LPG price cut, Ujjwala expansion could cost over Rs 370 billion annually
The government’s decision to slash domestic cooking gas prices by Rs 200 per 14.2-kg cylinder and expand the Pradhan Mantri Ujjwala Yojana (PMUY) by adding 7.5 million poor households to its beneficiary base could cost upwards of Rs 370 billion on an annualised basis, an analysis of liquefied petroleum gas (LPG) consumer base and average gas refill data suggests. For the computations, it is assumed that the LPG cylinder refill rates will stay at the levels recorded for 2022-23 (FY23) and fuel retailers will continue to sell LPG to households at a price that is Rs 200 lower than what they would have charged for a cylinder had the price cut not been announced. On its part, the government has not provided any estimate of the cost of the twin decisions. Speaking on condition of anonymity, a senior official in the finance ministry said that the actual cost could be somewhat “lower” than this estimate as there are a number of variables in the equation. These include possible over recoveries on LPG sales by fuel retailers, movement in international crude and LPG prices going ahead, and currency fluctuations. The official, however, did not provide any estimation of what the actual cost might be. The government on Tuesday announced the price cut, which was implemented by public sector oil marketing companies (OMCs) on Wednesday. While the government has so far not officially clarified whether or not it plans to foot the bill for this price reduction, which will benefit over 310 million domestic LPG consumers in the country, the finance ministry official quoted above said that OMCs will bear the impact of the price cut. The official, however, clarified that the government will cover the Ujjwala subsidy of Rs 200 for the 7.5 million new beneficiaries, as is the case for existing beneficiaries under the scheme. For Ujjwala beneficiaries, the price cut is over and above the subsidy, which implies that they will get a cumulative relief of Rs 400 per cylinder.
A potential hub for Green Hydrogen
The global demand of over 100 MMT of Green Hydrogen and its derivatives like Green Ammonia is expected to emerge by 2030 of which India can potentially export about 10 MMT of Green Hydrogen/Green Ammonia per annum which will be about 10 per cent of the global market. India is expected to achieve Net Zero emissions by 2070. India currently imports over 40% of its primary energy requirements, worth over USD 90 billion every year. Dependency on imported fossil fuels in the transportation and manufacturing sectors is necessitating a shift towards technologies that enable an enhanced share of renewable sources in the energy mix, and progressively reduce the dependency on fossil fuels. Green Hydrogen has the potential to play a key role in such low-carbon and self-reliant economic progress. It can directly replace fossil fuel-derived feedstocks in petroleum refining, fertilizer production, steel manufacturing etc. Hydrogen-fueled long-haul automobiles and marine vessels can enable the decarburization of the mobility sector. The asymmetries in expected demand and production capabilities for Green Hydrogen, in different countries and regions, are likely to result in international trade of Green Hydrogen and its derivatives like Green Ammonia and Green Methanol. This presents a unique opportunity for India to capitalize on its abundant renewable energy and land resources and the growing global demand for Green Hydrogen, to become a leading producer and exporter of Green Hydrogen and its derivatives.
Govt cuts windfall tax on domestic crude, hikes levy on export of diesel, ATF
The Government on Friday cut special additional excise duty (SAED) on crude petroleum to Rs 6,700 per tonne with effect from September 2. In the last fortnightly review on August 14, windfall tax on domestically Besides, SAED or duty on export of diesel will increase to Rs 6 per litre from Rs 5.50 per litre, currently. The duty on jet fuel or ATF will be doubled to Rs 4 per litre effective Saturday, from Rs 2 per litre currently, according to a finance ministry notification.produced crude oil was set at Rs 7,100 per tonne. Besides, SAED or duty on export of diesel will increase to Rs 6 per litre from Rs 5.50 per litre, currently. The duty on jet fuel or ATF will be doubled to Rs 4 per litre effective Saturday, from Rs 2 per litre currently, according to a finance ministry notification. It said SAED on petrol will continue at nil. India first imposed windfall profit taxes on July 1, 2022.
Oil Prices On Course For A Weekly Gain Despite Economic Uncertainty
After four days of gains, crude oil prices were on track to end their two-week losing streak as traders once again turned their attention from economic indicators to OPEC+ supply policy. Brent crude was trading above $86 per barrel at the time of writing and West Texas Intermediate was changing hands at close to $84 per barrel, two days after the U.S. Energy Information Administration reported another massive draw in oil inventories, at 10.5 million barrels for the second to last week of August. That inventory draw followed another recently reported one of 17 million barrels, which contributed to a perception of strong, resilient demand for crude in the world’s largest consumer of the commodity. To date, crude inventories in the U.S. are at the lowest since last December. This perception undermined fears among traders that sluggish economic growth in the biggest oil markets in the world would affect global demand negatively, helped by positive economic data from the U.S. Even China’s latest PMI reading did not pressure prices, possibly because while the overall figure was in the contraction zone below 50, several important sub-readings were above 50, indicating growth. Meanwhile, OPEC+ is meeting next week to discuss its next moves and analysts expect the production cuts to remain unchanged and get extended for another month as the group seeks sustained higher prices. “We continue to expect cuts to be extended, with prices above US$90/bbl (on a sustained basis) required to draw OPEC supply back to market, as well as incentivize U.S. shale producers to increase drilling activity,” the National Australia Bank said in a note, cited by Reuters. Russia has already said it would extend its export cuts for another month, which also contributed to this week’s price gains and now traders anticipate an identical move by Saudi Arabia with regard to its production.
ONGC eyes 11pc rise in oil, gas output by 2026
ONGC expects to produce 44.546mn t of oil equivalent of crude oil and natural gas by the April 2025-March 2026 fiscal year, up by 11pc from 2022-23. It sees oil output increasing to 20.23mn t (148.3mn b/d) by 2023-24 and 20.838mn t by 2025-26, from 19.584mn t in 2022-23. It expects natural gas output to hit 20.882bn m³ (57.2mn m³/d) by 2023-24 and 23.708bn m³ by 2025-26, from 20.63bn m³ in 2022-23. ONGC is India’s largest oil and gas producer and any growth in its output will boost India’s efforts to enhance domestic oil and gas production to reduce dependence on imports. The firm has 22 major projects under implementation with an expected output of 94mn t of oil equivalent in the coming years, along with a strong pipeline of over 40 upcoming projects, ONGC chairman Arun Kumar Singh said. Exploration acreage area is also set to increase to 500,000km² by 2025-26 from 162,000km² currently. The firm has set a capital expenditure of over 300bn rupees ($3.62bn), focusing on exploration and rejuvenation of matured western offshore fields. These investments are alongside ONGC’s target to achieve net zero Scope 1 and 2 emissions by 2030. It is also set to invest another Rs1 trillion in green energy initiatives, including setting up renewable energy capacity as well as green ammonia, green hydrogen and offshore wind energy projects, and developing carbon capture, utilisation and storage (CCUS) technology. The company currently has 189MW of renewable energy generation capacity and is targeting 10GW by 2030 with this investment, according to its annual report. During 2022-26, ONGC is planning to set up 25 compressed biogas plants, 5GW of renewable energy capacity in Rajasthan, a 1mn t/yr green ammonia plant and wind energy projects, details of which are not yet known. Petrochemical plans ONGC will continue to transform 40-60pc of its feedstock crude into chemicals, and aims to increase its petrochemical capacity to over 8mn t/yr by 2030 from 3.4mn t/yr currently. “ONGC is collaborating with other entities to explore opportunities in the oil to chemical, refining and petrochemicals value chain by setting up two greenfield [oil-to-chemical] (O2C) plants in India,” Singh said. Further details of the O2C projects are not yet known. Petrochemical demand is expected to remain strong and will continue to be a key driver of oil and gas demand in the future, he added. Singh previously said state-controlled refiner MRPL is going ahead with plans to expand its petrochemical business. ONGC is MRPL’s main shareholder with a 72pc stake. MRPL will focus on establishing a petrochemical plant on India’s west coast and the expansion programme is under configuration, the company’s general manager M Venkatesh told Argus at the end of May, but did not give further details.
Government Hikes Price Of Domestic Natural Gas For September
The central government raised the price of domestic natural gas on Thursday to $8.60 per million metric British thermal units for September, from $7.85 per mmBtu in August. The gas produced from the nomination fields of Oil and Natural Gas Corp. and Oil India Ltd. will have a ceiling of $6.50/mmBtu, according to a notification by the Petroleum Planning and Analysis Cell. On April 8, the Ministry of Petroleum and Natural Gas linked the price of natural gas produced from legacy nomination fields of ONGC, OIL, and the New Exploration Licencing Policy blocks to the Indian crude basket. The price of natural gas from these fields was fixed at 10% of the monthly average of the Indian crude basket. Earlier, the gas prices were reviewed every six months under the New Domestic Natural Gas Pricing Guidelines, 2014, which were based on volume-weighted prices prevailing at four global gas trading hubs. These guidelines have now been rationalised due to the significant time lag and high volatility in gas prices. Gas produced by ONGC and OIL from their nomination blocks will be within the floor and ceiling prices, and gas produced from new wells or well interventions in the nomination fields of ONGC and OIL will be allowed a premium of 20% over the price under the administered price mechanism.
RIL’s biogas entry ticks all the boxes on green investment
Reliance Industries Limited (RIL) Chairman and Managing Director Mukesh Ambani has made positive announcements on Monday for the biogas sector. The company plans to establish 100 Compressed Biogas (CBG) plants in the next five years, using 5.5 million metric tons of agro- and organic waste annually. The impact will be huge considering it will help reduce nearly two million tonnes year-on-year of carbon emissions, apart from producing 2.5 million tonnes of organic manure. This would also result in India having to import 0.7 million metric tonnes per annum less of LNG, saving crucial forex reserves of roughly Rs 15 billion. Reliance Industries Limited (RIL) Chairman and Managing Director Mukesh Ambani has made positive announcements on Monday for the biogas sector. The company plans to establish 100 Compressed Biogas (CBG) plants in the next five years, using 5.5 million metric tons of agro- and organic waste annually.
Adani Total’s Dhamra LNG Terminal Will Achieve Peak Capacity By 2024, Says CEO
Adani Total Ltd.’s Dhamra LNG Terminal is equipped to perform at peak capacity since it got commissioned, according to Chief Executive Officer Satinder Pal Singh. However, peak performance is contingent on sufficient sourcing and downstream evacuation by users, Singh told BQ Prime. “We expect the terminal to achieve full capacity around end of 2024, when connectivity to all major consumption centers will be completed. The 6.50 million tonne LNG capacity at Dhamra Port is one of the largest in India and first on the east coast. Which are the sectors and companies you have tied up with for the LNG supply? Satinder Pal Singh: Adani Total Pvt.’s Dhamra LNG terminal is designed to import, store, re-gasify and safely send out up to 6.5 million tonne per annum in this current initial phase. At this time, we have two users in the form of Indian Oil Corp. and GAIL India Ltd., who have substantially subscribed capacity on a long-term basis. Both users will source LNG and market gas for their captive and third-party use. IOCL has its refineries at Paradip, Haldia, Barauni, and Guwahati. The revival of brownfield fertiliser plants in Sindri, Barauni and Gorakhpur will act as consumption centres. Also, industries and city gas distribution companies in the region will be supplied from Dhamra by the users. As this is the only terminal in east India, all eastern demand for LNG will be met most efficiently from this terminal.
Why the India-UAE deal to trade in local currencies matters
With India and the UAE starting to settle bilateral trade in their respective currencies, the move is set to further strengthen economic relations between the two countries and could provide a significant boost to exports from Asia’s third-largest economy, analysts say. Last month, India signed an agreement with the UAE to allow it to settle trade in rupees instead of US dollars — which is widely used for India’s trade settlements. This move aims to lower transaction costs by cutting expenses that accompany payments made in foreign currencies and the uncertainty created for businesses by fluctuating exchange rates. The Indian rupee hit a historic closing low of more than 83 against the US dollar two weeks ago. Foreign exchange costs present a significant expense for India in terms of its crude oil imports. The country is the world’s third-largest importer of the commodity and it pays for oil imports in the US currency, which has fluctuated a lot in recent quarters. “There are many benefits to such a development,” says Ratnadeep Roychowdhury, co-head, private equity and sovereign wealth funds, at Indian law firm Nishith Desai Associates. “It protects the bilateral trade from geopolitical risks and currency fluctuations. It strengthens the trading relation and underlines each country’s commitment to the other. Moreover, it helps both countries to de-risk their dependence and exposure to the reserve currencies in use today.” The pact will have a “major impact” as “the removal of hedging costs should make [India’s] export pricing more competitive”, he added India is the UAE’s second-largest and the UAE is India’s third-largest trading partner. Bilateral trade between the two countries increased by 16 per cent to $84.5 billion between April 2022 and March 2023 from $72.9 billion in the previous financial year, according to Indian government data. However, India has a trade deficit with the UAE, which stood at $21.62 billion in the last financial year. While India’s major import from the UAE is oil, its exports to the country include jewellery, refined petroleum products, food, textiles, and machinery. The first crude oil transaction under the local currency settlement (LCS) system took place this month between Abu Dhabi National Oil Company (Adnoc) and the Indian Oil Corporation, according to the Indian embassy in the UAE. The transaction involved the sale of about a million barrels of crude oil, settled with Indian rupees and UAE dirhams, it said. The new payment option “symbolises the deep-rooted trust and strategic partnership between India and the UAE”, says Swati Babel, a cross-border trade finance business specialist.
Money Manager Sees $120 Oil Surprising Bears
Crude oil prices could be on track to hit $100 and even $120 per barrel, which calls for aggressive buying moves into the oil market now, Cole Smead, president and portfolio manager at Smead Capital Management, told BBN Bloomberg on Wednesday. China’s underwhelming economic performance is as bad as it gets and still, oil prices have not fallen apart, Smead told BBN Bloomberg, arguing about his commodity strategy. The weakness in China’s economy is not driving oil prices currently. The crucial factor for oil is the ongoing supply cuts, he added. The supply side calls for faster price moves higher than the market has been probably expecting, according to Smead. “There should be money being thrown around trying to take advantages because if we wait back to a $100 or $120 a barrel, I think people are going to feel ‘Gosh, I really missed that,” he told BBN Bloomberg. So far this year, concerns about China’s economy have stopped any sustained oil price rallies in their tracks. The chances of a ‘soft landing’ in the United States have increased, analysts and the Fed say, but concerns continue about the need of more Fed hikes to fight inflation. The Chinese weakness has made the market take a wait-and-see approach to find if China’s policies to revive its real estate sector and consumer confidence are yielding results. Market participants expect additional stimulus and other measures from China to put its economic growth and industrial production on track to meet the authorities’ 2023 targets. At the same time, the supply cuts from the OPEC+ alliance have started to tighten the market, analysts say. The cuts from OPEC+ and Saudi Arabia, coupled with expected continued strength in demand, are set to result in inventory draws for the rest of the year, supporting oil prices, according to analysts and forecasting agencies.