PNGRB retracts announcements designating 54 city gas networks as common carriers
PNGRB revised its April guideline that had formed the basis for notices to 54 city gas licensees in 2021 with a new one, repealing the prior one that had stated networks to be common carriers. The agency stated that it made the decision to remove all of those notices because the previous guideline was revoked. Regarding the notices, city gas license holders have been suing the PNGRB in court. Companies will immediately withdraw their cases if notices are withdrawn, according to sources with knowledge of the situation. However, the people said that the regulator may once more take action to designate the licensed areas that have long past their exclusivity period as common or contract carriers. This would be required to promote fair competition among suppliers, lower consumer costs, and increase the nation’s gas consumption.
Oil marketing companies reduce price of commercial LPG cylinder and jet fuel
The oil marketing companies (OMCs) announced on Saturday that they would reduce the price of jet fuel and commercial LPG used by hotels and restaurants in the country. As per the price notifications, a 19-kg commercial LPG used by hotels and restaurants was cut by 69 to Rs 1,676 in Delhi, while ATF (Aviation Turbine Fuel) was cut by Rs. 6,673.87 per kilolitre, or 6.5%, to Rs. 94,969.01 per kl in the national capital. The reduction follows a marginal 0.7 percent (Rs 749.25 per kl) increase on May 1. The revised price will be applicable today, June 1, 2024. However, the rate of cooking gas used in domestic households remained unchanged at Rs. 803 per 14.2-kg cylinder. April 1 saw the first reduction in commercial LPG prices since January. The rate had gone up by Rs. 14 per cylinder on February 1 and Rs 25.5 on March 1. Oil companies such as Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd. (BPCL), and Hindustan Petroleum Corporation Ltd. (HPCL) revise the prices of ATF and cooking gas on the 1st of every month based on the average price of benchmark international fuel and the foreign exchange rate. Petrol and diesel prices remain unchanged after a Rs. 2 per liter cut implemented in mid-March. Currently, petrol costs Rs 94.72 per liter in Delhi, and diesel is priced at Rs 87.62 per liter.
Extreme Weather and Red Sea Crisis Trigger Commodities Rally
After three years of extreme volatility, many experts predicted that commodities prices would broadly stabilize in 2024. However, adverse weather conditions, escalating geopolitical tensions and soaring shipping costs are turning those predictions on their heads. According to data gathered by the the United States’ National Oceanic and Atmospheric Association (NOAA), the European Union’s Copernicus Climate Change Service (CCCS), the United Nations World Meteorological Organization (WMO), last year not only broke 2016’s heat record but shattered it by a wide margin. 2023 was 1.48°C warmer than the pre-industrial period, with global average temperatures at least 1°C warmer than pre-industrial averages on every single day. Well, 2024 could be even hotter, with the National Centres for Environment Information (NCEI) predicting a 22 percent chance that the current year will be the warmest year on record and a 99 percent probability that it will rank in the top five warmest years. NCEI data reveals that the first four months of the current year were the warmest in 175 years. Wild weather driven by climate change is elevating the cost of energy, food and fuel; increasing the frequency of natural disasters and raising insurance costs. According to Munich Re, last year, extreme weather and earthquakes inflicted global losses of $250 billion, a new norm for insurers. These wild weather patterns–coupled with geopolitical tensions–have changed the outlook for certain commodities. Gary Cunningham, director of market research at Tradition Energy, has predicted that U.S. natural gas futures could soar to $4 per million British thermal units later this year if the ongoing hot weather persists and increases cooling demand. That would mark a large 60% jump from the current Henry Hub price of $2.50/MMbtu. The same case applies to Europe. European natural gas prices held around €35 per megawatt-hour in the last week of May, close to a 5-month high amid expectations of lower supply and robust cooling demand. New weather forecasts anticipate hotter temperatures in Northern Europe at the beginning of June; aggressive heat waves in Europe later in the summer and excessive heat in France and Spain. “This summer will almost certainly bring a rash of debilitating heat waves, particularly in the US midsection and Europe,” said Jennifer Francis, a senior scientist at the Woodwell Climate Research Center, has predicted. Meanwhile, soaring temperatures in Asia have intensified bidding competition for LNG in major hubs, underscored by the 16.7% annual increase in imports from Japan in April. Europe now competes with Asia for LNG cargoes from exporters like the US, Qatar and Nigeria However, ample reserves in European storages and added capacity in Norwegian gas fields are helping temper shortage risks. Hot weather and dry conditions have triggered shortages of several agricultural commodities resulting in price spikes. Wheat futures have hit the highest since July, reversing bearish bets by hedge funds they held for almost two years. In North America, much of Kansas is still suffering from extreme drought, though harvests are expected to improve from last year when drought was so bad many fields didn’t make it to harvest. Still, with hot conditions prevailing more than a month before the harvest season kicks in, experts are warning that those rosier forecasts might not be realized. “It better start raining pretty quick to get these numbers,” said Dave Green, executive vice president of the Wheat Quality Council and leader of the crop tour. Meanwhile, Citigroup analysts have predicted that extreme weather could see prices of Arabica coffee jump about 30% to hit $2.60 a pound over the next few months if adverse weather and production issues prevail in Brazil and Vietnam. Shipping Bull Market Shipping stocks have so far been the biggest winners in the energy sector. From tankers to dry bulk to containers to LPG, shipping equities are constantly taking out fresh highs. Indeed, with the exception of the pandemic, 2024 is on track to be the best year for shipping equities since the shipping supercycle in 2004-2008. With shipping rates soaring, leading commodity shipping stocks are firmly in the green this year, and show no signs of slowing down. Tsakos Energy Navigation (NYSE: TNP) and Teekay Tankers (NYSE: TNK) recently hit fresh 52-week highs, as did dry bulk carrier owners Genco Shipping & Trading (NYSE: GNK), Golden Ocean (NASDAQ: GOGL. TNP is now up 40.1% in the year-to-date; TNK has climbed 51.0%, GNK has gained 34.9% while GOGL has rallied 46.3%. Tanker stocks have been more of a mixed bag: Scorpio Tankers (NYSE: STNG) is up 34.9% YTD; Frontline Plc (NYSE:FRO)+42.4%, Nordic American Tankers (NYSE: NAT) -1.2%, Euronav (NYSE: EURN)-3.9% while International Seaways (NYSE: INSW) has returned 45.3%. Source: Drewry According to Lloyd List, broad gains by shipping stocks can be chalked up to an improved operating model. In the pre-financial-crisis era of 2008, shipping companies featured highly cyclical revenues with heavy capital expenditures on newbuildings, equity sales to fund growth, full dividend payouts, and very high debt levels. However, they have mostly changed their playbook, especially larger spot-centric bulk commodity shipping owners. Mirroring the similarly retooled strategy of U.S. oil exploration and production (E&P) companies, shipping companies now have much lower debt to reduce break-evens, limited capital expenditures, more sustainable shareholder returns including dividend payouts, and share buybacks when stock prices are below net asset value (NAV). According to Clarksons Securities analyst Frode Morkedal, these changes have led to “a significantly more receptive investor market for shipping. Shipping stocks have made a significant turnaround this earnings season, outperforming the previous two quarters.”
Global LNG supply to increase by 80% by 2030: Goldman Sachs
The global liquefied natural gas supply is set to surge by 80 percent by 2030, driven by new projects in Qatar and North America, a new analysis showed. In its latest report, Goldman Sachs said that this robust rise in supply would bring an end to the current energy crisis following Russia’s invasion of Ukraine. The US-based financial services firm also highlighted that investments in LNG are projected to increase by over 50 percent by 2029. Michele Della Vigna, Goldman Sachs’ head of natural resources research in Europe, the Middle East and Africa, said: “LNG in the US, without any doubt, is dominating future supply and we believe that the capacity growth in LNG is going to bring an end to the energy crises that began a couple of years ago, following European sanctions on Russian gas after the invasion of Ukraine, and work to lower natural gas prices in Europe and Asia.” He added: “We’re projecting an 80 percent increase in global LNG supply by 2030, which will be driven by new projects in North America and Qatar.” In January, QatarEnergy signed an agreement with US-based Execelerate Energy to supply up to 1 million tons per annum of LNG to Bangladesh for 15 years. Similarly, in February, Qatar’s state-owned firm signed another agreement with Petronet to supply 7.5 mtpa of LNG to India for a period of 20 years. In the same month, QatarEnergy chief Saad Al-Kaabi announced a new expansion of its LNG production in the North Field, which will add a further 16 mtpa to existing capacity, bringing total production to 142 mtpa.
Govt cuts windfall tax on petroleum crude to Rs 5,200 per MT from Rs 5,700
The Indian government has cut the windfall tax on petroleum crude to Rs 5,200 ($62.33) per metric ton from Rs 5,700, effective on June 1, according to a notification issued on Friday. The tax, which is revised every fortnight, remains unchanged at zero for diesel and aviation turbine fuel. The Indian government on May 16 had reduced the windfall tax on petroleum to Rs 5,700 per metric ton from Rs 8,400. India started taxing crude oil production and exports of gasoline, diesel and aviation fuel in July 2022 to regulate private refiners which wanted to sell fuel overseas instead of locally in a bid to gain from robust refining margins.
Domestic Natural Gas Prices Reduced, Government Caps Prices
The Ministry of Oil has reduced the price of domestic natural gas to USD 8.44 per million metric British thermal units (mmBtu) for June 2024, down from USD 8.90 in the previous month. Despite this reduction, the price will remain capped at USD 6.5 per mmBtu under the current pricing formula, as part of the government’s efforts to stabilise the market. The new pricing mechanism, introduced by the government, sets a floor price of USD 4 per mmBtu and a ceiling price of USD 6.5 per mmBtu for domestic gas. This applies to natural gas produced from legacy and oil fields managed by Oil and Natural Gas Corporation Ltd (ONGC) and Oil India Limited (OIL). Under this regime, domestic gas prices are linked to imported crude oil prices, pegged at 10 per cent of the Indian crude basket, with monthly updates to reflect current market conditions. This pricing reform follows recommendations from a government-appointed panel led by Kirit Parikh, an energy expert and former member of Niti Aayog. Established in 2022, the panel aimed to overhaul the pricing structure for domestically produced natural gas to stabilise the market for both producers and consumers. The primary goals included boosting domestic gas production to meet the target of deriving 15 per cent of India’s energy from natural gas by 2030 and ensuring fair pricing for consumers. Key recommendations from the Parikh committee included a fixed pricing band for gas from legacy fields, which constitute two-thirds of the country’s total natural gas production. The panel advised linking the price of gas produced by state-owned companies from fields allocated on a nomination basis to imported crude oil prices, with a minimum floor price of USD 4 per mmBtu and a ceiling of USD 6.5 per mmBtu. The ceiling rate for APM gas from legacy fields will see an annual increment of USD 0.5 per mmBtu. The current pricing formula will remain for gas fields with challenging geologies, such as Reliance Industries and British Petroleum’s KG-D6. Additionally, the committee recommended integrating natural gas into the Goods and Services Tax (GST) regime to streamline taxes and prioritise city gas in the allocation of APM gas. This ensures the city gas sector falls under the ‘no-cut’ category, meaning supplies to other consumers will be curtailed first in the event of a production decline.
India explores for crude oil on sweeter terms after end of Iran oil waiver
India is trying to leverage its robust ties with West Asian crude oil producers such as Saudi Arabia, Kuwait and the United Arab Emirates (UAE) to source additional volumes at terms similar to those of its annual contracts in a bid to avert any sharp rise in its domestic oil prices. India, the world’s third-largest oil importer, is in discussions with oil producers in West Asia as well as in other geographies to procure a total of about 15 million tons of extra crude over the year to urgently bridge a supply gap that will be caused by the exit of Iran from its energy basket. US secretary of state Mike Pompeo on Monday announced that the Donald Trump administration would no longer grant exemptions to some countries to import Iran oil with the conditional waiver set to expire on 2 May. India’s attempt to boost crude supplies from the Gulf nations also comes at a time when they plan to increase their investments in India. Crude purchased under the annual contract terms would be more lucrative for India than under spot contracts. Such contracts would also allow for purchasing additional quantities of crude at similar terms. “Talks with West Asian suppliers such as Saudi Arabia, United Arab Emirates and Kuwait are in advanced stages. They have been our long-term suppliers and will be leaned on for extra cargoes at old terms and conditions,” an Indian government official said, requesting anonymity.
India targets global renewable ammonia market, aims for energy leadership
With the goal of achieving leadership in sustainable energy through smart international partnerships, India is staking its claim in the global market for renewable ammonia. India emphasises its commitment to renewable energy with plans to produce 5 million metric tonnes of renewable hydrogen by 2030 and gain a 10 per cent share of global trade. To help with project funding and implementation, leading organisations like ReNew-Jera and ACME-IHI have started to sign non-binding supply agreements for renewable ammonia, and more will follow. India’s affordable renewable hydrogen is well-positioned to compete internationally, despite challenges in the form of inconsistent policies and market competition from established ammonia manufacturers in South Korea and Japan. India’s competitive edge is further strengthened by the National Green Hydrogen Mission 2023, which eliminates interstate transmission fees and offers incentives. The industry is quite hopeful about India’s ability to achieve the demanding European standards for renewable fuels at more affordable rates than other global markets, as it has the capacity to produce hydrogen at a significantly lower cost than other countries.
CoolCo reveals more details on GAIL LNG carrier charter deal
LNG carrier operator CoolCo has revealed more details regarding its recent 14-year charter deal with India’s largest gas utility GAIL. CEO Richard Tyrrell said during the company’s first quarter results earnings call on May 22 that this charter deal with GAIL is the largest single contract CoolCo has ever entered into. He said GAIL is a “significant importer of LNG into one of the highest potential markets”. “It is great to establish our relationship and we’re aiming to work together on future projects,” Tyrrell said. GAIL is an end user for LNG and sells regasified LNG to customers in the fertilizer, city grid, power, refinery, and petrochem sectors, amongst others in India. The state-owned firm owns and operates a network of over 16,000 km of natural gas pipelines in India. It holds a stake in India’s largest LNG importer, Petronet LNG, and the company buys volumes under long-term LNG deals, including from the US and Qatar. GAIL charters LNG carriers to ship these volumes and currently has 4 vessels in its fleet. It also operates the 5 mtpa Dabhol LNG terminal in India. Tyrrell said growth in India is underpinned by a booming economy and high growth niches like the compressed natural gas and LNG markets for transportation. “You can see how LNG imports have bounced back now that the prices have stabilized after the Ukraine shock and are now back on their upward trajectory,” he said. “The high-teen return on equity that we achieved on the newbuild sets a supportive precedent for the second vessel, around which active discussions continue,” Tyrrell said. Kool Tiger and Kool Panther Under the long-term deal announced on May 16, CoolCo will charter one of the company’s two newbuild 174,000-cbm LNG carriers currently under construction at South Korea’s Hyundai Samho. CoolCo will deliver the newbuild to GAIL in the Gulf of Mexico, with the time charter starting in early 2025. Also, GAIL has the option to extend the charter by two additional years beyond the firm 14-year period. CoolCo purchased this and the other LNG carrier from its largest shareholder Eastern Pacific Shipping, and they feature GTT’s Mark III Flex membrane cargo tank system, reliquification, air-lubrication, and shaft generators. The shipping firm exercised its option with affiliates of EPS Ventures in June 2023 to acquire newbuild contracts for the two 2-stroke LNG carriers scheduled to deliver in the fourth quarter of 2024. CoolCo will pay about $235 million for each of the LNG carriers which will be named Kool Tiger and Kool Panther. This is much lower than the current prices in South Korea of about $260-270 million for a newbuild 174,000-cbm LNG carrier.
Petronet expects 15 percent rise in India’s LNG imports
India’s largest LNG importer Petronet LNG expects a 15 rise in the country’s imports of liquefied natural gas during this financial year, according to Petronet LNG’s management. Petronet’s executives said during the company’s earnings call on May 23 that the company expects India’s LNG imports to rise to 27 millions tons in the fiscal year 2025/2026 which ends in March next year. The reasons behind the growth are lower prices as India is a price-sensitive market and the hot weather during this season which has “substantially” increased power demand. India imported about 23.3 million tonnes during the April 2023-March 2024 financial year, up by 17.5 percent, according to PPAC data. At the moment, India imports LNG via seven facilities with a combined capacity of about 47.7 million tonnes. These include Petronet LNG’s Dahej and Kochi terminals, Shell’s Hazira terminal, and the Dabhol LNG, Ennore LNG, Mundra LNG, and Dhamra LNG terminal. Hindustan Petroleum’s 5 mtpa Chhara LNG import terminal in Gujarat should also receive its commissioning cargo later this year. Dahej expansion and Kochi pipeline Petronet is currently expanding its 17.5 mtpa Dahej LNG terminal with about 5 mtpa of new capacity, and is also constructing two additional LNG tanks on top of the six existing tanks. The company’s executives said that the 5 mtpa additional capacity at the Dahej terminal should be available by March 2025. During the financial year which ended March 31, 2024, the Dahej terminal processed 865 TBTU of LNG as against 704 TBTU processed during the previous financial year. The overall LNG volume processed by the company in the financial year was 919 TBTU, and this compares to 752 TBTU in the financial year before. Besides the Dahej LNG terminal, Petronet operates the 5 mtpa Kochi LNG facility and is working on the Gopalpur FSRU project. The Kochi terminal is currently operating at about 20 percent capacity. Petronet expects the Kochi-Bangalore pipeline to be completed by the end of this year or by the end of March next year and this will substantially boost the utilization of the facility. Moreover, Petronet’s executives said during the call that the construction of the Gopalpur project will take about three years to complete and the project is currently in its initial stage. In December last year, the firm executed binding deals with Gopalpur Ports for its first LNG terminal on India’s east coast. Petronet and Gopalpur Ports signed sub-concession agreement, sub-lease deed, and port service agreement for the first phase of the 4 mpta FSRU-based terminal, with provision for converting to a 5 mtpa land-based terminal at the port. The company’s executives noted during the call that Petronet may opt for a land-based terminal because of limited availability of FSRUs in the international market.