Long delays at Indian LPG terminals tie up VLGCs, freight hits 10-month high
India’s large imports of LPG to meet festive-season demand in November have sparked heavy congestion at its ports, forcing some vessels to wait more than two weeks to discharge cargoes, VLGC fixtures from ship brokers showed, pushing freight to the highest in 10 months Nov. 23. “There are delays and congestion at the ports. We have been seeing huge imports in the Indian market. The ports are getting busy on the discharge due to the volume of imports amid a rise in domestic consumption,” an Indian shipping source said. “Domestic consumption in India is on the rise even while prices of LPG are going up and this is the major reason Indian importers are taking more LPG cargo imports in recent weeks and also to avoid inventory losses,” the source said. “(It is) not unusual waiting time in India these days — three to five days in Haldia. But yes, some places we do have some delays… which of course helps on the shipping market,” another ship broker said, referring to the rise in VLGC rates from the delays caused by a combination of large imports and less than adequate port infrastructure. “It is not easy to fix out your ship coming ex-India,” he added. India’s LPG consumption has been rising and hit nine-month highs at 2.49 million mt in October, as the country prepared for Diwali in November. Though imports in September fell 7.7% on the month to 1.57 million mt, these were from a record high of 1.71 million mt in August, according to data from the Petroleum Planning and Analysis Cell dating back to 1998. In the first 10 months this year, India’s LPG consumption totaled 23.076 million mt, up 2.52% on the year, PPAC data showed. Freight rebounds Up to the third week of November, around 624,100 mt of mixed propane-butane LPG cargoes aboard 13 VLGCs were waiting at Indian terminals, including Mumbai, Haldia, Pirpau, Visakhapatnam, Kandla and Mangalore, fixtures showed. The waiting times ranged between one day and two weeks, according to the fixtures. The 58,123 Dwt BW Birch, fully laden with a Middle Eastern propane-butane cargo, has been waiting off Haldia for more than two weeks, according to the fixtures and Platts cFlow trade-flow analytics software. The number of vessels peaked at 30 in the second week of November, waiting to discharge about 1.52 million mt of mixed cargoes off ports including Mumbai, Visakhapatnam, Pipavav, Kandla, Haldia, Pirpau, Mangalore, Dahej, Tuticorin, Porbandar and Ennore, the fixtures showed. In the first week of November, about 1.08 million mt of LPG in 27 ships were waiting off India’s east and west coast ports, the fixtures showed. Congestion at Indian and Chinese ports, along with delays vessels face in transiting the Panama Canal, had limited the number of available VLGCs to move cargoes during a high-demand season in Asia, sending rates on the major Persian Gulf- Japan route to almost six-month highs at $63.5/mt Nov. 16. Though freight briefly eased to around $61/mt, as more trader relets emerged, levels rebounded to $66/mt Nov. 23, the highest since $69/mt on Jan. 25, as concerns over delays persisted amid healthy flows of US cargoes to Asia in December. “(It is due to) long waiting times, and just generally bullish sentiment. We see this pattern all the time,” a third ship broker said. “While the Persian Gulf-Chiba route might be losing steam, I think Houston-Chiba will keep going,” he said, pointing to the busy schedules of US-to-North Asia shipments. He said waiting times to transit the Panama Canal is currently about nine days for north-bound vessels and 15 days for those south bound, compared with the typical five to six days. Up to the Nov. 5 week, waiting times were around 18 days north bound and about 10 days south bound. “Discharge port delays in India and the Far East are tying up potential ships and affecting itineraries as with the preference to place ships on a long-haul voyage where rates are typically at a seasonal high, leaving behind relatively fewer ships,” the third ship broker added.
LNG trade: IGX volume on the rise, with prices up to 30% below spot rates
As global LNG prices are ruling high, industrial fuel consumers in India are mitigating the adverse impact on them to some extent by increasing the volume of purchases on the platform of IGX, the country’s fledgling natural gas exchange. “In a year since trading started on IGX the gas prices discovered have been on average 10-30% lower compared with global spot LNG prices,” Rajesh Kumar Mediratta, CEO & MD of IGX told FE. IGX offers contracts in day-ahead, daily, weekdays, weekly, fortnightly and monthly modes. The prices on IGX dropped to a low of $6.1/mmBtu in April 2021 when spot LNG was at $10/mmBtu. IGX contract prices have since consistently increased in tandem with the rise in crude oil price and LNG in international markets but have remained lower than the spot LNG prices in the range of $5 to $20/mmBtu. In October when spot LNG prices touched a high of $35/mmBtu in line with the increase in Brent crude price, IGX prices remained considerably lower at $18.7/mmBtu. In November the spot LNG prices have dropped to $31/mmBtu and the IGX prices were at $27.4 per mmBtu. “The lower price discovery has increased liquidity on the exchange,” said Mediratta. The trading volumes have risen from 2500 mmBtu in January to 10,00,000 mmBtu in October 2021. “The volumes were positively impacted by the introduction of the open auction that allowed bidders to watch the price quoted by other participants and accordingly revise their bids. It also helped in market price discovery gas at IGX,” Mediratta said. However, the rising international gas prices have impacted spot LNG prices forcing some customers to shift to long term contracts of over six months and one year. “Some customers have moved to contracts for six months and some to alternate fuels with the increase in spot LNG prices. Spot prices have moved from $5 per mmBtu in February to $35 now. But we believe the prices will again drop after February when winter will end in Europe, America and Northern parts of Asia. IGX prices are beneficial in the long term,” Mediratta said. According to the ministry of petroleum and natural gas (MoPNG), India has an LNG regasification capacity of 42.5 million metric tonnes per annum (mmtpa) out of which 24.3 mmtpa is utilised and about 50-60% capacity is booked on a long term basis, which leaves close to 40% of capacity for spot RLNG. In comparison countries such as Japan and South Korea have 80% of LNG contracted in long term. Mediratta believes government notification in August allowing domestic producers of gas to sell 10% of annual production on exchanges will increase the volumes from Q4FY22. This will help companies to bring more acreage under production as they will get market price for their gas compared to the administered price of $2.9/mmBtu. IGX has also sought permission from the Petroleum and Natural Gas Board of India (PNGRB) to increase the number of gas hubs to facilitate buying, which will help reduce the cost for buyers as different zones have additional rates based on distance from supply zones. “We are adding four hubs, two each in Uttarakhand and Haryana, two in Gujarat and one in Maharashtra,” said Mediratta.
Chhattisgarh govt announces reduction of VAT on petrol, diesel
The Chhattisgarh government on Monday decided to reduce Value Added Tax (VAT) on petrol and diesel by 1 per cent and 2 per cent, respectively. This decision was taken during the cabinet meeting chaired by Chief Minister Bhupesh Baghel, a government official said. The move will cause a loss of nearly Rs 1,000 crore to the state exchequer. Providing major relief to the people of the state. Chief Minister Bhupesh Baghel-led cabinet has decided to cut the prices of petrol and diesel. VAT on diesel and petrol has been reduced by 2 per cent and 1 per cent respectively. The state government will bear the loss of about Rs 1,000 cr.. the Chief Minister’s Office (CMO) tweeted.
Centre clarifies on reports of giving away ONGC’s Mumbai High field to private sector
The Oil Ministry added that there is enough scope for several large and small companies to operate in the offshore and onshore basins in the country as substantial area is still available. The Centre on Monday clarified on reports of the Oil Ministry’s proposal to give away public sector behemoth ONGC’s Mumbai High field to private sector, saying that such a step “has to be done by following system and procedures in a transparent manner.” In an official statement, the Ministry of Petroleum and Natural Gas stated, “ONGC had conducted an internal Strategy Meet at Udaipur from 29th to 31st October 2021 for which suggestions including making a 25 years energy perspective plan, 15 years exploration plan by taking more acreages under exploration, and having partnerships for its major fields, with scope of enhancing recovery and technology infusion, were made.” The Centre added that while on one side, area under exploration has to be increased which would subsequently lead to more new discoveries in the country, on the other side, production from existing fields has also to be optimised and increased wherever possible by employing advanced technology, drilling more production wells, wherever technically feasible, and better management. “For this private sector companies can be involved as partners or through various business models so that new techniques and technology can be brought in through such companies which have experience in this. However, all this has to be done by following system and procedures in a transparent manner. ONGC has to prepare its plan and take right decisions in order to increase domestic production,” the ministry further said. It also added that there is enough scope for several large and small companies to operate in the offshore and onshore basins in the country as substantial area is still available. To recall, the government had decided in February 2019 that National Oil Companies (NOCs) would be free to choose field specific models, including farm out and Joint Venture (JV)/ Technical Service Model (TSM) for enhancing production from their mature and ageing fields. Last week, reports stated that Petroleum Secretary Tarun Kapoor had said the government is pushing ONGC to involve private sector companies and service providers wherever possible to help raise oil and gas production. Kapoor’s comments came days after the second-highest ranked official in his ministry asked Oil and Natural Gas Corporation (ONGC) to give away a 60 per cent stake plus operating control in India’s largest oil and gas producing fields of Mumbai High and Bassein to foreign companies. India is 85 per cent dependent on imports to meet its oil needs, and a way to cut the high import bill is to increase domestic production. Mumbai High, which was discovered in 1974, and B&S that was put into production in 1988 are Oil and Natural Gas Corporation’s (ONGC) mainstay assets, contributing two-thirds of its current oil and gas production. Without these assets, the company will be left with only smaller fields.
Shell halves Singapore refining capacity, to change chemical feedstock
Royal Dutch Shell (RDSa.L) has halved its crude processing capacity at its Singapore hub and reduced fuel exports, executives said on Tuesday, as the major transits from fossil fuels to cut emissions and meet global low-carbon energy needs. The refinery on Pulau Bukom will continue to produce naphtha for its ethylene unit, Shirley Yap, senior vice president of chemicals and products at Shell Singapore, told reporters. Shell has also started testing new chemical feedstocks – pyrolysis oil and bionaphtha – at the cracker, she said, as the major aims to supply olefins with lower carbon footprint to customers like Japanese chemical maker Asahi Kasei Corp (3407.T). Shell is a key fuel supplier in Asia and the drop in exports has tightened supplies and propelled margins for refiners in the region back to pre-pandemic levels in recent months. “The reality is that we’ve cut a substantial part of our capacity and there’s demand for fuels today so we have to ensure that we are doing it at a pace that is in step with our customers and in step with the society,” Shell Singapore Chairman Aw Kah Peng said. “But at the same time … it can’t be turned on with just a flick of the switch as infrastructure needs to be build but we want to be there as quickly as we can,” she said. Shell will build its first pyrolysis oil upgrader to produce 50,000 tonnes per year (tpy) of treated pyrolysis oil for its 800,000 tpy cracker on Bukom in 2023. Pyrolysis melts plastic waste into products such as pyrolysis oil, which can be upgraded as raw material for plastics and chemicals, although the process isn’t commercially proven and consumes a lot of energy. Other projects in Shell Singapore’s pipeline include a carbon capture and storage (CCS) hub and a 550,000 tpy biofuels plant to process waste and vegetable oils into sustainable aviation fuel (SAF). Shell aims to make about 2 million tpy of SAF by 2025 globally although SAF accounts for less than 0.1% of today’s global jet fuel demand. The projects form part of Shell Singapore’s plans to cut emissions from its operations by half by 2030, from 2016 levels on a net basis, Shell Downstream Director Huibert Vigeveno said. Shell did not provide investment figures for the projects. Energy companies are face increasing pressure from investors, activists and governments to steer away from fossil fuels and rapidly ramp up investment in renewables. Globally, Shell has pledged to halve emissions from its operations by 2030, as well as reduce its net carbon footprint by 45% by 2035. read more Bukom, together with other Shell chemical plants on Jurong Island, forms one of five Energy and Chemical Parks owned by the major globally and is the only one in Asia. Shell plans to build two chemical conversion units in Asia to convert waste plastics into pyrolysis oil for Singapore, similar to units in the Netherlands with joint venture partner BlueAlp which will be operational in 2023. Shell previously announced it would trial the use of hydrogen fuel cells for ships in Singapore and is exploring developing a solar farm in a landfill near Bukom.
Rosneft believes Indian market has long-term potential
Russian oil company Rosneft promotes a framework of integrated cooperation with Indian partners across the entire value chain, from the extraction of oil to the refining and distribution of oil products. Since 2016, Indian companies (ONGC Videsh Ltd., Oil India Limited, Indian Oil Corporation, and Bharat Petroresources) own 49.9 per cent of the JSC Vankorneft subsidiary. This Krasnoyarsk Territory-based enterprise is developing the Vankor oil and gas condensate field — the largest field discovered and brought online in Russia in the last 25 years (extracted AB1+B2 reserves amount to 286 million tonnes of oil and condensate and 103 billion cubic metres of gas). Furthermore, a consortium of Indian companies (Oil India Limited, Indian Oil Corporation and Bharat Petroresources) owns 29.9 per cent in Taas Yuryakh Neftegazodobycha (other shareholders are Rosneft and BP), which holds licences to areas in the Central Block of the Srednebotuobinskoye field and the Kurungsky licence block (AB1C1+B2C2 reserves total 168 million tonnes of oil and condensate and 198 billion cubic metres of gas). Since 2001, an Indian company ONGC Videsh Ltd. has been a member of the Sakhalin-1 project (with Rosneft, ExxonMobil, and Japanese consortium SODECO among other shareholders). In 2020, the project produced 12.4 million tonnes of oil and condensate and supplied more than 2.4 billion cubic metres of gas to consumers. Cumulative payments to Indian partners and the dividends from joint projects amounted to $4.6 billion over the past five years. “Rosneft believes that the Indian market has a long-term potential, which is why the Company acquired a 49.13 per cent stake in Nayara Energy in 2017,” a spokesperson of Rosneft said. The deal remains the largest foreign direct investment in India’s oil and gas sector. Nayara Energy is comprises top-quality assets, including the Vadinar refinery with a throughput of 20 mtpa. The refinery is the second largest facility of its kind in India and one of the most technologically advanced in the world. “Rosneft is expanding its investment in the Indian economy: a major petrochemicals development programme is underway, with an investment of about $750 million at the current stage. In particular, there are plans to build polypropylene production units with a capacity of up to 450,000 tonnes per year,” added Rosneft’s spokesperson. Nayara Energy’s business also includes a deep-water port that can accommodate very large crude carriers (VLCC) and one of India’s largest retail network. Nayara Energy looks to further expand its network of petrol stations in India to 8,000 over the next three years. Rosneft has extensive experience in long-term contracts. The development of vertically integrated cooperation with Indian partners along the entire value chain from new upstream projects in Russia with joint flow control would strengthen India’s energy security. “We hope that our new cooperation proposals will be welcomed by our Indian partners,” Rosneft’s spokesperson said. “One of the promising areas of cooperation may be the Vostok Oil project, which is the largest greenfield oil and gas project in the world,” said Rosneft. It is comprised of 52 licence areas with 13 oil and gas fields, including the Vankor field developed with the Indian partners, the Suzunskoye, Tagulskoye and Lodochnoye fields, as well as the new and promising Payakhskoye and Zapadno-Irkinskoye fields, unique in their reserves. The project’s resource base exceeds 6 billion tonnes (44 billion barrels) of oil with a uniquely low sulphur content of 0.01-0.04 per cent. The resource base is comparable to the largest oil provinces in the Middle East or the US shale formations. The high quality of the feedstock eliminates the need for separate units at refineries and significantly reduces the project’s greenhouse gas emissions. Vostok Oil is a project with low production costs per unit of output, with a carbon footprint 75 per cent lower than that of other major greenfield oil projects in the world. From drilling to pipeline and tanker design in the oil export chain, Vostok Oil already includes highly environmentally friendly technology in its design phase. The project plans to use, among other things, associated petroleum gas for power supply. It will also be supported by local wind power. The project is expected to produce up to 100 million tonnes of oil in 2030. Vostok Oil’s logistical advantage lies in its ability to deliver oil from the fields in two directions at once — to European and Asian markets, including India. Rosneft launched the full-scale development of the project’s fields in 2020. In June 2021, during the XXIV St. Petersburg International Economic Forum, Rosneft entered into more than 50 contracts related to the project for a total amount of $7.8 billion. In October, Rosneft completed a series of Vostok Oil roadshows for suppliers and contractors. The Company held 16 meetings with major works and services suppliers and engineering companies from 15 countries in Europe, Asia and the Middle East. Following the meetings, the Company received some 60 offers of cooperation. Leading international experts’ opinions on resource base, development technologies, and the project’s economic model along with the legal experts’ reports conclude that the project implementation is not subject to any sanctions restrictions. To implement the project of an unprecedented scale, the Russian Federation provided Vostok Oil with a set of investment incentives to advance the project’s infrastructure development. These made it possible to form a sustainable economic model for the project and make it attractive for large global investors. Analysts at Goldman Sachs called Vostok Oil a “magnet for investors”. Leading global investment banks estimate that “the project’s net present value could be in the range of $75 billion to $120 billion.” The project’s outstanding potential is confirmed by the interest exhibited by international investors: at the end of 2020, the major international trader Trafigura bought a 10 per cent stake in the project; in November 2021, a consortium led by Vitol acquired a 5 per cent stake in the project. “Rosneft is currently negotiating entry into the project with a number of potential partners, including a consortium of Indian companies,” added the spokesperson.
Oil firms may cut fuel prices on low demand
Brent crude plunged 6.95% to $78.89 a barrel on Friday from $84.78 10 days ago. It was the lowest since October 1. A downslide in international oil prices on demand concerns due to the resurgence of Covid-19 cases in Europe could prompt domestic fuel retailers to slash petrol and diesel rates as benchmark Brent crude plunged sharply by 6.95% to $78.89 a barrel on Friday from the month’s peak of $84.78 a barrel 10 days ago, two people aware of the development said on Sunday. Brent has slipped below $80 a barrel, the lowest since October 1, which makes a case for reducing petrol and diesel rates in India, they said requesting anonymity. “State-run oil companies have made some small gains on automobile fuels, but they preferred to watch the declining trend in global oil markets for some time before passing on the benefit to the consumer, as in the past a fall in fuel rates was quickly followed by a spike,” the first person said. Immediate price reductions would, however, be small, under Re 1 per litre, he added. Retail prices of petrol and diesel in India, which are linked with daily fluctuations of their international benchmarks, have been frozen since November 4, the day the Union government sharply reduced central levies on petrol and diesel by ₹5 a litre and ₹10, respectively. Petrol price has been stable for the last 18 days at ₹103.97 per litre and diesel at ₹86.67 in Delhi. “For the first time in many months international oil prices fell due to demand concerns, else producers were keeping oil prices artificially high by restricting supplies, ignoring pleas of major consumers such as the US and India,” the second person said. India is the third largest consumer of crude oil after the US and China. Experts say state-run oil marketing companies should scrupulously pass on the benefit of falling global oil prices to the consumer as theoretically they revise petrol and diesel rates daily. SC Sharma, former officer on special duty at the erstwhile Planning Commission, said: “Since oil prices have fallen and are likely to fall in future, India’s oil marketing companies are also required to pass on the benefit of reduced oil prices on a day-to-day basis in order to give relief to consumers as also to facilitate high economic growth.” Recently, India saw an unprecedented spike in automobile fuel rates. One of the reasons for high domestic fuel rates is production curbs by the oil cartel, the Organisation of the Petroleum Exporting Countries (OPEC). After international oil prices plunged below $20 due to global lockdowns to contain the Covid-19 pandemic in April 2020, OPEC and its allies, including Russia (together known as OPEC+) on April 12 last year announced an unprecedented 9.7 million barrel per day cut in oil output.
Clean energy push to slash petrol, diesel demand growth: Crisil
Demand growth in petrol and diesel combined will likely decline to 1.5% per annum this decade, compared with 4.9% in the last, because of increasing blending of ethanol with petrol, and rising use of vehicles powered by compressed natural gas (CNG) and electricity. The trend will also be persuaded by policy interventions as India targets net-zero emissions by 2070. Taking a cue, oil refiners would be altering their production mix in favour of alternatives such as petrochemicals, which should also support their profitability. Hetal Gandhi, director, Crisil Research said, “A more than three-fold increase in the number of CNG stations, advancing of the ethanol blending target, and a significant decline in EV battery prices are likely to slash demand growth in petrol to 1% this decade from 8.4% in the last. Demand for diesel will be relatively resilient (2% annual growth compared with 3.9% earlier) because of non-exposure to the two-wheeler segment, where the shift to EVs is sharper, and the presence of a significant proportion of freight vehicles where CNG and EV penetration would be limited. Consequently, the proportion of diesel and petrol in the consumption of petroleum products will reduce to 44% by 2030 from 50% now.” Yet refiners are expected to add 37 million metric tonne per annum of capacity (15% over the existing base) by fiscal 2025, investing over ₹1500 billion. Almost all these facilities would be capable of producing both transportation fuel and petrochemicals. Consumption of petrochemicals is expected to grow at a healthy 8-10% in India. Per-capita consumption of polymers is expected to double to 18-20 kg by fiscal 2030. That, and slowing demand for transportation fuel would result in the share of petrochemicals in petroleum products rising to 17% by fiscal 2030 from 7% in fiscal 2020. This healthy demand growth for petrochemicals will partly offset the decline in India’s crude oil demand growth to 3.5% this decade from 4.5% in the last. This flexibility of diversification would lend stability to refiner margins. Their profitability, and those of oil marketing companies (OMCs) has been on the mend with margins gradually rebounding to pre-pandemic levels. Despite the lower demand growth for petrol and diesel, the credit profiles of refiners and OMCs will remain stable over the near-to-medium term, indicates a CRISIL Ratings analysis of public sector refineries and OMCs, which have 65% share of refining capacity and 90% share of oil marketing in India.
Saudi Aramco Heeds New Investments in India, After Reliance Calls Off Deal
The Saudi Arabian public petroleum and natural gas Saudi Aramco (SE:2222) has announced that it has no plans of giving up on investment opportunities in India, as the latter houses ‘tremendous growth opportunities over the long term, stated the oil giant on Sunday. The global oil major has confirmed that it will continue looking for and evaluating new and existing business opportunities with potential partners in the country. In August 2019, Reliance Industries (NS:RELI) Limited and Saudi Aramco signed a non-binding letter of intent, as per which the former would sell 20% of its stake in its O2C business to the latter for raising USD 15 billion, for debt reduction. However, the deal between the two corporations was called off by RIL on Friday, which led to the conglomerate’s shares tanking almost 4% on Monday, closing the session 4.4% lower at Rs 2,363.75 apiece. Despite not going ahead with the 2019 deal, Aramco and Reliance have stated that the Mukesh Ambani-led company will continue to remain Aramco’s preferred partner in India and has plans to partner with the firm in future, without adding much to this development.
RIL to re-evaluate proposed stake sale deal with Saudi Aramco
Reliance withdraws plan to hive off O2C business Reliance Industries Ltd and Saudi Aramco have decided to re-evaluate the 2019 deal under which the Saudi Arabian company was expected to pick 20 per cent stake in Reliance’s oil to chemicals (O2C) business. Consequently, RIL has withdrawn its application with NCLT to hive off its O2C business. “Due to evolving nature of Reliance’s business portfolio, Reliance and Saudi Aramco have mutually determined that it would be beneficial for both parties to re-evaluate the proposed investment in O2C business in light of the changed context. Consequently, the current application with NCLT for segregating the O2C business from RIL is being withdrawn,” RIL said. The two companies had signed a non-binding Letter of Intent in August 2019 for a potential 20 per cent stake acquisition by Saudi Aramco in the O2C business of Reliance. “Over the past two years, both the teams made significant efforts in the process of due diligence, despite Covid restrictions. This has been possible due to the mutual respect and long-standing relationship between the two organisations,” RIL said in a statement. New Energy & Materials businesses However, Reliance recently unveiled its plans for the New Energy & Materials businesses by announcing the development of Dhirubhai Ambani Green Energy Giga Complex at Jamnagar. It will be amongst the largest integrated renewable energy manufacturing facilities in the world. RIL and Aramco could thrash a new deal in the future. “The deep engagement over the last two years has given both Reliance and Saudi Aramco a greater understanding of each other, providing a platform for broader areas of cooperation. Saudi Aramco and Reliance are deeply committed to creating a win-win partnership and will make future disclosures as appropriate,” the statement said. RIL shall continue to be Saudi Aramco’s preferred partner for investments in the private sector in India and will collaborate with Saudi Aramco and SABIC for investments in Saudi Arabia. Saudi Aramco and RIL have a very deep, strong and mutually beneficial relationship, that has been developed and nurtured by both companies over the last 25 years. Both companies are committed to collaborate and work towards strengthening the relationship further in the years ahead, RIL said.