Govt opens 12th city gas bid round
Petroleum and natural gas minister Hardeep Puri launched the 12th city gas distribution bidding round on Thursday, which offered licences for seven geographical areas (GAs) spread over five states and two union territories. The areas on offer cover 92 districts in Arunachal Pradesh, Meghalaya, Manipur, Nagaland, Sikkim, Jammu & Kashmir and Ladakh. The latest licensing round will expand city gas coverage to almost the entire country. City gas licences distributed over the 11 rounds so far already cover 98% of the nation’s population and 88% of its area. Puri said the Petroleum and Natural Gas Regulatory Board (PNGRB) will now work on taking city gas supplies to the country’s islands. In the 12th round, a GA covers a full state, unlike in previous rounds when it was limited to a district or two, said Gajendra Singh, member, PNGRB. The main gas pipeline in the Northeast touches all the state capitals. The Gurdaspur-Jammu pipeline, being built by GAIL, will take natural gas supplies to J&K.
The War Premium Fizzles Out In Oil Markets
Crude oil prices are set for a modest gain this week as the war premium that emerged in the aftermath of last weekend’s attacks of Hamas on Israel appeared to cool down as inventories built and nations made a clear attempt to contain the violence. Brent crude is set to end the week with a gain of 2.3%, Reuters estimated, while West Texas Intermediate is about to book a 0.8% gain. One of the reasons for the short-lived rally was the apparent determination to contain the latest flare-up of violence in the Middle East and prevent any further escalation. President Biden has been unequivocal in his support for Israel and U.S. forces have been put on alert as a clear deterrent to other nations involving themselves in the conflict. At the same time, he has emphasized the importance that Israel and Netanyahu follow the rules of war. Another factor that helped keep oil prices under control was the massive oil inventory build reported this week by both the American Petroleum Institute and the Energy Information Administration. The API saw the build at 13 million barrels while the EIA estimated it at 10.2 million barrels. Separately, the International Energy Agency reported that Russian crude oil and fuel exports had climbed higher in September despite a deal with Riyadh to reduce oil exports by 300,000 bpd. According to the IEA, crude oil and fuel exports from Russia were up by 460,000 bpd between August and September. Russia’s Deputy Prime Minister has since claimed that the country’s pledge to reduce oil exports by 300,000 bpd includes oil products. Meanwhile, all eyes are on Iran after the U.S. said it would investigate whether Tehran was involved in the planning of the Hamas attacks and canceled the transfer of $6 billion to Iran as part of a prisoner exchange deal. Iran has denied any involvement. The U.S. also imposed the first sanctions on two tanker owners that have been transporting Russian crude oil abroad, claiming the oil they transported had been sold at a price higher than the cap of $60 per barrel imposed on Russian crude by the G7 and the European Union. This added to oil’s upward potential, as did OPEC’s latest monthly report that saw oil demand continue to be resilient. The effect was reinforced by the IEA’s monthly report, which acknowledged the supply situation with oil was a tight one. While oil markets remain tight and geopolitical risk will keep traders on edge for the foreseeable future, demand concerns and growing inventories continue to weigh on oil prices amid economic uncertainty.
How India can utilize its coal and lignite mines for Green Hydrogen production
India is gearing up for its green transition with the intention of achieving net-zero emissions by 2070. Several alternative solutions are being explored and assessed to accelerate this transformation. Among the many potential areas identified, to reduce our reliance on imported Hydrogen is to produce it domestically using carbon-emitting methane. According to a study by the Council for Energy, Environment and Water (CEEW), India consumes close to 5.6 million tonnes of hydrogen, most of it produced using methane. In addition to that, 1.9 million tonnes of hydrogen come from abroad, embedded in methanol, ammonia, and fertilisers. This all adds up to the current consumption reaching 7.5 million tonnes annually. Therefore, under the visionary guidance of the Prime Minister of India, Narendra Modi, the National Hydrogen Mission was initiated by the Union Cabinet in January 2022 to meet 7.5 million tonnes of its annual requirement from locally produced green hydrogen and make India a leading producer and supplier in this sector worldwide. Further, with its adoption, it is estimated that India can abate 3.6 gigatonnes of CO2 emissions cumulatively between now and 2050. This can be a significant lever for the nation to contribute towards its announced climate targets and net-zero vision.
GAIL India issues swap tender for Jan delivered LNG cargo
GAIL (India) Ltd has issued a swap tender offering one liquefied natural gas (LNG) cargo for loading in the United States in exchange for one LNG cargo for delivery to India in January, said two industry sources. India’s largest gas distributor is offering a cargo for loading from Cove Point on a free-on-board (FOB) basis on Jan. 14. It is seeking one cargo for delivery to the Dabhol terminal on Jan. 1-7 on a delivered ex-ship (DES) basis. The tender closes on Oct. 12.
India’s Natural Gas Demand To Grow 4% In Last Four Months Of 2023: IEA
India’s demand for natural gas will surge 4% in the final four months of 2023, according to the International Energy Agency’s Medium-Term Gas Report. This is higher than the 2% increase that the Petroleum Planning and Analysis Cell reported in the first eight months of the same year. The growth is expected to contribute an additional 10 billion cubic metres of gas supply by 2026. The report, issued on Oct. 10, also projects an average annual growth rate of over 8% in India’s natural gas demand between 2022 and 2026, resulting in a substantial 20 billion cubic metre increase. This increased demand will primarily be fuelled by the power, petrochemical, and fertiliser sectors. After a steep drop in 2022, the IEA stated that India’s natural gas demand is expected to rebound and resume its growth pattern on the back of a favourable economic outlook, enhanced availability of gas supply, and the ongoing reforms aimed at opening up the gas market. Growth Contributing Sectors The Indian natural gas market is heavily skewed towards industrial demand, according to the IEA report. Industrial demand made up over 70% of the net gas demand increase from 2017 to 2021 and is projected to contribute 40% of the overall demand growth by 2026. The Indian natural gas market, as per the IEA report, is heavily tilted towards industrial demand. This sector represented over 70% of the net gas demand increase between 2017 and 2021 and is expected to contribute 40% to the overall demand growth by 2026. Although smaller than industrial demand, gas demand for power generation also plays a significant role in India, the report stated. Gas-to-power demand is projected to grow 15% annually from 2022 to 2026, due to expanding capacity at existing gas plants and increasing power demand, despite ongoing additions of renewable capacity. The IEA indicated that the fertiliser sector will significantly drive India’s industrial gas demand growth as the country works towards discontinuing urea imports by the end of 2025. By 2025, India’s traditional urea production capacity is projected to rise by over 6 Mtpa, potentially leading to nearly 5 bcm of additional gas demand, the report said. In the first eight months of 2023, demand for re-gasified LNG in the fertiliser sector nearly tripled compared to 2022, with government subsidies and improved connectivity for southern Indian fertiliser plants contributing to this surge, according to the IEA. The commissioning of the Dhamra LNG import terminal in April is anticipated to boost India’s regasification capacity by more than 10%, it said.
G-7 price cap on Russian oil tested as India pays record premium
Refiners in India are buying cargoes of Russian oil at the widest premium above a G-7 imposed cap since the curb was introduced, highlighting the market’s importance to Moscow and a gap that may intensify scrutiny of the controversial mechanism. Crude processors in the key importer paid an average of $86 a barrel for Russian shipments in August, according to the Ministry of Commerce and Industry. That’s the biggest spread in dollar terms since the $60-a-barrel limit came into force after Moscow’s invasion of Ukraine in the first quarter of 2022. Oil rallied in the third quarter as OPEC+ leaders Russia and Saudi Arabia choked off some supply to tighten the market. That rally lifted benchmark prices even further above the price set by the cap — which is designed by the Group of Seven to meet the twin needs of seeking to limit the Kremlin’s crude-based income, while at the same time keeping Russian flows on the global market. The cap is constructed to bar access to critical western financing and insurance services for crude cargoes if shipments are valued above $60. Beyond that level, they are permitted, as long as buyers and sellers make alternative arrangements. India, a vast oil buyer, has been adept at doing so. US Treasury Secretary Janet Yellen recently warned that the US is preparing to crack down on evasion of the G-7 cap on Russian oil, as recent market prices signal the mechanism may no longer be working as hoped. The US is looking at enforcement very carefully, Yellen told the Wall Street Journal.
IEA cuts forecast for growth in oil demand in 2024; no impact of Israel war yet
The International Energy Agency (IEA) on Thursday lowered its forecast for growth in oil demand in 2024, suggesting harsher global economic conditions and progress on energy efficiency will weigh on consumption. In its monthly report, the IEA forecast demand for oil will rise by 880,000 barrels per day (bpd) in 2024, down from its previous forecast of 1 million bpd, based on broader economic concerns and a faster adoption of electric vehicles among other energy efficiency measures. However, the Paris-based agency that advises the United States and other industrialised countries, raised its 2023 demand forecast to 2.3 million bpd, from a previous estimate of 2.2 million. OPEC and its allies, known as OPEC+, began limiting supplies in 2022 to support prices. In September, global benchmark Brent hit 10-month highs after Saudi Arabia and Russia extended their combined 1.3 million bpd cuts until the end of the year. “If extra cuts are unwound in January, the balance could shift to surplus, which would go some way to help replenish depleted inventories,” the agency said. Although Russia pledged to cut crude exports until the end of 2023, according to the IEA’s estimates Moscow’s total exports of crude oil and products in September rose by 460,000 bpd to 7.6 million bpd, with crude accounting for 250,000 bpd of the increase. The jump in exports highlights the difficulty the West has faced in trying to reduce Russian exports and revenue to Moscow amid its war with Ukraine. Last year, the IEA predicted harsh Western sanctions would lead to a collapse in Russian energy exports. ECONOMIC HEADWINDS, GEOPOLITICAL RISK Oil prices fell sharply last week as a darkening economic outlook intensified fears of slower growth in demand, eclipsing supply concerns. But prices spiked early this week after Palestinian Islamist group Hamas’ attack on Israel, which has ignited fears that a wider conflict could exacerbate the existing supply deficit. So far, however, there has been no direct impact on supplies, the IEA said, adding that it stood ready to act if needed to ensure adequate supplies. Meanwhile, as 2024 beckons, a high interest rate environment in key Western economies aimed at bringing down inflation and the consequential stronger U.S. dollar is dampening demand in lower-income emerging markets like Nigeria, Pakistan and Egypt, the IEA said. Still, so far, major oil consumers, particularly China, India and Brazil, continue to see solid growth in demand, it said.
India will invite bids for gas distribution licences, official says
India will invite bids for city gas distribution licences in five north-eastern states and two union territories, A. K. Jain, chairman of the Petroleum and Natural Gas Regulatory Board, said on Thursday. India is seeking to boost the use of cleaner fuel to cut its carbon emissions, and has set a 2070 goal for net zero carbon emissions.
Shift In U.S. Policy On Iran Oil Could Swing Global Markets
Back in August, we reported that Iran oil exports had hit record highs thanks in large part to the Biden administration opting to look the other way as Tehran boosts production ostensibly in a bid to keep markets well supplied and oil prices low. The price response to the escalation in the Middle East tensions has so far been modest; however, the Israel-Gaza war is likely to cause a significant shift in U.S. policy on Iran due to its open support and backing for Hamas. Commodity analysts at Standard Chartered have noted that the decision towards the end of the first Obama administration to link trade policy to imports of Iranian oil by key consuming countries effectively cut Iran’s output by over 1 million barrels per day (mb/d). Constraints were later eased after the signing of the Joint Comprehensive Plan of Action (JCPOA) in 2015. However, constraints were tightened again after the U.S. withdrew from the JCPOA during the Trump administration, with output falling below 2mb/d in 2020 when waivers given to consuming countries were withdrawn. Iran’s oil output and exports have increased sharply under the Biden administration, with production hitting 3mb/d, including 500,000 b/d in the current year, while exports sit just under 2mb/d. Earlier, reports emerged that the U.S. and Iran were making progress after resuming talks on a nuclear deal, a move that could ease sanctions on Iran’s oil exports. Israel’s Haaretz newspaper reported that the talks are moving forward more rapidly than expected, with the possibility of a deal being struck in a matter of weeks. Deal terms are likely to include Iran ceasing its 60% and higher uranium enrichment activities in return for permission to export as much as 1M bbl/day of oil. A successful nuclear deal could change the oil markets, with former Iran oil minister Bijan Namdar Zanganeh saying that his biggest dream has always been to increase Iran’s oil output to as much as six million barrels per day. But recent allegations that Iran helped Hamas plan the Israel attack is very likely to seriously strain relations between Washington and Tehran. StanChart has opined that The U.S. has three broad policy options in relation to Iran’s oil output: (1) the status quo, with output at 3mb/d or higher, (2) the pre-2023 plateau of close to 2.5mb/d, or (3) near-zero exports with output below 2mb/d as reached at the end of the Trump administration. The analysts note that option #1 was the most expedient policy for the U.S. in terms of both market influence and geopolitics just a week ago. However, the latest developments in the Middle East have brought options #2 and #3 into focus as potential policy targets. Europe Gas Prices Soar After Israel Shuts Gas Field Whereas oil markets do not appear to have been affected much by Israel’s crisis, the precautionary closure of Israel’s Tamar gas field by Chevron Inc. (NYSE:CVX) has sent Europe’s gas prices rocketing despite the continent being flush with the commodity. StanChart estimates that the shutdown has cut Israel’s domestic output by about 28 million cubic meters per day (mcm/d) and sent Europe’s natural gas prices 15% higher. StanChart notes that whereas exports from Israel to Egypt usually come from the Leviathan field, the Tamar outage is likely to have knock-on effects, with early indications suggesting that exports have been reduced by about 5 mcm/d from the usual 23 mcm/d. Theoretically, the reduction of exports to Egypt could have implications for European markets as it reduces the likelihood of Egypt loading LNG cargoes. StanChart has observed that those fears are somewhat overblown since the number of cargoes at risk is small, if not zero. Indeed, Egypt’s domestic demand has been so strong that no cargoes were exported in September. In their defense, Europe’s gas markets are facing other supply risks beyond Tamar including renewed concerns over strike action in some Australian LNG facilities, as well as an outage in a two-way interconnector pipeline between Estonia and Finland. The damage to the Balticconnector pipeline and an adjacent telecommunications cable is being treated as potential sabotage by the Finnish investigation. While the pipeline itself is of relatively minor significance within the EU supply system, market concerns are likely to be heightened about the potential sabotage of other vital pipelines. Europe’s gas inventories have continued to rise even as concerns about potential supply losses have dominated. According to Gas Infrastructure Europe (GIE) data, inventories hit a new all-time high at 112.92 billion cubic meters (bcm) on 8 October, good for 97% of storage capacity. The y/y increase stands at 9.41 bcm and the build above the five-year average is 11.75 bcm. According to StanChart, it seems likely that the start of significant inventory draws will be delayed, and the EU is likely to finish the withdrawal season with very high inventories and potentially well above 70 bcm with early forecasts suggesting that the European winter will be extremely warm. In contrast, inventories finished the 2021-22 withdrawal season four weeks after the invasion of Ukraine at just 29 bcm and the 2017-18 withdrawal season ended with less than 20 bcm in inventory.
India September oil product demand up 1.5% sequentially
The demand for oil products in India grew 6.7% year-on-year and 1.5% sequentially in September on the back of healthy auto sales and factory activities, according to a report by S&P Global Commodity Insights. All products, including petrol and diesel, saw a growth in demand in September over August. Naphtha and kerosene were the exceptions. “Middle distillate demand to drive 53% of total Indian oil demand growth in 2023 with gasoline and naphtha together to contribute 28% of the growth,” it said. India’s oil products demand increased by 73,000 bpd in September owing to robust auto sales and factory activity ahead of the upcoming festival season while the rainfall lagged by 5.6% below the long-period average for this season. Along with the growth in gasoil, jet fuel and gasoline, LPG also posted strong growth as the government had reduced prices of domestic cylinder by ₹200 per cylinder. Diesel consumption reported during September was higher by 0.4% on month and up by 3.8% YoY. Demand remained strong in the mobility sector as evident from the data of e-way bill generation and daily average highway toll transactions. There was some slowness from the agriculture sector and contraction in sales of tractors leading to lower diesel consumption. The monsoon season ended with a deficit in total rainfall received by 5.6% largely affecting the sowing and harvesting activities. Gasoil demand is expected to be close to 7% above pre-COVID-19 levels this year. Himi Srivastava, analyst, South Asia Oil Markets, S&P Global Commodity Insights, said: “India’s gasoline demand saw a September increase to 869,000 b/d due to lower rainfall and strong auto sales keeping mobility demand strong. As the temperatures rose, the requirement of running air conditioners in cars also increased thereby increasing the consumption of gasoline. India’s gasoline demand rebounded to above pre-covid-19 levels in 2021 and is expected to be some 23% higher than 2019’s level in 2023.”