How rising international gas prices impact India Inc.
Gas prices in Europe and the US are trading at record levels as Nord Stream 1 gas pipeline is expected to go under unscheduled maintenance for three days at the end of the month. European gas prices hit a new unprecedented high, while the US gas prices were at their highest since July 2008. Russia’s state-owned energy giant Gazprom said it would shut down Europe’s single biggest piece of gas infrastructure – Nord Stream 1 pipeline – to service its compressor. The unscheduled maintenance works on the Nord Stream 1 pipeline, which runs from Russia to Germany via the Baltic Sea, deepen a gas dispute between Russia and the European Union and exacerbate both the risk of a recession and a winter shortage. GAIL – the largest gas transmission company in India – could see an impact on its earnings due to higher gas prices. The company imports gas from the US market – the prices of which are linked to the US gas prices. Thus, higher gas prices in the US will increase the gas sourcing cost for GAIL. Along with this, if gas usage declines in India due to higher prices, the same will lead to a lower amount of gas being transmitted through its pipeline, which will eventually lead to lower earnings. Petronet LNG – India’s largest gas importer – earns a majority part of its income from gas regasification. Reducing gas imports to the country could hurt Petronet’s regasification income. In the month of July 2022, total LNG imports in India declined 10% YoY and 8%, MoM, due to a sharp increase in spot LNG prices and also likely due to shortages driven by lower gas supply on some of the long-term contracts. City gas distribution companies also stand to impact as the blended gas cost increases. Currently, CGDs are sourcing 6% of their gas requirement for CNG and household usage from the spot market, while the gas supplied for industrial use is fully sourced through sports market. Owing to rising gas prices in the Asian market, the blended gas cost will also increase for CGDs. The same is expected to impact Gujarat Gas the most, followed by IGL and MGL.
Chennai Petroleum Corp forms joint venture for $4 billion refinery
Chennai Petroleum Corp Ltd (CHPC.NS) said on Tuesday it has formed a joint venture with its parent company Indian Oil Corp (IOC.NS) and others to build a 9 MMTPA refinery at a cost of 315.80 billion rupees ($3.95 billion) in southern Tamil Nadu state. CPCL, in which National Iranian Oil Company has about 15% stake, was operating a small refinery at the Cauvery Basin at Nagapattinam, where the new plant will be located. The new refinery will come up after dismantling the existing 1 million metric ton per annum (MMTPA) refinery, according to CPCL’s website, and will produce liquefied petroleum gas, BS VI quality gasoline, diesel and aviation turbine fuel. CPCL will hold 25% stake in the new refinery for an investment of 25.70 billion rupees, while IOC and other seed equity investors including Axis Bank (AXBK.NS), HDFC
India’s crude oil production falls 3.8% in July, misses target
Crude oil production in India declined by 3.76% year-on-year to 2.45 million tonne in July 2022. Crude oil output was 2.54 million tonne during the same period last year. Crude oil production missed the 2.59 million tonne target for the month by 5.57%, said a statement from the ministry of petroleum and natural gas. State-run energy major ONGC’s production was 1.63 milion tonne, 3.36% lower than target of the month and 1.70% lower when compared with production of July 2021. The statement said the fall in ONGC’s production came on the back of decline in output from Gandhar in Ankleshwar (Gujarat), ceasing of high potential wells in Geleki field in Assam, restriction on drilling activities due to socio-political issues in Cauvery, among others. Oil India Ltd’s production stood at 263,700 tonne, which is 8.11% lower than the target of the month. It was, however, 4.12% higher when compared with production of July 2021. The fall in crude production comes at a time when oil prices remain volatile amid the Russia-Ukraine crisis and concerns of a global slowdown. India has been making efforts to increase its domestic oil production to reduce import dependence. The country imports around 85% of its energy requirements. In March, a standing committee on petroleum and natural gas recommended that the government review its strategy to increase domestic oil production and take concrete, tangible steps for this. The data from the petroleum and natural gas ministry showed that natural gas production during July 2022 declined 0.40% on a year-on-year basis to 2.88 billion cubic metres. It was 3.33% lower than the target for the month. ONGC produced 1.66 billion cubic metres of natural gas, 3.92% lower than the production level of July 2021. Oil India’s natural gas production, however, increased 5.69% to 262.53 million cubic metres.
U.S. Strategic Petroleum Reserve Falls To 35-Year Low
The United States’ Strategic Petroleum Reserve (SPR) now has only 453.1 million barrels in its inventory, following another significant drop in the past week that puts the emergency reserve at a low not seen in three and a half decades, Reuters reports, citing the Department of Energy. In the week ending August 19th, the SPR saw another draw of 8.1 million barrels, following smaller releases in the weeks leading up to that. In March, the Biden administration authorized the release of 1 million bpd from the SPR over a period of six months in a bid to lower oil prices and to potentially boost domestic production through contracts with companies to purchase future oil at fixed prices. The SPR releases are a response to the disruption of global oil markets caused by Russia’s invasion of Ukraine and subsequent Western sanctions that have led to soaring oil and gas prices. The final plan called for a total release of 180 million barrels of crude from the SPR to counter the inexorable increase in oil prices amid a tight market. The record-high release of crude oil from the SPR will end this fall. In addition to the lowest inventory levels in the SPR since 1985, last Wednesday, the Energy Information Administration (EIA) estimated that crude oil inventories (excluding the SPR) had fallen by 7.1 million barrels. For that week, U.S. crude oil inventories, excluding those in the SPR, were at only 425 million barrels, or 6% below the five year average. The largest sale from the SPR was announced on August 11, when the Department of Energy said that nine companies would buy 20 million barrels. According to the Institute of Energy Research, the SPR is expected to shrink to a 40-year low by the end of October, with inventories then at 358 million barrels, compared to 621 million barrels a year ago.
UP to Promote biofuel production
Uttar Pradesh Chief Minister Yogi Adityanath has directed concerned officials to prepare a bioenergy policy that will promote biofuel production in the state. Yogi said that as per the vision of Prime Minister Narendra Modi, efforts to promote bioenergy projects, like compressed biogas (CBG), biocoal, ethanol and biodiesel, have yielded positive results. Till now, production has commenced in two units of biocoal while one unit of compressed biogas has been completed in the month of June, he said. According to state government spokesman, the Chief Minister said that planned efforts should be made to establish at least one biofuel unit in all 75 districts, while in the next phase, it should be extended to every tehsil. “Vacant land in village society /revenue land/sugar mill premises should be used for setting up biofuel plants and for storage of biomass,” he said. Biofuel will help meet energy needs and aid in generating additional income and also give employment, Yogi said, adding that the state will have to develop the biomass supply chain for future needs. “There is a need to promote the use of biofuels in the field of energy and transportation. Biomass pellets should be used in power generation plants. Concerted efforts are needed in this direction.” Explaining the importance of biofuels, the Chief Minister said that promoting biofuels will be helpful in reducing dependence on crude oil and promoting a cleaner environment. He further added that the use of biofuel will reduce carbon emissions which is a cause of worry for the entire world. “In such a situation, Uttar Pradesh has an opportunity to present a model. A new bioenergy policy should be formulated to make the state realize its immense potential,” the Chief Minister said. He also said that efforts should be made to achieve the target of producing 500 tonnes of CBG per day of compressed gas in the next five years. “The industry must be consulted while formula ting a new bioenergy policy. Understand the needs of the investing entities/companies. Taking the opinion of all the parties, a new policy should be prepared after comprehensive consultation,” he directed officials.
Venezuela Increases Petcoke Exports to India
Caracas, August 21, 2022 (venezuelanalysis.com) – Venezuela has significantly ramped up its petroleum coke (petcoke) sales to Indian companies. According to Reuters, cement companies in India received 160,000 tonnes of petcoke between April and July, with cargoes of at least 80,000 more expected in August. The Asian giant started importing Venezuelan petcoke in 2022 after previously relying on the US and Saudi Arabia as suppliers. The Venezuelan exports have hovered around US $220 per tonne, some 5 to 10 percent below market price, as Caracas seeks international trade partners while heavily targeted by US sanctions. The South American nation has accumulated large stockpiles of petroleum coke, which is a byproduct of oil refining or upgrading. A study from the Venezuelan Academy of Physical, Mathematical and Natural Sciences found that every barrel of heavy crude from the Orinoco Oil Belt yields 25 kilos of petcoke. Venezuela’s state oil company PDVSA produces its flagship Merey export blend (16°API) from upgrading Orinoco heavy crude. The high-carbon petroleum coke is used as an energy source from its combustion and its demand has grown amidst rising coal and fuel prices on a global scale. Though more expensive than coal, petcoke is a more efficient energy source. It is widely used by the cement industry as the toxic sulfur dioxide (SO2) emissions are absorbed by limestone. India uses an estimated 27 million tonnes of petcoke per year and is the world’s largest consumer. Indian corporations Ramco Cements, JSW Cement and Orient are among the main purchasers of Venezuelan coke. Ramco CFO S. Vaithiyanathan told Reuters that the product is of high quality and with low sulfur content as the Caribbean country threatens to displace traditional suppliers. Other significant buyers of the oil industry byproduct include Turkey and China. The higher volume of exports has caused reported disruptions at the country’s main export hub in eastern Venezuela. However, the operational logjam was alleviated with the opening of a new terminal operated by privately owned Maroil Trading. Industry experts claim that Venezuela could boost its market presence even further by addressing infrastructure deficiencies. The estimated 300,000-400,000 tonne-per-month petcoke sales provide some relief as the country’s crude production stagnates under the weight of crushing US sanctions. Since 2017, Washington has levied financial sanctions, an oil embargo, secondary sanctions and a bevy of other measures against Venezuela’s most important industry. The US Treasury Department likewise targeted swap agreements and key imports to keep crude operations running. Oil output fell dramatically as a consequence of the unilateral measures, from nearly 2 million barrels per day (bpd) in mid-2017 to decades lows under 400,000 bpd three years later. Production nearly doubled in 2021 but PDVSA has struggled to meet ambitious goals set. Output has hovered around 700,000 bpd and receded to 661,000 bpd in July. Caracas had previously turned to New Delhi as a prospective trade partner following the January 2019 oil embargo. The Nicolás Maduro government reportedly considered crude-for-medicines deals as possible avenues to bypass sanctions. However, the Trump administration threatened Indian corporations, including refining giant Reliance Industries, against dealing with Venezuela. The US Treasury Department has not explicitly targeted Venezuelan petrochemical and oil byproduct exports but has not issued exemptions either, forcing PDVSA to offer discounts in order to attract customers. The threat of running afoul of wide-reaching US sanctions has kept international corporations from purchasing Venezuelan petroleum coke. According to Argus Media, Turkish cement would not import from the Caribbean nation at discounted rates for fear of jeopardizing cement sales and other business with the US.
Bangladesh may import Russian diesel at cheaper rate via India
Bangladesh may prefer to import Russian oil via a third country to avert possible risks of the business. According to official sources at the ministry of power, energy and mineral resources, neighboring India might be such a preferred third country with regard to importing Russian oil. ‘Currently, India has been importing Russian oil defying the United States sanctions while Bangladesh has a long term contract with India to import refined oil from its refinery at Numaligarh in Assam state,’ said an official at the ministry preferring anonymity. ‘If there is a bilateral arrangement between the two nations, such a business is very much possible,’ he said, adding it could be a possible way to avert the risk in import of Russian oil at a cheaper rate. The possibility of importing petroleum fuel from Russia came into discussion at the policymaking level following an offer from a Russian company to sell its refined petroleum, specially diesel, at a cheaper rate to Bangladesh. Russneft, a Russian oil company headquartered in Moscow, recently offered the state-owned Bangladesh Petroleum Corporation petroleum fuels at $59 per barrel against a global market price of over $100 per barrel. As per the offer, the Russian company will reach its refined petroleum to Chattagram port at the rate which includes the premium and shipping cost as well. However, the ministry of power, energy and mineral resources has not yet officially disclosed anything about the Russian company’s offer. State minister for power, energy and mineral resources Nasrul Hamid declined to give any detail of such an offer. ‘No more update as yet,’ he told UNB on Thursday. Sources at the BPC said the import of Russian oil is not like fuel import from other countries. They said Bangladesh is assessing its possible risks to import petroleum fuels from Russia as such imports may invite anger from the US and its Western allies. Russia has been facing huge economic sanctions from the US and its European allies following its war with Ukraine. If any country directly imports Russian oil it may face similar sanctions, said the officials, adding that is why any move in this regard will not only depend on the decision of the ministry of power, energy and mineral resources. According to official sources, after receiving the offer from Russia on petroleum fuel sale, now different concerned ministries, including the ministry of foreign affairs, ministry of finance and the ministry of power, energy and mineral resources are assessing the potential risks and different processes of such import. Prime minister Sheikh Hasina at the ECNEC meeting on August 16 said that the government wanted to buy fuel oil, fertiliser and wheat from Russia. In this connection she mentioned she had given the responsibility to her principal secretary to talk to the Russian ambassador regarding the matter. ‘The foreign ministry can take initiative in this matter, we will procure fuel oil from Russia with our own funds as the SWIFT is closed and the price of dollar is very high,’ she said. Meanwhile, Power Cell director Mohammad Hossain said that if the government could manage the import of diesel at cheaper rate, operation of the diesel-run power plants would be resumed to increase the power generation. As part of an austerity measure, the government suspended the operation of the diesel-fired power plants from July 19 and introduced area-wise load shedding to reduce diesel imports and save foreign currency. Although area-based load-shedding was scheduled for one hour, it continued for three hours at a time in some city areas across the country. Load-shedding in rural and remote areas, however, stretched for more hours, consumers claim. Markets and shopping malls can now stay open until 8:00pm. The government also prohibited illumination in different social gatherings in community centers, shopping malls, shops, offices and houses since July 7. Finally, it introduced a holiday staggering for industries on August 11 as part of the plan to save power and natural gas.
L&T Commissions Green Hydrogen Plant At Its Manufacturing Complex In Hazira, Gujarat
Larsen & Toubro (L&T), an Indian multinational engaged in EPC Projects, Hi-Tech Manufacturing and Services, today announced the commissioning of a Green Hydrogen Plant at its AM Naik Heavy Engineering Complex in Hazira, Gujarat. The plant was inaugurated by Mr. Shrikant Madhav Vaidya, Chairman – Indian Oil Corporation Limited. The production of Green Hydrogen based on an alkaline electrolysis process has begun today. The plant will produce 45 Kg of Green Hydrogen daily, which will be used for captive consumption in the company’s Hazira manufacturing complex. The Green Hydrogen Plant is designed for an electrolyser capacity of 800 kW comprising both Alkaline (380 kW) and PEM (420 kW) technologies and will be powered by a rooftop solar plant of 990kW peak DC capacity and a 500kWh Battery Energy Storage System (BESS). As part of the first phase of the project 380 kW Alkaline electrolyser has been installed, while the 420 kW PEM electrolyser along with solar plant capacity augmentation to 1.6 MW peak DC, will be part of future expansion. Commenting on the occasion, Mr. Subramanian Sarma, Whole-time Director & Senior Executive Vice President (Energy), L&T said: “L&T is at the forefront of providing innovative and sustainable solutions that will help meet the energy needs of the future. We are proud that our engineers have set up the Green Hydrogen generation plant at Hazira complex and integrated it with the existing manufacturing shops for use of the green hydrogen.” He added that “This initiative is in line with L&T’s climate leadership targets of Lakshya-2026 that will help reduce greenhouse gases footprint for us as well as our clients by approximately 300 tonnes/annum. We believe that Green Hydrogen is a promising alternative fuel, and this plant is a testimony that we are committed to create a greener tomorrow.” The plant is spread across 3000 sq. meters, and the first phase of the project has been installed, tested, and commissioned. The scope involves the generation of high purity Green Hydrogen (99.99%) and Oxygen, and their captive consumption in the manufacturing shops. A blend of 15% Hydrogen with Natural Gas will be used as a fuel, and oxygen will supplement the existing usage in cutting and welding applications. To ensure safe operation and production, the plant design incorporates both active and passive safety systems and will be operated through state-of-the-art control systems with remote monitoring functionality. In addition, an integrated data analytics platform designed by L&T will provide insights into the performance of the electrolysers and the overall plant. As part of its ESG commitments, L&T has pledged to achieve water neutrality by 2035 and carbon neutrality by 2040. Making Green Hydrogen an integral part of its clean fuel adoption policy. L&T’s climate change, energy efficiency and renewable energy programmes are aligned with the National Action Plan on Climate Change (NAPCC), released by the Government of India. The Company’s programmes are also being aligned to the Nationally Determined Contributions (NDCs) ratified by the Government of India during the COP 21 – Paris Agreement.
GAIL Faces Profit Hit Over Gas Supply Cut – Report
Profit at state-run GAIL (India) Ltd will be hit as it rations gas sales after supplies are cut under its long-term deal with a former unit of Russian energy giant Gazprom amid high spot prices, its head of finance Rakesh Kumar Jain said on Thursday. GAIL, India’s largest gas distributor and operator of pipelines, imports 14 million tonnes per annum (mtpa) of liquefied natural gas (LNG) under various long term deals. Of this about 2.5 mtpa, or up to 39 LNG cargoes, were to be supplied this year by Gazprom Marketing and Trading Singapore (GMTS), now a unit of Gazprom Germania. Since the end of May, GMTS has missed delivery of 8 LNG cargoes to GAIL and is not certain about future supplies as it is securing the fuel for Europe, Jain said in an analyst call. He said GMTS has not declared force majeure, but “they are not scheduling (LNG cargoes supplies) at the moment. “Profitability certainly will be hit if the situation remains as it is today…There is a challenge in this quarter,” he said, adding GAIL’s gas marketing and transmission business will be hit due to lower supplies. GAIL has cut supplies to fertiliser and industrial clients besides reducing operations at its petrochemical plant at Pata, northern India, by over 50% to avoid purchase of costly spot LNG, Jain said, confirming a Reuters report. The state-run firm is also advancing delivery of some of its overseas LNG cargoes through time swaps and has chartered ships to bring in some of its U.S. LNG that it was planning to trade. GAIL has deals to import 5.8mtpa LNG from the US. Jain said GAIL is also scouting for long term LNG deals to secure supplies, although its previous tender for a 10-year 0.75mtpa deal failed. The company agreed a 20-year deal with Russia’s Gazprom in 2012 for annual purchases of an average 2.5 million tonnes of LNG. Supplies under the contract began in 2018. GMTS had signed the deal on behalf of Gazprom. At the time, Gazprom Germania was a unit of the Russian state firm. However, following Western sanctions against Russia over its invasion of Ukraine, Gazprom gave up ownership of Gazprom Germania in early April without explanation and placed parts of it under Russian sanctions.
At $4.3 bn, imports from Russia jump nearly 7 times in June: Govt data
India imported goods worth $4.23 billion in June from sanctions-hit Russia, up 6.8 times as compared to last year, as demand for shipments of crude oil grew at the fastest pace during the month. Crude oil worth $3.02 billion was imported in June, which translates into a share of 71 per cent of the total imports from Russia, commerce and industry ministry data showed. Similarly, during the April-June quarter, India’s imports from Russia were valued at $9.27 billion, up 369 per cent on year. Crude oil comprised almost two-thirds of imports from the nation. Other major imported items from the country included coal, soybean and sunflower crude oil, fertilisers, among others. Russia’s prominence as India’s trading partner has been growing since its invasion of Ukraine on February 24, following which it faced economic sanctions from the Western nations, leaving the world grappling with challenges on several fronts, including disruption in the global food production system, sharp jump in commodity prices, especially for oil and natural gas. India’s rising dependence on crude oil from Russia comes in the backdrop of the sanctions-hit nation offering discounted oil. In the April-June quarter, Russia became the third largest crude oil supplier to India, after Iraq, Saudi Arabia, and ahead of the United Arab Emirates (UAE), which has also been India’s key oil supplier. With a share of only 1.2 per cent of India’s total trade during the 2021-22 financial year, Russia’s share has grown to 3.1 per cent during the April-June quarter of the current fiscal year. The country was India’s seventh largest trading partner in the quarter-ended June, driven by a sharp jump in imports. Despite pressure from Western nations, prominently the US and the European Union, India did not pick a side and chose to maintain a neutral stance considering its historical relationship with Russia. India, on various global forums, has been defending its stand. On Wednesday, External Affairs Minister S Jaishankar again defended India’s decision to buy discounted Russian oil, saying many suppliers have diverted their supplies to Europe, which is buying less oil from Russia. “It is a situation today where every country will try to get the best deal possible for its citizens, to try to cushion the impact of high energy prices. And that is exactly what we are doing… I have a country that has a per capita income of $2,000. These are not people who can afford higher energy prices,” Jaishankar said at the 9th India-Thailand Joint Commission Meeting. He added that it was the government’s “obligation” and “moral duty” to ensure that the people in India get the “best deal”. Outbound shipments to Russia fell to $190.55 million in June, down by 23 per cent year-on-year. However, exports to Russia have been picking up gradually since May, after nosediving to $79 million in March. Top items exported to Russia during the month include electrical machinery and equipment, iron and steel, pharmaceutical products, marine products, automobile components. (Source: Business Standard) Russia’s Sibur steps up LPG ship-to-ship transfers to serve Asia August 19, 2022: Russia’s largest liquefied petroleum gas (LPG) exporter, has stepped up ship-to-ship (STS) transfers at European ports to create larger cargoes that mean it can make money on sales to Asia, according to traders and Refinitiv Eikon data. Sibur used to supply most of its LPG to the European market. But since spring, demand for its products in northwest Europe has fallen due to Western sanctions against Russia’s financial sector, which have complicating dealings with the country’s energy companies, and so-called self-sanctioning by EU buyers. Neither Sibur, nor Russian LPG generally, is subject to Western sanctions, but European customers have cut back purchases, leading the company to look for buyers elsewhere. STS operations help Sibur reload LPG from standard gas tankers carrying 10,000-12,000 tonnes to VLGC (very large gas carriers) that can carry about 50,000 tonnes of LPG. Shipping higher volumes helps Sibur offset higher costs for delivering the product to Asia, making profits closer to what it used to make in northwest Europe, traders said. In July, Sibur supplied four cargoes of 11,000 tonnes each from Russia’s Ust-Luga port to an STS facility in Rotterdam, from where it shipped the product on VLGC Eiger Explorer with 44,000 LPG onboard to Singapore, according Refinitiv Eikon data. Late in July, Sibur also supplied four 11,000-tonne cargoes from Ust-Luga to the Dutch port of Vlissingen, where the product was also moved ship-to-ship to the tanker Gas Alkhaleej for delivery to India’s Mundra, according to Refinitiv data. Both shipments were carried out by trading firm Trafigura, traders said. Trafigura said it “continues to engage with customers and governments to understand their requirements and provide the commodities and energy they need in severely disrupted commodities markets”, but declined further comment. Sibur didn’t answer a Reuters’ request for comment.