Crude oil price drops as lack of OPEC+ unity hangs over market
Oil prices fell on Monday, with Brent dropping after four days of gains, as investors and traders awaited crucial talks by OPEC+ following disagreement within the group that could lead to major producers pumping up volumes to grab market share. Brent crude was down by 40 cents, or 0.5%, at $75.77 a barrel by 0131 GMT, after falling 1 cent last week, the first weekly decline in six. U.S. oil was down by 30 cents, or 0.4%, at $74.86 a barrel, having risen 1.5% last week, the sixth consecutive week of gains for the contract. The Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, voted on Friday to increase production by about 2 million barrels a day from August to December 2021 and to extend the remaining output cuts to the end of 2022, but objections from the United Arab Emirates (UAE) prevented an agreement. It was a rare public disagreement between members of the group, with national interests increasingly diverging, which is impacting OPEC+ policy as oil users want more crude as their economies recover from the COVID-19 pandemic. “This latest move raises the bar for the OPEC+ alliance, which has shown great unity that has ultimately helped rebalance the market following the collapse in demand,” ANZ Research said in a note. “A break-up could result in a free-for-all that would likely lead to a collapse in prices.” Saudi Arabia’s energy minister sought on Sunday to push back against UAE’s opposition to a proposed OPEC+ deal, calling for “compromise and rationality” to get unanimity when the group meets again on Monday. “You have to balance addressing the current market situation with maintaining the ability to react to future developments … if everyone wants to raise production then there has to be an extension,” Prince Abdulaziz bin Salman told Saudi-owned Al Arabiya television channel. He also highlighted uncertainty over the course of the pandemic and production from Iran and Venezuela. In the United States, energy companies increased oil and natural gas rigs for a third week out of the last four. The number of oil and gas rigs, an early indicator of future output, was up by 5 to 475 in the week to July 2, the most since April 2020, Baker Hughes Co said in its closely watched report on Friday.
GAIL looks at petrochemicals, renewables for growth
State-owned GAIL India Ltd is eyeing expansion in petrochemicals, specialty chemicals and renewables as it pivots a new strategy to expand the business beyond natural gas, its chairman Manoj Jain said. The nation’s largest gas marketer and shipper has adopted a revised future blueprint, called ‘Strategy 2030’ to define its journey through the next decade. “This strategic plan will help us to address our challenges in changing industry scenarios and provide new areas for growth with geographic expansion,” he told in an interview. GAIL transports over 70 per cent of all gas shipped in the country through its network of 13,340-km network of natural gas trunk pipelines. It sells 55 per cent of all natural gas in the country and has petrochemical plants at Pata in Uttar Pradesh and Lepatkata in Assam that gives it a 17.5 per cent market share. The firm will convert an existing LPG Plant at Usar in Raigad district of Maharashtra into 500,000 tonnes per annum polypropylene complex with an estimated investment of Rs 8,800 crore by 2023-24, he said adding the company will explore opportunities in the petrochemicals segment to meet high future demand of polyethylene and polypropylene. “We are also assessing opportunities for certain specialty chemicals in India,” he said. GAIL has a small portfolio of 120 MW of wind and solar power generation capacity which it plans to scale up to 1 GW at an investment of Rs 4,000 crore in next 3-4 years. “While gas will remain our core segment, we will look for growth in other areas such as petrochemicals, specialty chemicals, renewables, water, etc to reach new heights in coming years,” he said. “This with a view to build a strong business portfolio and organisation structure which is not only robust enough to respond to the fast-changing business scenario but also unlocks growth opportunities for the long-term growth of the company.” GAIL is investing Rs 32,000 crore in laying important sections of National Gas Grid — about 7,500-km of lines, mostly to the eastern part of the country. The company is talking to city gas licence holders to set up liquefied natural gas (LNG) dispensing stations on National Highways to supply fuel to long-haul trucks and buses. It is also setting up compressed biogas plants to convert municipal waste into gas that can be used as fuel (CNG) in automobiles and in households for cooking purposes. Besides, it plans to set up ethanol units that can convert agriculture waste or sugarcane into less polluting fuel that can be doped in petrol, helping cut India’s import dependence, he said. While the renewable energy push would cost Rs 4,000 crore, setting up at least two compressed biogas plants and an ethanol factory would entail an investment of about Rs 800-1,000 crore, he said. India, which imports 85 per cent of its crude oil needs, is stepping up efforts to explore new forms of energy to clean up the skies and reduce dependence on imported fuels. Jain said GAIL is setting up its first compressed biogas (CBG) plant in Ranchi at a cost of Rs 200-300 crore. The facility will produce five tonnes of CBG per day and approximately 25 tonnes of bio-manure using municipal waste. “The gas produced will be fed into the city gas network supplying CNG to automobiles and piped natural gas to households. This will help reduce pollution,” he said. GAIL has floated an expression of interest (EoI) seeking partners for the setting up of CBG plants. It also plans to set up an ethanol manufacturing unit, he said. The move by GAIL, which commands a 75 per cent market share in gas transmission and more than 50 per cent share in gas trading in India, is seen as part of the government’s vision to prepare for the energy transition process, under which the share of gas in the energy mix is sought to be raised to 15 per cent by 2030, from the current 6.2 per cent. GAIL recently signed an agreement with Carbon Clean Solutions Ltd. Under this, CCSL will initially build four CBG plants using its own funding, technology, and expertise. These plants will be based on 10-year CBG offtake agreements with GAIL or its associated companies. Depending on the success, the partnership will be scaled up to many more such plants.
Oil companies bet on $100 a barrel as they rush to sell assets
Oil companies are betting that if they sell land, buyers will come, as crude prices have soared more than 50% this year, fueling the most robust pipeline of deals in more than four years. Large oil companies are unloading properties from Texas to California, with some using the market rally as a chance to rake in cash for future investment in the global transition to cleaner energy. Other sellers are taking the chance to profit when just a few months ago big properties were being sold at a loss, according to interviews with 10 advisers and analysts. Even though renewable fuel usage is increasing, overall global oil demand is expected to return to pre-pandemic levels next year, leaving opportunities for producers looking for deals. “In greed versus fear, last year fear was the factor. Greed is creeping in now,” said Dan Pickering, chief investment officer at Pickering Energy Partners. “There is more optimism in the market, there is a little more greed from the seller’s perspective, there is a little more urgency from the buyer’s perspectives.” Still, some buyers may struggle to secure financing. Some private equity firms that once loomed large in oil transactions have headed to the sidelines under investor pressure about climate change, while European banks have also largely pulled out of lending to oil companies. Smaller deals or land with more shale, seen as less polluting than tar sands oil, may be easier to finance, Pickering said. Among the largest sellers are the majors, including Royal Dutch Shell, BP and Chevron. Early this year, big players – like Norway’s state-run Equinor – were finding fewer buyers, as the company had to sell its position in North Dakota’s Bakken shale region for $900 million, roughly one-fifth of the value of its purchase there a decade ago. Now, companies see a better outlook for possible sales. On Wednesday, Chevron confirmed news first reported by Reuters that it planned to divest a swath of conventional assets in the Permian Basin, which sources valued at over $1 billion. While some sellers are motivated by an opportunity to unload underperforming assets at a profit, others, like Shell, are selling in an effort to cut back on carbon emissions under pressure from investors and government regulations. The potential transactions are concentrated in the largest U.S. shale formation, the Permian Basin of Texas and New Mexico. In addition to Chevron’s planned Permian sale, Shell is considering divesting all of its acreage in the Permian Basin and has notified joint venture partner Exxon Mobil that it will be leaving production in California as well. Smaller deals have also popped up as private equity firms seek to turn over long-held investments and distressed players look to shed unwanted assets. Three companies proposing Permian asset sales have pegged their desired deal prices to oil rising to $100 a barrel, according to one person familiar with the talks. Bank of America has estimated global benchmark Brent futures will reach $100 per barrel in 2022, with U.S. crude trading at $95 a barrel. That’s higher than Reuters’ poll on Wednesday of 44 analysts, who expect an average price of $64.54 this year and $65.44 next year. “While asset prices are coming up helping sellers, there is still plenty of room for buyers to capture upside at these commodity price levels,” said Andrew Dittmar, a senior M&A analyst at energy information provider Enverus. “Buyers are paying valuations on assets that leave room for commodity prices to come down a bit and they still make money.” Smaller, privately held companies also see a potential to take advantage of the current high prices. Private driller Recoil Resources is hunting for a buyer, and Mesquite is looking to divest Eagle Ford acreage as it considers selling off even more assets as it emerges from bankruptcy. Potential buyers for smaller packages may include Skye Callantine’s Validus, which people close to the firm say is among active bidders on assets in the Eagle Ford.
Tata Motors bags an order of 15 hydrogen-based fuel cell buses from Indian Oil Corporation Ltd.
Reaffirming its commitment towards sustainable mobility, Tata Motors, India’s largest commercial vehicle player and leading bus manufacturer, announced that it has won a tender of 15 hydrogen-based proton exchange membrane (PEM) fuel cell buses from the Indian Oil Corporation Limited (IOCL). IOCL had invited bids for supply of PEM fuel cell buses in December 2020, and Tata Motors was selected as the winner following a diligent evaluation process. All 15 buses will be delivered within 144 weeks from the date of signing of the Memorandum of Understanding (MOU). In addition to supplying the buses to the Research & Development Centre of IOCL, Tata Motors will also collaborate with them to undertake R&D projects and collectively study further the potential of Fuel Cell technology for commercial vehicles. This will be done by jointly testing, maintaining and operating these buses for public transport in real-world conditions in Delhi-NCR. The buses will be refuelled by hydrogen, generated and dispensed by IOCL. Sh. S.M. Vaidya, Chairman, IndianOil, stated that IndianOil has been pioneering the national efforts towards ushering in the hydrogen economy for various applications, including mobility. This 1st of its kind project in the country is bringing the country’s largest fuel supplier and largest commercial vehicle manufacturer on board to take the hydrogen & fuel cell technology to the next level. This initiative would also act as a stepping stone for various other key programs of IndianOil, which proposes to introduce hydrogen-based mobility on different iconic routes and important sectors in the country. These futuristic steps are in the right direction for making hydrogen as the ultimate net-zero fuel. Speaking on the occasion, Mr. Girish Wagh, President, Commercial Vehicle Business Unit, Tata Motors said, “We are delighted to win this prestigious tender from IOCL for it adds to Tata Motors’ rich legacy of introducing future ready technologies for cleaner and greener public transport. We have successfully supplied 215 EV buses under FAME I and won orders for 600 EV buses under FAME II. This order to supply PEM Fuel Cell buses from a company as respected as Indian Oil Corporation, further encourages our ongoing efforts on developing India-focused alternative sustainable fuels to transform the future of mobility in India.” Dr. SSV Ramakumar, Director (R&D), IndianOil while congratulating Tata Motors Ltd., mentioned that lot of hard work has been put in by the IndianOil R&D team towards conceiving, planning and executing this joint developmental cum demonstration program with a strong support from Ministry of Petroleum & Natural Gas. IndianOil through cutting edge R&D, is committed to strengthen the production and supply chain of hydrogen energy in India and would be setting up ~1 ton per day hydrogen production pilot plants based on 4 innovative pathways besides collaborating with Tata Motors for fuel cell research.
Oil price steady after OPEC+ delays meeting on supply decision
Oil prices held steady on Friday after OPEC+ ministers delayed a meeting on output policy as the United Arab Emirates balked at a plan to add back 2 million barrels per day (bpd) in the second half of the year. U.S. West Texas Intermediate (WTI) crude futures were up 5 cents at $75.28 a barrel at 0155 GMT, having jumped 2.4% on Thursday to close at their highest since October 2018. Brent crude futures inched up 4 cents to $75.88 a barrel, after rising 1.6% on Thursday. Both benchmark contracts posted strong gains on Thursday as a plan backed by Saudi Arabia and Russia for the Organization of Petroleum Countries and allies, together known as OPEC+, to add back 400,000 bpd each month from August through December 2021 was more cautious than investors had expected. Prices retreated after the plan met resistance from the UAE and OPEC+ postponed a ministerial meeting to Friday. “Failure to come to an agreement could mean that the group continues with current levels of production, which would mean that the market tightens even quicker,” ING commodities strategists said in a note. If existing curbs are extended, however, some OPEC+ producers may be less willing to stick to their quotas, which would result in an increase in supply, ING said. WTI was on track for a 1.6% rise for the week with the U.S. crude market seen tightening as refinery runs pick up to meet recovering gasoline demand, while U.S. shale oil production has not risen at the same pace. [EIA/S] Brent was heading for a 0.5% fall for the week, reflecting concerns about fuel demand in parts of Asia where cases of the highly contagious COVID-19 Delta variant are surging. Citi analysts said they do not expect WTI to climb to a premium to Brent, as they expect U.S. oil output to pick up at the end of 2021 and grow further in 2022.
City gas companies set to get protection after Oil Min proposes new rule
No company, except the licensee, can sell natural gas to homes and vehicle owners in a licensed area without the central government’s permission even after the city gas network has been declared a common carrier by the regulator, the oil ministry has proposed. This essentially means a city gas licensee may face automatic competition only for its industrial and commercial customers after the end of the exclusivity period while its home and super-profitable CNG business may get longer protection. Licensees get cheaper domestic gas for supply to homes and vehicles while depending on expensive imported gas for other customers. Cheap domestic gas comes mainly from old fields and its price is regulated by a government-set formula. “Third-party access for marketing natural gas to CNG (transport) and PNG (domestic) segments in an authorised geographical area, shall be allowed only when the central government finds it necessary or expedient to do so having regard to factors such as availability of domestic gas for such purpose and overall public interest,” say the oil ministry’s draft rules for open access to natural gas pipelines and city gas distribution network. The Petroleum and Natural Gas Regulatory Board (PNGRB) shall declare a city gas distribution network as common carrier upon the expiry of its exclusivity period and also determine its transportation tariffs, per the draft, which also provides for setting up of a transport system operator (TSO) to manage common carrier capacity of all gas pipelines. The TSO isn’t permitted to market or sell natural gas but can own and operate pipelines. The TSO can collect fees from users to meet its expenses. It shall frame suitable procedures to provide for the registration of users of common carrier capacity, receipt of necessary pipeline data from all pipeline entities, collection and scheduling of nominations for transportation of gas in open access capacity, and management of imbalances in open access capacity, per the draft. The TSO is also expected to set up a gas management control centre and a database management system. It would also provide information to gas exchange about available common carrier capacity, according to the draft.
Now, shell out Rs 1,000 more than last year to fill up petrol tank
With the latest fuel hikes in Mumbai, you now pay Rs 1,000 more than what you would pay for filling up the vehicle tank with petrol in April last year. This is a huge jump and has burnt a hole in the pockets of motorists. Dealers, however, say that the rush at the pumps continues as usual and people are buying expensive fuel for transport even as petrol is retailing at Rs 105 a litre now. It was priced at Rs 76.31 a litre in April last year. On the other hand, the government has been earning a huge revenue, with the state earning around Rs 25,000 crore annually, an official said. The break up of petrol on Wednesday after series of over 100 hikes in the past one year is Rs 37.19 for the base price of the fuel while you pay Rs 34.36 for Central government excise and tax on every litre, Rs 29.54 goes in Maharashtra government’s kitty towards VAT and surcharge and dealers get a commission of Rs 3.87 per litre. “So you pay around Rs 68 towards government duty, taxes, and commission for every litre of petrol– which is a burden on consumers,” said a member of the Petrol Dealers Association. Activists have demanded that both Centre and state should roll back excise duty and VAT to some extent in order to give relief to consumers and bring down prices. Diesel was retailing at city pumps at a new high of Rs 96.77 a litre in the city. Although transporters protested peacefully on Monday across the state, they now threaten a nationwide chakka jam if the government doesn’t intervene and reduce rates, said Bal Malkit Singh of All India Motor Transport Congress. In case of petrol, Parbhani has the highest rate in Maharashtra at Rs 107.22 a litre. Ravi Shinde of Petrol Dealers Association said: “The ever-increasing burden of working capital without an increase in dealer margin for the last fours years has literally broken the back of low selling dealers. They are left struggling to beg banks to give more loans which they find difficult to repay. So, any hike in petrol or diesel does not benefit pump owners significantly.”
HPCL, GAIL to build 2G ethanol plants
Hindustan Petroleum Corp Ltd (HPCL) and Gas Authority of India Ltd (GAIL) are planning to build second generation (2G) grain-based refineries, to help boost India’s ethanol output by 2025. HPCL will invest Indian rupee (Rs) 4bn ($54m) on a 125,000 litre/day grain-based ethanol plant at Una in the Himachal Pradesh state in northern India, with plant site of 70 acres to be provided by the state government. Feedstock grains such as rice and maize for the plant would be sourced from four districts in Himachal Pradesh and two districts in neighbouring Punjab state, the company said. GAIL is planning a bigger grain-based ethanol plant with a 500,000 litres/day capacity, in joint venture with private partners. “We are seeking partners for an ethanol refinery, so that we can also be part of ethanol blending programme of the Government of India, which is now a new lucrative area, which has been opened by the government,” a senior company official said. Ethanol produced at the proposed plant would be sold to oil marketing companies for blending with petrol, he added. While the company is yet to finalise investment details and plant location, GAIL intends to build the refinery in an ethanol-deficient state, the company source said. India will need to produce more than 12bn litres (4.2bn tonnes) of ethanol to achieve its target of blending 20% ethanol in fuel by 2025, and to meet the requirements of the chemical and other sectors, as per GAIL’s assessment. Ethanol used for blending in fuel in the country is traditionally produced using sugarcane molasses and juice. By 2025, the government expects the sugar industry to produce 7bn litres of ethanol or 58% of the total output required, with grain-based and other 2G ethanol plants expected to produce the remaining 5bn litres. The government expects to achieve nearly an 8.5% ethanol blending rate for fuel from December 2020 to November 2021.
India fuel consumption picks up in June as lockdowns ease
India’s auto fuel demand picked up in June as economic activity accelerated after the easing of pandemic-related lockdowns, preliminary sales data showed on Thursday. State-run refiners sold 2.12 million tonnes of gasoline last month, up 29.35per cent from May and about 5.7per cent from the year-earlier period. Sales of gasoil, which accounts for about two-fifths of India’s overall refined fuel consumption and is directly linked to industrial activity in Asia’s third-largest economy, rose 18.5per cent from May to 5.36 million tonnes, but were down 1.84per cent from June 2020. Compared to June 2019, demand for gasoline and gasoil last month slipped 10.4per cent and 18.8per cent, respectively. Fuel demand in India would recover to pre-pandemic levels by the end of this year after being hit by a deadly second wave of coronavirus, oil minister Dharmendra Pradhan said on Tuesday. In May, local fuel consumption, a proxy for oil demand, slumped to its lowest since last August as lockdowns and travel restrictions in several states stalled mobility and muted economic activity. State-run Indian Oil Corp, Hindustan Petroleum Corp and Bharat Petroleum Corp Ltd own about 90per cent of India’s retail fuel outlets. Below is a table of India’ preliminary daily fuel sales data with volumes in million tonnes.
U.S. natgas companies put hydrogen to the test
NEW YORK, At least two dozen U.S. energy firms, including Dominion Energy Inc and Sempra Energy , have started producing hydrogen or testing its viability in natural gas pipes to take advantage of existing infrastructure as the world prioritizes lower-carbon fuels. Nations worldwide are trying to reach net-zero carbon emissions by 2050, but that will rely heavily on technology – like hydrogen – that is in developmental stages. Utilities have a potential advantage if they find that clean-burning hydrogen can be successfully transported in existing gas pipes and power plants. But governments need legislation and regulation to encourage energy companies to spend billions in order to reduce production costs for green hydrogen, analysts said, before it can displace fossil fuels. Almost all of the world’s hydrogen production is currently through fossil fuels, and large utilities are currently mostly testing blends of natural gas and hydrogen in their pipelines. The companies experimenting with hydrogen are in early stages. Canada’s Enbridge Inc is blending up to 2per cent hydrogen into its natural gas distribution systems in Ontario, and just received approval to blend hydrogen in Quebec. “We are looking to understand the potential either with the existing system or, as we’re continuing to modernize the gas pipeline system, to ensure that new construction is hydrogen-ready,” said Pete Sheffield, Enbridge’s chief sustainability officer. Sempra’s Southern California Gas (SoCalGas) utility, which supplies gas to 22 million consumers, is working on pilot programs to test the fuel in its pipelines and see how a blend with natural gas affects the company’s pipes, as well as appliances and other equipment. The first project would blend hydrogen in a mostly residential area that SoCalGas can isolate from the rest of its distribution system, said Jawaad Malik, chief environmental officer. Virginia-based Dominion is testing a 5per cent hydrogen blend in a training facility in Utah and recently proposed a similar pilot in North Carolina, said Dominion spokesperson Aaron Ruby. Hydrogen is only considered clean if it is produced using low- or no-carbon emitting energy sources like biomass, nuclear, renewables or fossil fuels paired with carbon capture technology. “These types of proposals have not yet shown a path to a deeply decarbonized gas system,” said Julie McNamara, senior energy analyst for the Union of Concerned Scientists. Almost every gas turbine used to produce power can burn fuels containing about 5per cent to 10per cent hydrogen, said Jeff Goldmeer, General Electric’s emergent technologies director for decarbonization. That would cut carbon dioxide emissions from natural gas from the power sector, which has been one of the fastest growing sources of demand for gas. Roughly 36per cent of energy-related carbon emissions come from fossil fuel-fired electricity generation, according to the International Energy Agency (IEA). A RISE IN PILOT PROGRAMS To reach net-zero emissions by 2050, global hydrogen use needs to expand to more than 200 million tonnes in 2030 from less than 90 million tonnes in 2020, according to the IEA. Reaching that goal will be difficult. Hydrogen production and transport costs more than natural gas, for now. Evercore ISI analysts said in a report this week that green hydrogen could become cost-competitive with less clean versions by 2030. GE has more than 75 turbines worldwide that use or have used fuels containing hydrogen, which have produced more than 450 terawatt-hours (TWh) of power. U.S. utility-scale facilities generated about 4,009 TWh of electricity in 2020, according to U.S. federal data. Technology will have to advance further to burn hydrogen as a viable fuel rather than just as a small percentage of a natural gas blend. “Clean hydrogen will be constrained in supply for the foreseeable future,” said McNamara of the Union of Concerned Scientists. “Blending it at a low level into a gas pipeline that should be transitioned to electrification is just not the right pathway to be taken today.