a weathervane for global demand trends and trading decisions are often made based on the latest data out of Beijing. In this case, the latest data has shown declines in both crude oil imports and fuel exports, along with a slew of economic reports that revealed developments falling short of expectations and as such being perceived as suggestive of a weakening economic growth and, by extension, oil demand. “Trade and industrial output numbers last week suggested that apparent oil demand continued to trend lower in July,” ING’s Patterson and Ewa Manthey said in a note. “These worries mean that speculators continue to be hesitant about jumping into the market, despite expectations for a deficit environment for the remainder of the year.”
Surge in LPG and Petrol use drives 7.4% growth in India’s oil demand
India witnessed a 7.4% increase in its petroleum product consumption in July 2024, totaling 19.65 million metric tonnes, according to the latest report from the Petroleum Planning and Analysis Cell (PPAC). This uptick is largely fueled by heightened economic activitiesand government infrastructure projects across the country. Liquefied petroleum gas (LPG) usage saw the most significant rise at 10.1%, primarily driven by domestic consumption under government schemes such as the Pradhan Mantri Ujjwala Yojana. Petrol consumption also surged by 10.5%, reflecting increased demand for personal mobility, facilitated by relatively normal monsoonal patterns which reduced usual seasonal travel disruptions. High-speed diesel, crucial for agriculture and freight, recorded a 4.5% increase, supporting ongoing rural activities and enhanced freight movement. Additionally, aviation turbine fuel consumption rose by 9.6%, buoyed by the recovery in air travel both domestically and internationally as pandemic-related restrictions eased further. The report also highlighted a substantial growth in renewable energy, with India’s installed capacity increasing by 165% over the past decade to reach 148 gigawatts. This aligns with the nation’s commitment to sustainable energy development.
Grain and sugarcane to power India’s ethanol production boost to 9.90 billion liters by 2025
In a significant push toward energy self-sufficiency, India is gearing up to enhance its ethanol production to achieve a 20% blending rate in petrol by the Ethanol Supply Year (ESY) 2025, necessitating an annual production of approximately 9.90 billion liters. To meet this ambitious target, the country is set to optimize the use of both grain and sugarcane feedstocks. The move comes as part of a dual strategy to ramp up ethanol output using grains and sugarcane, with annual ethanol production from grains expected to jump to around 6 billion liters by the next season, up from this season’s 3.80 billion liters. Sugarcane will complement this supply, as indicated by CRISIL Ratings, which has highlighted the substantial processing capacity available for ethanol production from sugarcane. This strategic use of both feedstocks is poised to help manage the sugar inventories effectively, particularly in light of the high carry-over stocks anticipated at the end of the current season due to regulatory limits on ethanol production and sugar exports. India’s drive to increase ethanol blending has been marked by a steady rise in the blending rate, which has increased by 200-300 basis points each season since ESY 2021. Despite last year’s erratic rainfall impacting sugarcane production, ethanol output from this route is expected to be around 2.50 billion liters for the season.
Rising demand, stagnant output pushes oil import dependency beyond 88% in April-July
India’s reliance on imported crude oil to meet its domestic consumption needs climbed to over 88 per cent in the first four months of the current financial year due to rising demand for fuel and other petroleum products amid flagging domestic oil production. The country’s oil import dependency in April-July was 88.3 per cent, up from 87.8 in the year-ago period as well as for the full financial year 2023-24 (FY24), per latest data from the oil ministry’s Petroleum Planning & Analysis Cell (PPAC). India’s energy demand has been rising briskly, leading to higher oil imports and increasing dependence on imported crude. Reliance on imported oil has been growing continuously over the past few years, except in FY21, when demand was suppressed due to the COVID-19 pandemic. The country’s oil import dependency stood at 87.8 per cent in FY24, 87.4 per cent in FY23, 85.5 per cent in FY22, 84.4 per cent in FY21, 85 per cent in FY20, and 83.8 per cent in FY19. Heavy dependence on imported crude oil makes the Indian economy vulnerable to global oil price volatility, apart from having a bearing on the country’s trade deficit, foreign exchange reserves, rupee’s exchange rate, and inflation. The government wants to reduce India’s reliance on imported crude oil but sluggish domestic oil output in the face of incessantly growing demand for petroleum products has been the biggest roadblock.
Oil Prices on Course for a Weekly Gain as Economic Optimism Returns
Crude oil prices were set for a weekly increase earlier today as optimism returned to the oil market following the release of a couple of better-than-expected reports on the U.S. economy. One of these was the retail sales report for July, which showed a 1% increase versus expectations of a 0.3% improvement, Reuters reported. The increase was all the more significant because it followed a monthly dip of 0.2% for June. The other report was the weekly jobless claims tally, which came in lower than expected, with new claims down by 7,000 for the week to August 9 from the previous one. “US economic data released this week has helped to temper fears of a sharp slowdown in the US economy,” FGE told Reuters. The latest data will also likely reinforce hopes that the Fed will soon begin cutting interest rates, which is seen as a major potential oil demand booster. On the other hand, the Fed has signaled repeatedly it would not rush into any interest rate cuts, meaning that these hopes may yet get betrayed. The strength of oil benchmarks is notable because of the abundance of bearish factors weighing on the commodity. Signs of weaker Chinese oil demand and two global demand revisions that came out this week, from OPEC and the International Energy Agency, are the key bearish factors. Meanwhile, in the Middle East the danger of an escalation remains while Israel continues to bomb Gaza and Iran continues biding its time. Israel this week began negotiations with international mediators on a possible ceasefire but what good that would do remains unclear since Hamas is boycotting the talks. “Geopolitics and the risk of an expanding conflict in the Middle East are propping up prices, as the threats of retaliation continue to grow louder,” Matador Economics chief economist Tim Snyder told Reuters on Thursday.
Russia Expands ‘Dark Fleet’ to Evade LNG Sanctions
Russia’s push to navigate sanctions and maintain its foothold in the global LNG market is gaining momentum with the deployment of a second vessel from its Arctic LNG 2 project. The tanker, Asya Energy, part of what’s being dubbed a “dark fleet,” recently departed from the sanctioned terminal in northern Russia, signaling Moscow’s continued efforts to circumvent Western restrictions. This development is similar to its first LNG tanker that was part of the Arctic LNG 2 project, known as the Pioneer. That vessel was last tracked in the Mediterranean. These vessels, reportedly part of a fleet assembled through discreet ownership transfers and minimal transparency, are crucial for Russia’s strategy to sustain LNG exports amid tightening sanctions. Russia has been expanding its dark fleet of LNG carriers, much like it did with oil tankers following its invasion of Ukraine. The ownership of several ice-class LNG tankers has been transferred to little-known entities, primarily in Dubai’s free trade zones, allowing them to operate under the radar. This strategy enables Russia to continue exporting LNG despite U.S. sanctions and recent EU measures that ban new investments and transshipment operations of Russian LNG. The sanctions, particularly those delaying the Arctic LNG 2 project and restricting the use of EU territory for transshipments, have driven Russia to employ its shadow fleet more aggressively. With demand for LNG still strong globally, Moscow is betting on these clandestine operations to keep its energy sector afloat. An analysis earlier this summer conducted by Bloomberg found that little-known shipping firms operating from Dubai’s free trade zone have assumed ownership of at least eight vessels in the earlier part of the year, including four ice-class LNG carriers that had already received Russia’s approval to transverse the Arctic route. Some of the tankers with new ownership do not have listed insurers, according to the analysis—a strong indication of being part of the dark fleet.
Jamnagar Refinery is among the top 10 largest oil refineries in the world
The Al-Zour Refinery in Kuwait, which commenced operations in 2022, has been ranked eighth globally among the largest oil refineries. With a refining capacity of 615,000 barrels per day, it accounts for 8.54% of the total refining operations carried out by the ten largest refineries worldwide, which collectively process 7.2 million barrels of crude oil daily. According to a report by Offshore Technology, as highlighted by Global Data, the Al-Zour Refinery is the only Gulf and Arab refinery to make the list of the top ten largest refineries globally. The refinery, owned by the Kuwait Integrated Petroleum Industries Company (KIPIC), received a score of 7.1 on the net refining index. It was specifically designed to handle heavy crude oil and produce high-value derivatives. Currently, there are 825 active refineries globally, with the sector expected to see substantial growth. The capacity of crude distillation units (CDUs), a key measure of refining capability, is projected to increase by 15% between 2023 and 2027. The top ten oil refineries by CDU capacity worldwide in 2022 are as follows: Paraguana Refinery, Venezuela – 955,000 barrels per day (established in 1949) Ulsan Refinery, South Korea – 840,000 barrels per day (established in 1964) Ruwais Refinery, South Korea – 800,000 barrels per day (established in 1969) Daewooshan Island Refinery, China – 800,000 barrels per day (established in 2019) Jamnagar Refinery II, India – 707,000 barrels per day (built in 2008) Jamnagar Refinery I, India – 660,000 barrels per day (started operating in 1999) Port Arthur Refinery II, United States – 635,000 barrels per day (built in 1903) Al-Zour Refinery, Kuwait – 615,000 barrels per day (fully operational in 2022) Texas City Refinery III, United States – 593,000 barrels per day (built in 1934) Gurun Island Refinery I, Singapore – 592,000 barrels per day (built in 1966)
Petronet LNG receives GST Bill of over Rs 40 million, calls tax demand unjustified
Petronet LNG has received a tax demand of over Rs 40 million from the Department of Goods and Service Tax, New Delhi, the company said in a filing dated August 14. The alleged violations include under-declaration of outward supplies and claiming input tax credit on supplies from GST identification cancelled dealer and from those who don’t pay taxes. The company has said that the demand and penalties are unjustified and that it will seek legal recourse. The filing stated: “The Company has received an order u/s Section 73 of the Goods & Services Tax Act, 2017 raising a tax demand amounting to INR 4,08,93,486/- (including penalty of INR 21,21,032 and interest as applicable) for FY 2019-20.”