ONGC charges premium over Brent in oil deals with BPCL, HPCL
India’s top oil and gas producer ONGC has signed term contracts with refiners to sell crude oil it produces from Mumbai offshore fields at a premium to international benchmark Brent, sources said. Oil and Natural Gas Corporation (ONGC) has signed deals to sell about 4.5 million tonne of crude oil each to Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL). The oil has been priced at the prevailing Brent crude oil price plus 1 per cent, company sources said. Brent, the world’s best known benchmark for the raw material that is converted into fuels like petrol and diesel in refineries, is trading at USD 80 per barrel. As per the pricing in the term contracts, ONGC would get USD 80 plus USD 0.8 for the oil it will sell to HPCL and BPCL. ONGC produces 13-14 million tonne per annum of crude oil from its fields in the Arabian Sea, off the Mumbai coast. In June last year, the government abolished a rule that said oil from blocks awarded prior to 1999 must be sold to government-nominated customers, mostly state refiners. The old rule had led to producers such as ONGC and Oil India not getting the best market price. Subsequent to that rule change, ONGC started quarterly auctions of crude oil produced from Mumbai High and Panna/Mukta fields in the western offshore. While the company got a slight premium over Brent – the crude oil its Mumbai offshore is closest in quality to – in the initial auction, refiners like Indian Oil Corporation (IOC) started seeking discounts equivalent to one they got on Russian oil, sources said. Following Moscow’s invasion of Ukraine in February last year, Russian oil was sanctioned and shunned by European buyers and some in Asia, such as Japan. This led to Russian Urals crude being traded at a discount to Brent crude (the global benchmark). The discount on Russian Urals grade was as high as USD 30 a barrel in the middle of last year and now around USD 6-7. Sources said refiners like IOC argued that they needed discounts as they suffered losses on selling petrol and diesel at below cost to keep inflation in check. ONGC resisted the discounts arguing that the government has taken away all upsides of the recent surge in oil prices through a levy of windfall profit tax. And as a way out, it floated the idea of a term contract – selling a fixed quantity of oil in a year at the pre-agreed benchmark. It first signed a pact to sell 4 million tonne per annum plus an optional 0.5 million tonne of crude oil to BPCL, which has a refinery to convert the crude oil into fuels like petrol and diesel at Mumbai.
Govt announces mandatory biogas blending in CNG, PNG
In a bid to promote bio-fuel in the country, the government on Saturday announced the phase-wise mandatory blending of compressed bio-gas (CBG) in compressed natural gas (CNG) and piped natural gas or PNG. In a meeting held by the National Biofuels Coordination Committee, it was decided that there will be a Central Repository Body (CRB) to monitor and implement the blending mandate. The mandatory blending obligation would start from FY2025-26. Initially, it will be kept 1% for use in automobiles and households, then it will be increased to about 5% by 2028. “In a major step towards enhancing use and adoption of CBG, the National Biofuels Coordination Committee (NBCC), chaired by the Petroleum Minister, announced on Saturday the introduction of phase-wise mandatory blending of CBG in CNG (transport) & PNG (domestic) segments of city gas distribution (CGD) sector,” said the petroleum ministry in a statement. According to the government, the objectives of the CBO (CBG blending obligation) are to stimulate demand for CBG in CGD sector, import substitution for liquefied natural gas (LNG), saving in forex, promoting circular economy and to assist in achieving the target of net zero emission etc. Petroleum minister Hardeep Singh Puri while talking about the initiative said the CBG blending obligation will promote production and consumption of CBG in the country. “It will encourage investment of around Rs 375 billion and facilitate establishment of 750 CBG pojects by 2028-29,” said Puri. Discussions also took place for promoting production of ethanol from maize with all stakeholders especially with the Department of Agriculture and Department Food and Public distribution (DFPD) to make it a prominent feedstock in coming years, the minister said. The government approved 1% sustainable aviation fuel (SAF) indicative blending target in ATF by 2027 for domestic flights and 2% SAF blending target in 2028 for international flights. The government has already achieved 10% ethanol blending five months before its November 2022 target. Now it has advanced its 20% ethanol blending in petrol target to 2025 from 2030. India, world’s largest importers of oil and gas, wants to cut down in its fuel import bill.
Oil And Gas Investment Could Halve By 2030 To Meet Climate Goal: IEA
The current $800 billion invested annually in the global oil and gas sector could be halved by 2030 if a goal to limit global warming to 1.5 degrees Celsius is to be reached, the International Energy Agency (IEA) said in a report Thursday. The report added that no new long-lead-time oil and gas sector projects would be needed if that goal were to be reached, and some current projects would need to be shuttered. The highest emitters in the global oil and gas industry have “vast potential for improvements”, the IEA said, as they face choices amid a climate crisis fuelled in large part by their products. The industry will need to reduce emissions by 60% by 2030 in order for the industry to align with climate goals to limit warming to the 1.5C above pre-industrial average defined in the Paris agreement, the IEA said. Temperatures this year are set to be the world’s warmest in 125,000 years, and there are concerns that the 1.5C threshold could be breached as early as this decade, which would lead to more and deadlier climate disasters. “With the world suffering the impacts of a worsening climate crisis, continuing with business as usual is neither socially nor environmentally responsible,” IEA executive director Fatih Birol said.
India’s net oil, gas import bill down 25% in April-October amid lower international prices
India’s net oil and gas imports in value terms for April-October of 2023-24 (FY24) declined by nearly a fourth on a year-on-year basis to $68 billion due to relatively subdued prices of crude oil, natural gas, and petroleum products globally, latest government data shows. This decline in the value of oil and gas imports came despite a rise in import volumes, suggesting that the fall in prices was significant enough to offset the volume growth. In the first seven months of the previous financial year—FY23—the country’s net oil and gas import bill was $90.1 billion. The price of oil, gas and refined petroleum products saw a hike last year following Russia’s February 2022 invasion of Ukraine. In the initial few months of FY23, international prices of these commodities were overheated. Their prices in the current financial year have been relatively softer and less volatile. For instance, the average price of the Indian basket of crude for April-October of last year was almost $102 per barrel, but in the first seven months of FY24, it was $83.44. According to provisional data from the Petroleum Planning & Analysis Cell (PPAC) of the oil ministry, India imported crude oil worth $75.5 billion in April-October of the current financial year, against $101.2 billion a year ago. However, in volume terms, oil imports for the period were higher by 0.6 per cent at 134.4 million tonnes. Apart from generally lower prices of crude oil globally, India has also benefited from ramping up imports of discounted Russian crude. Although the discounts are not as high as last year, the volume of oil imported from Russia has gone up significantly. Moscow now accounts for over 40 per cent of New Delhi’s overall oil imports.
Traders offer sanctioned Iranian crude to India as Chinese purchases peak
Suppliers of sanctioned crude oil led by Iran are making a beeline for Indian shores, after India encouraged imports of cheap Russian crude last year defying western pressure and sanctions, permitting Moscow to capture over 40 per cent of India’s oil market. Traders in the Middle East have approached Indian state-run refiners in the last few weeks with offers for sanctioned Iranian grades at deep discounts, industry sources said. Traders in Dubai contacted Indian state-run refiners offering Iranian crude at discounted prices, refining officials said. State-run refiners led by IndianOil, Bharat Petroleum and Hindustan Petroleum bought a combined 350,000 barrels per day of Iranian crude in 2018.
Margins of Indian refiners likely to be under pressure in 2024
Margins of Indian petrochemical companies like Reliance Industries, GAIL, and Indian Oil are likely to remain under pressure in the upcoming year. According to brokerage firm Prabhudas Lilladher, Chinese plans to reduce dependence on oil imports coupled with low demand environment in Europe are expected to be the reasons behind such margin pressure. “China, the world’s largest producer and consumer of petrochemicals has been adding new petrochemical capacities and improving its self-sufficiency. Thus, China has reduced its reliance on imports. Along with this, demand concerns too persist in Europe on the back of high inflation and interest rates. This has led to suppressed product margins,” the brokerage firm wrote in a report. Meanwhile, Indian refiners have announced aggressive expansion plans. Reliance has announced expansion plans across its petrochemical value chain, which will come up by 2026. Indian Oil is planning to enhance its petrochemical capacity from 4.1 mmtpa to 15 mmtpa by FY30. Similarly, GAIL is also expanding its capacity by setting up new plants. “Petro-chemical margins have been suppressed since the beginning of 2023 and we expect RIL, GAIL and IOCL’s petro-chemical margins to remain weak going into 2024 too, on the back of production capacities exceeding demand,” PrabhudasLilladher wrote in its report. As Chinese and Indian petrochemical producers add capacity, it is likely to create a supply glut without matching demand globally. With prediction of mild recession in the US and weak European economic health, demand for petrochemical products is not likely to improve in the next calendar year. Against this backdrop, Indian refiners’ margins will continue to be under pressure in 2024.
India ups LNG imports in October
India’s liquefied natural gas (LNG) imports rose in October compared to the same month last year, according to the preliminary data from the oil ministry’s Petroleum Planning and Analysis Cell. The country imported 2.34 billion cubic meters, or about 1.71 million tonnes of LNG, in October, a rise of 18.2 percent compared to the same month in 2022, PPAC said. During April-October, India took 17.75 bcm of LNG, or some 13 million tonnes, up by 13.4 percent, PPAC said. India paid $1.2 billion for October LNG imports, down from $1.4 billion last year, it said. As per India’s natural gas production, it reached 3.16 bcm in October, up by 9.3 percent compared to the corresponding month of the previous year. During April-October, gas production rose by 4.8 percent to about 21 bcm, PPAC said. At the moment, India imports LNG via seven facilities with a combined capacity of about 47.7 million tonnes. India’s Adani and France’s TotalEnergies started supplying natural gas in April to the grid from their 5 mtpa Dhamra LNG import facility located in Odisha, on India’s east coast. In August, the partners completed the first truck loading operation at the facility. During April-October, Petronet LNG’s 17.5 mtpa Dahej terminal operated at 94.3 percent capacity, while Shell’s 5 mtpa Hazira terminal operated at 39.8 percent capacity, PPAC said. The Dhamra LNG terminal operated at 26.4 percent capacity, it said.
Oil Prices Remain Depressed After OPEC+ Shocked Markets
Crude oil prices remained depressed in morning trade today in Asia following the Wednesday slump. Yesterday’s drop in prices was caused by news that OPEC+ is delaying its meeting, originally scheduled for this Sunday, to next Thursday. The latest EIA oil inventory report then added to downward pressure on oil prices by showing a sizeable build in U.S. crude stocks. Brent crude and West Texas Intermediate shed more than 1% earlier today, with Reuters reporting that there appeared to be disagreement among OPEC members on the production levels the cartel was aiming for. Citing unnamed sources from the cartel, the report said the dispute focused on African members. Analysts have suggested that Angola, Nigeria, and Congo want to have their production quotas raised from the levels agreed at a meeting in June. In June, OPEC+ agreed to limit output, with Saudi Arabia voluntarily cutting production by 1 million bpd and then extending this commitment until the end of this year. Since then, Saudi Arabia has expressed dissatisfaction with the production levels of other OPEC members. “At that meeting, OPEC squared the books on increasing UAE’s quota… by reducing the targets for the African nations that were underperforming their required production numbers,” RBC Capital Markets’ Helima Croft said in a note, cited by Reuters. ING’s Warren Patterson noted that disagreement among OPEC members would heighten price volatility but it remains unclear whether this disagreement would affect the cartel’s policy or Saudi Arabia’s production plans, Bloomberg reported earlier today. Citigroup analysts said they did not expect any surprises from the OPEC meeting, with Saudi Arabia most likely to extend its voluntary cuts of 1 million bpd for another month. The rest of OPEC would probably stick to their current quotas, the analysts predicted. Fears that OPEC+ will further deepen cuts at its next meeting put downward pressure on oil prices earlier this week, but the postponement of the meeting has added further concerns over the intensifying spat among the cartel’s members. Ahead of the delayed meeting, most analysts had expected the Saudis to extend the voluntary production cuts into 2024.
OPEC gains India oil market share in October, Russia slips
OPEC’s share in India’s oil imports in October hit a 10-month high as refiners bought more crude from Saudi Arabia and the United Arab Emirates after discounts narrowed for Russian oil that month, trade data showed. Russia’s share of the Indian market in October slipped to the lowest in nine months, according to Reuters calculations based on ship tracking data from trade sources. India, the world’s third-biggest oil importer and consumer, typically relies on producers in the Middle East for most of its oil needs and has encouraged refiners to diversify to cheaper alternatives to cut costs. The South Asian nation has emerged as the top buyer of the Russian seaborne oil sold at a discount after Western nations stopped buying from Moscow following its invasion of Ukraine. India imported about 4.7 million barrels per day (bpd) of crude in October, up 8.4% from the previous month as refiners increased purchases to meet higher local fuel demand during the festive season, the data showed. Imports from Saudi Arabia and the United Arab Emirates jumped to a 7-month high, up about 53% and 63% respectively in October from the previous month, the data showed. That helped lift the share of the producers in the Organization of the Petroleum Exporting Countries to 54% in October, up from 50% in September, according to the data. India imported on average 1.56 million barrels per day (bpd) of Russian oil in October, up 1.2% from the previous month, the data showed. Despite the increase, Russian oil’s share in India’s October imports slipped to 33% from 35% in September. Russia was the top oil supplier to India in April to October, the first seven months of this fiscal year to March 2024, followed by Iraq and Saudi Arabia. Higher intake of Russian oil boosted the share of the Commonwealth of Independent States (CIS) in India’s oil imports to the highest during April-October, the data showed.
Kerala Cabinet announces tie-up with BPCL to install compressed biogas plant fuelled by urban waste in Kochi
A Kerala Cabinet meeting on November 22, 2023 sought to convert Kochi’s mounting organic waste problem into a civic advantage by engaging the public sector Bharath Petroleum Corporation Limited (BPCL) to construct an industrial-level compressed biogas plant that would turn tons of biodegradable refuse from households, hotels, marriage auditoriums and markets into valuable energy and nutrient-rich fertilizer sludge. The plant would come up on 10 acres of Municipal Corporation land at Brahmapuram. The Kerala Government would hand over the public property to the BPCL. The Cabinet pegged the proposed plant’s daily processing capacity at 150 metric tonnes. The BPCL would underwrite the entire cost of the ₹150-crore project. The government would supply power and water to the plant at a subsidised rate. The BPCL would complete the scheme in 15 months. Kochi has a population of an estimated 7,00,000 and nearly 1,61,000 dwellings.