‘Refining capacity to grow at slower pace’
Indian refining capacity would expand at a far slower pace than was estimated earlier, according to latest government projection. Refiners would add 56 mtpa by 2028 to increase domestic capacity to 310 mtpa. “As per the data compiled by Centre for High Technology (CHT), a technical wing of ministry of petroleum and natural gas, the refining capacity of Indian refineries is projected to increase by about 56 mtpa by the year 2028,” junior oil minister Rameswar Teli told Lok Sabha on Thursday. Domestic refining capacity currently stands at 254 mtpa. Five years earlier, an oil ministry panel had prepared a detailed report on refining capacity and had projected the capacity to rise to 259 mt by 2020, 415 mt by 2025, and 439 mtpa by 2030. These projections were based on “firm plans and the projects already conceptualised and accepted in principle”, the committee had then said.
Russian ESPO Oil Price Surges On Strong Chinese Demand
Strong demand in China has sent the price of Russia’s ESPO crude blend surging to the highest in eight months as ESPO discounts to Brent are at their narrowest since the EU embargo on Russian oil imports came into effect in December, multiple trade sources have told Reuters. The EPSO crude going to China in September is trading at discounts of just $2-$2.50 per barrel to ICE Brent on delivered-ex-ship (DES) basis, according to the sources. This compares with discounts of around $4 per barrel for August. “August prices were already very expensive, but we were shocked to see that offers for September cargoes started at $2 discount,” one trade source told Reuters. Strong demand for cheaper Russian crude from China’s independent refiners, competition from Indian refiners, and the OPEC+ supply cuts, including from Russia, have all combined in recent weeks to lift the price of the ESPO crude. Early this month, the price of Russian ESPO crude jumped to the highest in seven months as Chinese buyers rushed to buy it ahead of a 500,000-bpd cut in exports Russia has pledged for August. ESPO has been trading consistently above the G7 price cap of $60 per barrel because it is the preferred Russian blend of Chinese refiners. The ESPO blend is lighter and sweeter than the flagship Russian blend Urals, which has normally traded at a more significant discount to Brent crude. Despite the recent jump in ESPO prices, the Russian crude grade remains the cheaper option for Chinese refiners because similar grades from West Africa and Brazil are trading at premiums over Brent for deliveries in September and October. If the OPEC+ group further reduces supply, the ESPO price could jump again and narrow the discount to around $1 per barrel, an oil trader told Reuters. Tanker-tracking data suggests that Russia’s crude oil exports by sea continue to slump and are now well below the February levels and nearly 1.5 million barrels per day (bpd) lower than the recent peak at the end of April.
BPCL still in talks for Russian oil deal, discounts narrow
Indian refiner Bharat Petroleum Corp (BPCL.NS) is still in talks with Russian oil major Rosneft (ROSN.MM) to buy oil under a term deal, its head of finance said, adding that discounts on Russian oil are narrowing. “Yes, there were discussions happening with Rosneft but not yet concluded,” Vetsa Ramakrishna Gupta told an analysts’ conference after the company’s June quarter earnings report. Reuters last month reported that BPCL is in talks to buy up to 6 million metric tons of Russian oil under a term deal with Rosneft. Indian refiners have been snapping up discounted Russian oil since many other countries imposed sanctions on Moscow after its invasion of Ukraine. The discounts make Russian oil cheaper than similar grades from the Middle East. But Gupta said discounts on Russian oil are shrinking compared to previous quarters. Narrowing discounts amid tightening supply made Russian Urals oil prices for August loading jump above the $60 per barrel price cap, sources told Reuters last month.
As sanctions bite, these ‘obscure’ new players are shipping half of Russia’s oil to India & China
With Russia facing crippling sanctions from the West, dozens of new middlemen, including companies without prior records, have been handling the trading of Russian oil to countries like India and China At least 40 such middlemen handled Russian oil trading between March and June, according to a Reuters tally. The new players have shipped at least half of Russia’s overall crude and refined products exports of 6-8 million barrels per day (bpd) on average this year, turning the little-known companies collectively into some of the world’s largest oil traders. The reporting shows that in May, Russia, one of the world’s top three oil producers, supplied record volumes to China and India, which have not imposed sanctions on Moscow and became its leading buyers since the war in Ukraine. India has been one of the top buyers of discounted Russian oil over the last few months with domestic refiners lapping up crude from the European country at attractive prices.
GAIL scouts for LNG sources, plans to grow long-term volumes by 50
GAIL is planning to tie up 7-8 million tonnes per annum of long-term liquefied natural gas (LNG) from diverse sources as it bets big on domestic gas demand and aims to play a leading role in India’s transformation into a gas-based economy, its chairman has said. “GAIL is committed to ensuring that the domestic demand is well supplied and protected from price shocks. To do the same, GAIL is looking to grow its long-term volumes by at least 50% or 7-8 million metric tonnes per annum in a staggered manner till 2030,” GAIL chairman and managing director Sandeep Kumar Guptatold ET in an interview. The company is in talks with suppliers in several countries including the US, Qatar, the UAE, and other countries east of India, he added. Gupta, the former finance chief of Indian Oil Corp, took over as the chairman and managing director of GAIL last October in the middle of a global energy crisis that had cut off afifth of its LNG supplies after a former German unit of Russia’s Gazprom stopped supplying.
Oil Prices Tick Higher On Optimistic Economic Forecasts
Oil prices saw another rise on Tuesday morning on optimistic forecasts published by the International Monetary Fund (IMF). On Tuesday, the IMF raised its 2023 global growth estimates based on promising economic activity in Q1. For 2023, the IMF is now estimating a 3% GDP growth—up 0.2 percentage points from its forecast published in April. Its 2024 remains unchanged at 3.0%. Oil prices rose on the news, with WTI surpassing the $79 mark. WTI was trading at $79.05 as of 10:52 am ET, up $0.31 (0.39%) on the day. Brent crude rose above $83, up $0.29 (+0.35%) on the day. Oil prices will now be subjected to estimates from the American Petroleum Institute (API) later this afternoon on U.S. crude oil and crude products inventory moves. While higher than previous estimates, the IMF’s forecast is still reflective of economic weakness and below the average 3.8% GDP growth seen across the previous decade. “What we are seeing when we look five years out is actually close to 3.0%, maybe a little bit above 3.0%. This is a significant slowdown compared to what we had pre-COVID,” IMF chief economist Pierre-Olivier Gourinchas told Reuters in a Tuesday interview. The IMF stated in its forecast that while shipping costs and delivery times have returned to pre-pandemic levels now that the WHO has ended the global health emergency, inflation continues to eat away at household buying power. In addition, high interest rates have raised the cost of borrowing, while savings built during the pandemic are receding. The IMF included a warning in its outlook that inflation could rise further should the war in Ukraine worsen, or if extreme temperatures raise commodity prices further. Crude oil prices are now the highest they’ve been since mid-April.
TotalEnergies Boosts Its Renewables Business With $1.66 Billion Deal
TotalEnergies is buying out all remaining shares in renewable energy developer Total Eren for $1.66 billion, thus raising its stake in the firm to 100% from 30%, the French supermajor said on Tuesday. The acquisition of the 70.8% stake in Total Eren that Total Energies did not already own is part of the energy giant’s strategy to pursue profitable growth in the renewable energy sector. The deal follows a strategic agreement signed between Total Energies and Total Eren in 2017, which granted Total Energies the right to acquire all of Total Eren after a five-year period. Currently, Total Eren has 3.5 gigawatts (GW) of renewable capacity in operation worldwide and a solar, wind, hydroelectric, and storage projects pipeline of more than 10 GW in 30 countries, including 1.2 GW in construction or late-stage development. “With the acquisition and integration of Total Eren we are now opening a new chapter of our development as the expertise of its team and its complementary geographical footprint will strengthen our renewable activities and our ability to build a profitable integrated power player,” TotalEnergies chairman and CEO Patrick Pouyanné said in a statement. TotalEnergies has recently signed several deals to expand its renewables business in several countries, including in Turkey, Algeria, and Germany. In Turkey, TotalEnergies signed on Monday an agreement with Rönesans Holding to buy a 50% stake in Rönesans Enerji and jointly develop, through this joint venture, renewable projects in Turkey, which is a liberalized growing electricity market. Earlier this summer, the French supermajor extended its partnership with Algerian state firm Sonatrach to cooperate in the development of renewable energy projects in Algeria and signed a collaboration agreement with Petronas’s company Gentari Renewables to develop renewable energy projects in the Asia Pacific region. Earlier this month, TotalEnergies was awarded two offshore licenses in the German North Sea and German Baltic Sea for offshore wind development, with capacity potential of 2 GW and 1 GW, respectively. Germany held a landmark offshore wind tender, in which energy supermajors BP and TotalEnergies won all of the 7 GW capacity on offer. BP secured leases at two North Sea sites off the coast of Helgoland with total generating potential of about 4 GW, while TotalEnergies secured the other two sites.
India may feel oil pinch as Russia looks to lower crude discount to $20/bbl
The finance ministry of Russia is planning to cut the discount to $20 per barrel from $25 that it presently uses to decide taxes on the country’s crude oil exports, Reuters reported citing the Finance Minister Anton Siluanov on Tuesday. The Kremlin had to change the way it taxes oil sales due to several factors including western sanctions over Russia’s invasion of Ukraine. The $60 a barrel price cap on Russian crude exports and the European Union’s import ban are also to be duly noted. In February, a law was signed by the Russian President Vladimir Putin, fixing the discount on Russia’s dominant Urals blend of crude oil for tax calculations. “Now the discount is $25 per barrel to Brent crude, we plan to reduce it to $20 per barrel. We are considering further measures to improve the calculation of taxes on oil exports,” Siluanov told the news site Argumenty i Fakty in an interview published on Tuesday, Reuters reported. While the Russian Finance Minister did not elaborate what measures are being considered, he added that in oil and gas revenues this year, the ministry will collect 8 trillion roubles ($88.5 billion), at the current price of about $80 a barrel. Russia’s crucial oil and gas revenues were 47% lower year-on-year in the first six months, which the finance ministry put down to lower Urals crude prices and reduced natural gas exports. Siluanov also said that by the end of the year, the budget deficit will be around 2%-2.5% of the gross domestic product. “We have enough of resources to meet the planned expenses, and additional ones that arise,” Siluanov said. Combined with Western sanctions and the closure of many financial markets to Russia, significant outlays to support Moscow’s military campaign in Ukraine have been depleting government coffers. On July 21, Reuters reported that Russia may consider introducing quotas on the export of oil products, in an attempt to stabilise gasoline prices globally. Gasoline wholesale prices are currently at an all-time high amid risk-on sentiment in broader markets and signs that Russia is making good on its pledge to curb supplies. Average gasoline prices at Saint-Petersburg International Mercantile Exchange (SPIMEX) rose earlier last week by 1.8% to 62,653 roubles ($694.5) per tonne, reaching a new all-time high. As Russian oil is becoming more expensive, buyers such as India are now considering boosting purchases from traditional sources in the Middle East instead. Adding to supply shortages, Moscow aims to reduce its third-quarter crude export plans by 2.1 million tons, in line with its previously stated pledge to cut overseas shipments by 500,000 barrels a day. Earlier pledges by Russia and Saudi Arabia to cut back production helped spark the rally in crude that started in late June.
The EU Has No Plans To Revise Its Russian Oil Price Cap
The European Union has no plans to revise the $60 price cap imposed on Russian oil exports even though Russian crude is selling above the cap. “There is no movement currently in the Council [of the European Union] with the oil price cap,” an unnamed diplomat from the Baltics told Energy Intelligence. The news outlet noted that officially, the price cap is subject to review once every two months, in order to ensure it is 5% below the market price for Urals. Russia’s flagship Urals crude blend traditionally sells at a discount to Brent, with that discount widening after the imposition of a price cap on all Russian oil exports as part of a sanction push following the invasion of Ukraine. In the past few weeks, however, the discount between Urals and Brent has been narrowing, until this month, when it topped $60. At the time of writing, Urals was trading above $63 per barrel. The Wall Street Journal noted in a report that this price rebound for Urals was evidence that Russia had adjusted to the sanction regime. It would also mean Russia’s oil export revenues would move higher, preventing which was one of the main goals of the price cap. The other goal was to keep global markets well supplied with oil. From its inception, the idea of the price cap, conceived by the G7 last year, had its critics. These argued the goals of the cap are mutually exclusive, while advocates said it is possible to both keep Russia’s revenues lower and exports high. In the end, the outcome has been kind of mixed, with Russia indeed seeing lower export revenues as the price of Urals remained depressed for months. Yet both Russian oil sellers and their clients have been using alternatives to Western shippers and insurers, essentially finding a way around the price cap, which only applies for buyers intending to use Western tankers and insurance coverage. In the past few weeks, however, the discount between Urals and Brent has been narrowing, until this month, when it topped $60. At the time of writing, Urals was trading above $63 per barrel. The Wall Street Journal noted in a report that this price rebound for Urals was evidence that Russia had adjusted to the sanction regime. It would also mean Russia’s oil export revenues would move higher, preventing which was one of the main goals of the price cap. The other goal was to keep global markets well supplied with oil. From its inception, the idea of the price cap, conceived by the G7 last year, had its critics. These argued the goals of the cap are mutually exclusive, while advocates said it is possible to both keep Russia’s revenues lower and exports high. In the end, the outcome has been kind of mixed, with Russia indeed seeing lower export revenues as the price of Urals remained depressed for months. Yet both Russian oil sellers and their clients have been using alternatives to Western shippers and insurers, essentially finding a way around the price cap, which only applies for buyers intending to use Western tankers and insurance coverage.
Subsidy On Petroleum
Government is committed to ensure access to affordable and clean energy to all. It has been endeavour of the Government to encourage usage of cleaner fuels like Compressed Natural Gas (CNG)/Piped Natural Gas (PNG), Liquefied Petroleum Gas (LPG), Compressed Bio Gas (CBG), BS IV Grade Petrol and Diesel, Ethanol Blended Petrol, Sustainable Aviation Fuel etc. in the country. Government of India is determined to promote usage of natural gas, as a fuel across the country, and to increase its share in primary energy mix from around 6.7 % to 15 % by 2030. As a major step towards its objective to provide cleaner fuels to households, Government launched Pradhan Mantri Ujjwala Yojana in May 2016, under which adult women from poor households are provided a deposit free LPG connection. Till December 2022, 960 million PMUY connections have been provided to poor households in the country. The coverage of LPG in country has gone up from 62 % in 2016 to almost 100% as on today. Number of active domestic LPG consumers have increased from 145.2 million on 01.04.2014 to 315 million as on 01.07.2023. Traditionally, rural population in India had been mainly using fuels such as firewood, coal, cow-dung, kerosene etc. for domestic cooking. It was primarily, due to issues relating to affordability, accessibility, and awareness. These traditional cooking fuels however cause significant harm to health and environment. To increase LPG usage amongst PMUY households, Government has started a targeted subsidy of Rs 200 per 14.2 Kg domestic LPG refill for upto 12 refills per year for 2022-23 and 2023-24 for PMUY beneficiaries. As a result of steps of the Government and Oil Marketing Companies to encourage LPG usage amongst consumers, per capita consumption of LPG by PMUY households has gone up from 3.01 refills in 2019-20 to 3.71 refills in 2022-23. The funds allocated for Direct Benefit Transfer for LPG (DBTL) Scheme (Budget Estimates) for 2023-24 are same as funds for 2022-23 (Revised Estimates) at Rs. 1800 million. Government reviews its budgetary requirements during the course of year based on emerging situations and expenditure position. For instance, the funds allocated for PMUY for the year 2022-23 at Budget Estimates stage were Rs. 8 billion which were revised to Rs. 8.010 billion at Revised Estimates stage. Further, to insulate domestic LPG consumers from fluctuations in international prices, Government continues to modulate the effective price to consumer for domestic LPG. During Covid Pandemic, Government had also provided about 141.7 million free LPG refills to PMUY households under Pradhan Mantri Gareeb Kalyan Package during 2020. To increase awareness of benefits of the usage of LPG, Government and OMCs have been organising massive awareness programmes through print, electronic and social media. LPG consumers including PMUY beneficiaries can book a refill by various methods including Interactive Voice Response System(IVRS), Short Message Service(SMS), Whatsapp, calling directly on the phone of distributor, e-commerce platforms, OMC mobile applications, OMCs web-portals etc. Further, OMCs continuously expand the distribution network by commissioning new LPG distributorships.