Malaysia’s Petronas agrees 10-year LNG supply deal with CNOOC valued at $7 bln
Malaysia’s state oil firm Petronas has signed a 10-year liquefied natural gas (LNG) supply agreement with a subsidiary of China’s offshore oil and gas major CNOOC Ltd valued at about $7 billion, the firm said on Wednesday. Petronas, or Petroliam Nasional Berhad, said the deal with CNOOC Gas and Power Trading & Marketing Limited is for 2.2 million tonnes per annum over a 10-year period. “This long-term supply agreement also includes supply from LNG Canada when the facility commences its operations by the middle of the decade,” Petronas said in a statement. The deal is indexed to a combination of the Brent and Alberta Energy Company (AECO) indices, it said. AECO is a Canadian natural gas price benchmark, similar to the Henry Hub index in the United States, but is not typically used as a pricing basis for LNG spot contracts. In Asia, the S&P Global Platts’ Japan-Korea-Marker (JKM) has been increasingly used as a pricing basis in spot contracts. Petronas signed its first LNG cargo using the AECO index to a buyer in the Far East in May. The deal with CNOOC reflects the markets’ receptiveness and recognition of AECO indexed LNG into the world’s largest LNG market, said Shamsairi M. Ibrahim, Petronas Vice President of LNG Marketing & Trading.
Cairn Energy secures French court order to seize 20 Indian govt properties
Britain’s Cairn Energy Plc has secured a French court order to seize about 20 Indian government properties in France to recover a part of USD 1.7 billion arbitration award, sources said on Thursday. On June 11, the French court had ordered Cairn Energy’s take-over of Indian government properties, mostly comprising flat; and the legal process got completed on Wednesday evening. An arbitration panel had in December ordered the Indian government to return USD 1.2 billion plus interest and penalty to Cairn Energy after reversing a retrospective tax demand. With Indian govt not honouring the award, Cairn Energy has moved in multiple jurisdictions overseas to recover the amount due by seizing Indian government assets.
Fuel rates continue to soar ; CNG, PNG prices also hiked in NCR
Fuel prices continue to soar across India and touched a record high in the national capital as petrol price is retailing at Rs 100.56 per litre and diesel at Rs 89.62 per litre on Thursday. As compared to Wednesday, petrol has become costlier by 35 paise per litre and diesel by 9 paise per litre. On July 5, Delhi Pradesh Congress Committee (DPCC) workers held a protest outside the residence of Chief Minister Arvind Kejriwal. “Prices of gas cylinders, edible oil and fuel have risen. Neither LG nor CM listens to the misery of people,” said DPCC President Anil Chaudhary. Other states have also witnessed an increase in the prices of petrol and diesel. Rates have been increased across the country and differ from state to state depending on the incidence of value-added tax. The price of petrol was increased by Rs 39 paise per litre and diesel by 15 paise per litre in Kolkata. In Kolkata, petrol is now being sold at Rs 100.62 per litre and diesel prices and diesel at Rs 92.65 a litre today. Earlier, TMC leader Partha Chatterjee had announced that sit-in protests will be staged against hike in fuel prices in every block and town of West Bengal on July 10 and July 11, following all COVID protocols. The price of petrol in Madhya Pradesh’s Bhopal have increased by 25 paise and it stands at Rs 108.88 per litre in the city. Meanwhile, the price of diesel in Bhopal remained unchanged and stands at Rs 98.40 per litre. On Wednesday, Karnataka Congress held a protest on the issue of rising fuel prices. “Prices of petrol and diesel are above Rs 100, this is a gift of Modi government. The middle class, the poor and the industry is suffering,” Congress MLA Rizwan Arshad had said. Additionally, the Compressed natural gas (CNG) retail price in the national capital revised from Rs 43.40 per kg to Rs 44.30 per kg, while in Noida, Greater Noida and Ghaziabad it has revised from Rs 49.08 per kg to Rs 49.98 per kg with effect from July 8. The Piped Natural Gas (PNG) domestic price to be Rs 29.66 per SCM and in Noida, Greater Noida and Ghaziabad are at Rs 29.61 per SCM.
Petrol price hits century in Delhi as fuel rate hike continues
Petrol prices continued its upward march again on Wednesday, a day after a brief pause, taking its price to cross century mark in Delhi and Kolkata, the only two metro cities where the fuel price was still catching up with other cities across the country. In Delhi, price of petrol increased by 35 paise from Rs 99.86 on Tuesday to Rs 100.21 a litre on Wednesday. In Kolkata, petrol price moved up from Rs 99.84 a litre to Rs 100.23 per litre. In other two metros – Chennai and Mumbai – Petrol prices have already crossed the century mark some time back. In fact in Mumbai, it crossed Rs 100 a litre mark on May 29. Petrol is now priced at Rs 106.25 a litre in Mumbai. With Wednesday’s increase, petrol price is now over Rs 100 a litre almost all across the country. Diesel is also catching up and may soon be available over Rs 100 a litre across the country soon. Diesel prices increased a tad lower on Wednesday. It increased by 17 paise per litre in Delhi to Rs 89.53 a litre. In the financial capital Mumbai, diesel costs Rs 97.09 a litre, data available on Indian Oil Corporation’s website showed. Officials in oil companies attribute the consistent increase in fuel prices to development in global oil markets where both product and crude price have been firming up for past couple of months on demand rise amidst slowing of pandemic. However, closer look at fuel retail prices in India gives a picture that it is high level of taxes that is keeping fuel rate higher even in times when global oil prices are firm. Global crude oil price is now hovering around $75 a barrel. It was over $80 a barrel in October 2018 but even then, the petrol prices hovered around Rs 80 a litre across the county. So, even with lower oil prices now, petrol prices have hit century and crossed it by a wider margin now in several parts of the country. The only way retail prices could be brought down in this period is by way of tax cuts by both Centre and States, suggests experts as crude oil prices are seen rising from here on. Fuel prices are already touching new highs every other day. Starting from a price line of Rs 90.40 a litre on May 1, petrol is now priced at Rs 100.21 a litre in the national capital, rising by a sharp Rs 9.81 per litre in last 68 days. Similarly, diesel price in the capital also rose by Rs 8.80 per litre in past two months to reach Rs 89.53 a litre in the national capital. With the price rise, fuel rates have been revised upwards in 36 out of 67 days between May, June and July. With global crude prices also rising on a pick up demand and depleting inventories of world’s largest fuel guzzler – the US, retail prices of fuel in India are expected to firm up further in coming days. The benchmark Brent crude reached multi-year high level of over $75 on ICE or Intercontinental Exchange.
63 per cent of tax on petrol goes to Centre, 37 per cent to state
Taxes played a major role behind the spiralling fuel prices in Bengal. The price of petrol approached 100 in the city and crossed the three-digit mark in most of the districts while the price of diesel has also crossed the Rs 90 mark two weeks ago. There are both central and state taxes on petrol and diesel. The petrol price has touched Rs 99.84 in Kolkata. The central tax is Rs 32.90 (around 63% of total taxes on petrol in state) while the state tax is Rs 19.27. Similarly, the diesel price reached Rs 92.27 in the city. On this fuel the central tax is Rs 31.80 and the state tax Rs 13.08. The base price of petrol in the city as on July 6 was only Rs 44.20 while that of diesel was Rs 45.16. Apart from taxes and the base price, the rest of the price components include freight charges and dealers’ commission. Sources in oil companies said that in July 2019, the average price of petrol was Rs 72-75 and diesel was Rs 67-69 in the city. The central tax on petrol was Rs 20-21 while state tax was Rs 15-16. For diesel the central tax was Rs 15-16 and state tax was Rs 12-13. So, the central tax on petrol rose by almost Rs 11-12 in last two years while the state tax went up by Rs 5 during this period. For the almost Rs 24 hike in price from Rs 74-75 to Rs 99 plus, the rise in excise component accounts for almost 50% while state tax accounts for 20%. The state government had reduced the taxes on petrol and diesel by Rs 1 on February 22 for four months, which has already been renewed for another three months through a notification. Incidentally, there was a lump sum (fixed tax on quantity) tax of Rs 1 each in both petrol and diesel across the state along with sales tax of 17% and 25% on diesel and petrol. The sales tax of the state has not changed for the last five years. The lump sum tax was withdrawn first in 2018 by Mamata Banerjee government till March 2020. Now this reduction would be till September. The total demand for petrol in the state is around 1.2 lakh kilo litre (1 KL is 1000 LTR) per month while that of diesel is around 3 lakh KL. The total state revenue from taxes (sales tax) from petroleum products is around Rs 8,000 crore. The state finance minister had earlier alleged while announcing Rs 1 cut in state taxes that a major part of central taxes on petrol and diesel is cess, which is not shared with the states. Mitra had claimed earlier that for petrol Rs 20 is cess that is around 60% of central component while for diesel, the cess is Rs 22, almost 70% of central component.
No deal at OPEC to hit fuel consumers badly in India
There may be no respite for fuel consumers in the country facing high prices of petrol and diesel for the past couple of months as global oil scenario is expected to remain firm with oil cartel OPEC failing to reach an agreement on gradual raising of oil production to meet the growing demand. At a meeting of OPEC plus (including Russia) differences surfaced between world’s largest oil producer Saudi Arabia and United Arab Emirates (UAE) over raising oil production marginally in August while maintaining production level at the same till 2022. This prevented a deal that would have helped to soften crude prices a bit next month on the back of increased oil production of 2 million barrels a day. With no deal among prime oil producers, analysts expect oil prices to remain firm and may hit even $80 a barrel over the next few days. At intercontinental exchange benchmark, Brent crude is currently hovering at $77.5 a barrel, up over 1 per cent from the previous day. This is the highest crude level since 2018. In fact, in the month of July itself crude prices have risen by over $7 a barrel. “The situation in global oil markets is not good news for fuel consumers in India. Unless government intervenes by lowering taxes on the two fuels, petrol and diesel retail rates could touch new highs over successive days this month,” said an oil sector expert not willing to be named. Petrol and diesel prices have been raised on 35 days since May 1. This has increased retail petrol prices by Rs 9.46 a litre in the last two months while diesel has also increased by Rs 8.63 per litre during the same time span. Also, the Centre had raised excise duty by Rs 13 on petrol and Rs 16 on diesel between March and May last year when oil prices collapsed due to the pandemic. The two hikes raised excise duty by 65 per cent on petrol from Rs 19.98 to Rs 32.98 a litre and 79 per cent on diesel from Rs 15.83 to Rs 28.35 a litre. These high taxes are amplifying the impact of rise in crude prices, sending petrol price above Rs 100 a litre and diesel above Rs 90 in most parts of the country. With expectation that global oil may rise further in coming days, consumers would have to brace for buying fuel at new record prices everyday.
Sarbananda Sonowal to become next Union petroleum minister?
Will former Assam chief minister Sarbananda Sonowal become the next Union petroleum minister? Prime Minister Narendra Modi’s cabinet of ministers is expected to be expanded with the addition of new members soon. Local media reports in Assam are rife with speculations on the next move of the former chief minister who stepped down after the BJP-led alliance won the recent assembly elections in Assam and Himanta Biswa Sarma was made the chief minister. While there is still no confirmed news on Sarbananda Sonowal’s next assignment, it is almost certain that the former AASU leader will be making a move to New Delhi. Earlier, certain reports said that Sarbananda Sonowal could get the Information and Broadcasting ministry while it was unlikely that he will be given the Sports portfolio which he had held before becoming the chief minister of Assam in 2016. “Sports minister Kiren Rijiju is doing good work. Besides, PM Narendra Modi will not want to change the sports minister just before the Olympics,” said a source in the party. Sonowal, who was elected as a legislator representing Majuli, will most likely be nominated for the Rajya Sabha. Assam Legislative Assembly speaker Biswajit Daimary, who was a Rajya Sabha MP from Assam, had left the post vacant after he won the Assam assembly elections. Meanwhile, a Times of India report said that the Congress party in Assam is already gearing up for byelections at Majuli. The Assam Pradesh Congress Committee has formed a panel to immediately take stock of the political situation in Majuli, the report said. The seven-member panel, formed by APCC president Ripun Bora, is headed by senior Congress leader and AICC secretary Bhupen Bora. The team has been asked to visit Majuli immediately to interact with workers from the grassroots to the district level, the report added.
Tight LNG Market to Benefit Shell, TotalEnergies — Analysis
Global demand for liquefied natural gas is expected to outpace supply until 2025, and Royal Dutch Shell PLC and TotalEnergies SE are best placed to benefit from this tight market, Jefferies says in a report. LNG consumption should grow at a compound annual rate of 5% through 2030, and at 2% during the 2030s, Jefferies estimates. This will be driven by new Asian importing countries, continued high growth in Chinese demand and new transport fuel applications. “We see gas as a key transition fuel for developing economies with India and China being the biggest growth drivers, more than offsetting demand decline in Europe, Japan and North America,” Jefferies analysts say. Combined with limited project start-ups in 2021 and 2022, this should keep the market tight and spot LNG prices at an elevated level in the medium term, the bank says. This will particularly favor companies such as Shell and Total, which have a relatively higher degree of exposure to spot pricing–as opposed to contracted sales which remain under pressure by Qatar’s aggressive marketing. Shell has the best LNG business among the big energy companies, according to Jefferies. The Anglo-Dutch group has the largest production capacity portfolio and is expected to increase it by at least 7 million tons a year by the middle of the decade. Moreover, Shell has a low break-even point and the highest proportion of spot LNG sales of all integrated oil companies. It also has the greatest number of LNG carriers and holds equity stakes in three regasification facilities. TotalEnergies is seen as a close second. However, the French company lags behind Shell in terms of LNG shipping capacity and ESG credentials, according to Jefferies. From 2025 onward, however, this should change, as a wave of projects will be commissioned and new volumes will enter the market, Jefferies says. Those include Shell’s LNG Canada, Exxon Mobil Corp.’s Golden Pass, Gazprom PJSC’s Baltic LNG, and Qatar Petroleum’s North Field East. As a result, the U.S. bank expects the market to become looser from 2025 until the end of the decade, which will weigh on spot prices for the super-chilled gas.
Oil and dollars: Why the UAE is risking a falling-out with OPEC+
The OPEC+ oil cartel is facing its biggest crisis since a price war at the start of the coronavirus pandemic. The United Arab Emirates, the group’s fourth-biggest producer, argued against a deal proposed by Saudi Arabia and Russia to extend quota limits until the end of next year, rather than ending them in April as originally planned. The UAE agreed with the other 22 OPEC+ members that monthly output cuts should be eased by 400,000 barrels a day from August, but said the extension should be treated separately. The group normally settles its differences in private and likes to put on a show of unity. But this rift runs so deep that the energy ministers of the UAE and Saudi Arabia aired their grievances in interviews with Bloomberg Television and other media on Sunday. The Organization of Petroleum Exporting Countries and its allies were meant to reconvene on Monday to try to bridge the divide, but called their meeting off. Without a deal, markets will be left in limbo at a time when they’re clamoring for more oil, prices for which are already up around 50% this year. Here’s why the UAE is digging in. Production increase The UAE claims it can pump much more than the 3.2 million barrels a day baseline accorded to it under OPEC+’s quota system. Energy Minister Suhail Al-Mazrouei said that level’s “totally unfair and unsustainable.” The country wants an increase to 3.8 million barrels daily if the supply agreement — signed in April 2020 as the coronavirus pandemic was crushing oil demand — is extended until the end of 2022. Mazrouei said the UAE has roughly one-third of its output idle, meaning it’s “sacrificing” its production to a greater extent than other OPEC+ members. Saudi Arabia argues that it’s withholding much more oil than the UAE — and has done for years. Riyadh also insists that the extension is needed to put energy markets at ease because of the continued threat to fuel consumption from the pandemic. Abu Dhabi, which produces almost all the UAE’s crude, is spending around $25 billion a year to help boost its capacity to 5 million barrels a day by the end of the decade. The UAE’s de facto ruler, Crown Prince Mohammed bin Zayed, sees the plan as crucial for raising more funds to invest in new industries and diversify the economy. “They want a higher baseline to better reflect the investment they’ve made,” Jeff Currie, global head of commodities at Goldman Sachs Group Inc, said in a Bloomberg Television interview. Foreign partners Unlike Saudi Arabia and most other Gulf OPEC members, Abu Dhabi has international companies as equity investors in its oil and gas fields. Long-standing partners such as BP Plc and TotalEnergies SE, which have operated in the region since before the UAE came into existence 50 years ago, have been joined by others from India and China over the past three years. Sultan Al Jaber, chief executive officer of Abu Dhabi National Oil Co., has led an aggressive restructuring of the state producer since taking on the role in 2016, and has done so with the firm backing of Prince Mohammed. In addition to boosting capacity and ties with Asian energy companies, he’s sold billions-of-dollars-worth of pipeline, refining and real estate assets to foreign private-equity investors. Lower production can potentially hurt those investors as well as the UAE. “We can not continue with our investors losing on their investment,” Al Mazrouei said in an interview with Bloomberg Television. Crude futures Abu Dhabi allowed its main grade of crude, called Murban, to be traded on a new futures exchange earlier this year. This was a first for an OPEC member. It wants Murban to be adopted by oil traders and other Middle Eastern producers as a benchmark for the region. For that, it needs to ensure large flows to underpin liquidity and trading. Adnoc has said it expects to provide more than 1.1 million barrels a day for the exchange from August. Ramping up Murban production closer to full capacity of about 2 million barrels a day would strengthen Adnoc’s bid for it eventually to get benchmark status.
Saudi-UAE tussle could lead to further hike in crude rates
Hopes of any respite from rising fuel prices receded on Monday after a bitter dispute between Saudi Arabia and UAE on Monday stalled an Opec-plus output deal, raising the prospect of tighter supplies amid recovering demand and prompting oil prices to jump higher. The grouping abandoned a meeting to bring the two warring heavyweights on the same page without announcing any prospective date. UAE is opposing Saudi proposal to extend the current deal to 2022, with phased increase in production, and demanding a higher baseline for its output quota. Riyadh feels the global economic recovery is still tenuous and wants the deal extended to keep the market in balance. It is also opposing revision of baseline for one member as it will prompt others to demand the same. An immediate fallout is that there will be no increase in August supplies as was expected. This will tighten the market as demand gains traction, especially from the US, Europe, China and India. The market reacted predictably as global benchmark Brent crude rose 1 per cent to near $77/barrel, the highest since 2018. Several investment banks recently projected oil at $80/barrel. This means pump prices will keep on rising unless the Centre reduces taxes it had raised last year. India’s crude purchase cost has risen from about $60/barrel in January to almost $75. As a result, petrol is currently selling for Rs 100 a litre and diesel is headed towards a century in most parts of the country, helped largely by last year’s sharp increase in taxes. The Centre had raised excise duty by Rs 13 on petrol and Rs 16 on diesel between March and May last year when oil prices collapsed due to the pandemic. The two hikes raised excise duty by 65 per cent on petrol from Rs 19.98 to Rs 32.98 a litre and 79 per cent on diesel from Rs 15.83 to Rs 28.35. These high taxes are amplifying the impact of rising crude prices, sending petrol price above Rs 100 a litre and diesel above Rs 90 in most parts of the country.