India’s refining capacity to hit 309.5 MMTPA by 2028; GVA of petroleum products at ₹2120 billion
India’s refining capacity is projected to increase to 309.5 million metric tonne per annum (MMTPA) by 2028, said Suresh Gopi, Minister of State in the Ministry of Petroleum and Natural Gas, in a written reply in Rajya Sabha. This is an increase from the current capacity of 256.8 MMTPA, with domestic consumption of petroleum products at 233.3 MMTPA for the year 2023-24. The ministry of statistics and programme implementation (MoSPI) reported that the Gross Value Addition (GVA) of manufacturing coke and refined petroleum products rose from ₹1560 billion in 2012-13 to ₹2120 billion in 2022-23. This growth has significantly contributed to the rise in India’s GDP from ₹99440 billion to ₹269490 billion during the same period, at current prices.
America overtook UAE as India’s second largest LNG supplier in 2023
The US displaced the UAE to emerge as India’s second largest supplier of liquefied natural gas (LNG) in 2023, accounting for 3.09 million tonnes (MT). LNG is emerging as a substitute fuel in the transition towards green energy. Analysts attributed the development to weakening LNG prices in international markets as well as India’s proximity, via the Cape of Good Hope, to US LNG cargoes compared to North Asia. The US also emerged as the world’s largest LNG exporter in 2023. According to the world LNG report 2024 by International Gas Union (IG), released earlier this month, the US supplied India 1.8 MT LNG in the pre-pandemic period (2019) and the quantity increased to 3.86 MT in 2021. Evolving trade dynamics India, the fourth largest LNG importer, scaled back in 2022 owing to rising prices and shipments from the US declined to 2.16 MT. On the other hand, the UAE’s share rose from 2.6 MT in 2019 to 3.32 MT in 2020, slipped to 2.59 MT in 2022 and again rose to 2.85 MT last year. Qatar remained India’s largest LNG supplier for five years running (2019-2023); cargoes topped 10 MT, barring in 2019 when it stood at 9.7 MT. In 2023, shipments from Qatar rose to a high of 10.92 MT. Another notable development during this period is the decline in the share of African nations in India’s LNG imports. According to IGU data, Nigeria and Angola, which supplied 2.7 MT and 2.9 MT LNG, respectively, to India pre-pandemic (2019), saw their cargoes shrink to 0.73 MT each in 2023. The share of both African nations has been declining since 2021. Kenneth Foo, Associate Editorial Director at S&P Global Commodity Insights, said the US was the standout exporter in the global LNG market in 2023, overtaking Qatar and Australia with strong growth in liquefaction capacity due to investments made several years ago. Total US LNG exports were about 15 per cent higher year-on-year at 89 MT. “With India at closer proximity via the Cape of Good Hope for US LNG cargoes, compared to North Asia, sellers were more incentivised to sell volumes to India to save freight costs. The ongoing US long-term contracts signed by Indian entities also continued to underpin LNG consumption,” he told businessline. On the decline in cargoes from Africa, Foo pointed out that Nigerian LNG exports faced significant challenges in the last two years. The country’s LNG export facility at Bonny remains under force majeure since October 2022 due to disruption in gas feedstock supply. “Other LNG supply from African countries like Angola has flowed to destinations that are willing to pay price premiums such as Europe across 2022-23. Middle-east volumes remain the mainstay of supply to India due to geographical proximity and significant long-term volumes agreement,” he added. On LNG cargoes in 2023 staying below the levels recorded in 2019-21, he pointed out that from 2019 to 2021, LNG prices were significantly lower, enabling Indian companies to buy spot volumes at market prices. “Indian companies continue to be price-sensitive, and the various fuel-switching alternatives such as naphtha/ fuel oil for refiners, fuel oil and LPG for industrials, and gasoline/gasoil for transportation mean that LNG prices need to be low enough for imports to grow into 2024. Expectations are that, if prices remain below $12 per mBtu, there would be significant import growth potential for India,” Foo added.
HPCL scouts for LNG deals, hopes to start LNG terminal by December
India’s Hindustan Petroleum Corp Ltd is scouting for liquefied natural gas (LNG) import deals as it expects to start its 5 million ton per year (tpy) LNG terminal in western India by end of this year, its head of finance said on Tuesday. “We will be undertaking commissioning activity in November or December depending on weather conditions… We are in the market for tying up long-term gas from international players,” Rajneesh Narang said at its June quarter earnings call. The company’s previous attempt to commission the Chhara LNG terminal in April failed due to the bad weather, he said.
Oil Prices Continue to Fall Amid Growing Concerns Over Chinese Demand
Crude oil prices declined further early on Tuesday after more economic reports from China suggested weaker-than-expected economic growth. Brent crude slipped below $80 a barrel, with West Texas Intermediate trading just above $75 per barrel earlier today. This move in prices came as Reuters reported on a poll among economists expecting China’s manufacturing activity to shrink for the third month in a row. Staying with China, Citi cut its outlook on the country’s economy yesterday, now expecting GDP growth at 4.8%, down from 5% in an earlier forecast, after second-quarter growth came in below predictions. In some bullish news, ANZ analysts noted that the outcome of the Venezuelan elections could lead to lower global supply if the United States tightens its sanctions on Caracas. The country’s electoral authority declared Nicolas Maduro the winner of the presidential vote but the opposition is claiming it won 73% of the votes. “Nicolas Maduro’s victory in the latest Venezuelan election is a headwind for global supply, as this could result in tighter US sanctions,” ANZ said in a note, as quoted by Reuters, estimating the potential effect of tighter sanctions at between 100,000 and 120,000 bpd in daily Venezuelan output. Later in the week prices could move in either direction, with a Fed meeting scheduled for Wednesday that could reignite hopes of an interest rate cut before the end of the year. A day later, OPEC is holding a monitoring meeting and, according to Bloomberg, some market players appear to expect it might decide to roll back some of the production cuts. In reality, this is extremely unlikely in the current price environment, as the cartel made a note of saying the rollbacks will only be implemented if the market environment is right, meaning prices are high.
No Ethanol-Diesel Mandate Yet, Says Petroleum Minister Hardeep Puri
Petroleum Minister Hardeep Puri announced in Parliament on Monday that there are no current plans to mandate the blending of ethanol with diesel, describing the initiative as still in its experimental phase during Question Hour in the Rajya Sabha. Puri explained that oil marketing companies have conducted tests blending up to 7% ethanol with diesel in collaboration with the Automotive Research Association of India and select auto companies. Initial results indicate a flashpoint reduction to 15 degrees Celsius with a 5% blend, raising concerns about material compatibility, fuel stability, and potential fuel tank deposits. As the definition goes, the flash point is the temperature at which fuel ignites when exposed to a flame under controlled heating. Puri also highlighted the success in ethanol-petrol blending, which began in 2014 and is expected to reach 20% by 2025. The move aims to cut oil import costs, enhance energy security, and reduce carbon emissions.
‘Among the petroleum items, crude oil could be brought under GST first’: CBIC Chairman
Higher duty on gold was not only fueling smuggling but also causing market distortion and revenue loss, as it led to imports in non-bullion forms under various free trade agreements (FTAs) where they qualified for lower or even nil rates, Central Board of Indirect Taxes & Customs (CBIC) Chairman Sanjay Kumar Agarwal said in an interview with Soumyarendra Barik and Ravi Dutta Mishra. Agarwal stated that tariff rationalisation is undertaken with an objective to promote domestic manufacturing and boost exports and that the roadmap to bring petroleum products under the ambit of the Goods and Services Tax (GST) regime could start with crude oil as it would help integrate the entire petroleum sector.
India cuts Iraq oil imports to lowest since 2020
India’s imports of Iraqi crude oil plummeted in June to their lowest level since September 2020, industry data revealed this weekend. Indian refineries have been scaling back purchases from traditional Middle Eastern suppliers that raised prices earlier this year, the data showed. “Part of the reason is that they (Iraq) don’t have additional barrels to allocate,” said a trader. “Russian supplies are also readily available.” Earlier this month, Iraq’s oil ministry reaffirmed its commitment to the OPEC+ deal, promising to compensate for any overproduction since the start of 2024. While Iraq remained India’s second-largest oil supplier, followed by Saudi Arabia and the UAE, the United States emerged as the fourth-largest supplier. Indian refiners imported 1.98 million barrels per day of Russian crude in June, a 3.7% decrease from the previous month. The surge in Russian imports has reduced the share of Middle Eastern crude in India’s oil basket, pushing OPEC’s share to a record low. India, the world’s third-largest oil importer and consumer, relies on imports for over 80% of its oil needs. Indian refiners had placed orders in May for most of the crude oil arriving in June.
Russian oil prevails in India’s July imports despite refinery shutdowns
Despite a slew of local refining shutdowns, low discounts on Russian crude and a reduction in crude output, Russia continued to prevail in India’s crude basket in July and displaced Gulf grades and US oil, according to industry sources and shipping data. Russian oil accounted for close to 43.8 per cent of India’s overall 4.52 million barrels per day in July, marginally lower from 44.4 per cent share in June of 4.6 million bpd of imports, and from a 44 per cent share a year earlier, according to market intelligence data from Paris-based Kpler. Russia had a record 46 per cent share of the Indian oil imports market in May 2023.
Route clear for Mannar basin gas; in the interim, India’s LNG for Kerwalapitiya power plants
An Indian proposal to sell liquefied natural gas (LNG) for Sri Lanka’s gas-powered generation plants is an “interim solution” until gas production finally starts in the Mannar Basin, a plan long-delayed by incomplete regulatory frameworks and political wavering. Those requirements are all now in place. The final set of laws—the Petroleum Resources (Joint Study Agreements) Regulations No. 3 of 2024—was gazetted last week. It defines the procedure by which companies could conduct one or more joint studies with Sri Lanka’s Petroleum Development Authority (PDA) in any of the areas contained in the country’s Petroleum Resources Exploration and Development Block Map. The Petroleum Resources (Exploration and Development Block Map) regulations No. 1 of 2024 were also published in March. Since the production of local gas will take several more years, however, the Indian government made an offer last year for the New Delhi-headquartered Petronet LNG Ltd. (PLL) to export gas to Sri Lanka in liquid form, to regasify it and to transport it to the gas-powered generation plants run by LTL Holdings (Pvt) Ltd. in Kerawalapitiya. This will be a direct procurement contract between PLL and LTL. Sri Lanka’s cabinet has approved the arrangement. Geopolitical compromise The arrangement with India has a strong geopolitical flavour. In the past, Sri Lanka has twice reneged on agreements reached with India. For instance, in 2019, it signed a memorandum of cooperation with India and Japan to develop the Colombo Port’s East Container Terminal. It pulled out of the deal two years later, citing worker dissatisfaction and trade union unrest. Separately, in 2017, Sri Lanka approved an India-Japan joint venture for a US$ 250 million LNG import terminal to supply gas to Kerawalapitiya. The state-owned PLL and Japan’s Mitsubishi and Sojitz struck a deal to build the terminal, which was even approved by the Public Utilities Commission of Sri Lanka. In 2022, the Sri Lankan government cancelled this project. Sri Lanka then awarded a tender to China Harbour Engineering Company (CHEC) and Pakistan’s Engro Corporation to develop a floating storage and regasification unit (FSRU) at Kerawalapitiya and an offshore and onshore regasification LNG transmission pipeline network. It later deemed that project to be unfeasible amidst worsened economic conditions and pulled out before awarding PLL the latest LNG supply contract. Earlier, two other LNG projects were also shelved. One was an unsolicited bid in 2019 from Korea’s SK E&S Co. Ltd. for an FSRU, a pipeline, and an LNG supply deal. It was opened to a Swiss Challenge (where other bidders were invited to compete on its terms) and subsequently dropped. In 2021, there was an agreement that a United States company, New Fortress Energy, would buy a 40 percent stake in Sri Lanka’s Yugadhanavi power plant, develop an FSRU and supply gas to the plant. This also didn’t make the cut.
Oil Prices Are Set for a Third Consecutive Weekly Loss
Crude oil prices looked on track for a third weekly loss in a row, pressured by the perception of weaker-than-desired Chinese demand. Even so, oil made some gains earlier in the week, mostly on substantial inventory draws as reported by the American Petroleum Institute and the Energy Information Administration. The latest push for oil prices came from the U.S. Commerce Department, which reported GDP growth of 2.8% for the second quarter, attributing it to higher consumer spending and business investment. More U.S. economic data is due out later today when the Fed will report personal consumption expenditure data—the inflation metric that the U.S. central bank favors. Meanwhile, prices are getting some support from expectations that the PCE data would be positive, strengthening hopes of an interest rate cut in September. On the other hand, Goldman Sachs analysts said this week that weak demand and slower GDP growth next year could shave some $11 off oil prices—if the U.S. imposes new tariffs on imported goods. The decline could deepen to $19 per barrel, the analysts said, if the Fed delays rate cuts until after 2025 on persistently high inflation. Interestingly, some oil market watchers appear to be bracing for more OPEC supply coming online in the second half of the year. That’s according to Bloomberg, which said in a report earlier today that market observers were “split over whether the producer cartel will ease their curbs next quarter.” OPEC did indeed suggest it might begin to roll back some production curbs but it made a point of clarifying this would only happen if prices are where OPEC wants them to be. With prices sliding, it is quite unlikely that the group would bring back any supply, since that would only serve to pressure prices even more, betraying the very purpose of the cuts.