India Rushes to Long-Term LNG Deals to Speed Shift From Coal
Petronet LNG Ltd., India’s biggest gas importer, wants to secure 12 million tons a year of additional supply under long-term contracts, Managing Director Akshay Kumar Singh said Tuesday in Bengaluru at India Energy Week. That’s equivalent to about 60% of the nation’s deliveries last year, according to ship-tracking data. New Delhi is trying to boost its LNG import capacity to increase the share of natural gas in its coal-heavy electricity mix to 15% by 2030 from about 6% now, Prime Minister Narendra Modi said Monday. India will face competition from other importers eager to sign long-term deals to reduce their exposure to the kind of volatility that saw spot prices soar to a record last year. The LNG market will remain tight until 2026, Satinder Pal Singh, chief executive officer of Adani Total Private Ltd., said at the conference. Petronet is also aiming to extend an existing contract with Qatar, and will request as much as 1 million tons a year more from the Middle Eastern supplier. Petronet’s proposed Gopalpur LNG import terminal and an expansion at its existing Dahej plant are set to come online later this decade. Meanwhile, Gail India Ltd. is in discussions with Abu Dhabi National Oil Co. and Russia’s Novatek PJSC for long-term deals, Chairman Sandeep Kumar Gupta said at the conference.
Plans to revive LNG pipeline to Link India to Myanmar
India plans to construct a liquefied natural gas (LNG) pipeline connecting the country to Myanmar and Bangladesh to secure its energy source and counter China’s growing dominance in the region, two people privy to the developments revealed, according to a Daily Observer report. This idea was first discussed back in 2005-06 but was shelved after Myanmar opted for a pipeline to China instead. However, with India’s Act East policy and recent instability in energy markets due to the Ukraine war, the country is looking to revive the plan for interconnecting the gas grids of the three nations. “Pipeline connectivity with the eastern neighbours is being looked at as both the countries have large gas reserves, and they should be willing to sell their produce,” one of the two officials told the Mint in end-January. The proposed pipeline will be connected to the North East Natural Gas Pipeline Grid run by Indradhanush Gas Grid Limited (IGGL) in Tripura—a joint venture between Indian Oil Corporation Ltd, ONGC, GAIL, Oil India Ltd, and NRL. Myanmar’s natural gas reserves are estimated to be 22.5 trillion cubic feet as of 2021, with China and Thailand among its major importers of LNG. Public sector companies ONGC Videsh Ltd and GAIL also own 17% and 8.5% stakes in Myanmar’s A1 and A3 blocks, respectively. In 2013, China successfully secured a bilateral pipeline deal with the Myanmar government, which led to shelving of the India-Myanmar pipeline plan. On the other hand, Bangladesh has seen a decline in its natural gas reserves and has a high requirement for power generation. Dhaka is working to increase its reserves by exploring more exploration activities across the country and recently discovered 20 million cubic feet of gas per day at the Koilastila Gas field, which could significantly boost the country’s reserves. The proposed pipelines will boost the Indian government’s plans to make the North-east region a hub for oil and gas transit under its Hydrocarbon Vision 2030, as New Delhi looks to increase domestic hydrocarbon production while also expanding its sources of energy imports as it currently imports around 85% of its total energy requirement. Meanwhile, no formal responses had been received from the Ministry of Petroleum, the Ministry of External Affairs, the Bangladesh High Commission in Delhi, and the Embassy of Myanmar regarding this matter at the time of reporting.
India Looks To Boost Natural Gas Consumption With Long-Term LNG Deals
India plans to secure long-term deals for the supply of liquefied natural gas in a bid to reduce the share of coal in its energy mix. The biggest gas importer on the subcontinent, Petronet, is looking to secure some 12 million tons of LNG annually in additional supply under long-term deals, Bloomberg reported, citing the company’s managing director, Akshay Kumar Singh. This additional amount is equal to almost two-thirds of India’s total LNG imports in 2022, Bloomberg added, referencing tanker tracking data. India’s government plans to increase the share of natural gas in its power generation mix from 6 percent currently to 15 percent by 2030 and long-term deals are clearly one safe way of doing that. However, intensified competition for LNG cargoes has reduced the amount of available gas for long-term deals. As part of efforts to boost LNG supply, Petronet will seek to increase the contracted amount of LNG it buys from Qatar by 1 million tons annually, Reuters reported, citing the managing director of the company. Russia’s Novatek is also in talks with Indian gas importers for LNG deliveries, the chief executive of the company Leonid Mikhelson said on Monday at the India Energy Week. India is currently expanding its gas distribution network in cities, which would drive higher natural gas demand. To respond to that demand, along with plans to reduce coal dependency, India’s government has plans to expand the capacity of its LNG import terminals by 53 percent in the next few years. The country’s capacity to date is 22.5 million tons annually and the Modi government wants to expand this by 12 million tons. Meanwhile, India has slipped from number four in the global top LNG importer ranking to number seven amid sky-high LNG prices prompted by Europe’s eagerness to replace pipeline Russian gas with the super-chilled fuel.
India Predicts 500% Increase In Domestic Natural Gas Demand
Indian Prime Minister Narendra Modi on Monday projected that the country’s gas demand would rise 500% due to the rapid pace of development, while its share of global oil demand would more than double. While the Indian prime minister did not offer a specific time frame for this major boost in demand, he said that the country’s energy demand would be highest in the present decade. Modi’s statement, delivered during the opening ceremony of India Energy Week 2023, coincides with a recent OPEC report that expects India to be the largest contributor to incremental demand, with the country expected to add some 6.3 million bpd until 2045. Overall, OPEC said it saw demand increasing to 110 million bpd in 2045, up from 97 million bpd in 2021. Modi predicts India’s share in global oil demand will increase from 5% to 11%. The Indian prime minister used the occasion to highlight the country’s plans to boost exploration and production, which he said would provide opportunities for investors. Right now, India relies on imports for some 85% of its energy needs, with India and China being the largest importers of oil and gas in the world. With this in mind, India will remove significant restrictions on exploration, reducing “no-go” areas for E&P companies. India also plans to expand its refining capacity, along with its LNG import capacity by 2030. Asia is now the biggest buyer of Russian crude since the imposition of Western sanctions following Putin’s invasion of Ukraine. Some 70% of Russian Urals January loading cargoes were bound for India, according to Reuters data. India’s oil minister, Hardeep Singh Puri, also said on Monday that regardless of Western sanctions, the country would not shun Russian oil, which it receives at a discount to Brent crude. “I will be very frank,” Puri said, “we will play the market card …”
Will OPEC+ Abandon Its Output Cuts Amid Soaring Chinese Demand?
A strong rebound in China’s oil demand this year may lead to the OPEC+ group reconsidering its production targets and quotas, according to the International Energy Agency (IEA). China’s reopening is putting upward pressure on global oil demand, and half of this year’s demand growth is set to come from the Chinese growth in consumption, the IEA says. In case of a strong rebound in Chinese demand, OPEC+ may have to reconsider their output policy, the IEA’s Executive Director Fatih Birol told Reuters this weekend. “If demand goes up very strongly, if the Chinese economy rebounds, then there will be a need, in my view, for the OPEC+ countries to look at their (output) policies,” Birol told Reuters on the sidelines of an energy conference in India. The million-dollar question is whether the OPEC+ group, which includes non-OPEC producer Russia, will respond to rising demand by lifting oil production targets, or prefer to see how the embargoes and price caps on Russian crude and oil products would alter market flows and supply, and how interest rate hikes will impact economies in the short term. Last year, while the world saw overall oil demand grow following the reopening of economies and gas trade flows materially shifted after the Russian invasion of Ukraine, China’s demand was subdued and fell for both fossil fuels—for the first time in decades. The Chinese economy continued to grow last year, but at a much smaller pace than in previous years. This year, the reopening is expected to drive a rebound in oil demand, which could be pressured further upwards by “exploding” jet fuel demand in China, according to the IEA’s Birol. The agency said in its Oil Market Report for January that global oil demand was set to rise by 1.9 million barrels per day (bpd) in 2023, to a record 101.7 million bpd, with nearly half the gain coming from China following the lifting of its Covid restrictions. “China will drive nearly half this global demand growth even as the shape and speed of its reopening remains uncertain,” the agency noted. However, the IEA also said that “Two wild cards dominate the 2023 oil market outlook: Russia and China.” The EU ban on Russian oil products – in place from February 5 – could soon mean that “the well-supplied oil balance at the start of 2023 could quickly tighten however as western sanctions impact Russian exports,” the IEA said in its January report. Russia’s energy revenues are trending down due to the sanctions, which have led to a slump in the price of Russia’s flagship crude grade, Urals. Russia’s budget revenues from oil and gas – including taxes and customs revenues – plunged in January by 46% to the lowest level since August 2020, according to data from its finance ministry. Russia’s oil revenues alone are estimated to have dropped by 30% – or by around $8 billion – year-on-year in January, the IEA’s Birol told Reuters, adding that the price cap has worked in both keeping the market supplied with Russian oil and reducing Putin’s revenues. Last week, OPEC+ kept its production targets unchanged in a widely expected ‘wait-and-see’ approach to supply just ahead of the EU ban on Russian diesel and other petroleum products. Supply from Russia, demand in China, the state of the economies in the coming months, and the trend in interest rate hikes in the U.S. and other major mature economies will be the key decision drivers for OPEC+ this year. As will be the price of oil on the markets—the group led by Saudi Arabia and Russia is unlikely to leave oil trading below $80 per barrel.
India plans joint venture, PPP mode to build strategic gas reserve
India’s planned strategic gas reserve may come up as a joint venture of public sector companies or as a public-private partnership (PPP), two people familiar with the discussions said. The reserve may be set up as a separate entity on the lines of the Indian Strategic Petroleum Reserve Ltd (ISPRL), which can store 5.33 million tonnes of crude oil at its underground facilities at Visakhapatnam, Mangaluru and Padur. Talks for a strategic gas reserve have gained momentum after the Russian invasion of Ukraine last year snapped supplies and drove up prices. “It may be given to a public sector unit in the E&P (exploration and production) space to manage, which may form a joint venture. Public-private partnership is also being looked at,” one of the two people cited above said on the condition of anonymity. Exhausted oil wells may be used as reserves to store liquified natural gas (LNG), or entirely new LNG infrastructure may be constructed, the second person added. New infrastructure would include more LNG terminals and large underground salt caverns. “Either we can create a new LNG facility for storing the gas or use exhausted gas wells, where production has been stopped. But the problem with those wells is that there is a loss of efficiency. Only about 60% of the gas-filled into the well is recovered at the most,” the second person said. Several countries have built gas storage systems to ensure supply security. The US accounts for nearly a third of global gas storage, while Russia, Ukraine, Canada and Germany together account for another major portion. China also has gas storage facilities.
Russia ready to meet India’s oil needs at ‘market price’, Rosneft says
Russia was willing to meet India’s oil needs at ‘market price’, the CEO of top Russian oil major told Reuters on Monday. In December last year, the Group of Seven, the European Union and Australia enforced a price cap on crude oil at $60 per barrel, aiming to reduce Moscow’s ability to finance its war in Ukraine and preserve stability on the global oil market. Russia has emerged as the largest supplier of oil to India, replacing Iraq. When asked if Russia will give an additional stake to ONGC Videsh or other Indian companies in its Sakhalin-1 project, Rosneft CEO Igor Sechin said the decision to do so lay with the Russian government. Russia last year approved the requests of ONGC Videsh, the overseas investment arm of state-run Oil and Natural Gas Corp (ONGC.NS), and Sakhalin Oil and Gas Development Co(SODECO), a consortium of Japanese firms, to retain their 20% and 30% stake respectively in the project.
India wants Russian LNG
New Delhi is looking for a long-term contract to ensure its energy security. Russia’s largest liquefied natural gas (LNG) producer, Novatek, is poised to clinch a deal with India’s main gas distributor GAIL on long-term supplies, Reuters reported on Friday, citing industry sources. A preliminary agreement may be signed as early as this week during a visit by Novatek Chairman Leonid Mikhelson to India for an energy conference, people familiar with the matter told the news outlet on condition of anonymity. The news comes as GAIL struggles to recover from its 93% slump in profits in the three months to December compared to a year earlier, resulting from a supply disruption on the part of a former unit of Russian energy giant Gazprom. GAIL had a 20-year contract with Gazprom Marketing and Trading Singapore (GMTS), a former unit of Berlin-based Gazprom Germania. Last year, German authorities took over Gazprom’s subsidiary, now called Sefe, as part of anti-Russia sanctions, without providing compensation payments. The Indian utility company was forced to resort to gas rationing, and slashed output at its petrochemicals plants after supplies under the deal with GMTS fell through.
India’s Oil Refiners Using Dirhams For Payment In UAE
India’s oil refiners are making payments in United Arab Emirates Dirhams instead of Dollars, according to a report by the news agency Reuters. The report cites four sources with knowledge of the matter saying that the State Bank of India (SBI), is now clearing these dirham payments. Following the Russian Invasion of Ukraine, Western countries have put multiple sanctions on Russia, including a price cap on oil purchases. India has resisted the sanctions and has subsequently increased its Russian crude oil imports. However, Banks and financial institutions are cautious about clearing payments so as not to unintentionally violate the numerous sanctions imposed against Russia even though India does not recognise Western sanctions against Moscow, the report said. In particular, if the price of Russian crude increases above the price cap imposed by the Group of Seven nations (G7) and Australia in December last year, Indian refiners and dealers are concerned they may not be able to continue to settle trades in dollars. The G7 price cap forbids any Western business from engaging in the trading of Russian oil if the purchase price is greater than $60 per barrel at the loading point in Russia. According to the report, due to this, traders are looking for alternate payment methods, which may also help Russia in its efforts to de-dollarize its economy in reaction to Western sanctions. Indian refiners had previously tried to pay traders for Russian crude in dirhams through Dubai banks, but those attempts had failed, forcing them to return to using dollars, the report added. SBI has asked the refiners to provide a breakdown of the costs of the oil, freight, and insurance, allowing it to vet trade and avoid violating the cap, the report said. “The SBI is very conservative in its approach,” one of the sources told Reuters adding that even though India does not follow the price cap mechanism and Western insurance and shipping are not used for delivery. Indian refiners are buying Russian crude from traders at a price that includes delivery to India as well.
Government increases windfall gains tax on crude, diesel and ATF
The government changed the windfall profits tax on Saturday, increasing the Special Additional Excise Duty (SAED) on crude oil by Rs. 3,150 per tonne and the SAED on diesel and air turbine fuel (ATF) by Rs. 2.5 per litre. The new figures indicate that the levy on crude oil will rise from the previous Rs 1,900 per tonne to Rs 5,050 per tonne. The tax on diesel will rise from Rs. 5 per litre to Rs. 7.5 per litre. According to the data, the tax on ATF will rise from Rs 3.5 per litre to Rs 6 per litre. In the interim, there will be no additional taxes on gasoline. According to top government officials, the seven-month-old windfall profit tax on domestically produced crude oil and fuel exports is expected to generate about Rs 250 billion in the current fiscal year, which ends on March 31. The levy will continue for the time being because global oil prices are once again on the rise. “As of now, crude prices are again on the rise. So, for time being windfall tax will continue,” PTI quoted CBIC chairman Vivek Johri. Separately, Revenue Secretary Sanjay Malhotra had stated that the budget had forecast the current fiscal year’s windfall tax collection at Rs 250 billion. Johri had stated that it would be “impossible to anticipate how long the windfall taxes will last” because of how unstable the geopolitical environment remained. On July 1, India introduced its first windfall profit tax, joining an increasing number of countries that tax energy companies’ higher-than-average profits. At the time, export taxes on gasoline, ATF, and diesel were each charged at the rate of Rs 6 per litre (USD 12 per barrel), and Rs 13 per litre (USD 26 per barrel). Additionally, a windfall profit tax of Rs 23,250 per tonne (USD 40 per barrel) was imposed on domestic crude production. Every two weeks, the levy is reviewed, and rates are adjusted by market oil prices. The current windfall tax on crude oil generated by businesses like Oil and Natural Gas Corporation (ONGC) is Rs 1,900 per tonne. Crude oil extracted from the ground and beneath the seabed is refined and transformed into fuels such as gasoline, diesel, and aircraft turbine fuel (ATF).