PNGRB chairman interviews this week, Gurmeet Singh favourite
Interviews to select a new head of oil regulator PNGRB are slated to be held this week, with former IOC director-marketing Gurmeet Singh being considered the favourite. A Search Committee headed by V K Saraswat, Member (S&T), Niti Aayog, will interview shortlisted candidates on June 2 to select the new Chairman of Petroleum and Natural Gas Regulatory Board (PNGRB), two sources aware of the matter said. The panel — which also comprises secretaries to the ministries of oil, and commerce, secretary legal affairs and economic affairs secretary — will interview at least seven shortlisted candidates. Singh, who superannuated from Indian Oil Corporation (IOC) last month, is considered a favourite after his candidature was ‘endorsed’ by the Oil Secretary – who is also a member of the Search Committee, they said. While previously only those who have retired as chairman of public sector firms or senior bureaucrats were considered for the PNGRB top job, directors of PSUs were included in the selection universe by the Search Committee at its meeting on January 15. Such candidates, however, should have been affirmed by any member of the panel. Singh’s candidature was endorsed by the Oil Secretary, according to the minutes of the meeting. While the spokesperson of the oil ministry did not respond to emails sent for comments, an official said the Committee wanted more candidates to be included for consideration and so more names were sought. Since the panel is a search-cum-selection committee, it or its members could pick candidates with a good background for consideration. And going by this criteria, Singh was ‘endorsed’ by the oil secretary. Members of the committee have been asked to suggest more candidates with good standing, who can be interviewed. Other candidates shortlisted for the interview on June 2 include retired bureaucrats Avinash Kumar Srivastava and Ravi Kapoor, Subba Rao, Senior Economic Advisor in MEITY, former ONGC chairman Shashi Shanker and former ONGC director Sanjay Kumar Moitra. The post of Chairman, PNGRB, has been lying vacant since December 4, 2020, when Dinesh K Sarraf completed his three-year term. The Board, which comprises four members besides the chairman, is almost defunct with just one serving member. The Search Committee has selected former GAIL directors Gajendra Singh and A K Tiwari to fill posts of two members. Interviews to select member (legal) will also be held shortly, the sources said.
BPCL privatization likely to be completed by March 2022
State-run Bharat Petroleum Corp. Ltd (BPCL) is looking to complete its privatization process this financial year, if all goes well and covid-19 pandemic does not push the process back, said a top company official. The government, which holds a 52.98% stake in BPCL, is in the process of divesting its holdings, as part of its plan to raise a record ₹1.75 trillion from disinvestment proceeds in FY22. On 10 April, the government had given access to BPCL’s data to prospective bidders. So far, mining-to-oil conglomerate Vedanta and private equity firms Apollo Global and I Squared Capital’s arm Think Gas are in the race to buy the government’s stake in BPCL. “There were a few questions which we are in the process of addressing. And then there are a few questions that only the government of India can answer,” said N. Vijayagopal, director, finance, BPCL, after the March quarter earnings call. He said the final bidders will have to visit BPCL’s facilities, which is not possible now due to restrictions on international travel in view of the second wave of the covid-19 infections in India. “If things go as planned, these processes can be completed by July and the interested companies can submit the financial bids by August. If the sale and purchase agreement (SPA) is signed by September, we could take another five-six months to complete the deal,” said Vijayagopal, adding that this is his personal view and not of the government. As part of the privatization process, BPCL sold its 61.65% stake in Assam-based Numaligarh Refinery Ltd (NRL) for ₹9,875 crore to a consortium of Oil India Ltd (OIL) and Engineers India Ltd (EIL) (49%) and the remaining 13.65% to the Assam government in March.
Asia’s LNG demand growth to slow in 2022 as nuclear, coal gain- Woodmac
Liquefied natural gas (LNG) demand growth in Asia will slow down next year as the economic recovery stagnates and the capacity of competing fuels nuclear and coal expand in Japan and South Korea, research consultancy Wood Mackenzie said on Thursday. LNG demand in Asia is expected to rise by 12 million tonnes per annum (mmtpa) in 2022, down from the 19 mmtpa growth in 2021, Robert Sims, head of Woodmac’s LNG short-term, gas and LNG research, said in a note. “LNG demand growth in Asia will slow down as the economic recovery decelerates, coal and nuclear capacity will increase in Japan and South Korea and more offshore domestic supply will be available in India,” he added. At the same time, global LNG supply will grow by 18 mmtpa because of new supply from the Sabine Pass Train 6 and Calcasieu Pass projects in the United States and Indonesia’s Tangguh Train 3, he said. This will mean that there will be about 6 to 7 mmtpa of more LNG available for Europe, which will be 9% more than in 2021. Still, the key to shaping market dynamics in Europe next year will be the ramp up of the Nord Stream 2 pipeline, with capacity of 55 billion cubic metres per year, from Russia to Germany, Sims said, adding that it is expected to be commissioned this winter. “Prices might soften in 2022, but market fundamentals point towards a further tightening of the global LNG market through to 2025,” he said. “With LNG demand in Asia continuing to increase and global LNG supply growth set to slow down, competition for Atlantic LNG will intensify, reducing LNG availability to Europe.” For this year, Wood Mackenzie expects demand for restocking and strong coal-to-gas switching economics to support European gas prices through the summer despite global LNG supply expected to increase by 16 mmtpa in the summer, compared with the same period last year. “Winter will see market dynamics getting increasingly tighter,” Sims said. “Lower winter starting inventory in Europe, combined with high seasonal Asian demand, will result in increased competition for Atlantic LNG, including from the U.S., putting pressure on LNG prices”.
Moody’s flags Big Oil’s rising risk from climate battle
Rating agency Moody’s said on Friday that the credit risk of major oil producers has increased with recent events including Royal Dutch Shell losing a Dutch climate lawsuit this week and Exxon losing a battle with shareholders. Chevron also lost a vote to shareholders demanding it cut emissions further. “These actions represent a substantial shift in the landscape for oil companies, which had previously prevailed in courts, and largely fend off significant shareholder votes, on climate related matters,” Moody’s said. Moody’s said it considered Exxon losing board members to an activist hedge fund over its energy transition strategy the most important development because it “likely presages similar results in future board elections at other U.S. oil companies.” “The increasing potential for ever more stringent investor climate- and emissions-related investment thresholds are likely to lead to higher capital costs and diminished access to capital for oil companies that do not keep pace with investors’ expectations for transitioning to a low carbon business model.”
47 per cent people hold Centre responsible for hike in auto fuel prices
Around 47 per cent people hold the Central government responsible for the rise in petrol and diesel prices, as per the ABP-C Voter Modi 2.0 Report Card. The ABP-C Voter snap poll found that a total 21.2 per cent of people hold the state governments responsible for the price rise. Similarly, 18.4 percent of respondents hold the oil companies responsible for the hike in petrol and diesel prices. In urban areas, 43.9 per cent of people hold the Centre responsible for the rise in auto fuel prices, while 48.3 per cent respondents in the rural areas feel the same. A total 18.6 per cent of the people in the urban areas hold the states responsible for the rise in petrol and diesel prices, while in the rural area, 22.3 per cent hold similar views. The survey further stated that 21 per cent in urban areas hold the oil companies responsible for the price rise, while 17.2 per cent in rural areas feel the same. This survey was carried out between May 23 and May 27 on 12,070 people across the country. The petrol and diesel prices in India are decided by keeping the international fuel prices as a benchmark. A rise in global fuel prices results in a price hike in the domestic market. The state-run oil marketing companies, including Indian Oil Corporation (IOC), Bharat Petroleum and Hindustan Petroleum, align the rates of domestic fuel with that of global crude prices by taking into account any changes in the foreign exchange rates. On Saturday, the state-run oil marketing companies hiked fuel prices with petrol crossing the Rs 100-mark in Mumbai. With an increase of 26 paise, petrol price in Delhi has gone up to Rs 93.94 per litre. On the other hand, the price of diesel in the national capital went up by 28 paise to Rs 84.89 per litre. Another reason behind the price hike is the taxes levied by both the Centre and the state governments. The prices for petrol and diesel differ from state to state depending upon the value-added tax (VAT) and transportation charges.
EU countries seek to prolong bloc’s funding for gas projects
European Union countries will seek to prolong EU support for cross-border natural gas projects, a stance at odds with the European Commission’s plan to end such funding, according to a draft document. The EU’s “TEN-E” rules define which cross-border energy projects can be labelled Projects of Common Interest (PCI), giving them access to certain EU funds and fast-tracked permits. The EU is rewriting the rules in line with its climate change goals, as it seeks to reach zero net greenhouse gas emissions by 2050. The Commission proposed new TEN-E rules in December, which excluded dedicated oil and gas infrastructure. EU member states, who must approve the final rules, look set to challenge that position via a proposal drafted by Portugal. The draft, seen by Reuters, said projects in Malta and Cyprus that currently have PCI status should retain it until those countries are fully connected to the European gas network. That could help ensure the completion of Greece, Cyprus and Israel’s Eastmed pipeline to supply Europe with gas from the eastern Mediterranean. The countries aim to reach a final investment decision by 2022 and complete the project by 2025. The proposal, due to be discussed by EU ambassadors next week, also said that until 2030 investments to retrofit gas pipelines to carry hydrogen should be allowed to continue carrying natural gas blended with hydrogen. Portugal declined to comment. The PCI list is revised every two years. Campaign group Global Witness said the rules should not support fossil fuels, and pointed to an International Energy Agency report this month that said investments in new fossil fuel supply projects must cease if the world wants to reach net zero emissions by 2050. EU countries disagree on the role of gas in meeting green goals. Gas produces roughly half the CO2 emissions of coal when burned in power plants, but the fuel is not zero-carbon and gas infrastructure is associated with emissions of planet-warming methane.
India’s oil industry struggles to predict when demand will recover
Indian energy demand is taking a big hit as Covid-19 runs rampant across the country. But uncertainty around when the virus wave will subside and the lack of a unified government response has left the oil industry in the dark as to how quickly consumption might pick up again. The demand destruction over the last couple of months has been less severe than last year, when the government imposed the world’s biggest national lockdown. However, the lack of a coordinated effort to shut down activity to halt the virus’s spread will likely lead to a longer, although less pronounced, economic slump. “When it will return to normalcy is a very difficult question to answer,” said Shrikant Madhav Vaidya, chairman of Indian Oil Corp., the country’s biggest refiner. “We can only hope and pray that with the vaccination drive underway, things will come out well. But when, I don’t know.” Unlike last year, Prime Minister Narendra Modi hasn’t imposed a countrywide lockdown. States have been left to fend for themselves, leading to a patchwork of curfews and restrictions that are being constantly extended as record infections and deaths overwhelm hospitals and crematoriums. “We hope the situation will be clearer by the end of this month or the first week of June,” said Mukesh Kumar Surana, chairman of Hindustan Petroleum Corp. Demand should be better in the quarter through September, he said. Diesel and petrol, which account for more than half of oil consumption in India, are bearing the brunt of localised lockdowns. Sales of the two fuels at the three biggest retailers are about a third lower so far in May compared with pre-virus levels two years earlier. That’s not as bad as April 2020, however, when demand nearly halved. This time round, more factories have remained open and cargo movements between states haven’t been as badly affected. Even so, around 65% of India’s truck fleet is idle due to weak demand and a shortage of drivers, according to Naveen Kumar Gupta, secretary general of All India Motor Transport Congress. Localized restrictions are creating hurdles to truck movement and the slow progress on vaccination of drivers and a reverse migration of labor back to rural areas is really hurting the industry, he said. Indian refiners were hoping to keep processing rates reasonably high this year, encouraged by low stockpiles and export opportunities, even as consumption dropped. May shipments of clean fuels like gasoline and diesel are set to be the highest since January 2020, according to oil analytics firm Vortexa. However, a slowdown in construction and factory activity has led to a build-up of sulfur and bitumen stockpiles, making it more difficult to maintain operations. Crude processing fell to 4.86 million barrels per day in April, from 4.96 million in March, official data show. FGE sees run rates at 4.45 million this month, 4.6 million in June and then averaging 4.8 million over July and August. Demand for key oil products — diesel, petrol, LPG, naphtha, jet fuel and fuel oil — is set to drop by about 730,000 barrels per day in May from 4 million in March, the industry consultant said. June demand will be only around 30,000 barrels a day higher than this month, according to FGE. “The regional lockdowns and periodic announcements do make it difficult to predict,” said Senthil Kumaran, head of south Asia oil at FGE, who has already revised Indian fuel demand estimates lower twice this year. “I strongly believe the impact will linger through the third quarter as well. It’s going to be very difficult for Indian oil consumption to reach March levels anytime this year.”
Analysis: Strong Asian LNG demand soaks up India cargo diversions amid COVID-19 crisis
Strong Asian LNG demand for summer and tight supply amid maintenance and outages at multiple terminals have helped the market absorb the spot LNG cargoes rejected by India due to its COVID-19 related lockdowns, according to traders and market participants. This has muted the market impact of the diversions and enabled Indian gas importers and their suppliers to find alternate destinations for contracted LNG volumes without any force majeure notices being issued or triggering any major disputes, they said. In contrast, during India’s first nationwide coronavirus lockdown in late March 2020, its gas demand plunged and gas companies Gujarat State Petroleum Corp. and GAIL Ltd. had to issue force majeure notices to their suppliers for March-April delivery cargoes to LNG terminals like Dahej, Mundra and Dabhol, which exerted downward pressure on regional LNG prices. This time around, LNG sellers were able to offer the diverted term cargoes in the spot market — and fetch a higher price — amid sustained high spot LNG price levels. The S&P Global Platts JKM was assessed at $10.47/MMBtu on May 21, nearly five times the assessment on May 22, 2020, at $2.15/MMBtu. A Singapore-based trader said that a term cargo priced at a 13% slope to Dated Brent, which works out to around $8.60/MMBtu, could be sold at a 15% slope or more than $10/MMBtu in the spot market, making it profitable for traders to divert unwanted LNG. “It’s a win-win for diversions from India,” the trader said. Asia’s spot LNG market is being supported by unprecedented LNG demand from North Asia, especially China, where economic activity has been relatively robust in 2021 on the back of recovery from the pandemic. “The market is quiet about the diversions from India, which have not affected the market at all,” an Atlantic Basin LNG supplier said. Several LNG carriers headed for Indian ports have been diverted in recent weeks; the South Korea-flagged HL Ras Laffan was diverted from Dahej to South Korea on May 15-16, and other vessels were previously diverted to Fujian, Europe and the Middle East, according to shipbrokers and vessel tracking data. India’s state gas company GAIL was heard seeking an LNG cargo for June 11-13 delivery to Hazira terminal, but this was due to disruptions at ONGC’s offshore gas production platform on the west coast due to Cyclone Tauktae, which recently damaged offshore vessels, killing dozens. COVID-19 impact India’s gas-fired power generation has dropped as economic activity remains affected in several states by restrictions to stem the coronavirus resurgence. “India’s power generation from gas-fired power plants averaged 4.7 GW for the first half of May, which is 1.5 GW lower year on year. This is equivalent of a decline in gas demand of about 10 million cu m/day,” said Andre Lambine, Senior Power Analyst at S&P Global Platts Analytics. While Indian gas importers have largely backed away from the heavy spot market procurement seen earlier this year, the reduction in buying interest is also partly due to the high spot prices. Citigroup in a May 24 update said that various firms in India have requested canceling or delaying some of their LNG deliveries, particularly for June, but at the same time the Indian market was also highly sensitive to high LNG prices, both spot and oil-indexed, that have reduced its appetite for LNG. “Although such cancelations or delays, if realized, would make available more LNG for the rest of the market globally, the actual number of cargoes freed up might not be large,” Anthony Yuen, Managing Director and Head of Commodities Strategy for Pan-Asia at Citi, said in the report. To put Indian volumes into context, Yuen said India has been importing about 3 Bcf/d of LNG in recent months, with around 2.6 Bcf/d believed to be under contract, and cutting 0.5 Bcf/d of LNG imports for a month might only amount to about 15 Bcf, or 0.42 Bcm. “To illustrate the relative size of this development, total natural gas storage in much of Europe is about 13 Bcm below the 5-year average. The price impact, using European coal-to-gas switching as a sensitivity, might only be about $0.05/MMBtu,” Yuen added. COVID-19 induced demand destruction in India threatens some of the upside to Asian LNG prices, but overall Indian growth is still positive at more than 29 million cu m/d, keeping Asia-Pacific LNG imports over 90 million cu m/d stronger year on year, Chris Durman, Head of LNG Analytics at S&P Global Platts, said earlier in May. “But continued further strength in the JKM is likely to cause end-users to retreat to the sidelines,” Durman added.
IndianOil demand forecast to recover slowly by end-2021
India’s transport fuel demand is likely to grow this year, analysts told Argus, but at a slower than expected pace with uncertainty persisting around the further extension of Covid-19 lockdowns and the pace of vaccinations. Coronavirus cases have surged to 27mn in India, according to government data, making it the second-most infected country after the US. This has prompted many Indian states to impose strict lockdowns and curfews to curb the spread of infections, in turn weighing on fuel consumption. The country’s first-half May diesel, gasoline and jet fuel consumption slumped compared with the first half of April. Analysts expect fuel demand to recover in this year’s final quarter and reach pre-pandemic levels next year. US bank JP Morgan has cut its Indian oil demand projections by 690,000 b/d for May, with gasoline and diesel demand down by 275,000 and 370,000 b/d respectively, and by around 400,000 b/d for June, compared with its forecasts at the start of April. The bank predicts total Indian oil demand to drop to a 4.8mn b/d average in the second quarter before recovering to a 4.9mn b/d average in the third quarter and ending the year at an average of 5.3mn b/d in the final quarter, which would be 3.7pc higher than pre-pandemic levels in 2019. But there is a downside risks to these forecasts if India’s Covid-19 outbreak persists longer than expected or rebounds later in the year, it warned. Auto fuel demand in May is likely to be flat from the previous month but see some increases in June, said ratings agency Icra’s vice-president and co-head of corporate ratings Prashant Vasisht. But fuel demand on a quarterly basis will see a 15-20pc dip in the April-June first quarter of 2021-22, which could reduce crude demand by 300,000-500,000 b/d, he added. Refiners are now cutting production in response to falling domestic demand. “State-owned refineries are more likely to reduce runs as India’s product consumption declines, since a greater share of their products are marketed domestically,” said Rystad Energy analyst Sofia Guidi Di Sante, who expects demand to average 4.4mn b/d this year and increase to 5mn b/d next year. Rystad forecasts India’s refinery runs at 4.2mn b/d in May, down by 700,000 b/d or 14pc from April, and at an average of 4.8mn b/d in 2021 that will be 340,000 b/d below the pre-pandemic levels. Indian state-controlled refiner IOC is operating its 1.34mn b/d of capacity at 75-80pc in the second half of May, while Bharat Petroleum is running its 705,000 b/d of capacity at 80-85pc this month. Hindustan Petroleum’s 540,000 b/d of capacity is operating at 70pc, while MRPL is running its 300,000 b/d Mangalore refinery at 65-75pc of capacity. Demand for diesel and gasoline will rebound by 12-14pc from a year earlier in 2021-22 as mobility restrictions and lockdowns start to ease from the second quarter of the current fiscal year, said CRISIL Research director Hetal Gandhi. Gasoline “demand will be further supported by changing preference for personal mobility in wake of a Covid-led change in consumer behaviour,” Gandhi added.
Chevron shareholders approve proposal to cut customer emissions
Chevron Corp investors voted in favor of a proposal on Wednesday asking the oil major to cut its customer emissions, joining shareholders around the globe in raising pressure on energy companies to reduce their carbon footprint. Shareholders voted 61% in favor of a proposal to cut so called “Scope 3” emissions, generated by the use of its products, according to a preliminary count announced by Chevron at its annual general meeting. Chevron’s investor vote comes as a bitter shareholder revolt at its closest rival Exxon Mobil Corp nears a conclusion. Engine No. 1, a tiny activist fund, has proposed three of its own nominees to Exxon’s board and is arguing that the top U.S. oil producer needs a better response to growing climate concerns. While the “Scope 3” proposal does not require Chevron to set a target of how much it needs to cut emissions or by when, the overwhelming support for it shows growing investor frustration with companies, which they believe are not doing enough to tackle climate change. Chevron has pledged to limit the pace of growth of its carbon emissions that contribute to climate change, but has not set long-term targets to achieve net zero as many European oil companies have done. A Dutch court on Wednesday ordered European oil major Shell to significantly deepen planned greenhouse gas emission cuts, a landmark ruling that could pave the way for legal action against energy companies around the world.