RIL to press KG-Basin for higher revenues after govt hikes gas price
Mukesh Ambani-led Reliance Industries (RIL) is reaping the benefits of an increase in production from its oil and gas assets. The higher production from RIL-bp controlled Dhirubhai-6 (D6) block in the Krishna Godavari (KG) Basin will coincide with the government significantly hiking the price allowed for selling domestically produced natural gas. RIL’s share of production from the KG-D6 basin sequentially rose by 18.4 per cent to 39.2 billion cubic feet equivalent (BCFe) during the quarter ending September 30 of the current financial year. This stood at 33.1 BCFe in April-June 2021. There was nil production from this asset in July-September 2020. “Commissioning of R-Cluster and Satellite Fields in KG D6 block led to a turnaround in the oil and gas segment earnings,” RIL said in a presentation. The gas produced from this asset, awarded under the New Exploration Licensing Policy (NELP) regime, is priced in line with a government approved formula instituted in March 2016. The KG-D6 asset is enlisted under the Deepwater, Ultra Deepwater, and High Pressure-High Temperature area (collectively called difficult discoveries) category. This allows RIL and bp marketing freedom including pricing freedom, subject to a ceiling price on the basis of landed price of alternative fuels. The landed price is calculated once in six months and applied prospectively for the next six months. According to the Ministry of Petroleum and Natural Gas, the price data used for calculation of ceiling price in $ per million British thermal units (mmBtu) shall be the trailing four quarters data with one quarter lag. One BCF is equal to one million mmBtu. Under this pricing regime, RIL-bp was allowed to sell natural gas produced from KG-D6 subject to a price ceiling of $3.62 per mmBtu during the first half of financial year 2021-22 (till September 30, 2021). This drove up RIL’s revenue from the oil and gas business sequentially by 28.3 per cent to Rs 16.44 billion in Q2FY22. However, these earnings are expected to multiply when the year closes since the notified gas price ceiling has been almost doubled to $6.13 per mmBtu for the remaining six months of the current financial year. “A price of $7 to $8 per mBtu is remunerative for gas produced from difficult discoveries. These price levels are also expected to be attained in the April 1, 2022 to September 30, 2022 price revision,” said Sabri Hazarika, senior research analyst at Emkay Global Financial Services. These price hikes come on the back of global price movement. An unprecedented demand across the globe has led to a historic increase in gas prices, with most markers up three times (sequentially). According to RIL, a further increase is likely in the ceiling price applicable for KG-D6 gas buoyed by current high prices. In addition to the existing production, first gas is expected from the KG D6 – MJ Field by Q3FY23. RIL-bp expects to produce 1 BCF of gas per day, in a phased manner, from the integrated development of KG-D6 by 2023. This will be approximately 25 per cent of India’s production and 15 per cent of demand.
HPCL achieves maiden 100 TMT of Gas Sourcing & Marketing
In the changing landscape in Energy sector, Hindustan Petroleum Corporation (HPCL) is committed towards expansion of Infrastructure to enhance its presence in Gas Value Chain. In this direction, HPCL has achieved its maiden 100 TMT of Gas sourcing & marketing during the current financial year. In addition to marketing to various customers, HPCL is expanding its presence in Gas Value Chain by setting up exclusive City Gas Distribution network in 10 geographical areas. With this HPCL would be present in 20 geographical areas and 34 Districts. Hindustan Petroleum Corporation operates two major refineries producing a wide variety of petroleum fuels and Specialties. The Company also owns and operates the largest lube refinery in the country producing lube base oils of international standards.
Reliance’s green energy business taking shape, may contribute 10% of EBITDA in 5 yrs
Billionaire Mukesh Ambani’s Reliance Industries Ltd has made a wave of partnerships to give shape to its green energy business that spans solar, battery and hydrogen investments and could contribute almost 10 per cent of the company’s pre-tax profits in five years, a report said. The oil-to-retail conglomerate announced a wave of partnerships with REC, NexWafe, Sterling and Wilson, Stiesal and Ambri for total costs of $1.2 billion. “With these investments, Reliance has acquired the expertise and technology portfolio to start to build a fully integrated end-to-end renewables energy ecosystem through solar, batteries and hydrogen,” brokerage Bernstein said in a report. “Reliance will commercialise the acquired technologies and set up manufacturing plants in India.” Reliance is expected to continue to invest in technology such as fuel cells and key materials for the clean energy sector. “Based on our assumptions, we believe the new energy business could contribute almost 10 per cent of the company’s total EBITDA by FY’26 assuming all the factories are constructed and ramped up on the company’s timeline,” it said. “This will make Reliance a highly diversified conglomerate spanning E&P, refining, petrochemicals, clean energy, telecoms, retail and internet, although we suspect that the company will be split up given the inefficiency of such a corporate structure.” Reliance still needs the technology for fuel cell development, which the company is expected to acquire or license from one of the industry leaders such as Plug Power, Ballard, or Ceres. It may also need to invest in key suppliers for the sector such as manufacturers of cathode, separator and electrolyte for battery manufacturing and could also invest in MEA, catalysts and bipolar plates for fuel cell manufacturing. Reliance is targeting solar manufacturing of 100 GW and green hydrogen costs of $1 per kg by 2030. It will spend $10 billion on the new energy business over the next 3 years towards achieving these targets. “Based on capex for clean energy, we see a route to Reliance building a clean energy business, which could be worth $36 billion,” Bernstein said. Reliance is building a green energy business to supply the equipment India will need for its green energy revolution. Also, the firm has committed to being net carbon zero by 2035, which is earlier than any other energy company in the region. “While Reliance has the balance sheet and relationships, it lacks the technology and manufacturing know-how which will be essential for success. While it is easy to dismiss their ability to pull it off, Reliance has shown they can move into new verticals successfully. We think the same is true here,” the report said. Reliance at its shareholders’ meeting in June announced its plan to invest $10 billion in low carbon energy which marks another chapter in the transformation of the company. Over the next 3 years, Reliance will spend Rs 600 billion to construct four ‘giga factories’ to make integrated solar PV modules, electrolyzers, fuel cells and batteries to store energy from the grid. The site of these plants will be located at the new 5,000 acres Green Energy Giga Complex in Jamnagar. An additional Rs 150 billion will be used for investments across the value chain, technology, and partnerships for the new energy business. “From oil and gas to telecom, to retail and internet, it’s hard to think of another company which has reinvented itself as much as Reliance has done over the past decade. This is a bold move, however, and many will question what Reliance’s source of value is in these industries, other than their position as one of the most successful Indian conglomerates,” it said. Reliance is acquiring REC Solar Holdings from China National Bluestar for $771 million. REC is a well-established manufacturer of polysilicon, PV cells and modules with plants in Norway and Singapore. Using the technology of REC, Reliance will build a new integrated solar manufacturing plant in Jamnagar and expand capacity globally. Ambani’s firm is investing $45 million in NexWafe to jointly develop and commercialise at scale monocrystalline green solar wafers, and is acquiring 40 per cent in leading solar EPC and O&M provider Sterling and Wilson Solar Limited (SWSL). It has also signed a pact with Norway’s Stiesdal for technology development, and manufacturing of Stiesdal’s HydroGen Electrolyzers in India. Another $50 million has been invested in US-based Ambri to develop and commercialize Ambri’s liquid metal batteries for energy storage. Reliance is also in discussion with Ambri to set up a large scale battery manufacturing facility in India. “Overall, Reliance is building a fully integrated end-to-end renewable energy ecosystem for customers through solar, batteries and hydrogen. No other energy company is investing across the entire new energy value chain but if Reliance can pull this off then the value creation and earnings potential will be substantial,” Bernstein said.
India to bargain for undelivered cargoes for renewing LNG import contract with Qatar
India will bargain for supply of undelivered gas quantities of past years when it negotiates renewal of its multi-billion dollar LNG import deal with Qatar, an official said. Petronet LNG Ltd’s 7.5 million tonnes a year liquefied natural gas (LNG) import deal with Qatargas is ending in 2028. Renewal, if any, has to be confirmed 5 years ahead of that. Talks for renewal will start next year and will be conditioned on Qatargas delivering in 2022 the 50 cargoes or shiploads of LNG that weren’t taken in 2015, Petronet Director-Finance V.K. Mishra said. India in 2015 had not taken delivery of the cargoes as it renegotiated the pricing of the long-term supply contract after prices hit double-digit. Qatar had then agreed to revise the pricing formula subject to India buying an additional 1 million tonnes per annum of LNG. As regards the cargoes that were not taken, it was decided that India can see the cargoes anytime during the remainder of the contract that ends in 2028. In case, Qatar is unable to meet the request, the deferred cargoes can be delivered in 2029. “We have requested Qatar to give us the pending 50 cargoes next year,” Mr. Mishra said. “They haven’t yet given a response to our request.” He said the demand can be brought up when the renewal talks start. Spot LNG prices in Asia rose to a record $6.33 per million British thermal units on October 6, valuing a standard cargo at about $190 million. Petronet pays about $11 per mmBtu under its oil-linked contract with Qatar. Last year, Petronet had sought 3 cargoes additional to the annual contracted volume, of which Qatar delivered two, an official aware of the matter said. Petronet is promoted by four state oil firms — Indian Oil Corp (IOC), Bharat Petroleum Corp Ltd (BPCL), GAIL (India) Ltd and Oil and Natural Gas Corp (ONGC). Its chairman is Secretary to the Ministry of Petroleum and Natural Gas, Government of India. Sources said the government is backing Petronet’s efforts to get the undelivered LNG at times when energy prices have climbed to record high. The 50 cargoes will come at $11-12 per mmBtu against more than double the rate that is prevalent in the spot or current market presently. The Oil Ministry, they said, has assured Petronet to take up on its behalf the demand for supply of undelivered cargoes.
Exxon looks to buy stake in ONGC’s Indian deep sea fields
Global oil major ExxonMobil Corp is looking at buying a stake in some of the local deep water fields of Indian explorer Oil and Natural Gas Corp, oil secretary Tarun Kapoor said on Friday.
India Intends To Install EV Chargers Every 50 Kilometers Of National Highway
In India, the National Highways Authority of India (NHAI) has set an ambitious goal for developing its EV charging infrastructure. India Infrahub reports that NHAI will install an EV charging station along the national highways every 50 kilometers by 2023. This is over 40,000 kilometers of highways, with a plan of almost 700 charging stations. NHAI chairman Giridhar Aramane told ThePrint that wayside amenities were planned along the national highway network and would include EV charging stations, restrooms, rest areas for drivers, gas and diesel pumps, and restaurants. “We have bid out 100 wayside amenities and got a tremendous response. Each wayside amenity has received at least six-seven bids. Once the bids are awarded, (the work) will take six months to complete. “Whoever is traveling on national highways in an electric vehicle will not suffer if the vehicle breaks down.” Along with the government agencies, there are public and private sectors with their own plans for developing EV charging infrastructure in India. One example is the state-owned Hindustan Petroleum Corporation Limited (HPCL) and its plans to build 5,000 EV charging stations within the next three years. The oil company wants to utilize its network of 19,000 fuel retail stations and experience to add EV charging facilities. The company plans to build the charging stations in its retail fuel outlets. This news comes a few months after the NHAI announced plans to set up 600 EV charging stations along the national highway network in 22 states. An official in the NHAI told the Deccan Herald: “The NHAI will set up with the charging stations in joint venture with private companies in the next five years. Apartment of charging stations the NHAI also proposing to set up food courts, restaurants, retail outlets as well in one place along highways. “Setting up EV charging stations will help to boost the electric vehicle usage.” The article also noted that Union Road Transport Minister Nitin Gadkari said that by the end of this decade India wants 70% of its commercial cars, 30% of its private cars, 40% of its buses, and 80% of its two- and three-wheelers to be fully electric.
GAIL seeks to procure India’s largest Hydrogen electrolyser
GAIL’s electrolyser will outmatch the 5 MW one that NTPC is seeking to set up. It is expected that the 10 MW electrolyser will generate 4.5 tonnes of green hydrogen in a day. GAIL (India) is in the process of procuring what could be the largest Hydrogen electrolyser in India. Speaking at the side lines of India Energy Forum by CERAWeek, GAIL Chairman Manoj Jain said that a global tender for the same has already been floated for the 10 MW electrolyser. “The electrolyser will be deployed in the next 12 to 14 months,” Jain said adding that it may be deployed in Vijaipur, Madhya Pradesh, but the final location has not yet been decided. GAIL presently has a 400,000 tonnes per annum Liquefied Petroleum Gas (LPG) plant in Vijaipur. GAIL’s electrolyser will outmatch the 5 MW one that NTPC is seeking to set up. It is expected that the 10 MW electrolyser will generate 4.5 tonnes of green hydrogen in a day. Incidentally, the world’s largest electrolyser is also of 10 MW. The Fukushima Hydrogen Energy Research Field (FH2R) uses a 20MW solar array, backed up by renewable power from the grid, to run a 10MW electrolyser at the site in Namie Town, Fukushima Prefecture, Japan. A larger 24 MW Hydrogen electrolyser is being developed at the Leuna chemical complex in Germany. French oil major Total and utility Engie have also announced plans for 40 MW electrolyser to solar power in southern France. That plant is slated to be operational in 2024. Jain also said that GAIL intends to enter Liquefied Natural Gas (LNG) retailing for long haul vehicles. “We as the industry will set up 20 LNG dispensing stations on the Golden Quadrilateral (highway network) by March 2022 and 500 to 600 outlets in three to four years…ultimately the target is to set up 1,000 LNG stations,” he said. Responding to queries on the high cost of LNG in the international market and impact on consumers, Jain said, “Around 70% of the country’s imported LNG comes through long-term contracts so most major consumers such as fertiliser units and refiners have not faced too much difficulty.” But the price surge affects consumption by natural gas-based power plants and also discourages potential users of gas to switch to the fuel, Jain added.
Saudi Aramco plans to invest across India’s energy value chain
State-run Saudi Arabian Oil Co. (Saudi Aramco) plans to invest across India’s energy value chain and partner with domestic companies for the same, said senior vice president downstream Mohammed Y. Qahtani at the world’s biggest oil producer on Thursday. “Our vision is to invest across the value chain in India, and partner with Indian companies in this endeavor,” Qahtani said at the CERAWeek 5th India Energy Forum, according to a statement from Saudi Aramco. “As you know, Aramco is significantly strengthening its downstream business, to better complement our long-standing pre-eminence in upstream. And chemicals, especially, offer us a strategic opportunity,” he added in the statement. This comes against the backdrop of Mukesh Ambani controlled Reliance Industries Ltd announcing its plans in June to formalize its partnership with Saudi Aramco by the end of 2021. “Aramco is proud to be a key supplier of the energy that is fuelling Indian prosperity,” he said in the statement. India, the world’s third largest oil importer, has requested the Opec-plus grouping dominated by Saudi Arabia to up production. With the Opec cartel accounting for the majority of India’s crude oil imports, and around 40% of global production, any increase in production will help soothe the global crude oil markets. Amin Nasser, president and chief executive office (CEO) of Saudi Aramco was part of the virtual meeting that Prime Minister Narendra Modi held with the bosses of global oil companies on Wednesday. “Our goal is to build a chemicals business that is a global leader, on par with our leading position in oil. Our acquisition of a 70% stake in SABIC has been key … allowing us to offer one-stop integrated solutions from crude oil supplies, refined products and chemicals, to lubricants and advanced non-metallic materials,” Qahtani said. Saudi Aramco has also partnered with Indian state-run oil companies for setting up the world’s largest oil refinery and petrochemical complex in Ratnagiri. The project has hit the skids, after protests from farmers and Shiv Sena, which is in power in Maharashtra with its alliance partners. “And we are accelerating our investments in large integrated refining/ petrochemicals manufacturing complexes … especially in large markets like India,” he said. India’s plans to grow its refining capacity to 400 million tonnes per annum (mtpa) by 2025 from the present installed capacity of 249.36 mtpa through 23 refineries. Instead of setting up the controversial ₹3 trillion Ratnagiri Refinery & Petrochemicals Ltd. (RRPCL) at a single location in Maharashtra, the Union government is now exploring a plan to set up multiple small-size refineries and is looking for sites in Gujarat, Karnataka, Maharashtra and Andhra Pradesh as reported by Mint earlier.
India says rectifying oil demand, supply imbalance crucial for recovery
India said Oct. 20 that surging oil prices could potentially create hurdles for a post-pandemic economic recovery, and urged the world’s leading producers to take steps to potentially rectify the current supply and demand imbalances. Speaking at the India Energy Forum by CERAWeek, Indian Petroleum Minister Hardeep Singh Puri said the steep rise in prices was a wake-up call that investments need to flow into the oil and gas sector consistently. “I am sure our friends in OPEC+ will take into account the sentiment voiced in forums like these. We are trying to ensure economic activity, but if high prices undermine that economic activity then economic activity will slow down and demand for oil and gas will also go down,” Puri told the India Energy Forum. Saudi Arabian Energy Minister Prince Abdulaziz bin Salman told the forum that OPEC and its allies do not see any crude oil shortages in the market, dismissing calls from consuming countries to increase supplies to tame rising prices. Dated Brent prices have more than doubled in the last year, with S&P Global Platts assessing the benchmark at $85.03/b on Oct. 19. OPEC+ members are currently adhering to an agreement to increase crude production by 400,000 b/d every month, but key customers, including India, the US and Japan, have complained that the alliance is still holding back too much supply. “The energy markets today are characterized by imbalances. We need to accept that the world needs reliable supply of oil and gas until we can build new energy infrastructure,” Puri said. India’s 2021 oil demand is forecast to grow 295,000 b/d to 4.9 million b/d, which would still be well below 2019 levels. The country is expected to reach a prepandemic level of oil demand in 2022, according to S&P Global Platts Analytics. Adding to the pain Puri said India’s crude import bill, which accounts for about 20% of the country’s overall import bill, had risen to $24 billion in the quarter ended June from $8.8 billion in the same quarter a year earlier. “Those facts speak for themselves. Due to this extreme volatility, prices of fuels, such as petrol and diesel, have rallied to some of the highest levels in the country,” he added. Domestic gasoline consumption had sharply bounced back to a level higher than even prepandemic levels while diesel was also witnessing robust growth, Puri said. “If prices do not remain predictable, stable and affordable, the economic recovery could prove to be fragile.” Platts Analytics expects India’s overall oil demand to pick up after the monsoon season, with the upcoming festive season and an improving economy supporting consumption and pushing up fourth-quarter demand growth by 575,000 b/d quarter on quarter to 5.3 million b/d. He said one of the priorities of the government would be to find ways to boost domestic production of oil and gas. “We are taking action to increase the area under exploration.” Energy transition focus India’s per-capita energy consumption was about one-third the global average, creating the need to invest in building a wide variety of fuels to meet the anticipated growth in consumption, Puri said. “India is focused on moving towards cleaner energy and developing a gas-based economy, while also achieving the 450 GW renewable energy target by 2030. There will be great dependence on domestic resources, such as biofuels, and moving into energy products, such as green hydrogen,” Puri said. New Delhi in June brought forward its target to achieve 20% ethanol blending with gasoline to 2025 from the previous target year of 2030. India’s policy move to achieve a more-than-three-fold growth in ethanol blending rate in gasoline in less than five years looks to be a step in the right direction, but to many market experts and industry leaders, it sounds like an over-ambitious journey. “Biofuels will provide opportunities which would be a win-win situation for all our partners. We are reasonably confident of achieving the target,” Puri said. In addition, the government would be stepping up efforts to move toward Prime Minister Narendra Modi’s vision to become a gas-based economy, under which the country would aim to raise the share of gas in the overall energy mix to 15% by 2030 from the current level of 6%. An estimated investment of $60 billion had been lined up in developing gas infrastructure, which include pipelines, city gas distribution and LNG regasification terminals, Puri said. “Accelerating the gas initiative would also mean initiatives to boost our city gas distribution network in order to expand the use of cooking fuels, as well as initiatives such as LNG trucking,” he added.
Reliance’s oil-to-chemicals business seems to be in the right spot to leverage China’s climate crackdown
Indian oil-to-telecom conglomerate Reliance Industries (RIL) is expected to announce positive business growth especially in its oil-to-chemicals and telecom businesses for the July-September quarter. Analysts expect RIL’s oil-to-chemicals business margins to lift in the coming quarters if China sticks to its climate change goals leading to cut down in their exports of petroleum products. A report by Jefferies said it has a positive stance on RIL as its analysts “see potential for 10-12% upgrade to consensus oil-to-chemicals earnings before interest, taxes, depreciation, and amortisation (EBITDA) estimate for FY22 earnings if China sticks to its climate goals till the Winter Olympics in February 2022.” China is currently struggling with a severe shortage of electricity, which has left millions of homes and businesses struggling with power cuts including chemical manufacturing companies. “With over 50% of its [RIL’s] refinery slate in diesel, RIL’s refining profitability has improved sharply. If these elevated margins sustain till the Winter Olympics in February, RIL’s refining profitability could improve by $0.8 billion over the second half of FY22 earnings,” said a report by Jefferies. Currently, the company has four verticals — oil-to-chemicals (O2C) business that houses its oil refineries, petrochemical plants and fuel retailing business, digital services that comprises telecom arm Jio, retail including e-commerce and new energy.