Mukesh Ambani is going green but is still getting rich off oil
Along the Arabian Sea, the Indian city of Jamnagar is a money-making machine for Asia’s richest man, Mukesh Ambani, processing crude oil into fuel, plastics and chemicals. It’s also where the billionaire is making his newest bet: a $10 billion investment in green energy. In a swath of arid land, to the city’s southwest, Ambani’s Reliance Industries Ltd., owns the world’s biggest oil refining complex. It’s a sprawling network of plants and pipelines that can process 1.4 million barrels of petroleum a day in an operation covering half the area of Manhattan. In fiscal 2021, Reliance generated about 45 million tons of carbon dioxide emissions from its own operations, which puts the company among the top such emitters in India, according to data on other companies tracked by Bloomberg. Much of that came from its Jamnagar refineries. Next door, in a nod to a changing — and warming — world Ambani is now building factories that make more environmentally friendly products like solar panels, electrolyzers, fuel cells and batteries. On the face of it, the new investment is a sharp pivot for a giant conglomerate whose fortunes have been linked to oil refining for decades. Yet even as Ambani, 64, touts the shift to less polluting options, crude’s byproducts will remain one of the biggest drivers of the $80 billion fortune that’s made him the world’s 12th richest man. Reliance gets nearly 60% of its $73 billion in annual revenue from its oil-related business, which is so lucrative that it’s attracting other investors. The Middle Eastern energy firm Saudi Aramco is in discussions for the purchase of a roughly 20% stake in Reliance’s refining and chemicals business. Ambani’s conglomerate is also investing in global expansion projects for the petrochemicals business that’ll last for decades. Even if its new energy operations take off, they will contribute only 10% of Reliance’s total earnings before interest, taxes, depreciation and amortization by fiscal 2026, while oil-to-chemicals will stay at about 33%, Sanford C. Bernstein analysts estimated in July. That’s making Jamnagar a location that highlights a broader tension in the energy transition: While the world’s biggest fossil fuel companies are rushing to placate investors — and chase profits — by adding clean power sources, that doesn’t signal a quick retreat from polluting fuels. It’s a contrast playing out even as climate scientists escalate warnings about the fallouts of human-caused global warming. M.V. Ramana, an energy policy scholar and professor at University of British Columbia, said it would be hard for Reliance to dissociate from fossil fuel businesses that create emissions. “If you look at what Reliance’s trajectory has been, it is one of expansion of its fossil fuels business,” Ramana said. Shifting dramatically away from the more polluting oil-to-chemicals business is difficult “because it is going to affect their bottomline,” he said. Reliance didn’t respond to requests for comment. At its annual shareholders’ meeting in June, Ambani acknowledged the need for change. “The age of fossil fuels, which powered economic growth globally for nearly three centuries, cannot continue much longer. The huge quantities of carbon it has emitted into the environment have endangered life on earth,” he said. Reliance has said it will make its operations carbon neutral by 2035 with the help of projects that offset emissions. There are also plans to arm the 7,500-acre Jamnagar refinery-and-petrochemicals complex with solar power, green hydrogen and carbon dioxide capture and usage technologies. To curb pollution, about 2,200 acres of land within the facility have been converted into a green pasture, growing mangoes, guavas and medicinal plants. The site’s scope is so vast that it’s rubbed off on the city’s economy. The facility stands near miles of salt pans, its stacks towering over the low-rise houses in surrounding villages. Reliance’s logo is seen at the airport, on the numerous gas stations it operates, malls and the banners of its telephone service Jio. Jamnagar now has multi-storeyed apartments and luxury cars running on its roads. The Ambani firm has over the last 10 years invested about $15 billion to boost profits from its legacy oil refining and petrochemicals businesses, including $4 billion to convert petroleum coke — one of the dirtiest refinery by-products — into gas needed to power the massive Jamnagar complex. It’s also said it will spend $6 billion ramping up natural gas production from the depths of the sea along with joint venture partner BP Plc. In addition, the Reliance-BP joint venture is adding more fuel stations. BP didn’t respond to a request for comment. Reliance’s Scope 1 carbon dioxide emissions — those caused directly by a company’s operations — surged 60% in the year ended March 2020 to 47.5 million tons, mainly because it started using petcoke produced from the refineries internally, instead of selling it to customers outside, according to the company’s latest annual report. A year later, emissions came down to 45 million tons. India is one of the world’s biggest consumers of oil, and demand is only rising as its middle class buys more vehicles, and consumes more products like plastic bottles and paint that are made from petrochemicals. Many Indian cities, including capital New Delhi, are among the world’s most polluted. Prime Minister Narendra Modi has launched a national clean air program. The new Reliance green venture will be spread over 5,000 acres of land. Ambani has said a key focus will be to create products for producing solar power, an area where India has long lagged China. “When companies of this size announce such ambitious plans, it gives a great fillip to the decarbonization goals of the nations and the world at large,” said Shantanu Jaiswal, head of India at BloombergNEF. Still, moving away from polluting fossil fuels for economic reasons is hard not just for Reliance, but for the nation as a whole. India has insisted that developed nations take larger initial steps to cut emissions so that poorer nations don’t feel the economic strain. The Jamnagar refinery has spawned a whole generation of entrepreneurs. “The
Global oil majors may be joining race for BPCL: Document
Global oil majors may be teaming up with investment funds that are already in the race to acquire Bharat Petroleum Corporation Ltd (BPCL), a document detailing steps needed to complete India’s biggest privatisation showed. Billionaire Anil Agarwal’s Vedanta group as well as two US funds — Apollo Global and I Squared Capital – had last year submitted initial bids to buyout the government’s entire 52.98 per cent stake in India’s third-biggest oil refiner and second-largest fuel retailer. Detailing the ‘Next Step’, the ‘Brief Note on BPCL Disinvestment’ said Transaction Advisor and Asset Valuer are to submit an inception report, bidders have to complete due diligence of the company and sale purchase agreement has to be finalised. Also, “security clearance” of bidders may be needed “since consortiums are being formed”, it said without giving details. The bidding process allows for other interested parties to join and form a consortium with any one of the bidders which had submitted an expression of interest (EoI). Firms run by Indian billionaires Mukesh Ambani and Gautam Adani as well as global oil majors such as Royal Dutch Shell, BP and Exxon did not submit an EoI for acquiring BPCL at the close of the deadline on November 16, 2020. However, several top oil producers from the Middle East and Russia’s Rosneft were said to be interested in BPCL which would give the buyer access to over 14 per cent of India’s oil refining capacity and 23 per cent fuel market share. But they hadn’t submitted any bids. Industry sources said it was possible that one of the global oil majors or a Middle East oil producer may be teaming up with the investment funds already in race. Ambani’s Reliance Industries Ltd and Adani group are “extremely unlikely” to join the race, a source said. Steel magnate Lakshmi N Mittal, who runs an oil refinery in Punjab in joint venture with Hindustan Petroleum Corporation Ltd, was considered a potential candidate but sources said he was not interested in BPCL whose acquisition will cost nearly Rs 80,000 crore at current market trading price. The document showed financial bids will be called after submission of asset valuation report and business valuation report by Asset Valuer and Transaction Advisor respectively. Reserve price will be fixed thereafter and price bids will be opened after that. If its bid is accepted, the bidder quoting the highest price will be called to executive share purchase agreement and make payment. Open offers required under the extant guidelines/approvals shall follow, it said. BPCL owns 35.30 million tonnes of oil refining capacity spread over three refineries at Mumbai, Kochi in Kerala and Bina in Madhya Pradesh. It has 18,768 petrol pumps and 6,169 LPG distributors.
India’s new LNG plant starts next yr, to boost import capacity by 12 per cent
India will boost liquefied natural gas (LNG) imports from next year as private firm Swan Energy starts its floating terminal, raising the country’s capacity to ship in the super chilled fuel by 12 per cent to 47.5 million tonnes per annum (mtpa). New demand for LNG from India is expected to support Asian gas prices which rose to record highs earlier this year, partly aided by the transition from coal or oil to gas in developing countries. The 5-mtpa floating storage and regasification unit (FSRU), located at Jafrabad in western Gujarat state, will be commissioned in April, said P Sugavanam, director at Swan Energy and chairman of Swan LNG Ltd, which is developing the project. The FSRU was initially expected to be commissioned in the first quarter of last year, but the pandemic and two cyclones have delayed construction of a breakwater, needed to make it an all weather facility, Sugavanam told Reuters on Wednesday. “The breakwater should be completed by March,” Sugavanam said, adding Ghana’s Tema LNG is currently using the facility for storing LNG. India, the world’s fourth largest LNG importer, wants to raise the share of natural gas in its energy mix to 15 per cent by 2030, from the current 6.2 per cent to cut emissions. Companies are investing billions of dollars in India to build gas infrastructure as Prime Minister Narendra Modi wants to raise the share of cleaner fuel in India’s energy mix to 15 per cent by 2030 from the current 6.2 per cent. Swan is setting up a jetty and will build more tanks to eventually double the LNG import capacity, he said. State-run gas importers Indian Oil Corp and Bharat Petroleum Corp, and exploration firm Oil and Natural Gas Corp have leased 1 mtpa capacity each at Swan’s terminal. ONGC earlier this year invited bids from potential suppliers for regular participation in its spot LNG buy tenders, according to a document obtained by Reuters. Seven companies – Emirates National Oil Co (Singapore), Total Gas & Power, PTT International Trading, Vitol Asia, Gazprom Marketing & Trading Singapore, Mitsui & Co and Uniper Global Commodities – showed interest in participating in ONGC’s tenders, a source familiar with the matter said. Vitol and Mitsui declined comment while the others including ONGC did not reply to Reuters request for comment. Swan Energy owns 63 per cent of Swan LNG, while two entities of Gujarat state government together have a 26 per cent share. Mitsui holds 11 per cent and is also the technical partner on the project.
India’s LNG Imports Drop 15% Yr/Yr In July
India’s LNG imports in July came in at 2.52bn m3 (about 1.86mn metric tons), down 14.9% year/year, the country’s oil and gas ministry’s Petroleum Planning and Analysis Cell (PPAC) website showed on August 23. Imports were up 9% month/month, however. During the first four months of the financial year 2021-22, imports were 10.16bn m3, up 1.9% yr/yr, PPAC said. LNG imports in July cost some $900mn, up from $500mn in the same month last year. In the April-July period, the import bill was $3.1bn compared with $1.9bn in the year-ago period, PPAC data showed. In the financial year 2020-21, the import bill was $7.4bn.
India’s clean and green shift with Compressed Biogas
International petroleum prices have been on the rise given the demand resurgence. Aftermath of this can be seen in retail petrol prices which have crossed the Rs 100 mark in various parts of the country, without any tax cuts on the horizon. India is world’s third largest crude oil importer as it heavily relies of fossil fuels to satiate its energy demands. The towering fossil fuel consumption not only hurts India’s fiscal budget but also growing climate change accountability. While oil has been preferred over gas for energy needs, India is evolving with changing times and plans on halving its oil import bills by 2030 by adopting alternatives fuels to meet its energy demands. Indian Government is determined to rejig its energy mix to increase natural gas component from current 6.5% to 15% by 2030. Its work in this direction is prominent from launch of schemes like Sustainable Alternative Towards Affordable Transportation (SATAT) which envisages setting up 5,000 Compressed Bio-Gas (CBG) units across the country to produce 15 million tonnes of CBG by 2023 – this could attract investments worth Rs 2 trillion as per former oil Minister Mr. Dharmendra Pradhan. CBG is produced from bio-mass feedstock such as agricultural residue, cattle dung, sugarcane press mud, municipal solid waste, etc. Since properties of CBG are like Compressed Natural Gas (CNG) – it can replace CNG in automotive, industrial, and commercial areas. In fact, Ministry of Road Transport and Highways has permitted usage of bio-compressed natural gas (bio-CNG) for motor vehicles as an alternate composition of CNG. Widespread production and usage of CBG will not only reduce India’s dependency on crude oil imports but also enhance farmers’ income and rural employment. But the benefits of CBG don’t stop there. Solid by-products of CBG can be used as bio-manure which can enhance agricultural output. Thus, the entire CBG value chain has economic and environmental advantages – waiting to be tapped by entrepreneurs. Under SATAT scheme, Oil Marketing Companies (OMC) invite expression of interest from potential entrepreneurs to set up CBG plants, and supply CBG to OMCs for sale as automotive & industrial fuel. CBG Plant Owner is responsible for planning, preparation, engineering and execution of the project, including storage of raw material, operation and maintenance of the plant, maintaining final product output quantity and quality and managing the by-products & wastes from the plant. Key enablers of the scheme include offtake and marketing of CBG by OMCs, assured long term pricing, priority sector lending, central financial assistance of up to Rs 10 crore per project provided by Ministry of New and Renewable Energy (MNRE), nominal bank guarantee, fortnightly invoice clearance, liberty to Plant Owners to sell excess CBG to consumers other than OMCs. The Government is also working towards synchronization of CGB with City Gas Distribution pipelines for seamless evaluation and sale/ distribution of CBG. In addition to the scheme enablers, entrepreneurs can also avail benefit of incentives offered by state and central governments by way of investment subsidy (net SGST reimbursement), interest subsidy, stamp & electricity duty exemptions, etc. MSMEs can explore added incentives such as interest subvention, collateral free loans. Further, banks like State Bank of India and Bank of Baroda have dedicated financing for CBG plants to be set up under SATAT. Indian tax regime also offers noteworthy tax incentives/ exemptions for CBG entrepreneurs such as 100% profit linked deductions for 5 years, concessional corporate tax rate of 17.16%, special incentives for start-ups which also includes full deduction on profits for 3 years. On indirect tax front, CBG entrepreneurs in addition to input tax credit optimization can explore benefits under Manufacturing and other Operations Warehouse Regulations, 2019 for deferment of custom duty on capital goods imported. In spite these incentives and support mechanisms, mind boggles as to why entrepreneurs haven’t frenzied over CBG production under the SATAT scheme which was launched in Oct 2018. Why CBG usage is yet to become commonplace in India? As on May 2021, while 1550 letters of intent have been issued, little over 10 CBG plants have actually commissioned and only 1369 tonnes of CBG sold so far. While this may be a good start and gaining incessant interest, it may seem slow-paced for an initiative kick started almost three years back. Not only did the Pandemic devour 2020, the on-going second wave (and maybe a third, standing on our doorstep) continues to substantially affect and curb business activities. Even so, Covid-19 may not be the only factor which has retarded our pro-rata CBG goals. Reasonable uncertainty looms over OMC’s offtake arrangement with CBG Plant Owners as OMCs will only “endeavour” to offtake the CBG produced by Plant Owners depending on the actual demand. Promoters of the scheme may consider incorporating tailored take-or-pay arrangement – say for initial years of operation or up to certain levels of CBG produced. This would hike confidence among entrepreneurs. High loan interest rates and collateral requirements tend to wipe off incentives crafted under the scheme for entrepreneurs. Assured interest subsidy in initial years may alleviate financial burden to some extent. Companies and associations already operating in the CBG value chain may consider collaboration with other Indian or Foreign companies to share financial commitments and gain technological edge. MNRE has been conducting webinars on achievements in clean energy including development of the biogas sector. To energise the CBG space, such informational meets and webinars should be scaled up exponentially. Undoubtedly, the Government’s timely and pivotal initiative on CBG has given the much-needed push towards clean and green energy shift and with invigorated efforts, CBG can definitely become the protagonist in India’s clean energy journey.
Govt sensitive to fuel price rise, relief in coming month: Oil min Puri
Union Petroleum Minister Hardeep Singh Puri on Tuesday said that the Central government is sensitive to fuel price rise while also hinting that the public might get relief (in terms of fuel price) in the upcoming month. “Central Government is very sensitive to this issue (fuel price rise) but it is also very sensitive to see the other responsibilities that we have,” Puri said while addressing a press conference. Further, saying that the issue needed to be seen in a larger context, he said, “The central tax on fuel has remained the same at Rs 32, but since the VAT by states is set in percentage, their tax increase as the price of petrol increases internationally.” Saying that the fact that the central taxes were being used by the government to provide free medicines during the COVID-19 pandemic should also be considered, Puri said, “The common man will get a relief in the coming month.” As per the latest revision of fuel price on Tuesday, prices both petrol and diesel dropped by approximately 15 paise each. After the latest revision, a litre of petrol now costs Rs 101.49 in Delhi, while diesel costs Rs 88.92 per litre. Rates had been increased across the country and differed from state to state depending on the incidence of value-added tax.
Morbi ceramic industry faces additional burden of Rs 100 crore due to hike in gas price
A hike in the price of industrial gas by Gujarat Gas Ltd will put an additional burden of over Rs 100 crore per month on ceramic units in Morbi, the country’s largest cluster, industry representatives said on Tuesday. Gujarat Gas, which supplies natural gas to ceramic manufacturing units in Morbi in Gujarat’s Saurashtra region, on Monday announced a rise in industrial gas price under its agreement with effect from Tuesday. The company announced a hike in price of industrial gas by about Rs 5 per square cubic metre (Rs 4.37 plus tax) for its customers in ceramic and sanitaryware industry in Morbi and Surendranagar. This, the firm said, is necessitated due to “substantial increase” of natural gas price in international markets. The industry consumes 70 lakh cubic metres of gas every day, thereby adding a burden of Rs 100 crore monthly on it, industry representatives said. They said a sudden increase in the price of gas will adversely affect the units which have already taken orders, especially export orders which they are under obligation to fulfil. Morbi Ceramic Association President Nilesh Jetpariya said the hike will increase production cost for the units by 7-8 per cent, and may force nearly 30 per cent units operating in Morbi to stop production. He said fuel accounts for nearly 35-40 per cent of total production cost, and a sudden hike may prove to be unbearable to many units as they will be forced to sell products at a loss. “We have been appealing to Gujarat Gas and the state government to at least give us a month’s notice before raising the price of natural gas, but it always comes at a short notice that adversely impacts the industry,” Jetpariya said. Around a thousand ceramic units in Morbi consume 70 lakh cubic metres of natural gas on a daily basis, he said.
Gujarat Gas raises CNG, industrial PNG prices in its geographical areas
The state-run city gas distribution (CGD) company Gujarat Gas Limited (GGL) has raised the compressed natural gas (CNG) price across its authorized geographical areas within and outside Gujarat. GGL has also hiked the price of industrial PNG (piped natural gas) supplied to the ceramic and sanitaryware units in Morbi and Surendranagar. However, the company has kept unchanged the price of natural gas supplied to its residential consumers. According to GGL website, the CNG price has been increased to Rs 54.45 per kg (inclusive of taxes and duties) in Gujarat, which shows a rise of Rs 2 per kg over its previous tariff of Rs 52.45/kg. The new price is effective from August 24. “GGL had not increased CNG prices for the past one-and-a-half-year. This coupled with a rise in operational cost led the company to hike CNG prices,” said people in the know. The company serves about 7 lakh CNG consumers through its network of around 450 CNG stations in Gujarat. Meanwhile, GGL also hiked industrial PNG prices to Rs 37.51 per standard cubic meter (SCM) for ceramic and sanitaryware units in Morbi and Surendranagar. “The industrial PNG price for 3-month minimum guaranteed offtake (MGO) has been hiked by Rs4.37 per SCM (excluding taxes), which will put additional burden of Rs 100crore a month on ceramic units in Morbi,” said Nilesh Jetpariya, president, wall tiles division, Morbi Ceramic Association (MCA). Market sources said that the increase in industrial PNG price is mainly on account of the steep surge in liquified natural gas (LNG) price in the international market. Gujarat Gas provides 6.5 million metric standard cubic meter per day (mmscmd) to ceramic and sanitaryware units in Morbi and Surendranagar.
Petrol, diesel prices cut again as global oil rates soften
A day after keeping petrol and diesel prices unchanged, the oil marketing companies (OMC) on Tuesday reduced fuel prices further in line with the downward movement of global oil and product prices. Accordingly, the pump price of petrol and diesel was cut 15 paise per litre to Rs 101.49 a litre and Rs 88.92 a litre respectively in Delhi. Across the country as well fuel prices were cut between 10-20 paise per litre but its retail rate varied depending on the level of local taxes in states. Petrol prices in Mumbai and Kolkata, are now at Rs 107.53 and Rs 101.82 per litre respectively while in Chennai, petrol is priced at Rs 99.20. In the Tamil Nadu capital, petrol price fell by almost Rs 3 per litre on August 14 after the state government cut VAT on the fuel. Similarly, diesel prices in Mumbai, Chennai and Kolkata are now at Rs 96.48, Rs 93.52 and Rs 91.98 per litre, respectively. This cut in fuel prices had come amid declining global crude oil prices. The October contract of Brent crude oil on the Intercontinental Exchange (ICE) was trading at $65.18. The pump prices of auto fuels have been static since July 18. The long price pause for auto fuels came after fuel prices increased for 41 days in the current financial year. The 41 increases have taken up petrol prices by Rs 11.44 per litre in Delhi. Similarly, diesel rates have increased by Rs 8.74 per litre in the national capital.
China’s Sinopec adds new tanks at east China gas receiving terminal
China’s Sinopec Corp said on Tuesday it has completed adding two new tanks for liquefied natural gas at its receiving terminal in the eastern province of Shandong, two months ahead of the winter heating season starting mid-October. The tanks, each sized 160,000 cubic meters, were ready for use this month since construction began in November of 2018, bringing the terminal’s annual handling capacity to 7 million tonnes, or equivalent to 9.6 billion cubic meters a year, Sinopec said. This would be 17 per cent more than its current annual capacity of 6 million tonnes. The state oil and gas major also said it is aiming to double the Qingdao terminal’s capacity to 14 million tonnes annually by end of 2023, making it the largest in the country by then.