Biden Admin Announces Freeze On LNG Exports For Up To 15 Months
The Biden Administration has announced a freeze on LNG export permits for 15 months to non-free trade agreement countries, arguing this period will be used to evaluate the impacts of LNG exports on energy costs, U.S. energy security and climate change. The move is likely to impact India if the freeze extends beyond a couple of months. For India, the US is the third largest importer of LNG. In September 2023, India imported 24,452 million cubic feet (MCF) of natural gas from the U.S., a steep jump from zero MCF in February 2016. India’s import of LNG from the US has jumped multiplefold post-COVID-19 era. Informed sources said there might be an impact on the export of LNG from the U.S. to India if the freeze extends beyond a couple of months The Department of Energy, in a statement last week, said that a temporary pause on pending applications will not affect already authorised exports, which total 48 Bcf/d. It will also not impact our ability to supply U.S. allies in Europe, Asia or other recipients of already authorised U.S. exports. “This administration is committed to the affordability of energy and economic opportunities for all Americans; strengthening energy security here in the US and with our allies; and protecting Americans against climate change and winning the clean energy future,” said U.S. Secretary of Energy Jennifer M Granholm. “This practical action will ensure that DOE remains a responsible actor using the most up-to-date economic and environmental analyses,” she said. However, 18 Republican Senators in a letter to the Biden Administration on Thursday opposed such a move. “American LNG exports have enhanced our geopolitical influence and international energy security across the board since 2016. In addition to Europe, US LNG has a significant impact on energy security in Asia. Japan and South Korea have been the top two destinations for importing US LNG,” wrote the 18 Republican Senators led by James Lankford, Cynthia Lummis, and Bill Cassidy. “Taiwan also imports U.S. LNG, and India is rapidly increasing its imports as well. According to EIA, the four Asian countries accounted for one-fifth of U.S. LNG exports between January and October of 2023. Stable and secure supplies of U.S. LNG are critical to their energy security,” the 18 Senators wrote. The Biden Administration, they alleged, has already made a habit of slow-walking LNG permits, with the average permit taking more than 400 days, a large escalation from the 60 days of the Trump Administration and 90 days of the Obama Administration. “LNG exports from the United States are also uniquely suited to decrease global emissions. Both China and India, two of the largest polluters globally, are top destinations for US LNG exports. Efforts to limit the export of LNG from the United States thus directly undermines the ability to reduce emissions through the use of clean-burning natural gas,” they said. Limiting US LNG exports does not have any impact on the world’s demand for natural gas. Instead, countries, including Russia and Iran, will simply produce more energy that is subject to less stringent environmental regulations. As a result, limiting American LNG exports in the name of stopping climate change could do just the opposite and add to global emissions, Senators wrote. However, climate change leaders across the U.S. have applauded the Biden Administration for such a freeze. “This decision is a major win for communities and advocates that have long spoken out about the dangers of LNG and makes it clear that the Biden administration is listening to the calls to break America’s reliance on dirty fossil fuels and secure a livable future for us all. Strong leadership, that rejects fossil fuel industry fear-mongering, is our best bet to protect communities and ensure energy is affordable,” said Ben Jealous, executive director, Sierra Club.
Asia crude oil imports start 2024 strongly as India leads: Russell
Asia’s imports of crude oil saw robust growth in the new year, reaching an eight-month high in January as top buyers China and India snapped up cargoes. The world’s top-importing region saw arrivals of 28.57 million barrels per day (bpd) in January, up from 27.03 million bpd in December, according to data compiled by LSEG Oil Research. China, the world’s biggest crude buyer, imported 11.31 million bpd in January, slightly below the 11.48 million bpd in December, but well above the 10.24 million bpd from the same month in 2023, according to LSEG. It’s likely that China’s refiners were encouraged to keep imports at robust levels given the lower oil prices prevailing when cargoes were arranged and the release of most of their annual import quotas in one tranche at the start of 2024, rather than the usual practice of several instalments. China’s imports from Russia via pipeline and tankers were 1.94 million bpd in January, making it the biggest supplier of crude, edging out Saudi Arabia’s 1.68 million bpd. However, it’s worth noting that arrivals from Saudi Arabia were up from December’s 1.38 million bpd, which suggests that the world’s biggest exporter is making an effort to regain market share in China. It’s likely that China’s imports from Saudi Arabia will rise further in February after the kingdom cut its official selling prices (OSP) for its flagship Arab Light crude for February-loading cargoes to the lowest in 27 months. It’s not just China buying more Saudi oil, with Asia’s imports rising to 5.63 million bpd in January, up from 5.46 million in December. India, which had turned away from Saudi crude in favour of discounted barrels from Russia, is said by trade sources to be seeking more cargoes from Saudi Arabia in February. INDIA HIGH India, Asia’s second-biggest importer, is on track for record imports in January, with LSEG tracking arrivals of 5.33 million bpd, up from 4.65 million bpd in December. Russia remains India’s top supplier with 1.43 million bpd in January, up from 1.34 million in December, with Iraq in second place at 1.34 million bpd, up from 1.10 million bpd in December. With India’s economy performing strongly and rising profit margins for refined fuels in Asian markets, the country’s refiners are likely to continue to demand high crude volumes to take advantage of robust domestic and export markets for fuels. The question for the market is whether Asia’s strong start to the year for crude imports is likely to sustain. It’s likely that February will also see robust imports, largely because cargoes arriving this month will have been purchased when crude prices were soft. Global benchmark Brent futures hit a 5-1/2 month low of $72.29 a barrel on Dec. 13, having been trending lower after hitting the 2023 high of $97.69 in late September. This means that cargoes arriving in February were likely arranged when crude prices were declining. However, Brent started rallying from mid-December onwards, and a pullback in January amid global demand concerns was reversed in recent weeks as fears mounted over shipping disruptions through the Red Sea caused by missile and drone attacks by Yemen’s Iran-aligned Houthi group. Brent reached a high so far this year of $84.80 a barrel on Jan. 29, and ended at $81.71 on Wednesday. Higher prices may crimp some import demand in China, which can turn to inventories if it wants to keep refinery processing steady. India is also a price-sensitive buyer, but it’s likely to take several months of stronger oil prices to slow domestic demand enough to prompt lower imports. Overall, Asia’s strong start to 2024 for crude imports likely will extend for the rest of the first quarter, but what happens beyond that will largely depend on the trajectory of oil prices.
BPCL sets FY25 capex target at Rs 150 billion
State-owned Bharat Petroleum Corp Ltd has set it capital expenditure target for 2024-25 at Rs 150 billion, the company said on Tuesday. Further, it also aims to expand its market networks with new pipelines underway. “Augmenting strong marketingnetworks, we have approved two pipeline projects from Mumbai refineries,” the company said on an analyst call. In the current financial year 2023-24, the company’s capex outlay was at Rs 100 billion of which Rs 80 billion has been utilised till December 31. It also informed that two pipelines passing through Tamil Nadu & Karnataka and the other one through Andhra Pradesh & Telangana are under construction. “This pipeline will optimise our product placement cost in the southern part of the country,” the top management said. Further detailing the expansion plans, the state-owned oil marketing company also said that it is putting up three new depots in the northeastern part of the country and has acquired land for the same. The company’s market share in the petrol and diesel segment in the domestic retail market has also witnessed a rise. During Oct-Dec period, BPCL’s market share stood at 29.62 for petrol segment and 29.71 for diesel. Addressing the rising tensions over Red Sea which poses a threat to oil shipments to the country’s refineries, the company said that so far there has been no impact and its supplies till April are secured. “Right now we are not impacted by the red sea issue. We are waiting and watching,” the company’s Chairman and Managing Director G. Krishnakumar said. “Till about April we are covered and we do not have any worry.
ADNOC Gas expands Asian natural gas footprint with 10-year GAIL India LNG deal
ADNOC Gas announced a 10-year agreement to supply 0.5 MMtpa of liquified natural gas (LNG) to GAIL India Limited, India’s leading natural gas company. This agreement underscores ADNOC Gas’ growing global presence, particularly in the Asian LNG market and further reinforces the relationship between the UAE and India. This agreement follows several significant international LNG sales agreements, including those with Japan Petroleum Exploration Co., Ltd. (JAPEX), TotalEnergies Gas and Power, Indian Oil Corporation (IOCL), and PetroChina International (PCI), underscoring ADNOC Gas’ position as a global export partner of choice. The world continues to witness long-term structural demand growth for natural gas, an important fuel in a just and responsible global energy transition. ADNOC Gas remains focused on investments that will drive sustainable growth for its business, aligned with customer demand. In 2023, ADNOC Gas maintained a strong sales momentum signing several LNG agreements valued between $9.4 billion and $12 billion, while continuing to invest domestically to position itself to meet both local and international demand for natural gas. Natural gas plays a crucial role as a transitional fuel, with lower carbon emissions compared to other fossil fuels. It also serves as an important raw material in industrial value chains. ADNOC Gas continues to leverage opportunities arising from ADNOC’s integrated gas masterplan, which links every part of the gas value chain in the UAE, ensuring a sustainable and economic supply of natural gas to meet local and international demand. Within the ADNOC Group’s broader Gas masterplan, ADNOC is progressing a new low-carbon Ruwais LNG project, currently under development in Al Ruwais Industrial City, Abu Dhabi. The Ruwais LNG project is set to be the first LNG export facility in the Middle East and North Africa (MENA) region to run on clean power, making it one of the lowest-carbon intensity LNG plants in the world, supporting ADNOC’s accelerated Net Zero by 2045 ambition. When completed, the project, is expected to consist of two 4.8 MMtpa LNG liquefaction trains with a total capacity of 9.6 MMtpa. Dr. Ahmed Mohamed Alebri, Chief Executive Officer of ADNOC Gas, said, “This long-term LNG supply agreement with GAIL India marks a significant step forward in our commitment to continue providing reliable and sustainable energy solutions to our partners and customers around the world. India continues to be a key market for ADNOC Gas, and this latest supply agreement underscores our ongoing dedication to fostering long-term partnerships that promote responsible energy consumption.
State refiners may face margin pressure as cheap Russian oil imports dip
State-run refiners could face margin pressure after the share of discounted Russian oil in India’s imports dipped to a year’s low in January. Volumes inched up from December, when fresh US sanctions were introduced, but were still 11 per cent lower in January than in November, according to ship tracking data and industry officials. The share of state-owned oil companies, excluding joint-sector HMEL, in Russian crude imports shrunk to 41 per cent in January from 54 per cent in December, according to calculations based on Kpler data. The reduction in discounted Russian supplies will affect gross refining margins as cheaper crude contributes to the profits of Indian Oil, Bharat Petroleum and Hindustan Petroleum, refining officials say.
Fresh Sanctions Could Seriously Curtail Iran’s Surging Oil Exports
Last year, we reported that the Biden administration has been increasingly cozying up to Iran as the U.S. and its allies hoped to strike a new nuclear deal with Tehran after the Trump administration scuttled the Joint Comprehensive Plan of Action (JCPOA) deal of 2015. Following the imposition of severe sanctions by Washington, Iranian oil production tumbled from 3.8 million barrels per day in early 2018 to less than 2 mb/d in late 2020; however, production has surged under Biden to 3.2 mb/d. Since the start of the current escalation in the Middle East, experts have debated whether the status quo with Iran is going to be maintained or the West will attempt to roll the clock back to early 2022 or even to late 2020. The latest attacks on U.S. troops in the region have all but removed those doubts. On Monday, news emerged that three U.S. service members were killed in Jordan, while more than 40 other soldiers were injured following a drone attack on a U.S. military base near the Syrian border. U.S. forces are suspected to have mistaken the enemy drone for an American one and let it pass through unchallenged. The U.S. and its European allies have wasted no time condemning Iran for the attack and are mulling boosting sanctions on the country due to Tehran’s unabashed support for militant groups in the region, particularly its support for Houthi forces. U.S. Secretary of State Antony Blinken has revealed that the West’s response to the attack will be “multi-levelled, come in stages, and be sustained over time”. “Following the threats posed by the Islamic Republic in the region, especially its support for the Houthis and proxy groups in Iraq in recent months, which led to the formation of an international coalition in the Red Sea, recently, the United States and some Western countries have initiated discussions to intensify sanctions against Iran,” a diplomatic source told Iran International. As commodity analysts at Standard Chartered have observed, the markets only issued a muted response to the attacks with oil prices pulling back after the initial spike. StanChart has speculated that the market is assuming the U.S. will only issue a single layer of response over a short period that will be limited to Iraq and Syria, but is not pricing in a response that could be extended over time. StanChart says that, following the attack, there’s a big probability of a significant change in the policy dynamic between the U.S. and Iran, and in particular Iran’s surging oil production is likely to be in the crosshairs. The Biden administration is likely to be further motivated to take stern action on Iran due to the country’s continued violation of the terms of the JCPOA agreement. Iran has not only lifted the cap on its stockpile of uranium to 18 times the level permitted by JCPOA but has also increased its enrichment activities to 60%, far above the 3.67% permitted level. A year ago, the International Atomic Energy Agency (IAEA) reported the discovery of particles of uranium enriched to 83.7%. The U.S. as well as allies the UK, France and Germany (commonly referred to as the E3) have pointed out there’s no credible civilian justification for Iran’s nuclear programme. Last September, E3 reported they are “committed to preventing Iran from developing nuclear weapons, including through the snapback process if necessary”. Market Weakness Not Justified By Fundamentals Previously, StanChart has argued that the weak oil price action is not justified by oil fundamentals, which remain strong. The commodity analysts have pointed out that the bearish sentiment is mainly being driven by the notion that demand growth has failed to meet Wall Street’s expectations, a notion it has dispelled using actual data. Last year, oil demand at the end of the year surpassed January 2023 forecasts; forecast for the current year by the EIA estimate is 881kb/d higher, the IEA estimate is 380 kb/d higher while StanChart’s is 819 kb/d higher. Standard Chartered has reiterated its earlier position that oil markets are heavily discounting geopolitical risks due to a lack of clear understanding about seasonality. In StanChart’s view, the current oversupply in January is primarily due to seasonality but has predicted the markets will gradually tighten as the months roll on–again, due to seasonality. According to the experts, the current global crude inventory build of 1.17 mb/d will flip to a draw of 1.40 mb/d in February, with the inventory draw widening to 1.48 mb/d in March, thanks in large part to seasonal demand recovery. StanChart says the expected inventory draws, coupled with the seasonal upswing in demand, could potentially trigger a significant oil price rally.
RIL’s profit from consumer business to leapfrog petroleum
Reliance Industries (RIL) is likely to witness higher profit growth in its consumer businesses—telecom and retail—from next year vis-à-vis its traditional oil refining and petrochemical business. The higher growth will help consumer businesses leapfrog RIL’s standalone business, which is oil to chemicals (O2C). The twist in the tale is that the conglomerate built the telecom and retail verticals using the cash flow from O2C. Analyst community expects a reduction in capital expenditure at telecom and retail, while the businesses improve cash flow aided by booming margins. According to a report by Bernstein Research, Reliance Jio’s focus will shift to monetisation of assets with the completion of 5G rollout and it will lead to moderation in capital expenditure. “We expect around 15% CAGR revenue growth for Jio over the next 3 years with a strong 11% plus tariff hike in FY25. Market share gains will continue as Jio reaches around 500 million subscribers and around 47% revenue share by FY25,” it said. At the retail front, the performance of the grocery business remains solid for Reliance Retail Ltd (RRL) supported by price hikes of staples and recovery in general merchandise demand, says JP Morgan in its report. Robust performance in fashion and lifestyle despite muted category demand and the improving traction for grocery in quick commerce channels is also helping the company. “The operating leverage is aiding Reliance Retail’s margin expansion,” says JP Morgan. The retail business grew 24% year-on-year which Bernstein believes is sustainable with store expansion and a higher eCommerce mix. “We see normalisation in retail capex with a focus on improving revenue per square feet as older stores mature,” the analysts said. While consumer businesses, which were started/ramped up in the last five years, see a better profit leeway for the next few years, O2C earnings growth is likely to end flat. The volume growth and the margin expansion are unlikely to improve in the petrochemicals business this year. The earnings growth will stall at current levels until 2026-27 when additional capacity comes online, says Bernstein. However, there is hope in the oil and exploration and production business. The volumes are likely to peak in the next 12 months while the company continues to build solar and battery-making capacity.
Deadline to levy additional duty on unblended diesel deferred
The Centre has deferred the deadline to levy an additional ₹2 per litre tax on unblended diesel by one more year to April 1, 2025, according to a Central Board of Indirect Taxes and Customs (CBIC) said in a notification. The levy on petrol and diesel that is not blended with ethanol and bio-diesel, respectively was announced in FY23 budget. The move was in line with with government’s commitment to promoting biofuels and reducing crude imports. India remains the world’s third-biggest crude importer and consumer, importing around 85% of its total consumption. It has set a target to cut imports by 10% to 67% by 2025 by enhancing domestic crude production, ethanol blending and shifting focus to renewables, green hydrogen and promoting electric vehicles among others.
NGEL signs MoU with Govt of Maharashtra for development of Green Hydrogen Projects
NTPC Green Energy Limited (NGEL) signed a memorandum of understanding (MoU) with Govt of Maharashtra for development of Green Hydrogen and derivatives (Green Ammonia, Green Methanol) of up to 1 million ton capacity per annum, including Pump Hydro Projects of 2 GW and development of RE projects with or without storage up to 5GW in the state. The MoU was exchanged between NGEL’s Chief Executive Officer Mohit Bhargava and GoM’s Deputy Secretary (Energy) Narayan Karad in the presence of Chief Minister Deputy CM and other senior officials. The above MoU has been signed as a part of Green Investment Plan of Govt of Maharashtra in the next five years and envisages a potential investment of approximately Rs 800 billion. NTPC is in the path of building up RE capacity of 60 GW by 2032. NGEL is a wholly-owned subsidiary of NTPC and aims to be the flag bearer of NTPC’s Renewable Energy journey with an operational capacity of over 3.4 GW and 26 GW in pipeline including 7 GW under implementation.
41% in India still rely on biomass for cooking, emitting 340 mn tonnes of CO2 annually
Forty-one percent of the Indian population still uses wood, cow dung or other biomass as cooking fuel and cumulatively emits around 340 million tonnes of carbon dioxide into the environment every year, which is about 13 per cent of India’s greenhouse gas emissions, according to a new report. The report “India’s Transition to E-cooking” by the independent think tank Centre for Science and Environment also said that the Pradhan Mantri Ujjwala Yojana led to a rapid expansion in access to liquified petroleum gas (LPG) in India, but it has “not guaranteed a sustained transition to clean cooking in households” that benefited from the scheme. Around a third of the world’s population 2.4 billion people globally (including 500 million people in India) still lack access to clean cooking solutions. This causes untold damage to the economy, public health and the environment. Approximately three million people globally (including 0.6 million people in India) die prematurely every year because of indoor air pollution. These deaths are mostly caused by wood-based cooking, the report said, citing research conducted in the past. Although the Ministry of Petroleum and Natural Gas (MOPNG) claims that the country’s household LPG “coverage” stands at 99.8 per cent, the National Family Health Survey conducted in 201921 (NFHS-5) shows that 41 per cent of the population still cooks on biomass, it said. “CSE’s own calculations have found that this 41 per cent cumulatively emits — when it cooks on wood, cow dung or other biomass around 340 million tonnes of CO2 (carbon dioxide) into the environment every year, which is about 13 per cent of India’s national GHG emissions,” the report said. A review of India’s last Biennial Update Report (BUR3) to the United Nations Framework Convention on Climate Change shows this particular sectoral emission is not counted as part of national emissions. Through PMUY launched in May 2016, more than 100 million households in India received LPG cylinders by the end of March 20