IGX gets regulator’s approval for trading of domestic natural gas
The approval is in line with the petroleum ministry’s notification dated 19 August 2021 where domestic gas producers were authorised to sell up to 500 million standard cubic meters or 10 per cent of annual production from contract area, whichever is higher, annually through gas exchanges. Indian Gas Exchange (IGX), announced it has received approval from Petroleum and Natural Gas Regulatory Board (PNGRB) to trade domestic gas on its platform and it will launch gas trading on 16 May 2022. “This is like the beginning of new era in gas markets. Exchange will enable trading of marketing freedom ceiling price gas (ONGC & Reliance KG D6) and marketing and pricing freedom gas namely CBM, DSF etc in more flexible spot basis up to 6 months,” Rajesh K Mediratta, Managing Director & CEO of IGX, said. With this approval, upstream gas production and Marketing & Pricing Freedom gas can now be effectively managed through flexible contracts at IGX, the exchange, an arm of Indian Energy Exchange (IEX), said in a statement. “In addition to this, producers will also have immediate sales opportunity which will eventually result in maximisation of domestic gas production and increased liquidity on the platform,” it added. Small buyers who currently do not have access to domestic gas either due to their size or allocation priority can now come to the exchange and procure domestic gas at competitive prices and ultimately help build a gas ecosystem. IGX currently facilitates delivery-based trades in six contracts such as Day-Ahead, Daily, Weekday, Weekly, Fortnightly and Monthly at five different designated physical hubs – Dahej, Hazira, Dabhol, Jaigarh and KG Basin.
Germany to revive LNG infrastructure
The German government plans to rapidly expand the infrastructure for importing liquefied natural gas (LNG) through an “LNG acceleration act”, a government statement said. An early draft of a corresponding bill has been provided for Germany’s governing parties, aiming to build land-based and floating LNG terminals and the necessary pipelines faster, Xinhua news agency reported, citing the statement. Construction of gas pipelines and infrastructure for LNG terminals in Germany could begin this summer, according to the statement. Last week, Minister for Economic Affairs and Climate Action Robert Habeck signed contracts for the lease of a total of four floating LNG terminals, with 2.94 billion euros ($3.1 billion) available for this purpose. “This is part of the effort to put Germany’s energy supply on a broader basis,” the government said.
Green hydrogen to be a focus area: Actis PE
Global private equity investor Actis is actively considering investing in the green hydrogen segment in India, said Sanjiv Aggarwal, Sanjiv Aggarwal, Partner, Energy Infrastructure at Actis. “We are studying the sector very carefully. Its an area which we are very actively considering investing in not only in India, but also in other markets,” said Aggarwal. Green hydrogen is produced by splitting water into hydrogen and oxygen using electrolyzers. Over the past few months, several Indian companies including Reliance Industries, Renew Power, Indian Oil Corporation, Adani Group, and Greenko Grouphave announced plans in this segment. Actis which last month sold its renewable energy platform Sprng Energy to Shell Overseas Investment BV, for Rs 119 billion has also incorporated Blupine Energy Pvt Ltd, under which it is targeting $800 million to $1 billion of investments to develop renewable energy projects and store assets. Sprng was Actis Energy 4 fund investment.
Petrol to escape Rs 2 green tax from October on 10% ethanol blending
India has achieved nearly 10% ethanol blending of petrol months ahead of the target, a move that will spare consumers an additional Rs 2 per litre tax from October. The budget had proposed the additional tax on unblended petrol from October to speed up adoption of the cleaner fuel as part of the country’s energy transition and climate action plans But ethanol supply remains a concern, even though the government is pushing hard to expand capacity. The roadmap for blending prepared jointly by the oil ministry and government think-tank Niti Ayog for developing an ethanol economy in the country had set a target of 5% blending by the end of 2022 and 20% by 2025. The Centre has also targetted 5% blending of biodiesel with diesel by 2030. The roadmap reckons 20% blending of petrol with ethanol will result in an annual saving of $5 billion, or more than Rs 300 billion in India’s oil import bill. The Centre has also targetted 5 per cent blending of biodiesel with diesel by 2030.
India’s crude oil imports rise in March on demand recovery
India’s crude imports rose about 4.2 per cent in March to 19.03 million tonnes from a year earlier, government data showed on Monday, as consumption picked up in the world’s third-largest oil importer after COVID-19 curbs were eased. India’s fuel demand had scaled a three-year peak in March, with petrol sales hitting an all-time high, as demand rose and the market built up supplies ahead of expected price increases. “The increase in imports can be attributed to demand recovery; COVID curbs have eased, there is pick-up in the industry and economy with schools, colleges and all opening,” said Prashant Vasisht, vice president and co-head, corporate ratings at ICRA. “Also, Indian companies, both from the private and public sector, are not shying away from buying and utilizing cheaper crude available from Russia.” India has bought more than twice as much oil from Russia since it invaded Ukraine as in the whole of 2021, at a time when Western sanctions have prompted many oil importers to shun trade with Moscow. Imports of oil products rose 9 per cent month-on-month, but were down 9.5 per cent from 2021 at 3.62 million tonnes. Exports of oil products climbed 10.9 per cent from a year earlier and of the total 6.74 million tonnes exported in March, diesel accounted for 3.37 million tonnes. India – Asia’s third-biggest economy – holds surplus refining capacity and is a major exporter of refined fuels. “A lot of European companies are opting not to buy Russian crude and refined products. And even before the war, there was a lack of stock levels of diesel in Europe. So, since there’s healthy demand, it has lead to increase of product exports for India,” ICRA’s Vasisht said.
India asks GAIL to import LNG to meet rising city gas demand
India has mandated state-run GAIL (India) Ltd to import gas and buy from local difficult fields to meet growing demand growth from household and transport sectors as cheaper supplies from old blocks is not enough, a government order said. City gas distributors (CGD) have set up sales network to supply gas to transport and households across the country, buoyed by Prime Minister Narendra Modi’s aim to raise the share of gas in India’s energy mix to 15% by 2030 from 6.7% now. These companies gets a priority in half yearly allocation of gas from the old fields, sold at a cheaper rate of $6.1 per million British thermal units (mmBtu), and the shortfall is met through imports. The distribution companies pass on the costs of gas purchases to their customers leading to differential pricing of fuel in the country. Now, the oil ministry has asked GAIL to buy gas produced from the fields in difficult areas at the ceiling price fixed by the government or actual price which ever is lower. The current ceiling price of the gas from difficult fields is $9.92/mmBtu, lower than the spot prices of the liquefied natural gas
Halting Russian gas imports would cause supply problems for Italy: Minister
Italy will face short-term energy supply problems if Russia opts to cut gas sales to the country, Italian Ecological Transition Minister Roberto Cingolani has said. Speaking on the sidelines of the City Enterprise Festival in Vicenza, Cingolani said Italy’s transition away from Russia had already started, but will take time. Like other European Union member states, Italy is seeking to reduce its dependency on Russian natural gas due to the ongoing conflict in Ukraine, Xinhua news agency reported. Previously, Italy imported around 29 billion cubic meters of gas from Russia every year. Italy has now struck deals that will replace most of those imports. “Imports of 25 billion cubic meters of gas are ensured from 2024 onwards,” Cingolani said. The gap between previous levels of Russian imports and the new supply deals will be covered by imports of liquified natural gas, alternative energy sources, and conservation he explained.
Assam: Piped gas to Cachar homes soon to be a reality
The Cachar district administration said Oil and Natural Gas Corporation will provide piped gas to homes in the district soon. “ONGC authorities recently said projects are being taken up for supply of LPG gas through pipelines throughout Cachar district in the near future,” said an official communiqué. At present, the facility is available in Sonai town in the southern Assam district. Cooking gas is being supplied through pipelines in this town from ONGC’s plant at Dhanehari Part II near Sonabarighat. “Sonai people are lucky enough to get piped cooking gas. In the first phase, 100 families of Sonai town were provided piped LPG from that plant and new connections are also being given,” Cachar deputy commissioner Kriti Jalli said while addressing the oath-taking ceremony of Sonai municipal board on Saturday.
Europe May Face LNG Crisis This Winter
A liquified natural gas (LNG) crisis is brewing for European countries dealing with energy insecurity in the wake of Russia’s invasion of Ukraine, as demand will outstrip supply by the end of this year, Rystad Energy research shows. Although soaring demand has spurred the greatest rush of new LNG projects worldwide in more than a decade, construction timelines mean material relief is unlikely only after 2024. Global LNG demand is expected to hit 436 million tonnes in 2022, outpacing the available supply of just 410 million tonnes. A perfect winter storm may be forming for Europe as the continent seeks to limit Russian gas flows. The supply imbalance and high prices will set the scene for the most bullish environment for LNG projects in more than a decade, although supply from these projects will only arrive and provide relief from after 2024 The European Union’s REPowerEU plan has set an ambitious target to reduce dependence on Russian gas by 66% within this year – an aim that will clash with the EU’s goal of replenishing gas storage to 80% of capacity by 1 November. By shunning Russian gas, Europe has destabilized the entire global LNG market that began the year with a precarious balance after a tumultuous 2021. The decision to sharply reduce reliance on Russian gas and LNG from current levels of between 30-40% will transform the global LNG market, resulting in a steep increase in energy-security based European LNG demand that current and under-development projects will not be able to supply. Russia last year sent 155 billion cubic meters (Bcm) of gas to Europe, providing more than 31% of the region’s gas supply. Replacing a significant portion of this will be exceedingly difficult, with far-reaching consequences for Europe’s population, economy, and for the role of gas in the region’s energy transition. This will also likely create a boom for LNG producers elsewhere of a scale and duration not seen in over a decade. “There simply is not enough LNG around to meet demand. In the short term this will make for a hard winter in Europe. For producers, it suggests the next LNG boom is here, but it will arrive too late to meet the sharp spike in demand. The stage is set for a sustained supply deficit, high prices, extreme volatility, bullish markets, and heightened LNG geopolitics,” says Kaushal Ramesh, senior analyst for Gas and LNG at Rystad Energy. The expected reduction in Russian gas for Europe in 2022 is 37 Bcm, rising to more than 100 Bcm by 2030. As a result, Europe’s gas consumption likely peaked in 2019 and will now decline steadily through to 2030. Gas and LNG is therefore set to play a reduced role in Europe’s energy mix, providing further impetus for renewables and potentially a greater role for nuclear and coal. Europe was in fact on course to increase Russian imports of gas and LNG to over 40% of its supply by 2030, if the now stalled Nord Stream 2 pipeline had been approved. This will instead drop to around 20% by 2030 as current contracts are not renewed. To facilitate additional LNG imports, a slew of regasification terminals has been planned across Europe – some new and some reactivated from deep slumber. If Russian flows were to stop tomorrow, the gas currently in storage (about 35% full) would likely run out before the end of the year, leaving Europe exposed to a brutal winter. Under this scenario, in the absence of joint buying arrangements and countries competing for limited molecules, the TTF gas price could climb to more than $100 per million British thermal units (MMBtu), resulting in industrial curtailments and widespread fuel switching in the power sector. We have already seen curtailments to fertilizer, steel and paper manufacturers in Europe, underscoring the economic pain that awaits. In an extreme scenario of a severely cold winter, not even the residential sector would be safe. LNG markets go bullish with wave of new projects More than LNG 20 projects with a combined capacity of over 180 million tonnes per annum (tpa) have reported some development progress recently. To be certain of LNG supply in 2030, the market will need more than 150 million tpa of production from the 186 million tpa planned, which means more than 80% of the project pipeline must be realized. US projects are in pole position – some of which have been dormant waiting for demand to rise, and have now been given new life. Projects such as Energy Transfer’s Lake Charles and NextDecade’s Rio Grande that were previously on ice have reported 9.45 million tpa worth of deals after the invasion, including an about-face deal by French player Engie, which pulled out of negotiations with NextDecade in November 2020 but recently closed a 1.75 million tpa deal with the same project. However, the project pipeline globally remains far from able to rescue the market. It includes the 15 million tpa Rovuma Area 4 LNG project, to be located adjacent to TotalEnergies’ Area 1 LNG in the currently at-risk Palma region of Mozambique. We expect little to no progress on this project until TotalEnergies resumes construction. Mexico is also well-positioned for Asian exports due to geographical proximity and non-dependence on transit through the Panama Canal, and appears to be gaining momentum among Asian buyers. At the same time, higher prices will slow Asian LNG demand growth in the medium term, which means the continent will remain dependent on fuel oil and coal. In some scenarios, Asian LNG demand may be permanently dented, and deployment of renewables accelerated.
Gasoline Prices May Have Finally Peaked
Following Russia’s invasion of Ukraine and the subsequent sanctions on Russian oil, the price of crude oil rapidly climbed above $120 a barrel. Gasoline prices — which had already been climbing since bottoming out in April 2020 — rapidly followed. For the week ending March 14, 2022, the Energy Information Administration (EIA) reported a weekly retail average gasoline prices across all grades of $4.41 a gallon. That was the highest weekly average ever reported by the EIA (but it isn’t adjusted for inflation). Previously the highest weekly average reported took place in July 2008, when crude oil prices reached nearly $150 a barrel. However, since reaching $4.41/gal, the national average dropped to about $4.20/gal as oil prices pulled back to ~$100/bbl. Barring a new geopolitical event that impacts the oil markets, it seems likely that the price of gasoline will remain below that March peak for now. That doesn’t mean we will see significant relief any time soon. Refiners are currently switching over to the more expensive summer blends. These blends are mandated to have lower vapor pressure to help minimize smog formation in the summer. But, they are more expensive to produce, and the supply of ingredients to produce summer gasoline is less than for winter gasoline. This all coincides with peak driving season. That’s why we rarely see significant drops in the price of gasoline in the summer. The only thing I can imagine that could make this happen is if Russia withdraws from Ukraine in the near future and some of the sanctions on Russian oil are dropped. In the slightly longer term, however, the situation looks a lot better. U.S. oil production continues to climb. This past week U.S. oil production reached 11.6 million BPD, up 1 million BPD from a year ago and up 600,000 BPD since January. If we can maintain that pace for another year, the U.S. will be back at record levels of oil production. The number of rigs drilling for oil reached 552 this past week (source), which is up 210 rigs from a year ago. That represents a year-over-year increase of 61%, and is the highest level of drilling since the Covid-19 pandemic took hold in the U.S. Taken altogether, these signs point to the likelihood of much lower gasoline prices later this year. But you are probably going to have wait until after summer.