India May Ramp Up its Oil Purchase from UAE
The expectations have risen to overcome the dependence on Russia because of high Russian shipments of crude oil since Indian refiners started depending more on Russian crude in 2022. Yet Russian oil shares overall two-thirds imports of India’s oil demands. India is expected to surge its oil purchase from the United Arab Emirates in the upcoming months following discussions between the two countries on the sidelines of the ongoing COP 28 summit in Dubai. Historically, the UAE has been considered India’s third largest source of crude. In 2021, UAE, exported almost 58.5B dollar in crude petroleum. The main destinations of exports were Japan, India, China, Singapore, and Thailand. The UAE economy is heavily reliant on revenues from petroleum, and natural gas, especially in Abu Dhabi.
Gas firms seek price deregulation as city distribution targets fall behind
Irked by the slow rollout of city gas distribution (CGD) networks in India, the Petroleum and Natural Gas Board (PNGRB) has told companies to get going or risk having their bank guarantees seized. In turn, the companies have told the regulator they are wary of committing investments without the government saying the time period in which natural gas will be offered a free play in the economy, sources said. Oil and gas companies have made bank guarantees worth Rs 350 billion, and PNGRB has not said whose money could be seized but slow pace is rife.
Global oil in softening mode: Bonanza for India
Global oil prices have been softening for the past two months despite continuing geopolitical tensions. The phenomena of lower prices has defied predictions by investment agencies that had forecast oil skyrocketing in 2024. Instead, 2023 is ending with oil markets in bearish mode and the benchmark Brent crude being quoted at a low of 75 dollars per barrel. Unless the situation alters gravely over the next six months, it looks as if Goldman Sachs’ gloomy expectation of crude soaring to 100 dollars per barrel by the end of next year has little chance of becoming a reality. The current depressed state of oil markets comes after the peak of mid-October when prices had touched 92 dollars per barrel. This was a reaction to the decision by Saudi Arabia and Russia to extend their voluntary output cuts of 1.3 million barrels per day (bpd) for another three months. The momentum of higher rates could not be maintained in the following weeks due to several factors. The first is the failure to maintain production quotas by members of the oil cartel now known as the Organisation of Petroleum Exporting Countries Plus due to the addition of Russia and other allies to the group. Several members have been exceeding their listed quotas including Iran and Venezuela which are exempt due to the sanctions. Other countries like Angola and Nigeria have felt the need to produce more oil to generate enough revenues for their exchequer. The differences within the cartel came to light at the recent OPEC plus meeting where African producers were reported to be concerned over the proposed output cuts of 2.2 million bpd scheduled for the first quarter of 2024. The latest visit of Russian President Vladimir Putin to Saudi Arabia indicates the growing concern of OPEC+ leaders over the inability of the cartel to operate as a cohesive unit.
Petrol, diesel may get cheaper as OMCs become profitable
Petrol and diesel prices in the country are expected to come down soon after remaining unchanged for over a year. The government has begun discussing ways to pass on the benefits of softening global crude prices to consumers before the 2024 Lok Sabha elections, according to a report by ET Now. In contrast to peak losses of ₹17 per litre on petrol and ₹35 per litre on diesel in 2022, OMCs are now making a profit of ₹8-10 per litre on petrol and ₹3-4 per litre on diesel. According to the report, the oil ministry has already discussed crude versus retail price scenarios with OMCs. Since oil marketing companies (OMCs) are now making profits, the government has begun discussions on the matter to give some relief to the people, the report further added. The finance ministry and the oil ministry are pondering over the current crude oil price scenario. In addition to OMC profitability, they are discussing global factors, the report noted. Why fuel is expected to get cheaper? Due to strong profits in the last three quarters, OMCs’ overall losses have narrowed. The combined profit of three OMCs – IOC, HPCL and BPCL – was ₹280 billion last quarter, the report further stated. Since OMCs’ under-recovery has ended, the government thinks that the consumers must also reap the benefits. Earlier this week, oil prices fell on the back of concerns about a drop in demand and continued uncertainty over the depth and duration of OPEC+ supply cuts.
India’s refining capacity to rise 22% by 2028, says minister
India will expand its refining capacity by about 22% from the current 253.92 million metric tons per year to meet its growing energy demand, junior oil minister Rameswar Teli said on Monday. Data compiled by Centre for High Technology, a technical wing of the federal oil ministry, shows the refining capacity of Indian refineries is projected to increase by about 56 million tons per year, equating to about 1.12 million barrels per day, by 2028, Teli said in a written statement to lawmakers. The minister said capacity expansion is likely to be “adequate” to meet India’s projected demand for refined fuels in the long-run.
PNGRB chairperson meets Himanta Biswa Sarma, highlights importance of City Gas Distribution
Dr. Anil Kumar Jain, Chairperson, Petroleum and Natural Gas Regulatory Board (PNGRB) met Assam chief minister Himanta Biswa Sarma highlighted importance of City Gas Distribution (CGD) issues and sought for assistance of State government in promoting natural gas. Chairperson briefed CM about the progress of Oil & Gas Infrastructure in the state of Assam and role that Assam is playing towards realising the Prime Ministers vision for creation of Gas based economy. He highlighted important City Gas Distribution (CGD) issues and sought for assistance of State government in promoting natural gas. Chairperson assured all possible efforts by PNGRB for rapid natural gas infrastructure growth in the State of Assam. He emphasised that rationalisation of Value Added Tax (VAT) on CNG & PNG along with mandates for conversion of public transport to CNG would encourage the use of natural gas in the State. Further, he suggested support from the Government for faster adoption of Domestic PNG connections by providing benefits in line with Pradhan Mantri Ujjwala Yojana. The Chief Minister assured all possible assistance for development of natural gas infrastructure. He believed that accelerated consumption of natural gas will also lead to increase in gas production from the gas fields in Assam which are presently underutilised.
India Could Boost Russian Crude Imports As Prices Fall
As the price of Russia’s flagship crude fell below the $60 per barrel price cap and international benchmarks slumped, India expects to increase its purchases of Russian oil, an anonymous senior government official in India told Reuters on Friday. The price of Russia’s flagship crude, Urals, has dropped below the $60 per barrel price cap for the first time in months amid plunging international benchmarks. The price of Urals crude loaded from Russia’s Baltic Sea port of Primorsk fell to $56.15 a barrel, while the price of Urals at the Novorossiysk port in the Black Sea slumped to $56.55, Bloomberg reported on Thursday citing data from Argus Media. The data is used to inform G-7 policy on the price cap. Urals crude had been trading above the price cap since July, and reports have emerged that the West is considering toughening up the sanction enforcement on evaders of the price cap on Russian oil, almost none of which has recently traded below the ceiling of $60 per barrel. The recent rout in the oil market has driven Urals below the price cap, for now. Last month, the U.S. sanctioned several maritime companies and three vessels for transporting Russian oil above the G7-set price cap. One of the tankers, NS Century, was reportedly headed to India when it was sanctioned. At the end of last month, reports emerged that India was still considering whether to allow the now-sanctioned tanker carrying Russian oil to approach and dock at one of its ports—a sign that the U.S. clampdown on Russian crude trade could limit India’s ability to buy and import cheaper oil. The Indian official refused to comment for Reuters on the likely destination of NS Century, but said that India doesn’t expect the sanctions to impact Indian purchases because of a sufficient number of available tankers on the market.
Two-thirds of LPG sellers hold on to bulk importers to stay afloat in dollar crisis
The liquefied petroleum gas (LPG) sector in Bangladesh is in serious crisis. About Two-thirds of the 30 LPG companies in the country are now struggling with an everyday task that has become extraordinarily difficult, that of opening Letters of Credit (LCs) to import this indispensable cooking fuel which has also become the go-to for industries and automobile. The overwhelming reason is the ongoing dollar crisis, according to the industry insiders. These companies find themselves in a difficult situation. They are being forced to keep their factories churning by tapping into the gas supply from a select few companies. Companies like Omera, Bashundhara, BM, Uni, Jamuna, United are among the few chosen ones, who are importing LPG in large quantities. Now it’s all about managing that elusive working capital and sidestepping potentially colossal losses. It’s a dance with the dollar crisis, and these companies are doing their best to juggle the challenges to keep the machines churning out products. Omera had imported around 15,000 tonnes of LPG a month in the second half of 2022; nowadays, it is importing 25,000 tonnes monthly to meet the increasing demand from the industrial and automobile users. It also supplies the other brands bottlers who are unable to import on their own. On the other hand, after huge investments for infrastructures and holding a strong market position, most others, including Navana, and G-Gas, started to depend on Omera for local procurement. At least 18 companies were importing bulk LPG a year ago, and now, not even half of them are able to manage to open LCs for imports on a regular basis, said Azam J Chowdhury, president of LPG Operators Association of Bangladesh (LOAB). For instance, G-Gas, a concern of engineering conglomerate Energypac, used to import 5,000 tons or more LPG a month. It could not import any for the last three months. “Due to the crisis of the greenback, dollars are nowhere available at the official rate. Banks are asking for even a 130% LC margin against the multimillion dollar LCs,” said Humayun Rashid, managing director and CEO of Energypac. “When an industry is incurring continuous losses, the unforeseen high LC margin is not affordable,” added Rashid who is also the president of the International Business Forum of Bangladesh. To stay afloat in the business of essential commodities and to keep its popular brand afloat, his company, like most others, is locally procuring only a portion of what it used to import, thus losing in the competition. Unlike others, the LPG business cannot pass all their additional costs on to the consumers as they have to sell at the Bangladesh Energy Regulatory Commission (BERC) fixed retail prices. The gap between the official exchange rate and the practical rate at which LCs are settled months later is determining how much loss an LPG importer will incur per cylinder, according to chief financial officers of LPG companies. For instance, the BERC while fixing the LPG retail price of Tk117.02 per Kg for December, considered the weighted average exchange rate of Tk116.39 per dollar, at which companies settled LCs in the previous month while importers are rarely getting the dollar below Tk120. Atiar Rahman, head of finance at Omera Petroleum said, “Every single taka we pay for a dollar in addition to the BERC-recognised exchange rate, is causing a Tk10-12 in loss per 12 Kg cylinder.” Companies are incurring a loss of around Tk80 per cylinder as they have to buy dollars at Tk122 or even more. Just paying more for a dollar alone won’t solve the LC opening problem. The high LC margin is also increasing the financial cost of the already struggling companies that had been financially bleeding for more than a year, said the Chief Financial Officer of another LPG firm that was forced to stop importing a few months ago. “We only know the selling price of our product at the local market but we don’t know how much our purchase cost would be until six months later,” said Mohammad Yasin Arafat, director of Jamuna Gas. The cause of this paradox is that the LCs are settled 6-8 months later. Yasin said the continuous devaluation of Taka against the dollar has created a situation where delay in settling LCs are making the imports more expensive, on a retrospective basis, he added. Azam J Chowdhury said, “We raised our concern in this regard during the last meeting with the energy regulator.” BERC considers only the documented costs of companies while the unofficial and undocumented cost of managing dollars for LCs far exceeds the official rate, said LPG industry CFOs.
‘Not enough,’ International Energy Agency issues grim assessment of COP28 pledges
The International Energy Agency (IEA) on Sunday (Dec 10) released its first detailed assessment of the ongoing COP28 climate talks in Dubai, and it couldn’t be more concerning. The experts concluded that despite the commitments made during the summit by more than 100 nations, the world was still off track to cap global warming to the crucial 1.5-degree threshold. The analysis showed that fresh pledges would lead to reduced gas emissions by four gigatons; however, it was just one-third of what was required. The pledges “would not be nearly enough” to keep global heating to 1.5 degrees, said an IEA statement. The IEA’s Executive Director Fatih Birol was quoted as saying by CNN that enough countries had not joined pledges to wean themselves off fossil fuels. “The IEA’s very latest assessment of these pledges shows that if they are fully implemented by their signatories to date, they would bridge only 30% of the gap to reaching international climate goals,” Birol told CNN. “There is a need for more countries and companies to join the pledges — and for agreement on an orderly and just decline of global fossil fuel use if we want to keep the 1.5 °C goal in reach.” Key pledges Over 120 countries, including the United States, have agreed to triple global renewable energy capacity and double energy efficiency measures. Fifty major oil and gas companies, such as Exxon and Saudi Aramco, have committed to reducing methane emissions by 80 to 90 per cent. Similarly, companies have also pledged to abandon the practice of flaring by 2030. Flaring is the deliberate burning of natural gas during oil extraction. Companies sometimes flare natural gas to depressurise systems during oil drilling, though, at other times, flaring occurs when an operator doesn’t need or want to collect all the gas available, often because it’s cheaper to burn it than collect it. Contention However, negotiations on language related to all fossil fuels, including oil and gas, are proving contentious. While over 100 countries support a fossil fuel phase-out, some oil-producing nations resist any reference to reducing oil and gas.
As petroleum-free future looms, oil companies eye investing in renewables
Petroleum producers are looking for off-ramps to take them off the petrol and diesel highway and turn to renewable sources, both as a survival tactic in a world of petroleum-free transportation and as a gesture to the vociferous climate change chorus. “Oil firms are essentially attempting to figure out how the best presently available cash cow in the world can be replaced for the benefit of their own sustainable future,” Matthias J Pickl, an economics professor at King Fahd University of Petroleum and Minerals in Saudi Arabia, was quoted in NS Energy. Oil majors are “progressively positioning themselves for the proclaimed energy transition” and wind and solar are taking an increasingly important role in the energy industry, he has written according to NS Energy. In India, the Reliance conglomerate with a giant petroleum footprint has announced plans for a New Energy ecosystem making solar, wind, batteries, hydrogen, and bio-energy platforms. Reliance Chairman Mukesh Ambani has committed INR 750 billion for this transformation. Total, the French oil company, announced this year that it will invest USD 300 million in a joint venture with Adani Green Energy in wind and solar farms project. This year, Total says it will be investing USD 5 billion overall in low-carbon energies, which would be higher than its capital investments in oil and gas.