LNG Prices Linger at 7-Month Lows Despite High Asian Imports
Ample supply is keeping spot LNG prices in Asia around the lowest level in seven months, defying seasonal patterns in which prices spike in peak winter. Last week, the average LNG price for March delivery into northeast Asia was up by $0.10 week-on-week to $9.60 per million British thermal units (MMBtu), remaining close to the seven-month low of $9.50 per MMBtu from the previous week, according to estimates from industry sources quoted by Reuters. For a third week in a row, Asia’s spot LNG prices remained below the $10/ MMBtu threshold, despite the season–peak winter in north Asia. Comfortable inventories and reduced demand, coupled with high exports from the top LNG exporters the U.S., Australia, and Qatar, are keeping prices muted. Asia’s LNG imports were estimated to have hit in December a record-high for any month in history as China regained the top importer spot from Japan and lower spot prices incentivized purchases. Imports of LNG into Asia rose to 26.5 million metric tons in December, per data from commodity analysts Kpler reported by Reuters columnist Clyde Russell. In January this year, Asia is estimated to have imported LNG volumes of 26.13 million tons, close to the record-high level from the previous month. But supply has also increased, especially from the United States and Australia, Reuters’ Russell notes. U.S. LNG exports are estimated to have reached a record high in December and the second-largest volumes in January, according to the data Russell quoted. Outside Asia, demand in Europe is tepid, with industries hesitant about boosting natural gas consumption, although prices are now a fraction of the records seen in 2022 and Europe appears to have put the worst of the energy crisis behind. The still high volatility in gas futures prices, compared to historical averages, and uncertainties ranging from geopolitical flare-ups in the Middle East to the U.S. pausing new LNG export project approvals, continue to be a concern for European industrial gas customers, analysts tell Bloomberg. Weak demand from Europe’s industry, due to lower consumption and weak economies, has been one of the reasons of the gas price slump this winter, despite the peak demand period for heating.
Green hydrogen: Proposals for projects worth ₹2.70 trillion received, says energy minister
To boost energy production from non-conventional sources, the Uttar Pradesh government was spearheading campaigns such as installing rooftop solar panels in 25,000 homes in Varanasi, energy minister AK Sharma said here on Saturday adding the goal was to provide roof-to-grid solarisation to 1.35 million households across the state. He also said that the state had received proposals for projects worth ₹2.73 trillion from 20 companies for setting up green hydrogen facilities. “The move is expected to reduce carbon emissions and create employment opportunities for 1,20,000 individuals in renewable energy,” he said. The state, he said, was actively participating in the National Green Hydrogen Mission, also offering subsidies for the purchase of biomass collection machinery and supporting the establishment of compressed biogas, biodiesel and bio-coal units. “The state aims to capitalise on the renewable energy sector and provide technical skills training to the youth in manufacturing, maintenance, and operation of solar facilities. The focus on green hydrogen aligns with the national goal of achieving net-zero carbon emissions by 2070, as announced by Prime Minister Narendra Modi,” Sharma said.
India’s crude oil imports from Russia hit 12-month low but long-term appetite remains intact
India’s crude oil imports from Russia fell for a second straight month in January to its lowest in 12 months but the nation’s insatiable appetite for Russian crude remains for the long term, according to data from energy cargo tracker and industry officials. Russia supplied 1.2 million barrels per day of crude oil to India in January, down from 1.32 million barrels in December and 1.62 million barrels in November 2023, according to data from energy cargo tracker Vortexa. Russia however continues to remain India’s top oil supplier, accounting for a little less than a quarter of 4.91 million barrels a day of oil that the world’s third largest energy consumer imported in January. The decline in cargoes from Russia was made up by increased sourcing from Iraq, which supplied 1.1 million barrels per day (bpd) in January, up from 985,000 bpd in the previous month. Supplies from Saudi Arabia declined to 659,000 bpd from 668,000 bpd in December. India is more than 85 per cent dependent on imports for its needs of crude oil, which is converted into fuels such as petrol and diesel at refineries. Its appetite for Russian oil swelled ever since such oil started trading on discount as the West shunned it to punish Moscow for its invasion of Ukraine. According to Vortexa, an energy intelligence firm, India imported just 36,255 bpd of crude oil from Russia in December 2021 as compared to 1.05 million bpd from Iraq and 952,625 bpd from Saudi Arabia. There were no imports from Russia in the following two months but they resumed in March, soon after the Ukraine war broke out in late February. Imports from Russia soared to an all-time high of 2.1 million bpd in June last year, accounting for almost 40 per cent of all oil India imported. According to Serena Huang, Vortexa’s head of APAC analysis, the reason for the fall in Russian crude oil import in last couple of months was the narrowing of Russian crude discounts versus Middle Eastern crude, recent US sanctions on shipowners carrying Russian crude above the price cap and rising tanker premiums as a result of the Red Sea attacks. Also, some state refiners rushed to fulfill term commitments with Middle Eastern suppliers, industry officials said adding the removal of sanctions on Venezuela has whetted the appetite of private Indian refiners to resume purchases from the South American supplier. Indian refiners started snapping up crude shipments from Venezuela after a three-year suspension in September 2020. These developments together have contributed to a slowdown in Russian purchases. Industry officials said the long-term demand for Russian crude oil remains intact. “A dip in one month and rise in another doesn’t tell you the entire story. The fact remains that Indian companies will continue to buy Russian crude oil as long as they make economic sense,” an official said. Indian state firms buy Russian crude oil on a delivered basis, meaning the supplier has to make arrangements for shipping and the buyer pays only when oil is delivered at the receiving port. This is unlike sourcing from the Middle East where the buyer pays for shipping and insurance. “Till such time that the delivered cost of Russian crude oil is less attractive as compared to alternate sources, Indian refiners will buy,” another official said. Trade sources and analysts also said that refiners are currently expressing increasing concerns about rising shipping costs and insurance. The US in December imposed sanctions on ships and vessel operators carrying Russian oil sold above the USD 60 a barrel cap set by the Group of Seven nations. Several tankers had to divert as banks and service providers were asked to ensure cargoes do not breach the price limit. Hindustan Petroleum Corporation Ltd (HPCL) chairman Pushp Kumar Joshi at an investor call last month said Russian oil made up for 30 per cent of all oil that the company imported and that the company has tied up supplies from Russia and other sources till mid-April. Bharat Petroleum Corporation Ltd (BPCL) chairman G Krishnakumar at an earning call late last month stated that 40 per cent of all crude oil that the firm imported in December quarter came from Russia.
SAF, Green Hydrogen, CCUS likely to be in spotlight at IEW 2024: EIL CMD
India is gearing to host the second edition of its flagship energy sector event, India Energy Week (IEW) 2024, in Goa from February 6-9. In the run-up to the event, PSU Watch spoke to Engineers India Limited’s (EIL) Chairperson and Managing Director Vartika Shukla to get a sense of the themes that will dominate the discussions at the marquee event. According to Shukla, Sustainable Aviation Fuels (SAF), Green Hydrogen and Carbon Capture, Utilisation and Storage (CCUS) technologies, along with digitalisation and automation are going to be the key themes that will be in the spotlight at IEW 2024. Here are excerpts: What are you looking forward to the most at India Energy Week? As you are aware that IEW 2024 is a platform where more than 350 exhibiting companies will engage with a diverse audience of over 35,000 energy professionals, forging meaningful connections, fostering collaborations, unveiling innovations and exchanging insights that will be integral to shaping the future of India’s energy landscape. This event shall be setting the narrative through several experts-led deliberations for a smooth energy transition for India vis-à-vis the global scenario in the years to come. We look forward to interacting with the industry leaders and technologists in the areas, inter alia, including Sustainable Aviation Fuels (SAF) technologies, CCUS technologies, Waste-to-Energy and value-added products, niche chemicals, Crude-Oil-to-Chemicals (COTC), evolving green hydrogen (GH2) production technologies, etc. We are keen to offer EIL’s engineering and innovative technology services in these emerging areas to buttress the efforts led by the industries toward the stated net-zero objectives of the country. What does your company plan to showcase? EIL is planning to showcase the engineering and technological prowess attained in its journey of around six decades serving clientele from various sectors in the areas of Oil & Gas, Fertilizers, Energy Efficient Infrastructure, Digitalization & Automation, Renewable Energy, etc. EIL will be presenting its unique track record of organisational capabilities and diversified experience in the energy industry through various thematic areas designed around innovative technologies developed by EIL. Some of them include our technology offerings for Bio-ATF production, Green Hydrogen/ Green Ammonia, Concentrated Solar Thermal (CST) technology etc. EIL will showcase its contribution to make India Atmanirbhar primarily in the energy sector by building a strong and potent manufacturing sector of the nation through its diversified operations, indigenous technology development, and venturing into the supply of proprietary engineered products. EIL is also planning to showcase its efforts in decarbonising its operations and technical solutions developed thereof for the assessment of the carbon footprint of the industry to assist global energy companies in achieving their energy transition objectives. According to you, what would be some of the themes that will be in the spotlight this year at IEW 2024? We believe the pace of technology development and its implementation particularly in the green energy sector has accelerated manifold in comparison to its state in the previous decade. India is poised to set up renewable power infrastructure on a significantly large scale to meet the twin objectives of meeting its burgeoning energy demand as well as achieving its Intended Nationally Determined (INDC) targets. At IEW 2024, we are going to witness deliberations around various possibilities of integrating renewable energy into the existing systems and processes. It is worth mentioning here that EIL has also executed Memorandum of Understanding (MoU) with Sunrise CSP Group for collaboration in the area of Concentrated Solar Technology (CST). EIL is offering solutions to integrate CST technology in various applications ranging from reducing the fossil fuel firing in process units to 24×7 power generation.
MRPL signs 5-year pact with BPCL for RLNG supply from Kochi
Mangalore Refinery and Petrochemicals Ltd. (MRPL) has signed a five-year gas supply agreement with the Bharat Petroleum Corporation Limited (BPCL). Under the agreement, BPCL will supply 0.43 MMSCMD (Million Metric Standard Cubic Metres a Day) of RLNG (Regasified Liquefied Natural Gas) to MRPL’s refinery and petrochemical facility in Mangaluru from its Kochi terminal. Sathyanarayana H.C., Group General Manager (Technical Services) of MRPL and Santhosh Sontakke Chief General Manager, Sourcing, Sales and Logistics (Gas) of BPCL, signed the pact in Mangaluru on February 1. Gas plays a significant role in refining crude oil, reducing feed costs, optimizing fuel, and lowering overall emissions from the refinery. MRPL intends to utilise RLNG as feed for the production of hydrogen and fuel for gas turbines to generate power, steam, and various furnaces. Using natural gas in the refinery helps reduce both the emissions and carbon footprint of the refinery, a MRPL release said on Saturday. Based on economics, the refinery will replace naphtha, diesel and fuel oil with RLNG, it said.
ONGC, IOC, other oil PSUs to invest ₹1200 billion in FY25
ONGC, IOC and other oil PSUs will invest about ₹1200 billion in the coming fiscal starting April in oil and gas exploration, refineries, petrochemicals and laying pipelines to meet the needs of the world’s fastest-growing energy consuming nation. The investment proposed in 2024-25 is 5 per cent higher than ₹1120 billion spent by the State-owned oil firms in the current fiscal year that ends on March 31, according to Budget 2024-25 documents. Oil and Natural Gas Corp (ONGC) has a planned capital spending of ₹308 billion in the next financial year. This expenditure in finding new reserves of oil and gas and bringing to production discoveries it has already made, is slightly higher than ₹305 billion capex in 2023-24 fiscal (April 2023 to March 2024). It is developing discoveries on both east and west coasts of the country. The top oil producer’s overseas arm, ONGC Videsh Ltd (OVL) will invest 68 per cent more at ₹55.80 billion in 2024-25 in oil and gas operations abroad when compared with the previous fiscal. Indian Oil Corp (IOC), the country’s top oil refiner, will be the top spender with an investment outlay of ₹309.10 billion, with the bulk of it in expansion and upgrade of its seven refineries that produce fuel. This outlay also includes ₹32.99 billion in the petrochemical business and another ₹2.3648 billion in the small oil and gas exploration portfolio it has. The investment planned by IOC is less than ₹312.54 billion spending in the current 2023-24 fiscal. Bharat Petroleum Corp Ltd (BPCL) has proposed a 30 per cent higher capital spending at ₹130 billion, two-thirds of which will be in its core refining business. Gas utility GAIL India Ltd will see its planned investment decline to over ₹80 billion in 2024-25 from ₹97.50 billion in the previous fiscal as most of its pipeline grid expansion projects are nearing completion. Hindustan Petroleum Corp Ltd (HPCL), a subsidiary of ONGC, will invest ₹125 billion in FY25, marginally higher than ₹120 billion in the previous year. Oil India Ltd, the nation’s second-largest oil producer, will invest ₹68.80 billion next year as compared to ₹56.48 billion in the current fiscal. In her interim budget for 2024-25 ahead of general elections, Finance Minister Nirmala Sitharaman had on February 1 put off capital support to oil marketing companies — IOC, BPCL and HPCL — to the next fiscal year. She, while presenting the annual Budget for 2023-24 on February 1 last year, announced equity infusion of ₹300 billion in IOC, BPCL and HPCL to support their energy transition plans. Alongside, she had also proposed ₹50 billion for buying crude oil to fill strategic underground storages at Mangalore in Karnataka and Visakhapatnam in Andhra Pradesh that India has built to guard against any supply disruptions. In November last year, the Finance Ministry halved the equity support and the documents of the interim budget for 2024-25 Sitharaman presented in Lok Sabha on Thursday showed no allocation for equity infusion in the current fiscal. The ₹150 billion has now been earmarked for 2024-25 fiscal (April 2024 to March 2025). The budget documents did not provide any funds either in the current fiscal or the next for filling the strategic reserves. While other state-owned oil companies such as ONGC and GAIL (India) Ltd too have lined up billions of dollars of investment to achieve net zero carbon emissions, the equity support was limited to the three fuel retailers, who had suffered huge losses in 2022 when they held retail petrol, diesel and cooking gas (LPG) prices despite a spike in raw material (crude oil) prices following Russia’s invasion of Ukraine..
Budget: Govt puts off equity infusion in state oil companies to next fiscal
The government has pushed its plan to infuse equity into Indian Oil, Bharat Petroleum, and Hindustan Petroleum to the next fiscal year and slashed the proposed amount by half to ₹15,000 crore, according to the budget document. This means the planned rights issue by Indian Oil and BPCL will be deferred to the next fiscal year. Similarly, the preferential allotment plan by HPCL, where the government doesn’t have a direct equity stake, will also get delayed. The government has also scrapped its plan to spend ₹5,000 crore on filling the strategic petroleum reserve (SPR). Crude oil has been very volatile this fiscal year and is currently trading around $80 per barrel, making it harder for officials to make purchase decisions. For the next fiscal year, the government has allocated ₹15,000 crore for equity infusion into state oil companies and ₹400 crore to pay for the construction of new SPRs. No allocation has been made for filling SPR. In the current year’s budget, the government had allocated ₹30,000 crore for equity infusion into oil marketing companies and ₹5,000 crore for the purchase of crude oil to fill the SPR. Strong profits at oil companies this fiscal year made the government change its mind on equity infusion, according to multiple people familiar with the matter. Indian Oil, BPCL, and HPCL have reported a combined profit of ₹69,000 crore for the nine months ended December as against a loss of ₹18,600 crore in the year-earlier period. The public aim of the planned equity infusion has been to help state companies pursue energy transition projects. However, it has been widely believed that it is no more than state support to companies that incurred losses in the previous fiscal year due to their inability to raise domestic pump prices in line with international rates. But with oil companies flush with cash now, the argument for fund infusion has weakened. Oil companies themselves have not been too eager to receive equity infusion from the government. Equity also needs to be serviced and oil companies can easily borrow from the market at competitive rates, many executives had previously told ET.
Export of petroleum products falls to 15-month low in Jan
India’s export of petroleum products fell to a 15-month low at 1.02 million barrels a day in January as the escalating tensions over the Red Sea prompted exporters to hold back shipments last month, data from data intelligence firm Kpler showed. January export volumes were the lowest since October 2022, when the country’s export of refined oil products stood at around 887,000 barrels a day, it added. Moreover, India’s shipments to Europe declined in January as many tankers had opted for the longer route via the Cape of Good Hope for the delivery, resulting in higher shipping costs. Africa’s Cape of Good Hope shipping route can extend voyages for up to 14 days or beyond. “To take just one specific example, the route from Jamnagar to Rotterdam takes 24 days via the Suez Canal and 42 days via the Cape of Good Hope,” Viktor Katona, lead crude analyst at Kpler said. The United Arab Emirates, Netherlands, and Malaysia were among the top buyers of Indian petroleum products in January including diesel, jet fuel, gasoline, and naphtha among others. While UAE imported 103,690 barrels a day of refined fuels from India last month, Netherlands imported 75,411 barrels a day. Indian exports to Malaysia stood at 64,098 barrels a day. Even with Russian oil cargoes departing from North Sea and Black Sea ports taking the Suez Canal-Red Sea route to India and China, its major buyers, have been secured so far, India’s exports have been hit transiting the Suez Canal. The country’s export of petroleum products to Europe had dropped to just 100,000 barrel a day from 350,000-400,000 barrel a day in November and December, Katona had said. “Many tankers have instead opted for the longer route via the Cape of Good Hope for the delivery which has resulted in increased shipping costs,” he said. The shipping cost has increased by 60-70%.
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.