Govt leaves ONGC headless as musical chairs continue
For more than 24 hours since 5 p.m. on Friday, no one has been in charge of India’s most valuable public sector company, ONGC, as the government failed to appoint even an officiating chairman after incumbent Subhash Kumar superannuated. It is quite likely that India’s flagship explorer, which accounts for the bulk of domestic oil and gas production and has annual capex plans in excess of Rs 300 billion, will continue to be headless for another 24 hours unless the government goes out of the way and orders someone to take charge on Sunday. In normal circumstances, director (HR) Alka Mittal, the seniormost functional director on the board, would have been asked to take on the mantle from Kumar. While the oil ministry did no such thing, it issued an order on December 28 giving director (onshore) Anurag Sharma additional charge as director (finance) — which was Kumar’s job before he was given the additional role of chairman — from Saturday. The situation, industry observers said, was unprecedented and could indicate the government’s desire to hoist a bureaucrat as chairman with the aim of subjugating the management into hiving off ONGC’s large producing fields. They pointed to repeated letters written by a senior bureaucrat in the ministry, asking the company to sell a major share in Mumbai High and Bassein fields to private firms – ostensibly with the aim of inducting technology for raising production. Indeed, ONGC has been without a duly selected chairman since February 2021 after Shashi Shanker retired. Kumar was appointed as Shanker’s successor as he was the seniormost functional director on the board and retired as chairman since the government failed to find a regular chairman through due selection process – either through government headhunter PESB or search-cum-selection committee. Usually, the Cabinet’s appointments committee puts the seniormost functional director in charge as chairman if a successor is yet to be chosen or appointed before the incumbent retires. The appointment can be for three months or till the appointment of a regular chairman selected through due process. The order is usually issued 2-3 days before the incumbent’s retirement, giving time for briefing the replacement. The administrative minister — Hardeep Puri in case of ONGC — also has discretionary power to put someone in charge on an ad-hoc basis for three months in case the appointments committee does not take a call. Curiously, PESB on June 4 last year conducted interviews for selecting Shanker but did not find anyone suitable from among nine candidates, including two serving IAS officers. It later said a selection committee will be set up to widen the search. The committee is yet to be set up.
Oil prices in 2022 might not reach the high levels of last year
The year 2021 witnessed an upward shift in the price of oil globally, reversing the falls of previous years. After trading at around $85 per barrel in late October, Brent oil fell sharply in November to $69 per barrel by early December. It rebounded thereafter and is currently trading in the upper $70s. Looking ahead to 2022, oil prices are not expected to reach those highs as energy supply is expected to grow faster, catching up on 2021 demand as well as meeting the additional demand growth for 2022. The market’s main focus will be on the upcoming OPEC+ meeting that will be held on Jan. 4, even though it is widely expected to maintain the existing policy of a 400,000 barrel per day increase in output each month. Despite the recent dramatic spread of the COVID-19 omicron variant, crude market sentiments have been improving lately, as most governments are appearing to be more inclined to protecting their economies by imposing lenient mobility restrictions, rather than resorting to total lockdowns. Omicron can be expected to have a lower impact on global economic growth, although the aviation sector could take a hit as the number of cases further increases across the globe. Potential global supply disruptions will also give oil prices additional support, similar to the force majeure interrupting Libya’s Al-Zawiya and Mellitah terminals, Ecuador’s heavy rains that led to the closure of several of its oil production facilities and the interruption of Shell Forcados exports in Nigeria last week after a malfunctioning barge blocked tanker access. Natural gas prices in Europe remain high following a recent surge, squeezing margins for refiners dependent on purchasing natural gas at spot prices. Refining margins have been rather strong in both European and Asian markets lately, brushing aside the weakness seen in early December as the downstream segment appears to have shrugged off fears of omicron having a major impact on demand. In fact, margins rebounding to strength are essentially a reflection of refiners’ concerns which triggered lower run rates. While demand remains robust, refining profitability should weaken further down the road once shortages are alleviated.
Is India missing the green hydrogen bus?
There is today little ambiguity about the empiricism of changing climates the world over. From increased frequencies of intense extreme events to melting ice and sea-level changes, the ramifications of a warming world are palpable. For poorer nations such as India, the rapidity of these changes herald unprecedented hardship, first for those living in fragile environments—leaving a trail of ghost settlements; cascading into the lives of people who reside in endowed and perhaps more resilient regions. As per a 2018 World Bank report, a business as usual scenario could potentially lead to half of the South Asian regions becoming moderate to severe climate change hotspots, affecting over 800 million people. In contrast, the report adds, this vulnerability can be substantively reduced to 375 million if global emissions are halved through collective action. This, of course, is not easy. As far as India is concerned, the UN’s Climate Change Conference in Glasgow on 1 November 2021, saw a 2070 net-zero pledge from the nation. The only other country that has a 2070 target under consideration is Indonesia, while most of the high carbon-emitting nations bind themselves by law and policy to touch the net-zero emissions of carbon dioxide by 2050 or before (China at 2060). Being the third-largest global emitter of CO2, India’s near 20-year lag in meeting the target can perhaps skew efforts to stabilize global temperatures. Although the well-promoted net-zero discourse needs to integrate the largely unaddressed issue of de-carbonization, its current arrangement does help strategies time-specific low-carbon pathways. For India a 2070 target, though distant, may need to top the nations’ political distractions in order to make meaningful interventions for climate-vulnerable life and livelihood choices. India’s energy mix is largely coal dominant—not likely to change anytime soon, despite its huge renewable push (as of September 2021, thermal power—power generated from burning coal, gas and petroleum—comprised 60% of India’s installed capacity in power generation with coal accounting for nearly 50%). A 2030 renewables target has been upwardly revised to 500 GW from 450 GW and carbon intensity has been pledged to be reduced by 45% within the decade. Considering that in the six years since the Paris Agreement, India was able to add 65.06 GW renewable capacity (as of September 2021, wind capacity was 39.87 and solar stood at 46.28 GW, representing about 38% of the overall installed power capacity), it would be interesting to see India add about 400 GW in mere nine years. As India struggles to put wind and solar farms and dabbles with electric vehicles, the world is securely and surely moving onto an era of green hydrogen. Nations such as Japan, China, Canada, France, Australia, Norway, Germany, Portugal, Spain, Chile, and Finland, as well as the European Union have already begun to use hydrogen for their petrochemicals and fertilisers industries. Although the majority of the hydrogen produced at present is “grey”, made from natural gas, data from International Energy Agency (IEA) suggests that the use of solar, wind or other green power sources to produce “green hydrogen” is highly feasible. Japan and China have accelerated their investments in green hydrogen to help the nation’s transition to a low-carbon economy. China in fact has inked a 2021-2025 trajectory for its hydrogen industry as one of China’s six top industries of the future. Opposed to nations that are looking towards transitioning their internal economies, there are others that are looking towards global export of green hydrogen. Chile, Argentina and Paraguay are a few such countries that are geographically endowed with cold deserts that are high-efficiency renewable energy generation regions. Such is the locational advantage of this area that it has been touted as the “new Saudi” of green energy. In years to come, the Magallanes and the Chilean Antarctic region, with overlapping (unrecognized) claims with the Argentine and British Antarctic territories, may well become a hotspot for geopolitical manoeuvring around green hydrogen. Closer home, however, yet another cold, dry and windy region offers a similar opportunity—the Tibetan plateau (Fig 1). China’s successful 850 MW Longyangxia Dam solar facility in the area should be reason enough for India to identify Ladakh as the most promising location for establishing green hydrogen facilities. Juxtaposed however are feeble efforts by India’s Nav Ratna companies such as NTPC to line up tenders this year to procure fuel cell buses for Ladakh and place a 1.25 MW solar power plant to produce green hydrogen in the future. Other public sector units too, such as GAIL and Indian Oil are at a nascent stage of hydrogen generation at various locations in India. Prime Minister Narendra Modi announced a National Hydrogen Mission in August 2021, a welcome recognition of the need to transition towards a green hydrogen pathway. Yet the R&D allocation of a meagre Rs 250 million in the Union Budget 2021-2022 was confounding. To put things in perspective, an exploratory Deep Ocean Mission with manned underwater submersibles (as grandiose as India’s space programme) that envisages mining at depths of 6,000 m in the distant future is allocated Rs 40 billion, while a green hydrogen target that is near achievable, helping the nation transition into low-carbon energy matrix earlier, is handed a paltry allocation. A net-zero transition strategy for the entire spectrum of the energy sector, modelling both public and private enterprise, is therefore imperative. It would be prudent for us to realize that with every fraction of upward creeping global temperatures, a larger amount of water vapour would be held in the atmosphere. This is, and would more devastatingly in the future, cause life-threatening extreme events. Not only would South Asia incur huge losses in agriculture with rising plant, animal and human disease burdens, but it would also lead to large scale climate refugees and crippling uncertainties. If the new flick “Don’t Look Up” is anything to go by, the onus of sensitizing the populace about intangible future events lies with the political dispensation of the day, who tragically driven by profiteering industry, lead the world to a horrific and dark
Malaysia’s Petronas says COVID-19 variants to keep oil demand uncertain
Malaysia’s state energy firm Petronas said on Tuesday that it anticipates recovery in oil demand from the impact of the coronavirus pandemic to remain fragile and uncertain in the next few years. The industry was optimistic about economic recovery but remained cautious and needed to be ready to face oil price volatility, Petronas said in its activity outlook report for 2022-2024. “The path towards sustained oil demand recovery remains fragile and uncertain due to the emergence of new COVID-19 variants that trigger fresh waves of lockdowns,” the custodian of Malaysia’s petroleum resources said. Oil prices slumped in November due to the new Omicron variant but have largely recovered and are up about 50per cent this year, supported by improved demand and supply cuts by the Organization of the Petroleum Exporting Countries and its allies. After 2024, Petronas forecast a positive outlook for drill rig activity and a steady outlook for fabrication of fixed structures and subsea facilities, as it continues efforts to monetise its oil and gas resources. Liquefied natural gas spot prices were expected to be volatile in the coming years due to weather patterns and potential policy changes that could alter supply-demand dynamics, it said. Petronas said many of its current oil and gas projects are expected to be for ready for hook-up and commissioning by 2023 and 2024. While many projects had to be deferred and rationalised due to the pandemic, those that survived are expected to resume and reach peak production only in 2025, it said. Petronas also said it is targeting domestic hydrogen production from 2024, starting with so-called blue hydrogen, which uses natural gas as a feedstock, and then moving to green hydrogen, which uses water.
BPCL sale unlikely this fiscal, Modi govt will be Rs 600 billion short of disinvestment target
The Narendra Modi government is expected to miss its 2021-22 disinvestment target of Rs 1750 billion by about Rs 600 billion as the privatisation of the Bharat Petroleum Corporation Ltd (BPCL) is not likely to go through before the financial year ends. In the last fiscal, 2020-21, the government set a disinvestment target of Rs 2100 billion in the Union Budget, and missed it by a whopping Rs 1780 billion. The government had set an ambitious target of Rs 1750 billion in the Union Budget 2021-22, with over a third of the receipts targeted from the listing (of shares for part sale of the government’s stake) of Life Insurance Corporation and privatisation of BPCL. Experts have estimated that listing of LIC itself is likely to fetch the government around Rs 1000 billion. The target is a mix of receipts from the privatisation of some public sector enterprises and from the sale of the government’s minority stake in other PSUs. While the disinvestment department has assured that the initial public offer of LIC would take place before 31 March 2022, the sale of BPCL, where the government is to sell its entire stake of 52.98 per cent, is in limbo as the bidders for the company have not been able to find partners who can buy the company with them. “BPCL (sale) now looks highly unlikely since we are left with only three months and there has been no movement on the stake sale,” a government official told ThePrint on the condition of anonymity. The rest of the companies listed in the Budget for privatisation included Shipping Corporation of India, Air India, Neelachal Ispat Nigam Limited, Container Corporation of India, IDBI Bank, BEML Limited and Pawan Hans, among others. The Air India transaction has been successfully concluded, but the government is yet to completely hand over the airline to Talace Private Ltd, a subsidiary of Tata Sons. According to the official, the government is in the final stages of concluding the sale of Shipping Corporation of India and Neelachal Ispat. Department of Investment and Public Asset Management (DIPAM) Secretary Tuhin Kanta Pandey recently said the government has received financial bids for Pawan Hans and Neelachal Ispat, and now the process of their privatisation has moved to its concluding stage. The list of companies to be privatised in 2021-22 also included IDBI Bank. Other than this, the government was also likely to privatise two state-owned banks and one insurance company. However, the money from the sale of these entities was not part of the disinvestment target budgeted for the current financial year. Fiscal deficit target may be hit So far, the sale of stakes in state-owned firms has fetched the government around Rs 93.30 billion. This amount does not include the Rs 27 billion it will receive from Air India and another Rs 2.10 billion from the sale of Central Electronics. With the likely shortfall of Rs 600 billion in the disinvestment receipts, the government’s fiscal deficit target could take a hit of 0.3 per cent of the GDP. Chief Economic Adviser Krishnamurthy Subramanian, in his last press conference before demitting office, had said that high growth in tax revenue in the current year will be able to make up for the revenue shortfall from disinvestment. For 2021-22, the government has fixed a fiscal deficit target of 6.8 per cent of the GDP. Fiscal deficit is defined as the gap between revenue and expenditure of the government, where the latter is higher than the former.
Govt announced Pankaj Jain as New Petroleum Secretary
Appointments Committee of the Cabinet approved the Pankaj Jain lAS, as the new Secretary under Ministry of Petroleum & Natural Gas. This restructuring process took place on Monday when Government announced the other major official’s reshuffle. Appointments Committee of the Cabinet (ACC), Ministry of Personnel, Public Grievances and Pensions Department of Personnel and Training approved many posts includes most of the IAS. Jain is currently serving as the Additional Secretary under the Department of Financial Services, Ministry of Finance. He is a 1990 batch IAS officer, and a Bachelor’s degree holder from Shri Ram College of Commerce, and completed his MBA from FMS Delhi. Apart from this, he is also an Associate of the Institute of Cost Accountants of India. Earlier he has worked for the Assam and Meghalaya Governments. This encompasses being District Magistrate at Shillong and Tura along with assignments in the Secretariat and State Corporations dealing with Power, Planning, Information Technology, Livelihood Promotion, and Industries as well as being Director with the Government of India in the Ministry of Micro, Small, and Medium Enterprises. However his work does not end here he also worked with the British International Aid Agency – the Department for International Development (DFID) as Governance Advisor and Senior Program Manager.
AG&P Pratham Kicks-Off Construction of Its Second Liquefied and Compressed Natural Gas (LCNG) Station in Andhra Pradesh
AG&P Pratham in India, the City Gas Distribution (CGD) arm of Singapore-based AG&P Group, a leading downstream LNG platform and infrastructure development company, held a groundbreaking ceremony last week to celebrate the start of construction for its Liquefied Compressed Natural Gas (LCNG) station in Andhra Pradesh. The AG&P Pratham LCNG station is the second in the state and third in South India. Located at YSR Kadapa district, the station comprises of two storage tanks with capacity of 56 KL of LNG storage and gasification. The LCNG station will provide uninterrupted access of natural gas to commercial, industrial, and residential customers and supply Compress Natural Gas (CNG) to help cars, taxis, and buses transition seamlessly to run on clean fuel in the region. AG&P Pratham has two CNG stations in operation currently in the YSR Kadapa District with 10 more to be commissioned by March 2022. In addition, AG&P Pratham is laying pipelines in YSR Kadapa town and industrial estate Putlampalli IDA to deliver Piped Natural Gas (PNG) directly into thousands of homes, businesses, and factories. “The construction of AG&P Pratham’s wholly-owned LCNG station in Andhra Pradesh is an important milestone in the roll-out of vital gas networks being developed in India. It is in lockstep with the country’s commitment to achieve 15% of natural gas in its primary energy mix by 2030. Over the next eight years, we will be building nine LCNG Stations and 134 CNG stations in YSR Kadapa and Anantapur, connecting factories, small-mid-large scale companies, over 10,00,000 households and the transport sector, ensuring reliable supply of this safe, competitive and eco-friendly fuel. Upon its commissioning, Andhra Pradesh will have access to natural gas that will accelerate industrialization, create jobs, reduce pollution and foster a healthier environment, improving the quality of lives for many Indians in the state,” said Mr. Chiradeep Dutta, Chief Operations Officer, AG&P Pratham.
Nitin Gadkari calls for manufacturing of Flex Fuel Vehicles (FFV) and Flex Fuel Strong Hybrid Electric Vehicles (FFV-SHEV) complying with BS-6 Norms in a time bound manner within a period of six months
Union Minister for Road Transport and Highways Nitin Gadkari has said in order to substitute India’s import of petroleum as a fuel and to provide direct benefits to farmers, the Automobile Manufacturers in India have now been advised to start manufacturing Flex Fuel Vehicles (FFV) and Flex Fuel Strong Hybrid Electric Vehicles (FFV-SHEV) complying with BS-6 Norms in a time bound manner within a period of six months. In a series of Tweets he said that in line with Prime Minister’s vision of Aatmanirbhar Bharat and government’s policy on promoting ethanol as a transport fuel, Flex Fuel Vehicles are capable to run on a combination of 100% Petrol or 100% bio-ethanol and their blends, along with strong Hybrid Electric technology in case of FFV-SHEVs. Gadkari said this move will drastically reduce Greenhouse Gas emissions from vehicles on a Well-to-Wheel basis, helping India to comply with its commitment made at COP26 to reduce the total projected carbon emissions by One Billion Tonnes by 2030. Government is enabling the use of various alternate fuels in an effort to shift from fossil fuels. In order to accelerate the introduction of Flex Fuel vehicles, the Production Linked Incentive (PLI) scheme has included automobile & auto components and auto components of flex fuel engines. NITI Aayog, after acknowledging the strong foundation for the Ethanol blending programme (EBP), has formulated the road map for Ethanol blending for the period, 2020-2025. Further in line with Prime Minister’s initiatives of launching three E-100 ethanol dispensing stations at Pune on the occasion of World Environment Day, and MoPNG’s (Ministry of Petroleum and Natural Gas) regulation, which stipulates that in addition to conventional fuel, the authorised entities are required to install facility for marketing at least one new- generation alternate fuel viz, Compressed Natural Gas(CNG), Bio-fuels, Liquefied Natural Gas (LNG), Electric vehicle charging points etc., complying with various statutory guidelines, immediate steps need to be taken to introduce flex fuel engine vehicles. It is expected that higher percentages of ethanol will be blended in gasoline in the next five years, requiring availability of flex engine vehicles.
India’s 10-month high in crude imports signals robust demand outlook
India’s crude imports in November reversed a declining trend to hit its highest level in 10 months as refiners build inventories in anticipation of higher runs, but analysts continued to keep a close eye on developments around the omicron variant of the coronavirus to see if it impacts inflows in the coming months. As average run rates have risen to 100% across all Indian refineries, they are accelerating crude purchases on expectations of a sustained increase in demand for products, with demand for transport fuels such as gasoline having recovered to pre-pandemic levels. India imported 18.37 million mt, or an average 4.5 million b/d of crude oil in November, up 7.5% month on month, latest provisional data from the country’s Petroleum Planning and Analysis Cell showed. This reversed the three-month low for imports seen in October. India’s crude imports in November were also up 0.5% on the year. “China and India will resume their front-line status in being the engines of growth in 2022, but Southeast Asia will also contribute substantially, especially in countries with high vaccination rates,” S&P Global Platts Analytics said. Over January-November, India’s crude imports rose 5.8% year on year to 191.8 million mt, or 4.2 million b/d. According to Platts analytics, India’s refinery runs are expected to rise by 370,000 b/d to 5.2 million b/d in 2022 amid strong domestic demand as economic activity gains steam and export demand rises. A strong reversal In 2020, India’s crude imports fell 10.3% year on year to 201.5 million mt, or 4 million b/d, on shrinkage in domestic fuel demand amid the pandemic-related lockdowns. For India, which meets 85% of its crude demand through imports, 2020 was the first year of negative oil demand growth in nearly two decades. “India is mirroring the global trend, seeing its crude consumption hitting a 10-month high in November. It gives a clear indication that refining companies expect India’s oil demand to remain strong well into 2022,” said Rajat Kapoor, managing director for oil and gas at AWR Lloyd. Indian refiners have been snapping up lighter crudes amid expectations that prices could remain at relatively higher levels in 2022. “Refiners are expecting higher crude prices in 2022. They are putting together a crude sourcing strategy keeping in mind a price that would be on the higher side in comparison to 2021. There is consensus that the price would not hit a fresh low in 2022 due to fundamental reasons,” said an Indian oil ministry official. As India’s mobility index rose from 215% in November to 226% in early December, analysts said they hope the impact of the omicron variant on December crude import volumes would be minimal as refiners would have committed purchases for December even before the news about the variant started to spread. “Fuel demand in December is expected to rise as both petrol and diesel consumption for the first two weeks of the month were higher than the corresponding period last month. Gasoline consumption was up 7% and diesel up 18% from the first half of November given both personal mobility and economic activity have been steadily picking up over the past few months in India,” Kapoor said. The omicron impact The continued uncertainty over the latest wave of infections due to the omicron variant has unsettled oil markets, with several European countries limiting large public gatherings, enforcing stricter social distancing rules and encouraging people to work from home more, with further curtailments expected after Christmas celebrations. “However, the spread of the virus is not that pronounced in India and stricter long lasting lockdowns are not expected here given the comparatively low severity and mortality rate associated with the omicron variant,” Kapoor added. India’s refined oil product exports fell 2.9% month on month to 5.2 million mt, or 1.3 million b/d, in November, PPAC data showed. The decline in exports of refined products was driven by diesel sales, which fell amid Omicron-related concerns. Diesel exports fell 3.9% on the month in November. Meanwhile, gasoline exports rose 3% on the month in November, while jet fuel exports rose 21.9% on the month in November, confirming the improvement in international air traffic. Exports of oil products were up 26.8% on the year in November. In January-November, India’s oil product exports rose 3.2% on the year to 54.7 million mt, or 1.3 million b/d.
Oil India to set up green hydrogen plant in Assam
Oil India Ltd, the nation’s second-largest state-owned oil explorer, is setting up a plant to manufacture green hydrogen at its Jorhat oilfield in Assam, the company said in a statement. “To strengthen its bouquet of clean energy offerings”, the company has initiated action for setting up a 100 kW green hydrogen plant at its Pump station-3 in Jorhat, it said. The pilot plant will generate green hydrogen using AEM technology, it said without giving details. “This is a first of its kind project in the country.” Speaking on the occasion of the ‘bhumi pujan’ ceremony of the project, Pankaj Kumar Goswami, Director (Operations) said the hydrogen so generated will be blended with natural gas using the existing infrastructure. Hydrogen being the cleanest form of energy is the latest focus area across the globe to satiate the rising energy needs. Green hydrogen is derived from water electrolysis using renewable energy like solar or wind. Biomass-based hydrogen production technologies also qualify under the green category. The government proposed the National Hydrogen Mission in the Union Budget 2021-22, initiating a hydrogen roadmap for the country.The mission was announced in August this year by Prime Minister Narendra Modi. Under the Paris agreement (COP 21), by the year 2030, India is committed to reducing its greenhouse emissions by 33-35 per cent from the 2005 levels. This has necessitated finding alternative sources of cleaner energy.