Linde (LIN) to Supply Industrial Gases to Indian Oil’s Panipat Refinery
Linde announced today that its entities in India have signed long-term agreements for the supply of industrial gases to Indian Oil Corporation’s Panipat refinery in Northern India. Linde’s entities will build, own and operate major new on-site facilities to supply hydrogen, nitrogen and compressed dry air to Indian Oil. The new on-site facilities will support the multi-billion-dollar expansion of the Panipat refinery from 15 to 25 million metric tons per year. Industrial gases play several important roles in refining, whether removing sulfur to make clean fuels, cracking crude oil into various products or purging and cleaning process equipment and control instruments. Panipat will be the second large-scale hydrogen plant which is built, owned and operated by Linde entities for Indian Oil. It will also be one of Linde’s largest on-site plants in India, with a total combined industrial gas production capacity of 142,200 cubic metres (Nm 3 ) per hour. The plant is expected to start up in 2025.
OPEC’s Share Of India’s Oil Imports Hits Record Low
OPEC had a record-low share of India’s oil imports between April and September, as the world’s third-largest crude importer more than doubled purchases of Russian crude, according to industry and trade data compiled by Reuters. Between April and September, the first half of India’s 2023/2024 fiscal year, Indian imports of Russian crude oil more than doubled to 1.76 million barrels per day (bpd) from 780,000 bpd in the same period of the 2022/2023 year, per vessel-tracking data cited by Reuters. India buys from abroad more than 80% of the crude oil it consumes. Over the past year and a half, the country has significantly raised its imports of cheaper Russian crude oil, which is banned in the West. In the first half of 2023/2024, Russia held a 40% share of Indian crude oil imports, while the share of OPEC exporters slumped to a record low of 46%, according to a Reuters analysis of data going back to 2001/2002. In the April-September period of 2022, OPEC’s share of Indian oil imports was 63%. Indian refiners have significantly ramped up imports from Russia while reducing purchases from Saudi Arabia, the world’s top crude oil exporter and Russia’s key partner in the OPEC+ pact. After lower imports of Russian crude in July and August compared to the prior months, India’s imports of oil from Russia rebounded in September. Cheaper Russian crude compared to Middle Eastern alternatives prompted Indian refiners to import more crude from Russia last month compared to a seven-month low in August. India’s crude oil imports from Russia rebounded amid a tighter market and more expensive crude from the Middle East, including from Saudi Arabia, which has been raising its contractual selling prices for Asia. According to the tanker-tracking data compiled by Reuters, Indian imports of Russian crude rose in September by 11.8% from August and jumped by 71.7% compared to September 2022, to an average of 1.54 million bpd.
IGX hopes to launch contracts for LNG trading next month: CEO Mediratta
The Indian Gas Exchange (IGX) hopes to launch contracts for the trading of liquefied natural gas (LNG) next month, enabling companies not linked to the pipeline network to use the cleaner fuel, its chief executive said on Thursday. India is building a vast gas pipeline network and import facilities as Prime Minister Narendra Modi wants to raise the share of gas in the country’s energy mix to 15% by 2030 from about 6% currently. “The LNG contracts will help the small industries with regassification facilities to transport LNG in trucks from the (import) terminals,” Rajesh K Mediratta told reporters at an industry event. He said IGX hopes to have daily volumes of 0.5 million-1 million cubic metres of gas under the new contracts. IGX is also seeking regulatory approvals to launch long-term gas contracts with a duration ranging from three months to one year. The pricing of gas under the long-term contracts will be linked to a formula, he said. “There are industries such as glass, ceramic, fertilisers, and refineries that want long-term contracts,” he said, adding the long-term contracts could be launched by December-January. At present, IGX has daily, weekly, fortnightly, and monthly gas contracts.
Traders Dumped Oil Despite Middle East Tensions
Institutional traders are dropping their oil positions as the outlook for the commodity—and the global economy—becomes marred in even more uncertainty. There has also probably been some profit-taking among hedge funds and other large oil futures market players after oil prices surged above $90 following the latest OPEC meeting earlier this month. The profit-taking started soon after the meeting, but the pace of exiting oil positions has accelerated recently. Reuters’ market analyst and columnist John Kemp reports that last week, traders quit oil and fuels at one of the fastest rates for the past decade, reducing their exposure by a total of 140 million barrels. For context, the last three weeks have seen institutional traders sell a total of 197 million barrels after building positions equaling 398 million barrels over the previous 12 weeks. Concern about the immediate future of the global economy is certainly one reason for this. The International Monetary Fund said this week higher energy prices would contribute to inflation, stoking the fears. According to the lender, a 10% increase in the price of oil would add 0.4% to inflation, aggravating an already unstable situation in many parts of the world. “Debt levels are at record levels and at the same time we are in this higher-for-longer interest [rate] environment. There is a lot . . . that could go wrong,” Gita Gopinath, deputy head of the IMF said, as quoted by the FT. Indeed, speaking of debt, the Wall Street Journal recently reported that for the first time in history, there is uncertainty about the placement of the latest issue of U.S. sovereign debt. There has been a significantly higher than usual supply of Treasury bonds this year, sending U.S. debt to a record, but there are indications that demand may not correspond to that higher demand. There is also the geopolitical factor, as well. With a new war in the Middle East, it appears the biggest question is whether Iran and the United States will become involved in it more directly. Should this happen, there appear to be unanimous expectations of an oil price surge. That price surge, however, would hit economies, and it would hit them hard, which could mean traders are being pre-emptive, especially since they are not switching from bullish to bearish positions, meaning they do not expect prices to slump anytime soon. Meanwhile, in some positive news for a change, the media reported that the U.S and Venezuela may be on the way to reaching a deal that would make the U.S. lift sanctions on Caracas. The news sent oil prices 1% lower. The situation is perhaps more interesting in gas markets. Reuters’ Kemp noted that while institutional traders sold oil, they bought U.S. gas last week. They may continue to do so as global gas supply disruption risk runs high. First, it was the war between Israel and Hamas that pushed gas prices higher, especially after the Israeli government told Chevron to shut down production at the Tamar offshore field for safety reasons. Gas from Tamar flowed to Egypt, where it was liquefied and exported, including to Europe. Then, reports began coming in that workers at Chevron’s two Australian LNG projects are once again planning to strike, which immediately sent European gas prices higher. However, Europe does not import LNG directly from Australia, with one exception last year; any danger of supply disruption in a market as tight as LNG is bound to affect prices in one of the biggest importers. This extra volatility of prices will likely persist over the next few months, with Europe increasingly leaning on U.S. LNG rather than other gas suppliers such as Azerbaijan and Qatar due to certain controversy over the former’s actions in the Nagorni Karabakh region and the latter’s long-standing financial support of Hamas.
Israel-Hamas conflict: India’s hope of respite in oil prices dashed
Since Hamas’ invasion of southern Israel on October 7, petroleum has become costlier by around $5 per barrel, threatening to stoke prices and impact growth Brent crude was trading at $89.8 per barrel on October 9 (9.15 pm IST), up over 4 per cent, thwarting India’s anticipation of a period of declining oil prices — after the leading global petroleum benchmark declined by around 11 per cent last week. The price of Brent crude had collapsed by around $12 per barrel — from $96.6 a barrel on September 27 to $84.6 on October 6, a day before the Hamas attack. “Oil prices have gone up a bit because the markets are very anxious, but there is no panic–I mean, not yet,” said Narendra Taneja, a Delhi-based prominent energy expert. “However, if it escalates into a full-blown war in the region, then there will be panic, pushing up oil prices,” further. The surge in oil prices is the risk premium in the market. The region where the conflict is occurring is the centre of global energy, said India’s oil minister Hardeep Singh Puri on Monday. He expressed confidence that the country would navigate through this. However, that won’t be easy because India imports over 85 per cent of its crude needs and has traditionally been susceptible to volatility in the oil market. Strategic crude reserves, which typically aid a nation during wars and calamities, at 39 million barrels provide for only around 7.5 days of India’s crude oil requirement, according to government data. The growing conflict in West Asia threatens to further impact India’s fiscal and balance of payments position, which was already suffering from surging oil prices since August, and hinder New Delhi’s efforts to control inflation. The Indian crude oil basket, a mix of Gulf sour and Brent sweet grades, averaged $93.54 a barrel last month. “While an immediate risk to oil flow as a direct result from the conflict is not foreseen but there is a risk that the conflict may turn into a larger proxy war involving larger global powers which can have a spiraling effect,” said Sourav Mitra, practice leader and director, at ratings agency Crisil. “As far as India is concerned, an increase of $10 per barrel in oil prices can lead to a 45 to 60 basis point increase in CPI.” While the loss sharing between OMCs and the government is slightly opaque, one can expect a 10 percent oil price rise to negatively impact India’s growth by 0.09% to 0.11%, Mitra added. At 4.2 million barrels a day in imports of crude in September, according to market intelligence agency Kpler data, it looked like India would have saved $50 million every day, and around $1.5 billion a month if Brent had continued to remain low in October. But as of October 9, India will pay around $17 million more every day, and half a billion dollars more on crude imports for the month. India’s rising import costs are conservative, based on the assumption that the conflict deflates quickly and Brent crude stabilises. However, ANZ Bank warned in a client note that oil prices will be supported by increasing geopolitical risk in West Asia and will be accompanied by higher volatility. Earnings at refiners are already looking weak for the July-September quarter, but a crash in oil prices earlier this month gave hope to state-run oil companies that they can make up for lower profits in last quarter by performing better during this quarter (Q3FY24), said a Mumbai-based refiner. Given the Assembly polls in five states in November and the Lok Sabha election in 2024, the official expects negative marketing margins to continue this financial year because New Delhi will veto any proposed hike in pump prices of petrol and diesel. “We expect OMC (oil marketing company) results to be operationally weaker for July-September, owing to a sharp fall in marketing gains of petrol and diesel due to the rise in benchmark prices,” said Mumbai-based brokerage Prabhudas Lilladher in a note today. State OMCs likely have incurred a marketing loss of Rs2-6 a litre at a gross level during July-September 2023 due to high diesel crack spreads in the international market, said Paras Pal, senior analyst at India Ratings & Research. Israeli Prime Minister Benjamin Netanyahu and his Cabinet have declared a war on Hamas, and launched airstrikes in Gaza. It is unclear how far this battle will continue, especially considering that what one expected was a short war between Russia and Ukraine has soldiered on for 19 months. The US is trying to broker a peace agreement between Saudi Arabia and Israel, undermining a deal reached earlier this year between Saudi Arabia and Iran brokered by China. Saudi Arabia had agreed to increase oil output next year if the Israel deal came through, analysts said. The attack by Hamas is an effort to scupper or at least paralyse the Saudi-Israeli deal, Taneja added.
Cross-border energy pipeline to bolster ties with India
India and Bangladesh have a long history of cooperation in various sectors, including energy. Over the years, both countries have recognized the importance of energy cooperation for economic and social development. In the next few years, India and Bangladesh are expected to deepen their energy cooperation. In the face of global energy market volatility, the Bangladesh government is moving to import re-gasified liquefied natural gas (RLNG) from India via a cross-border pipeline as part of a larger contingency plan for safe fuel supplies. An initial bid would bring in roughly 300 million cubic feet per day (mmcfd) from India’s H-Energy by 2025. This will be a second cross-country pipeline providing energy between India and Bangladesh. Since its inception on March 18, last year, the first one has been transporting diesel from India. India-Bangladesh Friendship pipeline, also known as the Maitree pipeline, is an essential infrastructure project that strengthens the bilateral ties between India and Bangladesh. Bangladesh-India friendship pipeline for carrying diesel oil was jointly opened through video conference by the Prime Minister of Bangladesh, Sheikh Hasina and the Prime Minister of India, Narendra Modi on March 18, 2023. This pipeline, built to transport petroleum products from India to Bangladesh, is not only a testament to the growing strategic relationship between the two countries but also a symbol of their commitment to regional connectivity and energy security. neighboring nations. The significance of the India-Bangladesh Friendship pipeline lies in its potential to enhance energy security and reduce dependency on volatile global markets for oil and gas. By establishing a direct link between India’s Siliguri terminal and Bangladesh’s Parbatipur depot, the pipeline offers a cost-effective and reliable means of transporting petroleum products. This strategic investment in the energy sector aligns with both countries’ long-term goals of achieving sustainable development and ensuring uninterrupted access to energy resources. The successful completion of this pipeline project demonstrates the high level of comprehension exhibited by both India and Bangladesh. Not only does this infrastructure development aid in meeting the energy demands of Bangladesh, but it also showcases the strides made by both countries in fostering regional cooperation. After completing a 275-kilometer cross-border pipeline from Kanai Chatta in East Midnapore district to Shrirampur in Khulna, India’s H-Energy, a subsidiary of Hiranandani Group, planned to transport RLNG from Digha in West Bengal to Khulna in Bangladesh. Petrobangla, the state energy corporation, signed a memorandum of understanding (MoU) with Hiranandani Energy (H-Energy) in 2021 with this goal in mind. Prior to the H-Energy agreement, India’s state-owned Indian Oil Corporation Ltd (IOCL) signed an MoU with Bangladesh to provide RLNG.The initial goal is to import RLNG equivalent to about 1.0 million tonnes per annum (MTPA) from H-Energy via this pipeline for 22 years to fuel the 800MW Rupsha combined-cycle power plant controlled by the state-owned North West Power Generation Company Ltd (NWPGCL). The imported fuel would be used mostly by the under-construction 800MW facility at Rupsha in Khulna. To generate energy, the plant will require approximately 130mmcfd RLNG. The remainder of the natural gas might be fed into the national grid. The Asian Development Bank (ADB) has agreed to finance US$ 600 million and the Islamic Development Bank (IDB) roughly $200 million to build the Rupsha power plant, which will have two 400MW gas-fired units. The remaining $ 150 million will be provided by the Bangladesh government. Petrobangla would also receive an additional 200mmcfd of gas by then from private company Dipon Gas, which plans to import approximately 500 mmcfd of RLNG from India. The remaining 300mmcfd would be sold to individual consumers. The pipelines represent a joint effort to exploit shared resources effectively and promote economic integration in the region. Furthermore, its construction also reflects the understanding between India and Bangladesh in identifying and addressing common challenges, such as the need for energy diversification and reducing environmental impact.
OMCs to prepare joint roadmap on green hydrogen push, to tap cleaner fuel
Oil-marketing companies (OMCs) may soon submit a joint road map for the adoption of green hydrogen to accelerate their energy transition plans, officials said. The Ministry of Petroleum and Natural Gas Ministry has asked OMCs to submit a detailed plan to increasingly adopt green hydrogen and provide a leg-up to their energy transition plans, the officials said. Public-sector undertakings (PSUs) under the ministry target to produce more than 1 million tonnes (mt) of green hydrogen by 2030. “The ministry has been meeting OMCs to ensure ways to boost green hydrogen production in the country. A joint road map will not only ensure better coordination in mapping demand but also enable OMCs to help each other in technical assistance,” the official said. Refineries in the country already utilise hydrogen for internal consumption, which has the potential to be converted into green hydrogen. The ministry plans to ensure uptake through city gas distribution (CGD) where it will be blended green hydrogen (GH2) with natural gas. Indian Oil Corporation Limited (IOCL) is testing hydrogen-enriched natural gas, or HENG, to be carried in natural gas pipelines. In theory, the two can be mixed in any proportion, but typically, HENG in the range of 10 per cent to 20 per cent hydrogen by volume represents the most-promising near-term option. Slow rollout In August, IOCL invited global tenders to establish its first green hydrogen generation plant at the Panipat refinery. At 10 KTA (thousands tonnes per annum) capacity, the project is envisaged to be created over the next 30 months.
India’s LPG consumption peaks in September, diesel declines: PPAC
India’s relationship with petroleum products is seeing some noteworthy shifts. In the latest report rolled out by the Planning & Analysis Cell (PPAC), data from April to September 2023 showcases some interesting ups and downs in consumption patterns. Taking center stage, LPG has emerged as a dominant fuel with its consumption touching 2551 thousand metric tonne in September alone. This spike underscores the increasing dependency of households and industries on this clean fuel. Contrastingly, the High-Speed Diesel (HSD) charts tell a different tale. A noticeable dip from 8217 thousand metric tonnes in May to 6493 thousand metric tonne in September raises questions about possible shifts in transport and industrial dynamics. But it’s not just the household fuels that are making headlines. The Aviation Turbine Fuel (ATF) numbers have soared with an 11% YoY growth. This jump might hint at the resurgence of the aviation sector, potentially signaling recovering travel trends post-pandemic slowdowns.
Petrol, diesel sales fall ahead of start of festive season
Petrol and diesel sales fell in the first half of October ahead of the start of festival season that is expected to boost consumption, preliminary data of state-owned firms showed. Last year, Durga Puja/Dussehra as well as Diwali fell in October. This year the festival season, when consumption picks up, starts in the second half of October. Petrol sales by three state-owned fuel retailers fell 9 per cent year-on-year, the first drop in two months. Diesel consumption dropped 3.2 per cent. The decline was largely because of the larger base of last year. Petrol sales dropped to 1.17 million tonnes during the first half of October from 1.29 million tonnes a year back. Sales dropped 9 per cent month-on-month as well. Consumption of diesel, the most consumed fuel in the country — accounting for about two-fifths of the demand, dropped to 2.99 million tonnes during October 1 to 15 from 3.09 million tonnes a year back. Month-on-month sales were, however, up 9.6 per cent when compared with 2.73 million tonnes in the first half of September. Diesel sales typically fall in monsoon months as rains lower demand in the agriculture sector which uses the fuel for irrigation, harvesting and transportation. Also, rains slow vehicular movements. This had led to a fall in diesel consumption in the last three months. And once the monsoon ended, consumption has risen month-on-month. Consumption of diesel had soared 6.7 per cent and 9.3 per cent in April and May, respectively, as agriculture demand picked up and cars yanked up air-conditioning to beat the summer heat. It started to taper in the second half of June after the monsoon set in. It has continued to fall since. Suppliers’ group OPEC sees India’s oil demand expanding on average by 2,20,000 barrels per day on the back of vigorous economic growth. Consumption of petrol during October 1-15 was 12 per cent more than in the COVID-marred October 2021 and 21.7 per cent more than in pre-pandemic October 2019. Diesel consumption was up 23.4 per cent over October 1-15 in 2021 and 23.1 per cent compared to October 2019. With the continuing rise in passenger traffic at airports, jet fuel (ATF) demand rose 5.7 per cent to 2,95,200 tonnes during first fortnight of October against the same period last year. It was 36.5 per cent more than in October 1-15, 2021, but 6.6 per cent lower than pre-COVID October 2019. Month-on-month jet fuel sales were almost 2 per cent lower compared to 3,00,900 tonnes in September 1-15, 2023. Cooking gas LPG sales were up 1.2 per cent year-on-year at 1.25 million tonnes in the first half of October. LPG consumption was 10.6 per cent higher than in October 1-15, 2021 and 153 per cent more than in pre-COVID October 2019. Month-on-month jet fuel sales were almost 2 per cent lower compared to 3,00,900 tonnes in September 1-15, 2023. Cooking gas LPG sales were up 1.2 per cent year-on-year at 1.25 million tonnes in the first half of October. LPG consumption was 10.6 per cent higher than in October 1-15, 2021 and 153 per cent more than in pre-COVID October 2019. Month-on-month, LPG demand fell 7.5 per cent against 1.36 million tonnes of LPG consumption during September 1-15, the data showed.
India Doesn’t Want Its State Refiners To Pay For Russian Oil In Chinese Yuan? Some Payments Held Up
The Indian government’s reluctance to permit state-controlled refiners to pay for Russian oil imports with Chinese currency has led to payment delays for at least seven shipments, sources familiar with the matter told Reuters. Despite the payment dispute, Russian companies like Rosneft continue to provide oil to Indian refiners. India has become the leading importer of Russian seaborne oil this year, taking advantage of discounted prices following the suspension of Russian oil imports by some Western nations due to the Ukraine conflict, the report said. The issue arises when refiners encounter difficulties settling their trade with Moscow, given the price cap of $60 a barrel imposed by the United States and the European Union on Russian oil. To navigate this cap, buyers have turned to alternatives such as Emirati dirhams for cargoes exceeding the limit as oil prices rise. In July, it was reported that Indian refiners began using Chinese yuan for some Russian oil payments while continuing to use dollars and dirhams for most of their Russian oil purchases. However, the Indian government has expressed discomfort with using yuan for payments, the report quoted two finance ministry officials saying. Officials at affected refiners have noted that payment for at least seven shipments is still pending, some of which have been outstanding since late September. It remains unclear whether the government explicitly instructed state refiners to cease using yuan, but it is evident that New Delhi does not approve of this practice. A government official stated that while it is not prohibited, the government neither encourages nor facilitates such trade. Most of the Russian oil purchased by Indian refiners comes from traders, with some direct purchases from Russian entities. While traders have been willing to negotiate deals in dirhams, Russian sellers have insisted on yuan.