High petrol, diesel rates to drive city gas volumes up 27 per cent
Sales volume of city gas is set to soar in a range between 25 per cent and 27 per cent this fiscal, driven by rebounding vehicular mobility and industrial activity, and a record price advantage versus competing fuels such as petrol, diesel and furnace oil. City gas comprises Compressed Natural Gas (CNG) used by vehicles, and Piped Natural Gas (PNG) used by homes and industries. “The strong growth will help city gas distributors sustain robust operating margins of 28 per cent even as higher prices of liquefied natural gas (LNG) get partly absorbed to cushion the impact on consumers. That, and strong balance sheets, will support stable credit profiles of distributors,” rating agency CRISIL said in a report. Last fiscal saw city gas volume contract 13 per cent as both demand for CNG and industrial PNG, which together contribute 90 per cent of total city gas consumption, were hard hit by the pandemic, especially in the first quarter, before recovering. The first quarter of the current fiscal, unlike last year, saw far less impact of lockdowns on vehicular mobility and industrial activities as volumes were up 130 per cent on-year though down 18 per cent sequentially. “We expect sustained recovery for the rest of the year, as both CNG and industrial PNG demand improve on a combination of higher economic activity and record price advantage against alternate fuels. This will drive overall demand by 25-27 per cent this fiscal, even 8 per cent above fiscal 2020 levels,” said Manish Gupta, Senior Director, CRISIL Ratings. Sales volume of CNG, which accounts for 40 per cent of total consumption, will be driven by an expanding network of CNG stations, up from 2,500 in May 2020 to 3,180 in May 2021, and higher sale of factory-fitted CNG cars. Sales of CNG cars are expected to increase 50 per cent to 2.6 lakh units this fiscal given their lower total cost of ownership than competing petrol and diesel ones. Demand for industrial PNG, which accounts for around 50 per cent of total consumption, will benefit from improving competitiveness against crude-linked industrial fuels this fiscal, a select ban on sale of polluting fuels such as furnace oil and pet coke, an expanding pipeline network, and hassle-free use.
China’s Sinopec completes its first LNG bunkering operation
China’s Sinopec Corp announced on Monday it has completed its first liquefied natural gas (LNG) bunkering operation in Weihai, a major seaport in the eastern Shandong province. The bunkering, or marine refuelling, operation transferred 250 tonnes of LNG by truck to a China Merchant Shipping vessel. Sinopec is China’s largest supplier of marine fuels. The use of LNG as a marine fuel has been gaining traction amid a global push to reduce the shipping industry’s carbon emissions.
Stubble burning: Two biomass power plants in Punjab delayed
In a setback to efforts to check stubble burning, the two additional biomass power plants that were to come up in Punjab this year have been delayed. The two biomass power projects, including the 10 MW project in Fatehgarh Sahib and 4 MW project in Nakodar, were to be completed by this June. Now, the projects will probably be operational by next year. Once operational, the two projects will consume around 1.2 Lakh Metric Tonnes (LMT) of paddy residue. Punjab Energy Development Agency (PEDA) officials have attributed the delay in their establishment to the Covid pandemic. The high cost of power production of these plants is also a major reason for the delay. Sources said private companies or owners have been losing interest as the state power sector, which is supposed to purchase power from these plants, has been seeking power at cheaper prices. “The two proposed projects have been delayed due to Covid but will definitely be operational by next year. Thereafter, these plants will consume paddy residue from the surrounding areas,” said PEDA CEO N P S Randhawa. Already, 11 biomass power projects are operational in Punjab and are generating 97.5 MW of power annually, using approximately 8.80 LMT of paddy stubble. Power purchase agreements of these plants have already been made with PSPCL.
U.S. gas production set for big increase in 2022 on high prices
U.S. gas traders are anticipating a big increase in production over the next year as the industry responds to higher prices by ramping up drilling, which should ensure supplies are more plentiful in time for winter 2022/23. As a result, futures prices for deliveries at Louisiana’s Henry Hub in January 2023 are currently trading around $1.15 per million British thermal units below prices for deliveries in January 2022. Henry Hub’s one-year calendar spread trades in contango about three-quarters of the time, reflecting the high cost of storing a gaseous commodity with low value to volume, so the current backwardation is unusual. The spread is currently in the 98th percentile for all trading days since the start of 2007, indicating supplies are expected to be exceptionally tight this winter, before improving significantly next year. During the first phase of the epidemic, monthly U.S. dry gas production slumped to just 75 billion cubic metres in June 2020, down from a record 85 billion cubic metres in December 2019. The number of rigs targeting primarily gas-bearing formations slumped to less than 70, from more than 130, over a similar period, according to field services company Baker Hughes. Since then, however, there has been a slow but steady increase in both drilling and production in response to the recovery in gas prices. Front-month futures prices have climbed to more than $5.00 per million British thermal units, the highest level for more than seven years, up from a low of less than $1.50 in June 2020. By June this year, production had already recovered to 79 billion cubic metres, while the active rig count had increased to just over 100 by early September. In the next few months, higher prices will draw even more rigs back into the gas market, leading to an increase in production from the second quarter and especially the third quarter of 2022. Higher production will also support an increase in exports next year to Europe and Asia, where the shortfall is even more severe, contributing to an improvement in gas supplies globally. In the meantime, however, prices will have to rise high enough to restrict consumption, mostly by encouraging power producers to run gas-fired generating units for fewer hours this winter, reverting to coal-fired units instead.
LNG regasification operable capacity expected to rise by 12 mmtpa: Motilal Oswal
India’s LNG regasification operable capacity is expected to rise by 12 mmtpa due to removal of constraints at existing LNG terminals, according to Motilal Oswal Financial Services. Nearly 24 mmtpa of capacity additions are underway at Dahej and greenfield terminals at Chhara, Jafrabad, Dhamra and Jaigarh over the next few years. Just the KG Basin is expected to result in 45 mmscmd of incremental domestic gas (that is 47 per cent of the domestic gas consumption). India currently has an LNG regasification capacity of 42.5 mmtpa. However, the operable capacity is 30 mmtpa, said the report by Motilal Oswal. With the completion of major pipelines like Jagdishpur-Haldia, Mehsana-Bhatinda, Kochi-Bangalore and upcoming northeast gas grid, India’s total trunk pipeline network is expected to grow to 32,600 km from 17,126 km, increasing the reach of gas to a larger number of consumers. A blanket ban on coal gasifiers had resulted in a doubling of gas consumption in Morbi in CY19. With easing of Covid-related lockdowns, stricter actions may be in store for these polluting clusters, thereby encouraging adoption of natural gas. The National Green Tribunal (NGT) is focused on reducing pollution and 90 per cent rise in length of trunk pipelines is expected over the next few years. Besides, there is increased availability of LNG operable capacity (57 per cent) and availability of domestic gas (30 per cent). “We expect the alignments of stars — the syzygy — to bode well for India’s gas sector,” said the report by Motilal Oswal.
Petronet eyes fresh foray into petchem business; plans LNG import facility on east coast
Petronet LNG Ltd, India’s largest gas importer, is looking to reclaim the lost opportunities of the past decade as it seeks fresh foray into the petrochemical business and plans to set up an LNG import facility on the east coast. Oil Secretary Tarun Kapoor, who is also the Chairman of Petronet, in the firm’s latest annual report said the company is looking at setting up a floating terminal at Gopalpur port in Odisha and “is embarking upon a major diversification drive to broad base its business activity and is exploring to have an ethane/ propane import facility at Dahej terminal”. Petronet had some years back planned to set up a terminal at Gangavaram in Andhra Pradesh for import of supercooled gas in ships. The company management stopped pursuing that terminal in 2015-16 on grounds that there isn’t enough demand to justify a 5 million tonnes a year import facility. Gangavaram would have been the first terminal on the east coast as Petronet owns and operates facilities at Dahej in Gujarat and Kochi in Kerala. Soon after that Adani Group began work to set up a 5 million tonnes a year import terminal at Dhamra port in Odisha. Petronet now sees that there is demand for gas in the eastern region and despite the Dhamra LNG terminal, it is now looking for a facility at Gopalpur, a source said. Similarly, the company is trying to recapture the lost opportunity in the petrochemical sector. Petronet’s long-term contract for import of liquefied natural gas (LNG) from Qatar provided for supply of 5 million tonnes a year of rich gas or gas containing ethane and propane – compounds used to make petrochemicals. That rich-gas was supplied to Oil and Natural Gas Corp (ONGC) which after stripping it of ethane and propane re-supplies to Petronet for onward sale to power plants, fertilizer units and other customers. The source said ONGC uses the rich gas at its petrochemical plant to make value-added chemicals. Now, Petronet is looking to use the same model. Petronet “has also planned for setting up of a petrochemical complex based on imported propane at Dahej LNG Terminal”, Kapoor said in the annual report. “The foray into petrochemicals would be a forward integration of our strategy as the same planned to get synchronised with our upcoming third jetty project and available land bank at Dahej.” He, however, did not give details of the planned petrochemical complex including investment and size of the plant. Petrochemicals, made using crude and natural gas as feedstock, form raw material for plastics, packaging material, and personal care products. In terms of volume, the petrochemical market in India stood at 42.50 million tonnes and is estimated to reach 49.62 million tonnes by 2025, expanding at a compound annual growth rate (CAGR) of 6.14 per cent between FY 2021 and FY 2025. Using ethane, plastics and detergents can be made; while propane can give plastic. Petronet is 50 per cent owned by state-owned refiners Indian Oil Corp (IOC) and Bharat Petroleum Corp Ltd (BPCL), gas utility GAIL (India) Ltd and oil and gas producer ONGC. The four companies sit on the board of the company, which is headed by the Secretary, Ministry of Petroleum and Natural Gas. Kapoor said Petronet is exploring the possible business opportunities from harnessing the cold energy from its regasification terminals at Dahej and Kochi. “Harnessing LNG’s cold energy not only maximises re-gasification terminals’ potential but also offers an opportunity to cut emissions in the cold warehousing chain simultaneously adding value and improving energy efficiency,” he said. After establishing a presence in the southern and western parts of the country, Petronet is now planning to set up a floating LNG terminal at Gopalpur port in Odisha with a view to establishing its presence on the eastern coast of India, he said. “The LNG terminal will help meet the increasing gas demand of the eastern and central part of the country,” he said. He added that Petronet has already completed the pre-project studies and is in process of preparing the Detailed Feasibility Report (DFR) for 4 million tonnes per annum floating storage & regasification (FSRU) terminal followed by a pre-feasibility report for a 5 million tonnes land-based terminal in future. Petronet, he said, “has signed MoU (memorandum of understanding) with Gopalpur Ports Ltd and is in discussion with them to finalise the key technical and commercial terms of the agreements”. Without giving investment details or timelines for the project implementation, he said the firm is in process of obtaining the final investment decision for the project. Dahej terminal is the largest import facility in the country, with a nameplate capacity of 17.5 million tonnes per annum. Kochi terminal is a 5 million tonnes nameplate capacity but it operates at a fraction of capacity in absence of pipelines to take the fuel to customers.
Aramco oil pipelines investors to sell at least $4 bln in bonds in Q4
A consortium led by EIG Global Energy Partners that took a stake in Saudi Aramco’s oil pipelines is preparing to issue at least $4 billion in the fourth quarter to refinance a loan that largely funded the $12.4 billion deal, two sources familiar with the matter said. The deal gave the consortium controlled by EIG a 49 per cent stake in a new entity, Aramco Oil Pipelines Company, and rights to 25 years of tariff payments for oil transported through Aramco’s extensive oil pipelines network. That deal, which includes all of Aramco’s existing and future stabilised crude pipelines, was backed by $10.5 billion financing from a large group of banks including Citi, HSBC and JPMorgan. The bonds will be refinanced across two or three deals, sources have said. The pipeline investors will likely accelerate to the fourth quarter a previous timeline to come to market with the first bonds, one of them adding it would likely be next month. The consortium is expected to raise at least $4 billion in the first bond transaction, two sources said, one of them adding it could raise up to $5 billion and the second saying it could go up to more than half the loan’s value. Sources had told Reuters in April the first bond sale would likely be in the first quarter of next year. EIG, a Washington, D.C.-based investment firm that has invested more than $34 billion in global energy and energy infrastructure projects, and Abu Dhabi sovereign wealth fund Mubadala Investment Co, which joined the EIG-led consortium, both declined to comment. The deal closely mirrors infrastructure deals signed over the last two years by Abu Dhabi National Oil Co (ADNOC), which raised billions of dollars through sale-and-leaseback deals of its oil and gas pipeline assets. A consortium that took a stake in ADNOC’s gas pipelines similarly refinanced nearly $8 billion in bank debt with bonds across two transactions in October last year and February 2021.
Centre-states may discuss early inclusion of natural gas into GST fold
With GST revenue collections making a rebound post the disruptions caused by the second wave of Covid pandemic, the Centre is likely to initiate dialogue with states for inclusion of petroleum products under the new indirect tax fold. Sources privy to the development said that based on the Petroleum Ministry’s suggestion, the Centre may take up with GST Council the issue of bringing natural gas under the Goods and Services Tax (GST) regime to begin with before the entire oil and gas sector is brought under it. The 45th GST Council meeting is scheduled on September 17, 2021 at Lucknow. Though the council members will discuss several pending issues such as states compensation, revision of GST rates on Covid essentials, inverted duty structure, the Centre is also likely to take up the case for early inclusion of gas into the new taxation fold. With revenue position remaining strained due to Covid-19 outbreak, states have been reluctant to consider bringing high revenue generating petroleum products under GST fold. But with GST collections improving substantially this year remaining above the Rs 1 lakh crore psychological-mark in most months of FY22, the Centre feels it is the right time to push for tax reforms in the oil and gas sector as well with the inclusion of gas helping in plan to develop a gas-based economy in the country. Inclusion of gas would not pose a challenge for the GST Council as it is largely an industrial product where a switchover to the new taxation would not be difficult. The revenue implication for the states is also low in the case of this switchover. “States are in a fairly better position now with GST revenue hitting over Rs 1 lakh crore-mark for the past few months and Centre has also improved their liquidity position through additional borrowing schemes. This should make phased inclusion of petroleum products under GST easier for the council,” said an official source in the oil ministry. GST levy on natural gas would help state-run oil companies such as ONGC, IOCL, BPCL and HPCL to save tax burden to the tune of Rs 25,000 crore as they would get credit on taxes paid for inputs and services. Tax credits are not transferable between the two different taxation systems. The Steering Committee for Advancing Local Value-Add and Exports (SCALE) chaired by Mahindra & Mahindra MD & CEO Pawan Goenka in its report to the commerce ministry has also batted for provision of input tax credit of natural gas to make its prices more competitive. This could happen once it is included in GST. Sources said Council could consider a three-layered GST structure for gas where residential piped natural gas (PNG) is taxed at a lower rate of 5 per cent, commercial piped natural gas could be taxed at a median rate of 18 per cent, and car fuel CNG could be taxed at a maximum rate of 28 per cent. However, such a proposal has not yet been drafted and it could be put on table after consensus is arrived at inclusion of gas under GST. Gas sales, including CNG and piped gas supplies, attract VAT ranging from 5-12 per cent. As part of its efforts to build consensus with the states on GST launch, the government had decided to exclude five petroleum products — crude oil, petrol, diesel, ATF and natural gas — from the list of items placed under GST, but included products such as cooking gas, kerosene and naphtha in the new regime.
Arun Kumar Singh takes charge as Chairman and Managing Director of BPCL
Bharat Petroleum Corporation Limited (BPCL), a ‘Maharatna’ and a Fortune Global 500 Company has announced the appointment of Arun Kumar Singh as the Chairman and Managing Director of the company and consequently he has taken charge yesterday. A Mechanical Engineer by qualification, Arun Kumar Singh was earlier Director (Marketing) on the Board of the company, holding additional charge of Director (Refineries) and Director (Finance). In his more than 36 years of experience in Oil & Gas industry, he has headed Business Units and Entities in BPCL such as Retail, LPG, Pipelines, Supply Chain Optimization, etc. He also held the position of President (Africa & Australasia) in Bharat PetroResources Ltd., a wholly owned Subsidiary of BPCL, engaged in exploration of Oil & Gas, largely overseas. He is also Chairman of Indraprastha Gas Ltd. a Joint Venture CGD Company, listed on Indian bourses. He is also a Director on the Board of Bharat Gas Resources Ltd., a wholly owned subsidiary of BPCL, engaged in Natural Gas business; on the Board of Bharat Oman Refineries Limited, a subsidiary of BPCL engaged in Refining business; and he represents BPCL on the board of Petronet LNG Ltd. (PLL), a Joint Venture Company, listed on Indian bourses. A Fortune Global 500 Company, Bharat Petroleum is the second largest Indian Oil Marketing Company and one of the premier integrated energy companies in India, engaged in refining of crude oil and marketing of petroleum products, with a significant presence in the upstream and downstream sectors of the oil and gas industry. The company attained the coveted Maharatna status, joining the elite club of companies having greater operational & financial autonomy. Bharat Petroleum’s Refineries at Mumbai & Kochi and subsidiary Bharat Oman Refineries Ltd., at Bina, Madhya Pradesh have a combined refining capacity of around 37 MMTPA. Its marketing infrastructure includes network of installations, depots, retail outlets, aviation service stations and LPG distributors. Its distribution network comprises over 19,000 Retail Outlets, 6,600 LPG distributorships, 733 Lubes distributorships, 123 POL storage locations, 52 LPG Bottling Plants, 60 Aviation Service Stations, 3 Lube blending plants and 4 cross-country pipelines.
Cairn accepts $1bn refund offer, to drop cases against India within days: CEO
UK-based Cairn Energy PLC on Tuesday said it will drop litigations to seize Indian properties in countries ranging from France to the US, within a couple of days of getting a USD 1 billion refund resulting from the scrapping of a retrospective tax law. The firm, which gave India its biggest onland oil discovery, termed “bold” the legislation passed last month to cancel a 2012 policy that gave the tax department power to go back 50 years and slap capital gains levies wherever ownership had changed hands overseas but business assets were in India. The offer to return money seized to enforce retrospective tax demand in lieu of dropping all litigations against the government “is acceptable to us,” Cairn CEO Simon Thomson told PTI in an interview from London. Cairn will drop cases to seize diplomatic apartments in Paris and Air India airplanes in the US in “a matter of a couple of days” after the refund, he said adding Cairn’s shareholders are in agreement with accepting the offer and moving on. “Some of our core shareholders likes BlackRock and Franklin Templeton agree (to this). Our view is supported by our core shareholders (that) on balance it is better to accept and move on and be pragmatic. Rather than continue with something negative for all parties which could last for many years,” he said. Seeking to repair India’s damaged reputation as an investment destination, the government last month enacted new legislation to drop Rs 1.1 lakh crore in outstanding claims against multinationals such as telecoms group Vodafone, pharmaceuticals company Sanofi and brewer SABMiller, now owned by AB InBev, and Cairn. About Rs 8,100 crore collected from companies under the scrapped tax provision are to be refunded if the firms agreed to drop outstanding litigation, including claims for interest and penalties. Of this, Rs 7,900 crore is due only to Cairn. “Once we get to final resolution, part of that resolution is us dropping everything in terms of litigation. We can do that within a very short period of time, just a matter of a couple of days or something,” Thomson said. “So we are preparing on the basis of getting this resolution quickly, all these cases being dropped, and putting all this behind.”