Cabinet to consider price caps on gas to stave off rates rising to USD 10.7 per mm
The Union Cabinet is likely to soon consider imposing caps or a ceiling on price for majority of natural gas produced in the country to keep input costs for users ranging from CNG to fertilizer companies in check, sources said. The government bi-annually fixes prices of locally produced natural gas — which is converted into CNG for use in automobiles, piped to household kitchens for cooking and used to generate electricity and make fertilisers. Two different formulas govern rates paid for gas produced from legacy or old fields of national oil companies like Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL), and that for newer fields lying in difficult to tap areas such as deepsea. The global spurt in energy prices post Russia’s invasion of Ukraine have led to rates of locally produced gas climbing to record levels – USD 8.57 per million British thermal unit for gas from legacy or old fields and USD 12.46 per mmBtu for gas from difficult fields. April 1. Going by the current formula, prices of gas from legacy fields are slated to climb to USD 10.7 per mmBtu with minor changes in rates for gas from difficult fields, two sources with knowledge of the matter said.
European Industry Boosts Natural Gas Consumption As Prices Drop
As natural gas prices in Europe fell to a 20-month low, industries are switching back to using gas in a tentative sign that European industrial gas demand is rising. The front-month futures at the TTF hub, the benchmark for Europe’s gas trading, slumped earlier this week to below 40 euros ($43.52) per megawatt-hour (MWh), the lowest price since July 2021, as temperatures were rising, wind power generation was strong, LNG supply ample, and gas inventories way above the average for the end of the winter. The refining industry, where the switch from fuel oil to natural gas is more easily done, is already showing signs of higher gas demand. Some manufacturing industries have started to “shift back from diesel or fuel to gas. So it created additional demand,” TotalEnergies chief executive Patrick Pouyanne said on the supermajor’s 2023 Strategy, Sustainability & Climate Presentation this week. While cheaper gas is welcome news for Europe’s industry, the rise in industrial gas use could pose problems for Europe’s gas storage supply later this year when the continent will be preparing for the 2023/2024 winter. Yet, the recovery in industrial production in Europe will be slow, according to one of its biggest industries, Germany’s chemicals sector. “The outlook for the future has brightened somewhat in Germany’s third largest industry,” German chemical association VCI said in a report earlier this month. “Meanwhile, the major drop in energy and raw material prices in recent months has stabilised the situation where the bottom seems to have been reached,” the association said, but added it does not expect a strong recovery. High energy costs compared to other locations, a lack of orders, and location problems continue to be major concerns, according to VCI. Last month, the world’s biggest chemicals company, Germany-based BASF, said it would cut 2,600 jobs and close some plants due to the high energy costs in Europe that had burdened operations and profitability over the past year.
Bangladesh Govt to procure 3.360 million MMBtu LNG
The Cabinet Committee on Government Purchase (CCGP) today approved separate proposals for procuring 3.360 million MMBtu LNG and 70,000 metric tonnes of fertilizer to meet the growing demand. The approvals came from the 11th meeting of the CCGP held on Thursday virtually with Finance Minister AHM Mustafa Kamal in the chair. Briefing reporters after the meeting virtually, Cabinet Division additional secretary Sayeed Mahbub Khan informed that the day’s CCGP meeting approved a total of seven proposals. He said that following a proposal from the Ministry of Agriculture, Bangladesh Agricultural Development Corporation (BADC) would procure some 40,000 metric tonnes of DAP fertilizer from OCP, SA, Morocco under state-level agreement with around Tk 2621.3 million where per tonne fertilizer would cost $610 against the previous price of $710.
India’s Feb crude oil imports jump 8% as demand hits over 2 decade high
India’s imports of crude oil in February rose about 8% from a year earlier, government data showed on Wednesday, as fuel demand hit over 2-decade highs in the world’s third-biggest oil importer and consumer. Rising crude demand and a strong Indian economy bodes well for higher refinery runs and imports, in addition to cheaper Russian crude, said Refinitiv analyst Ehsan Ul Haq, adding he expects refiners to boost runs and imports as temperatures rise and people travel more. Fuel demand in February hit its highest level in at least 24 years, data from the website of the Petroleum Planning and Analysis Cell (PPAC) showed this month. With Indian demand likely to rise further over coming months, crude imports should recover, said UBS analyst Giovanni Staunovo. On a monthly basis, imports were down 6% to 22.57 million tonnes, PPAC data showed. The month-on-month drop in imports could also be seasonal, as February imports were lower last year as well, Haq said. Russia tightened its grip on India’s oil market in February, leaving African crude oil imports in India at the lowest level in at least 22 years. Elsewhere, Indian Oil Corp, the country’s top refiner, will reduce its yearly oil purchase from Kuwait by 20% starting in April. To compensate, India’s IOC has increased its term crude volume with Iraq’s Oil Marketing Company (SOMO) by 20,000 bpd. Product exports in February rose by 12% month-on-month to 5.06 million tonnes, with diesel accounting for 2.15 million tonnes. The rise in exports comes despite India planning to extend restrictions on the export of diesel and gasoline after the current fiscal year ends this month to ensure the availability of refined fuels for the domestic market.
Former Russian unit commits 4 LNG cargoes to India
A former unit of Russian energy giant Gazprom will supply 4 shiploads of LNG to state-owned GAIL (India) Ltd for the first time since it halted supplies in May last year, Union minister Rameswar Teli said on Thursday. SefeMarketing and Trading Singapore Pte Ltd (SMTS), erstwhile Gazprom Marketing and Trading Singapore Pte Ltd, will “supply two cargoes in March 2023 and two in April 2023,” Minister of State for Petroleum and Natural Gas Telisaid in a written reply to a question in Lok Sabha. GAIL had in 2012 signed a 20-year deal with Gazprom Marketing and Singapore (GMTS) to buy 2.85 million tonnes per annum of LNG. Supplies started in 2018 and the full volume was to reach in 2023. GMTS had signed the deal on behalf of Gazprom. GMTS was moved to Gazprom Germania and in early April, Gazprom gave up the ownership of the German unit without giving a reason and placed parts of it under Russian sanctions.
Brent plunge fails to displace Russian crude for Asian buyers
A plunge in Brent crude prices has narrowed the spread between Atlantic Basin and Middle East benchmarks but has failed to spur interest from Asian refiners, which are instead buying up discounted Russian oil, leaving an overhang in African supply. Global oil benchmark Brent tumbled more than 10% over the past two weeks, touching a 15-month-low of $70.12 a barrel on Monday, as investors have fretted over banking sector turmoil in the U.S. and Europe and as strikes in France have dented oil demand. Middle East crude prices in Asia appear to be resilient as the market bets on robust demand from China, which is rebounding from zero-COVID restrictions that formerly squeezed its economy. The Brent-Dubai Exchange for Swaps (EFS), representing the premium of light sweet Brent over Middle East sour crude Dubai, shrank to $1.40 a barrel this week, its narrowest in more than two years. A tighter EFS typically means Brent-linked crude produced in the Atlantic Basin, including from West African countries, becomes more economical for Asian buyers. But traders have not seen a significant uptick in Asian demand for West African crude, because the cargoes remain much more expensive than Russian oil, even though they have gained competitiveness over Middle Eastern crude. With Russian crude so cheap, a move of a few dollars on Brent-Dubai EFS or even freight would not make a difference, other than providing Chinese buyers with a tool to drive prices lower, said a West African crude trader. Russia’s light sweet ESPO crude for May delivery is traded at a discount of about $6.80 a barrel against the ICE Brent on the deliver-ex-ship (DES) basis to northern China, trading sources said. Meanwhile, Congo’s Djeno, a medium sweet crude favoured by Chinese refiners, is assessed at a premium of $1.50 a barrel above ICE Brent for May delivery on DES basis. The pattern is similar in India, where Russian crude is delivered at discounts to Dubai quotes while West African oil is loaded at parity or a slight discount to dated Brent, an Indian trader said. Russia became the top crude supplier to China and India in recent months, eroding the market share of other suppliers such as West African countries. Just over 30 million barrels of West African crude have been loaded for Asia in March, the smallest volume since 2014 or earlier, shipping data from Refinitiv and Kpler showed. The slowing exports of West African crude are exacerbating a supply overhang in the West of Suez market and weighing down the Brent prices that the West African grades are pegged to. On Tuesday, about 20 million barrels of Nigerian crude for April loading were still unsold, just as the trade cycle for May cargoes was about to kick off. About four April-loading Angolan crude cargoes were also awaiting buyers. In the past three months, Nigeria has exported around 42 million barrels of crude on average each month while Angola’s average monthly exports have been around 33 million barrels.
Former Russian unit commits 4 LNG cargoes to India
A former unit of Russian energy giant Gazprom will supply 4 shiploads of LNG to state-owned GAIL (India) Ltd for the first time since it halted supplies in May last year, Union minister Rameswar Teli said on Thursday. SefeMarketing and Trading Singapore Pte Ltd (SMTS), erstwhile Gazprom Marketing and Trading Singapore Pte Ltd, will “supply two cargoes in March 2023 and two in April 2023,” Minister of State for Petroleum and Natural Gas Telisaid in a written reply to a question in Lok Sabha. GAIL had in 2012 signed a 20-year deal with Gazprom Marketing and Singapore (GMTS) to buy 2.85 million tonnes per annum of LNG. Supplies started in 2018 and the full volume was to reach in 2023. GMTS had signed the deal on behalf of Gazprom. GMTS was moved to Gazprom Germania and in early April, Gazprom gave up the ownership of the German unit without giving a reason and placed parts of it under Russian sanctions.
Big Oil Petitions Brazilian Court To Suspend New Oil Tax
Five international oil companies active in Brazil have petitioned a federal court to suspend the 9.2% tax on crude oil exports that new president Ignacio Lula da Silva introduced soon after he came into office, angering the industry. According to the government, the new tax will serve to attract more investments in the country with a focus on local refining. According to Shell, however, the tax was announced without “significant dialogue” and it created “uncertainty about new decisions regarding investments,” the supermajor told AFP. When the new oil export tax was announced at the end of last month, Shell, along with the Brazilian subsidiaries of TotalEnergies, Portugal’s Galp, Repsol, and Equinor, filed an injunction against it. “This measure, which was announced with no significant consultation with the industry, brings uncertainty to new investment decisions, negatively impacting the country’s competitiveness in the upstream sector – one where Brazil carries significant geological potential,” Shell told Bloomberg earlier this month. According to one Brazilian professor of economics who spoke to AFP, the decision is more political than economical and aims to avoid having to raise fuel prices too much, which would create discontent. According to the government, the new tax, which will be in place between March and July, will provide Brazil with a better fiscal balance and will help offset losses incurred from not hiking fuel prices in accordance with market prices. “During the next oil auction, it is possible that the bidders will take into account the risk that the rules will change,” a researcher from education think tank the Getulio Vargas Foundation told AFP. The tax sets a precedent that will lead to legal uncertainty for investors and have a spillover effect on other industries besides oil and gas, discouraging foreign investors from putting their money in Brazil, Livio Ribeiro explained.
BHEL signs MoU with IGL on March 22
State-owned Bharat Heavy Electronics Limited (BHEL) said in a regulatory filing that it has inked an MoU with Indraprastha Gas Limited (IGL) on Wednesday. The company signed the MoU for “Joint collaboration for development, manufacturing & deployment of Type-IV Cylinders (CNG and/or Hydrogen), Hydrogen blending in city gas distribution (CGD) and Fuel cell-based power backup system,” the filing added. As per the tweet by the IGL, “This MoU will pave the way for collaboration in Hydrogen Value Chain, contributing towards ‘National Hydrogen Mission’ of the Government of India, making India Atmanirbhar.” “Sanjeev Kumar Bhatia, VP (BD & Gas Sourcing- IGL) and S Prabhakar, GM & Head (Marketing-BHEL) signed the MOU in the presence of Dr Nalin Shinghal, CMD-BHEL, Pawan Kumar, Director (Commercial-IGL), Upinder Singh Matharu, Director (Power & HR – BHEL), Jai Prakash Srivastava, Director (E, R&D – BHEL), and other senior officials of BHEL and IGL,” the tweet by IGL said.
India’s LNG imports continue to rise
India’s liquefied natural gas (LNG) imports rose for the second month in a row in February, according to the preliminary data from the oil ministry’s Petroleum Planning and Analysis Cell. The country imported 2.25 billion cubic meters or about 1.66 million tonnes of LNG in February, a rise of 11 percent when compared to the same month in 2022, PPAC said. Also, February LNG imports were almost flat when compared to 2.26 bcm in January. During the April-February period, India took 24.76 bcm of LNG, or some 18.4 million tonnes, down by 12.8 percent, PPAC said. India paid $1.5 billion for February LNG imports, a rise of about 36 percent compared to $1.1 billion in 2022, while costs increased about 40 percent year-on-year to $16.8 billion in April-February, it said. As per India’s natural gas production, it rose by 1.9 percent to 2.65 bcm in February. Gas production increased by 1.1 percent in April-February to 31.49 bcm. India’s monthly LNG imports have been constantly dropping last year due to mostly high spot prices. However, Asian spot LNG prices dropped this year. Petronet LNG previously said it is expecting India’s LNG imports to increase in the first quarter of this year due to lower spot prices. At the moment, India imports LNG via six facilities with a combined capacity of about 42.7 million tonnes. Petronet LNG’s 17.5 mtpa Dahej terminal operated at 78.2 percent capacity, while Shell’s 5 mtpa Hazira terminal operated at 37.5 percent capacity in April-January, PPAC saI’d