India’s top refiner IOC reports three-fold surge in quarterly profit
Indian Oil Corp Ltd (IOC) , the country’s top refiner, on Friday reported a three-fold rise in net profit in the June quarter, helped by higher gross refining margins as prices of oil products surged. The state-owned company had reported a net profit of 59.41 billion rupees ($798.92 million) in the quarter ending June 30, compared with a profit of 19.11 billion rupees a year earlier, when lockdowns due to the COVID-19 pandemic hammered fuel demand and squeezed margins. Analysts were expecting a net profit of 42.48 billion rupees for the first quarter, according to Refinitiv data. Even though India was battered by a second wave of coronavirus infections during April and May, the restrictions imposed were not as severe as last year, with most states allowing vehicular movement. The company recorded gross refining margins – profit from converting a barrel of oil into refined products – of $6.58 per barrel in the three months to June compared with minus $1.98 per barrel a year earlier. Revenue from operations for quarter rose to 1.55 trillion rupees from 889.39 billion rupees a year ago. IOC and its unit, Chennai Petroleum, control about a third of India’s five million-barrels-per-day refining capacity.
Revenue from petroleum sector important for growth plans: Govt
The government has justified high level of taxation on auto fuels suggesting that revenue from petroleum sector is important for running various developmental schemes but has refused to acknowledge the role played by higher prices of petrol and diesel in fuelling inflationary pressure on the economy. Replying to a question on impact of rising fuel prices on country’s economic recovery from the Covid-19 pandemic in the Lok Sabha, minister of petroleum and natural gas Hardeep Singh Puri said that revenue generated by taxation (on petroleum products) is used in developmental schemes of the government like Pradhan Mantri Gram Sadak Yojana (PMGSY), Pradhan Mantri Ujjawala Yojana (PMUY), Ayushman Bharat, Pradhan Mantri Garib Kalyan Yojana (PMGKY) and also to provide relief to the poor during the pandemic by schemes like Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) under which free ration was given to 80 crore beneficiaries during April, 2020 to November 2020 and May-June 2021, free vaccination against Covid-19 etc. He said over the past 7 years, length of National Highways has gone up by 50% from 91,287 km (as of April 2014) to 1,37,625 km (as on 20 March 2021). Highway construction per day spiked 3 times from 12 km/day in 2014-15 to 33.7 km/day in 2020-21. The minister said cess is used for infrastructure development and also generates employment. Regarding higher prices of fuel raising inflationary pressure on the economy, the minister in his reply said that the weightage of petrol, diesel and LPG in the WPI index is 1.6%, 3.1% and 0.6% indicating that petroleum products may not be responsible rising prices in other categories. Taxes both by the Centre and the states account for a lion’s share of current retail price of petrol and diesel.
OPINION: India joins trend to use strategic crude reserves to offset high oil prices, says Russell
India’s move to commercialise its strategic crude oil reserves is another sign that major Asian importers are taking steps to mitigate the high prices caused by the OPEC+ group’s output cuts. India, the second-biggest crude importer in Asia behind China, aims to commercialise half of its strategic petroleum reserve (SPR), Reuters reported on July 22 citing two government sources with knowledge of the plan. While the commercialisation of the SPR, currently home to about 36.5 million barrels of crude or about 5 million tonnes, is aimed at raising funds to build more storage tanks, it also allows refiners to access cheaper oil from storage when prices are high and buy it back when prices fall again. Indian Strategic Petroleum Reserves Ltd, which oversees the SPR, will be allowed to sell 1 million tonnes of crude to local buyers, while private companies leasing storage will be allowed to re-export 1.5 million tonnes of oil if Indian firms don’t want it. Indian officials have expressed concern this year as crude prices rallied strongly amid moves by the producer group OPEC+ to cut as much as 7 million barrels per day (bpd) of output. Global benchmark Brent crude futures have surged 44 per cent this year, closing at $74.50 a barrel on Monday, not much below the high so far this year of $77.84 reached on July 7. For OPEC+, it may be a case of being careful what you wish for. Leading member Saudi Arabia had previously rejected India’s calls for output restrictions to be eased, instead telling New Delhi it should rather use up inventories bought cheaply last year when crude prices hit two-decade lows amid the coronavirus pandemic. India’s move to commercialise its SPR brings it into line with similar policies in Japan and South Korea, the third- and fourth-biggest crude buyers in Asia. CHINA USING INVENTORIES China doesn’t disclose details of the size or management practices of its SPR, but it appears the world’s biggest crude importer has dipped into stockpiles this year. An estimate of just how much can be made by deducting the total amount of crude available from imports and domestic output from the amount of crude processed by refineries. China’s refineries processed 15.13 million bpd in the first half of the year, while imports were 10.51 million bpd and domestic output was 4.01 million bpd. In short, they processed some 610,000 bpd more crude in the first half than was available from imports and domestic output. This is a reversal of the trend in recent years when China’s imports and domestic output have exceeded refinery throughput by large margins. The recent willingness of China, and now India, to use inventories to lower crude imports can be seen in data, with China’s crude imports down 3 per cent in the first half of 2021 compared to the same period a year earlier, while India’s imports dropped to the lowest in nine months in June. China’s imports are forecast by commodity analysts Kpler to stage a recovery in July, reaching 10.85 million bpd, which is up from June’s 9.77 million bpd and likely reflects the return of several refineries to operations after periods of maintenance. However, India’s imports are poised for a weak July, with Kpler estimating 3.66 million bpd will be landed, which will be the weakest outcome since September last year. If China and India become more pro-active in utilising their SPRs to ameliorate the impact of crude prices they deem to be too high, it will likely be a short-term bearish factor for oil. The question becomes how long can those countries, and others in Asia, sustain using inventories to offset imports, and what happens when they stop.
Big part of petroleum cess used for free vaccine, poor and various developmental schemes: Hardeep Puri
The government has justified high level of taxation on auto fuels suggesting that revenue from petroleum sector is important for running various developmental schemes but has refused to acknowledge the role played by higher prices of petrol and diesel in fuelling inflationary pressure on the economy. Replying to a question on impact of rising fuel prices on country’s economic recovery from the Covid-19 pandemic in the Lok Sabha, minister of petroleum and natural gas Hardeep Singh Puri said that revenue generated by taxation (on petroleum products) is used in various developmental schemes of the Government like Pradhan Mantri Gram Sadak Yojana (PMGSY), Pradhan Mantri Ujjawala Yojana (PMUY), Ayushman Bharat, Pradhan Mantri Garib Kalyan Yojana (PMGKY) and also to provide relief to the poor during the pandemic by schemes like Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) under which free ration was provided to 80 crore beneficiaries during April, 2020 to November 2020 and May-June 2021, free vaccination against Covid-19 etc. He said that over the last 7 years, length of National Highways has gone up by 50 per cent from 91,287 km (as of April 2014) to 1,37,625 km (as on 20 March 2021). Highway construction per day in India increased almost 3 times from 12 km/day in 2014-15 to 33.7 km/day in 2020-21. So, the minister said cess is used for infrastructure development and also generates employment. Regarding higher prices of fuel raising inflationary pressure on the economy, the minister in his reply said that the weightage of petrol, diesel and LPG in the WPI index is 1.60 per cent, 3.10 per cent and 0.64 per cent indicating that petroleum products may not be responsible rising prices in other categories. Taxes both by the Centre and the States account for a lion’s share of current retail price of petrol and diesel. The Central Government levies Excise/Cess on Petrol of Rs 32.90/litre which includes Basic Excise Duty of Rs 1.40, Road & Infrastructure Development Cess of Rs 18, Agriculture and Infrastructure Development Cess of Rs 2.50 and Special Additional Excise Duty of Rs 11. The current Central Excise/Cess on Diesel is Rs 31.80 per litre which includes Basic Excise Duty of Rs 1.80, Road & Infrastructure Development Cess of Rs 18, Agriculture and Infrastructure Development Cess of Rs 4 and Special Additional Excise Duty of Rs 8. The total excise duty/cess incidence as percentage of retail selling on petrol and diesel is 32.4 per cent and 35.4 per cent respectively, as on July 16, 2021. Besides, the State Governments levy VAT on the total amount of base price & Central Taxes of petrol & diesel which vary from Rs 4.83 in Andaman & Nicobar Islands to Rs 29.55 in Maharashtra, Rs 29.88 in Rajasthan, Rs 31.55 in Madhya Pradesh for petrol and Rs 4.74 in Andaman & Nicobar Islands to Rs 21.82 in Rajasthan for diesel, as on July 22, 2021. The current retail price of petrol and diesel is hovering around Rs 101.54 a litre and Rs 89.87 a litre in Delhi. The retail prices have increased 41 times since May 1 this year taking up petrol prices by Rs 11.44 per litre in the national capital. Similarly, diesel price has increased by Rs 9.14 per litre in the national capital. Since April 2020, petrol prices have increased by Rs 32.25 per litre from Rs 69.59 a litre to Rs 101.84 a litre now in Delhi. Similarly, diesel prices during the period has increased by Rs 27.58 per litre from Rs 62.29 to Rs 89.87 a litre in the national capital. The minister in his reply also informed that after the country wide lockdown imposed on March 25, 2020, the consumption of petrol and diesel dropped to 20,068 TMT (thousand metric tonne) during April-June 2020 which was approximately 34 per cent less than the consumption of the same period (30,399 TMT) during previous year (2019). As the lockdown was progressively lifted and economic activities resumed, the consumption of petrol and diesel gradually increased, reaching 28,410 TMT during January-March, 2021, which was approximately 106 per cent of the consumption during the same period in 2019. Further, the consumption dropped with the restrictions imposed during the second wave of Covid-19 in April-May, 2021, only to pick up again. By July 21, 2021, the petrol sales in July were 118.65 per cent of the sales in the same time period in 2020, whereas they were 111.90 per cent of the July 2020 sales for diesel.
China’s Guangdong starts building $1 bln Huizhou gas terminal
China has begun building a $1 billion natural gas import and storage base in the southern coastal province of Guangdong, a project in which U.S. energy major ExxonMobil is advancing discussion with partners for a joint investment. ExxonMobil entered in September 2018 a preliminary deal with Guangdong province to invest billions of dollars worth of projects in the manufacturing hub, including a petrochemical complex and an LNG terminal in Huizhou. “ExxonMobil is progressing project discussions with potential partners,” a Beijing-based company representative said, without giving further details. Official Xinhua news agency had reported on Saturday Guangdong started constructing the terminal last Friday and aimed to start operating the import facility around the end of 2023. The new terminal, situated at Huidong county of Huizhou city, has a designed annual receiving capacity of 4 million tonnes under phase-one investment estimated to cost 6.636 billion yuan ($1.02 billion), Xinhua said. China’s state economic planner, the National Development and Reform Commission, gave the greenlight for the project in early-July, the report added. The Huizhou terminal includes a berth that can dock up to 266,000 cubic-meter tankers of liquefied natural gas and three storage tanks each sized 200,000 cubic meters. The report did not give any details on the investors of the project. Guangdong also envisages expanding the project under phase two by adding another three 260,000-cubic meters tanks to raise the facility’s handling capacity to 10 million tonnes a year, the report said.
Excise duty collections from petroleum products being used in infra development: Nitin Gadkari
Union Minister Nitin Gadkari on Thursday said excise duty collected from petroleum products are being used for infrastructure development and other development items. The road transport and highways minister said this in the Lok Sabha while replying to a question on the impact of rising fuel prices on the logistics cost of transportation in the country. “The excise duty rates on petroleum products have been calibrated to generate resources for infrastructure and other development items of expenditure, keeping in view the prevalent fiscal situation,” Gadkari said. According to the minister, the logistics cost of transportation through road depends on several factors such as capital cost of the vehicle, salaries, insurance, permit tax, maintenance, fuel, toll tax and other miscellaneous expenses. The excise collections on petrol and diesel jumped by 88 per cent to Rs 3.35 lakh crore in the last fiscal ended March 31, 2021, after excise duty was raised to a record high. The excise duty on petrol was hiked from Rs 19.98 per litre to Rs 32.9 last year to recoup gains arising from international oil prices plunging to a multi-year low as the pandemic gulped the demand. Citing a study conducted by the Ministry of Road Transport & Highways through a consultant, Gadkari said the impact of fuel is 34 per of the total transport freight cost by vehicle. “The transport companies may or may not pass the increased cost depending upon the market situation or capacity to absorb additional cost etc,” he said, quoting the study. The prices of petrol and diesel are market-determined with effect from June 26, 2010, and October 19, 2014, respectively. Since then, the public sector oil marketing companies (OMCs) have been taking the appropriate decision on the pricing of petrol and diesel based on international product prices and other market conditions. Replying to a separate question, Gadkari said the national and local level lockdowns and restrictions due to COVID-19 posed constraints to the movement and supply/availability of materials, machinery and labour, which affected the progress of works. “However, due to several initiatives taken by the government under Atmanirbhar Bharat to provide relief measures to contractors/ concessionaires/ consultants, the maintenance and development work on National Highways have overshot the targets,” he noted. The minister pointed out that NHAI awarded 31 projects of 890 km length at a cost of Rs 26,322 crore from April to August 2020. The length of projects awarded by NHAI in the April to June period of 2021-22 stood at 383 km.
Trump slams Biden for approach to energy, coronavirus, internal security
Former US President Donald Trump has criticized the administration of US President Joe Biden for its approach to dealing with COVID-19 and the current energy policy, as well as an array of other issues, including border security. Speaking at the Turning Point USA Student Action Summit in Phoenix, Arizona, on Saturday, Trump said the Biden administration has been “negotiating with OPEC and Russia.” “Now we’re not energy independent,” Trump said. Earlier this month, the OPEC+ countries decided to extend the agreement on oil production cuts until the end of 2022. The US does not participate in OPEC talks, but Washington has expressed support for the negotiations. Trump also criticized Biden for allowing the Nord Stream 2 gas pipeline project to go ahead, and laughed at claims of reported Russian involvement in the Hunter Biden laptop hack. “Russia did it again,” Trump told the Turning Point USA Student Action Summit in Phoenix, pointing out that “it’s always Russia” because “they are getting rich from China” but not from Russia. Trump also criticized the current administration in Washington for not doing enough to stop the spread of COVID-19 and once again blamed the pandemic on China, saying it should “pay us retribution.” The former president reiterated his claim that the presidential elections last year were rigged, saying that the Democrats cheated with “millions of votes” in 2020. Trump called the election a “disgrace” and told the Turning Point USA Student Action Summit that “our nation is being destroyed.” The former US president pointed to increasing violence and crime in the US, saying that defunding the police and weakening law enforcement is going to make the situation worse. “Hundreds of people are being shot every weekend” in Chicago, Trump said, stressing that the city is “worse than any war zone.” He also emphasized that crime rates are at unprecedented high in New York. “We’re becoming a communist country,” Trump emphasized, adding that the current leadership is allowing the US to get “pushed around” by other countries. He said that the current administration is responsible for the influx of immigrants who continue crossing the southern border. Trump also criticized the Green New Deal (GND) on climate change.
Iran inaugurates major oil pipeline to bypass Hormuz Strait
Outgoing Iranian President Hassan Rouhani has inaugurated a major onshore pipeline that allows the country to bypass the Hormuz Strait for crude oil exports. The pipeline, with some 1,000 km in length, will transfer the pumped oil from facilities in Goureh to the Omani sea port of Jask, reports Xinhua news agency. The inauguration of the Goureh-Jask pipeline “gives a strong and firm response to all plotters particularly to the US,” Rouhani said during the virtual opening ceremony on Thursday, alluding to the American sanctions, which are aimed at hindering Tehran’s oil exports. “The US government waged war on us in two areas, one on oil exports, and the other on the supply of goods.” “They aimed to stop Iran’s oil exports and reduce crude exports to zero,” he said, hinting at the failure of the US anti-Iran maximum pressure policy. The $2- billion project, the construction of which started two years ago, detours the strategic Hormuz Strait which has long been used as a vital passageway for oil exports of the region. “As time goes by, the importance of this project will become more evident for the Iranians,” said Rouhani. The oil pipeline is able to initially export 300,000 barrels per day (bpd) of crude and will reach the capacity of one million bpd once fully ready in October, according to authorities.
LNG imports dip 17 per cent in June as prices soar, local output rises
Import of liquefied natural gas (LNG) dropped 17% in June over the last year as prices soared and local gas production expanded. LNG prices in the spot market have risen as high as $14 per metric million British thermal units (mmBtu), curbing demand and prompting many consumers to switch back to cheaper fuel oil. The spot prices had dropped to a record low of $2 per mmBtu last year but have been above $10 for the past few months. “Barely any spot cargoes have been imported in the past 2-3 months,” said an executive at GAIL, the country’s largest gas marketer. Spot and short-term cargoes comprise about half of India’s total LNG demand. Currently, prices under long-term contracts are a few dollars lower than the spot market and are being preferred by consumers, industry executives said. However, long-term LNG, too, has become expensive in the past few months as it’s mostly linked to crude oil prices that have climbed above $70 a barrel with a return in global demand amid an artificial supply curb by key producers. Some of the local demand for LNG is also being met by new production from the KG Basin gas fields operated by Reliance and BP. Production from fields operated by private players jumped three-fold to 862 million standard cubic meters (mscm) while the country’s overall output rose by a fifth to 2,777 mscm. The overall gas demand in the country, however, was lower at 5 billion cubic meters (bcm) in June, compared to 5.1 bcm a year earlier and 5.4 bcm of June 2019. “Any quantum jump in the domestic gas demand would come only after some of the under-construction fertiliser plants come onstream,” said the GAIL executive cited earlier.
India’s gas production jumps 19.5% in June on back of KG-D6
India’s natural gas production jumped 19.5 per cent in June, as Reliance Industries Ltd and its partner BP Plc ramped up output from their eastern offshore KG-D6 block, government data released on Friday showed. India produced 2.77 billion cubic meters of natural gas in June, up from 2.32 bcm in the same month last year, as per the data released by the Ministry of Petroleum and Natural Gas. This is the fifth straight month of output rising on a year-on-year basis. “Increase in gas production is through contributions from D-34 field of KG-DWN-98/3, which commenced from December 18, 2020 (and) wells from satellite cluster (commenced with effect from April 25, 2021),” it said. Reliance is the operator of block KG-DWN-98/3 or KG-D6 in the Krishna Godavari basin, off the east coast. The firm started producing from the second wave of discoveries in the block in December. D-34 or R-Series was the first field to start, followed by Satellite Cluster. Peak production from R-Cluster will be 12.9 million standard cubic meters per day, according to the operators. Satellite fields would produce a maximum of 7 mmscmd. MJ field in the same block will start production in the third quarter of 2022 and will have a peak output of 12 mmscmd. The production from KG-D6 more than made up for a fall in the output from fields operated by Oil and Natural Gas Corporation’s (ONGC). ONGC produced 5.6 per cent less gas at 1.68 bcm. Production from fields operated by the private sector in the eastern offshore was 545.53 million cubic meters in June as compared to 45.62 mmcm a year back, the data showed. It did not give a field-wise breakup. India’s crude oil production in June slipped 1.8 per cent to 2.48 million tonnes as state-owned ONGC and Oil India Ltd (OIL) produced less. Oil refineries processed 5 per cent more crude at 18.4 million tonnes in June when compared to the year-ago period, when economic activity had almost come to a halt because of a stringent nationwide lockdown. Private sector refiners produced 13.6 per cent more crude at 6.9 million tonnes, while public sector refiners processed 2.7 per cent less crude at 10.04 million tonnes. This is because public sector refineries operated at 85.71 per cent of their capacity, while private ones operated at 94.76 per cent. The refineries produced 4 per cent more fuel at 19.17 million tonnes in June.