Reliance moving ahead on renewable energy commitments
Reliance Industries has outlined in its annual report for FY23 the potential that India will be the first country in the world to produce green hydrogen at less than $1 per kg in the next decade. Terming it “The Green Hydrogen Aspirations”, the company that is a now diversified conglomerate with a presence in a host of B2B and B2C businesses says the belief in hydrogen was stated at the International Climate Summit. “The nation has set a goal to achieve 500 GW of renewable energy capacity by 2030. Reliance aims to establish and enable 100 GW of solar energy generation by that date. Intermittent solar energy generation can also produce green hydrogen for local use aligned with the company’s goal of making hydrogen affordable and accessible in India,” the annual report says. According to the company, it has consistently sought to fulfil its energy requirements while minimising the environmental impact. “During FY23, renewable energy consumption across its operations saw an increase of 115% year-on-year. The Dahej and Hazira manufacturing units generated 6.1 million GJ (gigajoule) of renewable energy, accounting for over 90% of the total green energy produced in the fiscal year by the company,” it says. Reliance employed, what is called a co-firing strategy that uses biomass “in conjunction with coal at its Dahej and Hazira manufacturing units, to reduce dependence on non-renewable resources.” The O2C (oil to chemicals) business extensively incorporates Internet of Things (IoT) and Machine Learning (ML) based cutting edge digital solutions. This is for the purpose of conserving energy plus the business’ own efforts to develop synthesis gas from renewable sources through biomass gasification. Specifically, on new energy, Mukesh Ambani, Reliance Industries’ Chairman & Managing Director, in 2021 announced an investment of Rs 750 billion in the business. That was meant to go into the setting up of giga factories to manufacture components for the ecosystem. “It will make it one of the world’s largest such integrated renewable energy manufacturing facilities. Reliance is making significant progress in developing the Dhirubhai Ambani Green Energy Giga Complex, which spans 5,000 acres in Jamnagar,” the annual report mentions. It says the progress is a reflection of the company’s strategy to establish giga factories to realise its vision for the new energy business. “Reliance is on track to create a fully integrated manufacturing ecosystem, complete with secure and self-sufficient supply chains. The company has invested in and formed partnerships with leading companies in the fields of solar power, batteries and electrolysers. These investments and partnerships will provide Reliance access to unique technology know-how and talent, enabling the Company to drive a disruptive transformation in the New Energy sector globally.”
India’s petroleum products consumption grows at 10 per cent
The country’s consumption of petroleum products during FY2022-23 grew 10% compared to the previous fiscal year, reaching a volume of about 223 million tonne, said minister of state for petroleum & natural gas, Rameswar Teli. In a written reply in the Rajya Sabha, Teli said the growth was led by a 13% increase in petrol consumption and a 12% rise in diesel usage.
Indian Gas Exchange Records Increase in Gas Volumes Traded
Indian Gas Exchange (IGX) reported a significant increase in gas volumes traded on its platform in July. The company traded 27,23,350 million British thermal unit (mBtu), equivalent to around 68 million metric standard cubic meters (mmscm). This represents a 28% sequential increase and a 20% year-on-year increase. The surge in volumes can be attributed to the growing interest from buyers in spot buying, driven by a correction in gas prices globally. A total of 65 trades were executed during the month, with the majority being daily and weekly contracts. Monthly and fortnightly contracts also saw significant trading activity. Suvali emerged as the most active delivery point for free market gas, while Gadimoga saw trading of domestic ceiling price gas. Other delivery points included Dahej, Mhaskal, KG Basin, Bhadbhut, and Ankot. The Gas Index of India (GIXI) for July 2023 stood at ₹866/$10.6 per MMBtu, representing a 2% decline from the previous month. Various spot gas benchmark prices recorded were HH at ~$2.5/MMBtu and TTF at ~$10/MMBtu. LNG benchmark indices included WIM at ~$12/MMBtu.
Supply Concerns Keep Oil Prices Elevated
Crude oil prices inched lower on Monday but remained elevated following a six-week winning streak. Supply concerns spiked when Ukrainian forces attacked two Russian oil tankers in the Black Sea over the weekend. “The Ukrainian naval drone attack on a Russian vessel over the weekend does make for some unease in a market already dealing with tightening supply,” energy analyst Vandana Hari told Bloomberg. Despite a slight decline in prices earlier in the day, these remain higher than last week’s, still being boosted by curbs in OPEC+ production, Reuters noted in a report earlier today. “The bullishness is in line with our expectations of a stronger second half for oil compared to the first half,” the report quoted DBS Bank energy analyst Suvro Sarkar as saying. “But we think further upside may be limited and oil prices could consolidate around the $85 a barrel level (Brent) for a while, capped by ongoing concerns about the pace of China’s recovery and doubts about how long Saudi and Russia will continue to curb production and exports, respectively, given the spare capacity on hand,” Sarkar added. Last week, Saudi Arabia provided an additional boost for prices when it announced it would extend its voluntary production cuts of 1 million bpd for another month in September. Days after the announcement, the Kingdom also raised its official selling prices for most buyers. Neither move was a surprise to traders, who have regained some of their bullishness on expectations the U.S. Federal Reserve will sometime soon end its rate hikes. Russia, meanwhile, said it would reduce exports in September by 300,000 bpd, adding to the Saudi curbs. These, by the way, Riyadh said might deepen at some point. An additional prod for prices came from the U.S. shale patch where drilling rigs fell for the eighth week in a row to the lowest since March last year.
Reliance plans crude unit maintenance at Jamnagar complex
Reliance Industries Ltd plans to shut a crude unit and some secondary units at its 704,000 barrels per day (bpd) export focused plant for maintenance in September-October, three sources familiar with the plan said. Reliance is the operator of the world’s biggest refining complex which houses two plants with a combined capacity of about 1.4 million barrels per day. The crude unit and secondary units including hydrotreater will be shut for 3-4 weeks from mid-September, they said, adding the refiner also plans to shut a fluid catalytic cracker at its 660,000 bpd site for 47 days. The shutdown of units would curtail Reliance’s crude imports and may push up gasoline margins, trade sources said.
Russian oil to India in June the cheapest since war in Ukraine
The average cost of Russian crude landing on Indian shores in June was the lowest since Moscow’s invasion of Ukraine more than a year ago. The price for each barrel including freight costs was $68.17, down from $70.17 in May and $100.48 a year earlier, according to the latest figures from India’s Ministry of Commerce and Industry. While that’s higher than a $60 cap imposed by Western nations on Moscow, the threshold doesn’t include shipping. India has become one of the world’s top consumers of cheaper Russian crude since the war, along with China. Data from Kpler shows Indian imports dipping over the past two months, with flows expected to fall further in August as the OPEC+ producer fulfills a pledge to trim exports. The analytics firm sees shipments to the South Asian nation rebounding from October, however.
Gas Prices Inch Higher As TotalEnergies Shuts Down Port Arthur Refinery
French supermajor TotalEnergies was forced to shut down a unit at its 225,000-barrels-per-day refinery at Port Arthur in Texas due to a leaky pump, adding to other refinery outages that have pushed U.S. gasoline prices higher in recent days alongside the rise in crude oil prices. Total’s U.S. unit of the French energy major, said in a statement, carried by Dow Jones, that “A pump located in unit 825 developed a leak that reached the reportable quantity of un-speciated volatile organic compounds.” “The unit is being shut down in order to isolate the pump and stop the leak,” the refinery operator added. The emissions from the incident ended on Thursday night after 11 hours. The refinery, 95 miles east of Houston, is one of TotalEnergies’ six refining and petrochemicals platforms worldwide, and the company’s largest facility in the United States. Last week, the same refinery reported an operational disruption and gas emissions after the cogeneration unit at Port Arthur experienced a unit upset due to a loss nitrogen oxides steam injection. The latest incidents at TotalEnergies’ Port Arthur refinery add to other disruptions and outages at refineries on the U.S. Gulf Coast in recent days. Last week, an unexpected shutdown at the gasoline-making unit of ExxonMobil’s refinery at Baton Rouge, Louisiana, sent U.S. gasoline futures rallying to the highest since October 2022. Repairs at the Exxon refinery could take weeks and last for the rest of the driving season, thus reducing gasoline supply to the market. Gasoline prices are also responding to the recent rise in crude oil prices. This summer, gasoline prices are rising amid heatwave-related outages at some domestic refineries and WTI Crude jumping back to above $80 per barrel.
Saudi Arabia Is Cooking Up A Surprise For The Oil Markets
Recent production cuts by Saudi Arabia are beginning to take a toll on the nation’s economy, according to the IMF’s latest World Economic Outlook. The Kingdom’s 2023 GDP growth projections have been significantly reduced, now expected to reach only 1.9%, down from the previously projected 3.1% in May. The IMF attributed this downgrade to the production cuts announced in April and June as part of the OPEC+ agreement. Despite efforts to diversify the economy with Vision 2030, Saudi Arabia remains heavily reliant on hydrocarbon revenues, with the impact of oil market developments still outweighing the growth potential of non-hydrocarbon sectors. Although the Kingdom has taken strides in economic diversification, all new projects, including the ambitious Giga-Projects, continue to be tied to oil and gas funds. Aramco’s substantial revenue base remains crucial for driving economic activity. While this analysis may not sit well with Saudi officials, the IMF downgrade could potentially be followed by similar reactions in the financial markets. The unilateral production cut presented by Saudi Energy Minister Prince Abdulaziz bin Salman, which was extended during the recent OPEC+ meeting, is now showing negative consequences. The Kingdom’s official stance is that Riyadh is the sole entity capable of controlling and stabilizing markets, particularly oil prices. However, many analysts have expressed skepticism about the true motives behind the Saudi move, as a tighter demand-supply situation is expected in the latter half of 2023. Some argue that price fluctuations and speculation are part of the market’s natural dynamics, and intervention may not be necessary. Evidence supporting the effectiveness of the Saudi cut is debatable. When the cut was initially announced, markets showed minimal reaction, and prices remained weak. The slow economic recovery in China and marginal global demand growth have kept oil prices within the range of $75-85 per barrel. The recent price rally can be attributed to factors unrelated to Saudi Arabia’s actions, such as stock withdrawals and reduced fear of a global recession. Saudi Arabia’s progress in economic diversification projects requires higher foreign direct investments (FDI) and increased government revenues, as well as access to international financial markets. The IMF report has cast some doubt on these aspirations. With the MENA region experiencing lower GDP growth projections and some countries facing financial crises, Saudi Arabia must reevaluate its short-term economic strategies. While non-oil GDP growth is robust, it cannot fully compensate for the current reliance on oil revenues. The low FDI inflow during Q1 2023 raises concerns, especially when compared to the expectations set in Vision 2030. Market analysts and media should closely monitor Riyadh’s actions in the coming weeks, as a significant change may be on the horizon. Although no immediate changes are expected at the upcoming JMCC meeting, a Saudi production hike before October 2023 is highly plausible. Signs of a new demand-supply crunch in oil and petroleum product storage volumes, along with positive indicators in Asia, Europe, and the USA, could lead to a dramatic shift in the Kingdom’s production volume strategies. A surprise move to prevent oil prices from surpassing $90-100 per barrel in Q4 could be in the works. While the media may not be informed, it is likely that Crown Prince Mohammed bin Salman and his brother are preparing a new Saudi surprise after the summer season.
Russia Anticipates $11 Billion Energy Revenue Boost Despite Embargos
Russia is expecting extra oil and gas revenues to reach 1 trillion rubles, or $11 billion, in the last five months of the year despite sanctions, embargos, and price caps, two people with knowledge of the situation told Bloomberg. The Finance Ministry hopes to put the fat revenues toward covering its budget deficit, which has bloomed thanks to the war in Ukraine, the anonymous sources suggest, although fiscal rules dictate that windfall revenues should be used to purchase foreign currency for the National Wellbeing Fund’s reserves. But those rules could change, according to a statement made this week by the Finance Ministry. “The government may consider reducing the use of the National Wellbeing Fund for financing additional federal budget expenditures in the transition period of 2023-2024,” a Thursday statement read. The $11 billion extra is in addition to the baseline level laid out in the country’s budget. So far this year, the ruble has weakened compared to the dollar—which means more rubles in additional revenue for the government. The extra windfall from oil and gas revenues comes even as Russia’s oil and gas revenues fell by 47% to 3.38 trillion rubles ($37.4 billion) in the first half of the year from the same period in 2022. In the first five months of the year, Russia’s budget deficit reached $42 billion, thanks in no small part to what it calls its “special military operation” in Ukraine. The United States still have a positive outlook on the G7 price cap on Russian oil—a price cap that was designed to curtail the country’s oil and gas revenues to give it less to spend on its efforts in Ukraine. “Our approach has struck at the heart of the Kremlin’s most important cash cow. Before the war, oil revenues constituted about a third of the total Russian budget, but in 2023 that number has fallen to just 25%,” a U.S. Treasury official said earlier this week. Despite its outlook for increased windfalls, for September, Russia said it had plans to cut exports by 300,000 bpd—an announcement that helped to send oil prices higher.
Oil Ministry and its PSUs lack seriousness in setting up CBG projects: Parliament panel
The parliamentary standing committee on petroleum and natural gas has come down heavily on the Oil Ministry and its PSUs for showing “lack of seriousness” in setting up compressed biogas (CBG) projects in the country. In a strong response, the committee said the Ministry of Petroleum and Natural Gas (MoPNG) failed to prevail upon its PSUs to set up CBG projects, which is important for demonstrating the viability of such projects and instilling confidence in investors, despite the same being recommended. “The committee are not happy with this lack of seriousness being exhibited by the Ministry and Oil and Gas PSUs. Besides, the committee are concerned to note that the Ministry have not shown any interest to issue orders to Oil and Gas PSUs for investing in creating and maintaining infrastructure for promotion of CBG projects which create a doubt that the Ministry itself is sceptical about the viability and success of the CBG projects,” it said. The panel emphasised that unless Oil and Gas PSUs “shed their reluctance” and come forward in investing in a few CBG projects, it will be difficult to persuade private entrepreneurs and investors to come forward and invest in the CBG sector. The report is on the action taken by the government on recommendations made in the 17th Report (17th Lok Sabha) of the standing committee on petroleum and natural gas on review of implementation of CBG (SATAT), which was placed in Parliament on December 21, 2022. The government’s Action Taken Replies were received on April 20, 2023, and the panel considered and adopted the report on July 27, 2023, which was then placed in Parliament on August 1. Lack of interest The committee in its original report had suggested that Oil PSUs should “aggressively” enter into CBG sector through company owned company operated (COCO) model or joint ventures with other OMCs/ entrepreneurs. In its response, the MoPNG said “oil and gas marketing companies (OGMCs) have been investing in creating and maintaining infrastructure for promotion of CBG projects which include development of Retail Outlet, laying of pipeline, purchase of equipment, etc. Further, they are also investing in establishment of CBG plants.” However, the panel was not happy with the response of the Ministry and countered that the Ministry is trying to “mislead” it. “The committee are not satisfied with the reply of the Ministry as it does not mention any new measure taken by Oil PSUs in this regard and has rather resorted to mislead the committee by furnishing the details of the CBG projects that are already being undertaken by IOCL, HPCL and GAIL,” it added.