BPCL to invest Rs 52, 731 crore in expanding capacities
State-owned Bharat Petroleum Corporation Ltd’s (BPCL) board has approved the ethylene cracker project at Bina Refinery including downstream petrochemical plants and expansion of the refinery with capital expenditure of approximately Rs 49,000 crore, the company said. The core component of the expansion projects is the Ethylene Cracker Project, which will drive the production of essential petrochemicals. The project encompasses the establishment of an Ethylene Cracker (EC) Complex, downstream Petrochemical Plants, as well as the expansion of the existing Refinery capacity from 7.8 MMTPA to 11 MMTPA and associated facilities at Bina Refinery. G Krishnakumar, C&MD, BPCL, said, “BPCL has leapfrogged into the world of Petrochemicals as we embark upon the ?49000 Ethylene Cracker project in our Bina Refinery, in step with the expansion of Refining capacity to 11 MMTPA. Combined with our investment in Wind Energy and new age Petroleum Oil Lubricants installations built for sustainable processes, this is a watershed moment in our strategic endeavor to be at the forefront in meeting the rapidly growing demand for energy and Petrochemical products in India.” The board has also approved the setting up of two 50 MW wind power plants for captive consumption, one at Bina refinery in Madhya Pradesh and another at Mumbai refinery in Maharashtra, the company said in an exchange release. The total project cost for two 50 MW wind power plants is approximately Rs 978 crore (Rs 489 crore for each project), it said. Additionally, BPCL is making significant investments in Petroleum Oil Lubricants (POL) and Lube Oil Base Stock (LOBS) installations with receipt pipelines at Rasayani in Maharashtra. This project, with an estimated cost of approximately Rs. 2,753 Crore, aims to augment storage capacity, smoothen the supply-chain and streamline the distribution of essential petroleum products. The company added that these expansion projects align with its vision to diversify and expand in adjacent and alternative businesses to create additional revenue streams and cleaner environment by building the renewable energy portfolio to achieve Net Zero targets in Scope 1 and Scope 2 emissions. “The expansion project at Bina Refinery and the other initiatives demonstrate BPCL’s dedication to meet the evolving energy needs of the nation and ensure energy security and sustainability. These investments will not only strengthen the company’s position in the petrochemical industry but also contribute to the economic growth and development of the regions where the projects are based,” BPCL said.
India Looks To Lock In Long-Term LNG Deals
Major Indian natural gas importers are discussing long-term supply deals with the biggest LNG exporting countries to lock in future supply and avoid volatility and uncertainty in case of spot price spikes, traders and executives tell Bloomberg. India plans to significantly increase its natural gas consumption as it looks to boost its share in the energy mix. But the country and its LNG importers are particularly sensitive to surging spot LNG prices and often retreat from the spot market when prices jump. Such was the case last year when high spot LNG prices priced out many Asian buyers as Europe bid up for supply and became the primary destination of spot LNG cargoes. For most of 2022, India – alongside other countries in South Asia such as Bangladesh and Thailand – withdrew from the spot market due to the record high prices. In India, LNG imports fell by 15.2% in 2022, but the total import costs soared by 44.5% due to high LNG prices, the Institute for Energy Economics & Financial Analysis said in a report in February. This year, the slump in spot LNG prices has encouraged price-sensitive buyers India, Pakistan, and Bangladesh to return to the market looking for cargoes. But it looks like Indian buyers are not willing to take chances on the spot market for years to come. According to Bloomberg’s sources, Petronet LNG, GAIL India, and Indian Oil Corporation are holding discussions with LNG exporters from the United States, Qatar, and the United Arab Emirates (UAE) for supply deals of 20 years. GAIL India, the biggest natural gas company in the country, is even reportedly looking to buy an interest in an LNG export project in the United States. Petronet LNG is in talks with Qatar to secure additional long-term volumes and is also in discussions with several other LNG suppliers, executives at the company told Bloomberg. Petronet LNG’s chief executive Akshay Kumar Singh, told Bloomberg earlier this month, “The lesson learned by the consumers is that they can’t run the business based on spot.”
Rosneft sends JV feelers to PSU refiners for India unit
Russia’s Rosneft has expressed interest in building a greenfield refinery in India in a joint venture with domestic state-owned refiners, according to people familiar with the matter. India’s public sector refiners are separately seeking foreign partners in their pursuit of a scaled-down alternative to the proposed $44-billion west coast refinery that hasn’t taken off for years, they said. The Russian firm is understood to have held preliminary discussions with Indian government officials and executives at state-run refiners regarding a new project in India, the people said. This will be separate from the Gujarat refinery that Rosneft-backed Nayara Energy operates. IOC, BPCL likely candidates for tie-up “Cooperation with Indian companies is being developed in the integral format throughout the whole technological chain, from production to refining and sales of petroleum products,” Rosneft told ET in an email. “Rosneft aims to further expand cooperation with Indian partners. Information on specific plans you will learn later in the relevant company announcements.” The oil ministry didn’t respond to ET’s queries, and neither did the state-owned Indian Oil Corp, Hindustan Petroleum Corp Ltd (HPCL) and Bharat Petroleum Corp Ltd (BPCL). It’s unclear which Indian refiner will end up partnering Rosneft but Indian Oil and BPCL could be the likely candidates. HPCL is overleveraged due to a greenfield refinery it’s building in Rajasthan. Indian Oil is the most upbeat among state firms on adding capacity and already has a crude purchase agreement with Rosneft, while BPCL has a land parcel ready for a refinery in Uttar Pradesh. State refiners have increasingly realised that they need an alternative to the west coast project in which Saudi Aramco had agreed in 2018 to take a 50% stake, people familiar with the matter said. The project is being jointly developed by Indian Oil, BPCL and HPCL. Unavailability of land and Maharashtra political strife may keep the leadership distracted, worsening the project’s prospects, said people familiar with the matter. Overseas partners The government and the state refiners are of the view that India needs to add greenfield capacity to meet future fuel demand, and can’t wait endlessly for the west coast refinery to take off, the person said. Therefore, each state refiner is now planning to move away from the joint venture and evaluate greenfield capacity separately, in partnership with foreign players, he said. More overseas entities are likely to be approached for partnership talks. State refiners plan to keep the majority in any joint venture with foreign firms, as that would help them control crude sourcing strategy as well as product pricing in domestic market, a person familiar with companies’ plans said.
India set for LNG deal-making rush in win for Modi’s gas push
India’s liquefied natural gas buyers are seeking decades-long supply deals to protect them from price surges, a move that will support the government’s plan to boost the fuel’s use. Importers are accelerating efforts to lock in fuel, according to traders and executives. Buyers including Petronet LNG Ltd., GAIL India Ltd. and Indian Oil Corp. are in talks with suppliers in the US, Qatar and the UAE for deals that last for 20 years. The trend is a reversal for the nation, which hasn’t signed a long-term deal since 2021, according to contract data from BloombergNEF. That should help reduce their exposure to the volatile spot market — where prices surged to a record last year and made the fuel too costly for many buyers. It also increases the prospect of imports rebounding in a boost for Prime Minister Narendra Modi’s strategy to more than double the share of gas in the country’s energy mix by the end of the decade to help reduce pollution. “The lesson learned by the consumers is that they can’t run the business based on spot,” Akshay Kumar Singh, chief executive officer of Petronet LNG, said earlier this month. “Going forward, we will be finding a lot of long-term contracts signed by different stakeholders.” India’s consumers — from power plants to petrochemical facilities — are highly price-sensitive as gas competes head-to-head with cheaper and dirtier alternatives, but had become too dependent on the spot market, which was far more expensive than long-term contracts last year. The nation’s LNG imports plummeted by nearly 20% after Russia’s invasion of Ukraine upended the market. While LNG rates have since dropped and India is again purchasing spot shipments, that may not last. Prices are slated to increase in the second half of 2023, impeding demand growth, according to Ayush Agarwal, LNG analyst at S&P Global Commodity Insights. Petronet is in the middle of negotiations with Qatar to extend an existing deal at a lower price and secure additional volumes, according to executives at the firm, who asked not to be named as the talks are ongoing. The company is in talks with several other suppliers, they said. GAIL is looking to purchase a stake in a US LNG export terminal, coupled with a 1 million ton per year deal. About nine suppliers have expressed interest, a senior company official said. GAIL is also in talks with several other suppliers outside of the US, another official said. Spokespersons for Petronet, GAIL and IOC didn’t immediately reply to messages seeking comment on contract negotiations. Even though there is little supply available before 2027 due to a lack of new projects, long-term contracts are still a way to avoid pitfalls in the spot market, Petronet’s Singh said earlier this month. “Business can’t be managed with spot,” Singh said. This year’s import level “all depends on how the prices are hovering in international market. We are keeping fingers crossed.”
OPEC Cut Failed To Lift Oil Prices, But The Year Isn’t Over Yet
Crude oil prices have been on a losing streak for four consecutive weeks now, erasing all the gains they booked after OPEC’s latest supply cut announcement as economic fears take precedence over demand expectations. When the cartel announced the cuts, almost every bank with a commodities department rushed to update their price forecasts, expecting prices to jump even higher than before. Morgan Stanley was a rare exception: it revised its price forecast for oil downwards. “OPEC probably needs to do this to stand still,” Martijn Rats, chief commodity strategist at the investment bank, said at the time, adding that the OPECc+ decision “reveals something, it gives a signal of where we are in the oil market. And look, let’s be honest about this, when demand is roaring…then OPEC doesn’t need to cut.” He seems to have been right, for the most part. Only it’s not demand itself that was the problem. It has been the popular expectation of worsening demand that has been driving the price decline. Indeed, the daily media updates on oil prices have, in the past four weeks, repeated the same refrain over and over again: weak U.S. and Chinese economic data, fears of more interest rate hikes in the U.S., fears of a recession, which is already a fact in certain industries, notably freight transport. Clearly, these expectations have had a sound basis. The thing about oil demand, however, is that the U.S., or the rest of the developed world, is not where additional oil demand will be coming from in the rest of the year and future years. It’s the developing world that will see growth in oil demand with the potential to drive prices higher. Dutch ING said in a recent oil market update that while oil prices remain depressed for now, things could very well change in the second part of the year, with a deficit looming on the horizon. The basis for this forecast is a combination of lower OPEC+ output, higher demand outside the OECD, and a smaller-than-expected growth in U.S. output, according to ING. What’s more, there is always the possibility that OPEC+ will cut output again, adding to oil’s upside potential. The Dutch financial services major is not the only one expecting higher prices later this year. Citi’s commodities head Ed Morse recently told CNBC that oil prices may have bottomed out, and we’re entering peak demand season in the much more populated northern hemisphere. “OPEC+ output cuts and a rebound in China’s demand will likely offset slower demand elsewhere … Therefore, we expect prices to bottom out soon,” the Commonwealth Bank of Australia said in a note from early May. Goldman is another bank that’s optimistic about the immediate future of oil prices. In a note from early March—weeks before the surprise OPEC+ cut announcement, the bank said Brent could reach $100 by the end of the year if OPEC keeps its 2-million-barrel output cut agreement in place. Again, that was before the OPEC+ additional cut announcement that temporarily boosted prices. And it might well boost them once again as the year progresses. All it would take would be a more optimistic economic update from either China or the United States. Of course, all these are only projections based on historical data and some common sense. The thing about markets, however, is that they do not always obey common sense but tend to get swayed on a dime. The past four weeks are evidence of that, with oil traders largely ignoring any fundamentals to focus on what banks call the macro picture. They have ignored data about Chinese refinery throughputs and oil imports to focus on the latest PMI, which has shown a contraction in the country’s growth pace. They have ignored data about U.S. production trends to focus on the April CPI reading, which showed inflation remains a substantial problem. All this is perfectly understandable: the so-called macro picture has a huge bearing on oil demand, which tends to decline in times of high inflation and rising interest rates. The thing that gets forgotten, however, while watching that macro picture is that oil, for all its bad rap, is what economists call an inelastic commodity. This means that whatever the price for the commodity, there will always be strong demand for it. And this, in turn, means that it might be time for traders to focus a bit more on the supply outlook. Because when supply tightens, prices will rise—demand will be going nowhere, even in inflation-stricken U.S. What’s more, as ING noted in its oil market update, OPEC+ is aware of the power it can wield in output control. There is nothing to prevent it from doing it again should prices fall too low for its liking. After all, how much market share can it lose?
BPCL Signs Exclusive bunkering Rights with Cordeilla Cruises for the West Coast
BPCL Signs Exclusive bunkering Rights with Cordeilla Cruises for the West Coast Mumbai, May 15, 2023: BPCL is pleased to announce its exclusive bunkering partnership with Waterways Leisure Tourism Pvt Ltd, the renowned operator of Cordeilla Cruises, one of the most luxurious fleets of cruise liners in India. As per the Memorandum of Understanding signed between the two companies, BPCL will be the sole provider of Very Low Sulfur Fuel Oil (VLSFO) as a bunkering fuel for the Cordeilla Cruises brand along the west coast of India.
GAIL to build Maharashtra ethane cracker at Rs 400 bn
GAIL (India), the leading gas supplier in the country, plans to construct an ethane cracker worth Rs 400 billion near its liquefied natural gas (LNG) import plant in Maharashtra, according to two insiders with direct knowledge of the matter. The move aims to meet the anticipated surge in demand as Indian companies boost their petrochemical production capacity due to the expanding economy, requiring more goods ranging from plastics to paints and adhesives. A cracker produces ethylene, which is necessary for producing products such as plastics. By 2040, the demand for petrochemicals is predicted to triple, necessitating significant investments to establish new facilities throughout the country, according to estimates by top refiner Indian Oil. GAIL is looking for land in the coastal region of Dabhol in Maharashtra for the 1.5 million tonne per year cracker project and intends to import ethane from the US for the scheme. The company is also exploring the possibility of acquiring land in Madhya Pradesh, which borders Maharashtra, if a deal in Dabhol fails to materialise. The proposed dual-feed cracker will also have the ability to crack up to 40% liquefied petroleum gas (LPG), allowing the option to switch to a less expensive feedstock to maximise margins. India’s per capita petrochemical consumption is around one-third of the global average, with Asia’s third-largest economy consuming 25 million to 30 million tonne of petrochemicals annually. Also read: Tata Power’s TP Saurya signs solar project in Rajasthan Rajasthan seeks bids for KUSUM Program-Eligible 452 MW solar projects
India cuts windfall tax on petroleum crude to zero
India cut windfall tax on petroleum crude to zero from Rs 4,100 per tonne with effect from May 16, according to a government notification. The windfall tax on petrol, diesel and aviation turbine fuel (ATF) was left unchanged at zero. In early May, the govt had slashed windfall tax on domestically produced crude oil to ₹4,100 per tonne from ₹6,400 per tonne. In the revision before that, the government had reimposed the windfall profit tax on domestically produced oil from zero to ₹6,400 per tonne and scrapped export duty on diesel. The tax rates are reviewed every fortnight based on the average oil prices in the previous two weeks. Starting July 1, 2022, India imposed the windfall profit tax, joining a growing number of nations that tax super normal profits of energy companies. While duties were slapped on the export of petrol, diesel and jet fuel (ATF), a Special Additional Excise Duty (SAED) was levied on locally produced crude oil. New Delhi had then introduced export duties of Rs 6 per litre on petrol and ATF and Rs 13 a litre on diesel. Windfall profit tax is calculated by taking away any price that producers are getting above a threshold. The levy was expected to compensate for the reduction in the excise duty on petrol and diesel to provide relief to consumers. But the reduction in the windfall cess from the initial levels is expected to reduce the realisation for the government. Private refiners Reliance Industries Ltd and Rosneft-based Nayara Energy are the primary exporters of fuels like diesel and ATF. The windfall levy on domestic crude aims producers such as state-run Oil and Natural Gas Corporation (ONGC) and Vedanta Ltd.
G7 leaders to target Russian energy, trade in new sanctions steps: Sources
Leaders of the Group of Seven (G7) nations plan to tighten sanctions on Russia at their summit in Japan this week, with steps aimed at energy and exports aiding Moscow’s war effort, said officials with direct knowledge of the discussions. New measures announced by the leaders during the May 19-21 meetings will target sanctions evasion involving third countries, and seek to undermine Russia’s future energy production and curb trade that supports Russia’s military, the people said. Separately, U.S. officials also expect G7 members will agree to adjust their approach to sanctions so that, at least for certain categories of goods, all exports are automatically banned unless they are on a list of approved items. The Biden administration has previously pushed G7 allies to reverse the group’s sanctions approach, which today allows all goods to be sold to Russia unless they are explicitly blacklisted. That change could make it harder for Moscow to find gaps in the sanctions regime. While the allies have not agreed to apply the more-restrictive approach broadly, U.S. officials expect that in the most sensitive areas for Russia’s military G7 members will adopt a presumption that exports are banned unless they are on a designated list. The exact areas where these new rules would apply are still being discussed. “You should expect to see, in a handful of spaces, particularly relating to Russia’s defense industrial base, that change in presumption happen,” said a U.S. official who declined to be named. The precise language of the G7 leaders’ joint declarations is still subject to negotiation and adjustment before it is released during the summit. The G7 comprises the United States, Japan, Canada, France, Germany, Italy and the United Kingdom. The G7 leaders’ action on Russia comes as Ukraine’s Western allies hunt for new ways to tighten already restrictive sanctions on Russia, from export controls to visa restrictions and an oil price cap, which have put pressure on Russian President Vladimir Putin but not halted the full-scale invasion that started over a year ago. Some U.S. allies have resisted the idea of banning trade broadly and then issuing category-by-category exemptions. The European Union, for instance, has its own approach and is also currently negotiating its 11th package of sanctions since Russia invaded Ukraine, with the bulk focused on people and countries circumventing existing trade restrictions. “The sometimes-discussed approach of ‘we ban everything first and allow exceptions’ will not work in our view,” said one top German government official. “We want to be very, very precise and we want to avoid unintended side effects.” Meanwhile, any change in language, including language specifying that certain trade is banned unless specifically exempted, by the G7 leaders may not necessarily lead to more bans immediately or indeed any change in Russia’s posture. “At least on day one, that change in presumption doesn’t change the substance of what’s allowed, but it matters for the long-term trajectory of where we’re going and the restrictiveness of the overall regime,” the U.S. official said. Ukraine, backed by Western arms and cash, is expected to launch major counter-offensive operations in the coming weeks to try to recapture tracts of its east and south from Russian forces. Ukrainian President Volodymyr Zelenskiy has been in Europe this week for meetings with Pope Francis as well as with leaders from France, Italy and Germany. He is expected to address G7 leaders, either virtually or in-person, during their summit in Hiroshima, the officials said. Former Russian President Dmitry Medvedev said last month a G7 move to ban exports to the country would cause Moscow to terminate a Black Sea grain deal that enables vital exports of grain from Ukraine. Food security in the aftermath of the war is also expected to be a major topic at the G7.
Oil Prices Sink As Economic Concerns Continue To Dominate Markets
Crude oil started trade this week with a decline, based on Asian trade data from earlier in the day, as traders’ worry about the state of the global economy trumped any expectations of tight supply. At the time of writing Brent was trading at below $74 per barrel and West Texas Intermediate had slipped below $70 per barrel as fears of a possible U.S. debt default continue to run high while Congress remains locked in negotiations over the debt ceiling. Legislators need to agree on a higher debt ceiling as soon as possible because the state’s coffers will run out by June 1st, according to Treasury Secretary Janet Yellen. This is not the first time Congress is taking its time agreeing to higher debt limits and it is not the first time various officials are sounding the default alarm. The current debt ceiling of the United States is $31.4 trillion. Democrats and the White House want this raised without any conditions but Republicans insist on some spending cuts in order to agree to the raise. “With the uneven re-opening in China and concerns that the U.S is facing a growth slowdown at a time when the X-date for the debt ceiling is rapidly approaching, topped off by a rally in the U.S dollar, market sentiment towards crude oil will remain tepid at best,” IG analyst Tony Sycamore told Reuters. “Sentiment in the oil market remains negative with an uncertain demand outlook and concerns over the US debt ceiling,” Warren Patterson, head of commodities strategy for ING Groep, told Bloomberg. “The market will likely be looking out for any potential demand revisions in the IEA’s monthly market report.” Since the start of the year, oil has lost some 13%, according to Bloomberg, and traders have accumulated the largest short position on the commodity since July 2021.