Domestic fuel rates expected to fall as Covid surge dampens crude oil cost
The slide in global crude oil prices on Monday gave hope for a similar fall in domestic petroleum prices. The fall in oil prices comes after a blockage at strategic Suez Canal spooked global Impex industry, while a massive wave of Covid-19 infections continued to impact large parts of Europe. Resultantly, global fears have resurfaced on the slowdown economic recovery due to this wave. At present, crude prices are reacting to the negative news flows. The Brent crude futures slipped to $63 levels a barrel on Monday. Similarly, the US crude traded lower. The WTI crude oil traded lower by 1.05 per cent at $59.92, while Brent is down by 0.78 per cent at $63.65 levels. However, the surge in domestic Covid cases will also weaken the rupee. Consequently, lower crude oil cost will dampen domestic petrol and diesel prices. “Crude oil prices are expected to slide due to increasing coronavirus cases and lower demand. Lower import from China is also a negative for crude oil,” said Anuj Gupta, DVP Research, Angel Broking. “In addition, the rupee is also expected to depreciate due to rising cases and fall in the equity market. Petrol and diesel prices may be revised downwards in India.” Currently, petrol costs Rs 90.78 per litre in Delhi, while diesel is pegged at Rs 81.10 per litre. Lately, prices of petrol had crossed the psychological Rs 100 per litre mark in some cities leading to increasing public outcry against the high prices and the inflationary impact of the auto fuels
Malaysia’s biodiesel exports in 2021 seen falling to four-year low
Malaysia’s exports of palm-based biodiesel are likely to fall this year to their lowest since 2017 due to European Union restrictions and the coronavirus pandemic, the Malaysian Biodiesel Association (MBA) said on Tuesday. Exports from Malaysia are estimated to fall to 350,000 tonnes from 378,582 tonnes in 2020, MBA president U.R. Unnithan said at the Virtual Palm and Lauric Oils Price Outlook Conference. The European Union accounts for nearly 80per cent of Malaysia and Indonesia’s exports of palm methyl ester (PME), the bio component of biodiesel that comes from palm oil. Exports, however, have slowed since the bloc in 2019 moved to cap the use of palm oil for transport fuel at 2019 levels due to deforestation concerns, with an aim to phase out its use by 2030. “(Malaysia’s) biodiesel exports are unlikely to best the performance seen in 2019 due to the EU Delegated RED II Act,” Unnithan told the conference. MBA estimates the EU’s total consumption of palm biofuel in 2019 was 6.2 million tonnes. It said that actual exports this year will start at much lower levels because EU member states pushing for a no palm-biofuel agenda can set a lower limit. Some member states will also phase out palm biodiesel before the 2030 deadline, Unnithan said. Exports this year will be the lowest in four years due to the impact of the EU rule, a rising crude palm oil-gas oil spread and reduced usage of vehicles due to coronavirus containment measures, he added. A recent rally in palm oil prices amid lower crude prices pushed the edible oil to trade $455 above gas oil on Tuesday, making it a less attractive option for biodiesel feedstock. Crude prices have declined on concerns that new pandemic curbs and slow vaccine rollouts in Europe will hold back a recovery in fuel demand, which collapsed last year as a result of global lockdowns to curb COVID-19 outbreak. Malaysia’s benchmark crude palm oil prices are trading at an average of 3,638 ringgit ($883.01) per tonne so far this year, up 34per cent from an average price of 2,700 ringgit throughout 2020.
Oil sector PSUs to set up InvITs for asset monetisation
After power, the country’s oil sector PSUs would now float an infrastructure investment trust (InvIT) as part of the asset monetisation exercise announced by the government and mobilise resources for fresh capital investment. As part of the exercise, gas transportation utility Gail India is expected to set up the gust InvIT in the oil sector in the next financial year. The proposed InvIT will house some of the gas pipeline infrastructure created by the company. Oil ministry officials said that this will help Gail to mobilise over Rs 20,000 crore through this route that could be helpful in developing new pipeline infrastructure that would help the country in developing a gas-based economy. Two other oil public sector undertakings (PSUs), HPCL and IndianOil, may also set up InvIT at a later stage. While Gail and HPCL will focus on monetising their pipeline infrastructure through the investment trusts, IndianOil proposes to do so in the case of its hydrogen-producing units as well as product pipelines that would be hived off into an InvIT. An InvIT is an investment vehicle created to hold income-generating and operational infrastructure assets such as roads, power transmission lines, and gas pipelines. These are like mutual funds and instead of financial securities InvITs hold bankable assets having long-term contracts with strong counterparties that provide a steady cash flow over the long term. The investment trust route may be new for the oil sector but power sector transmission utility PowerGrid has already put some of its assets for monetisation under the InvIT set up by it earlier. Other large PSUs will also be encouraged to take this route. Asset monetisation is an important aspect of the disinvestment exercise for FY22. Though this normally does not provide the Centre with large gains on PSU assets, it helps the entries to start a fresh capex cycle based on fund mobilisation through the route.
Bharat Gas to merge with BPCL
The board of privatisation-bound Bharat Petroleum Corporation Ltd (BPCL) on Monday approved the merger of its gas subsidiary, BGRL with itself in a bid to streamline corporate structure. “The board of directors of the company at its meeting today, ie March 22, 2021, has considered and approved the Scheme of Amalgamation of Bharat Gas Resources Ltd (BGRL) with the company (BPCL),” the firm said in a stock exchange filing. BGRL is a 100 per cent subsidiary of BPCL and its main business is gas sourcing and retailing. The merger will streamline the corporate structure and consolidate the assets and liabilities of BGRL within BPCL. Also, it will help in “availing easier financial support for the business” of BGRL and “more efficient utilisation of capital for enhanced development and growth of the consolidated business in one entity,” BPCL said. It will also improve management oversight and bring in operational efficiencies, cost savings and reduction of administrative responsibilities. “The amalgamation is in the interest of the shareholders, creditors and all other stakeholders of the companies and is not prejudicial to the interests of the concerned shareholders, creditors or the public at large,” it said. “No consideration in form of cash or shares is proposed to be issued as consideration for the amalgamation of BGRL with BPCL.”
Oil sector PSUs to set up InvITs for asset monetisation
After power, the country’s oil sector PSUs would now float an infrastructure investment trust (InvIT) as part of the asset monetisation exercise announced by the government and mobilise resources for fresh capital investment. As part of the exercise, gas transportation utility Gail India is expected to set up the gust InvIT in the oil sector in the next financial year. The proposed InvIT will house some of the gas pipeline infrastructure created by the company. Oil ministry officials said that this will help Gail to mobilise over Rs 20,000 crore through this route that could be helpful in developing new pipeline infrastructure that would help the country in developing a gas-based economy. Two other oil public sector undertakings (PSUs), HPCL and IndianOil, may also set up InvIT at a later stage. While Gail and HPCL will focus on monetising their pipeline infrastructure through the investment trusts, IndianOil proposes to do so in the case of its hydrogen-producing units as well as product pipelines that would be hived off into an InvIT. An InvIT is an investment vehicle created to hold income-generating and operational infrastructure assets such as roads, power transmission lines, and gas pipelines. These are like mutual funds and instead of financial securities InvITs hold bankable assets having long-term contracts with strong counterparties that provide a steady cash flow over the long term. The investment trust route may be new for the oil sector but power sector transmission utility PowerGrid has already put some of its assets for monetisation under the InvIT set up by it earlier. Other large PSUs will also be encouraged to take this route. Asset monetisation is an important aspect of the disinvestment exercise for FY22. Though this normally does not provide the Centre with large gains on PSU assets, it helps the entries to start a fresh capex cycle based on fund mobilisation through the route.
Gas price for ONGC to inch up to $1.82, fall below $4 for Reliance-BP
Government-dictated price for natural gas produced by companies such as ONGC is likely to inch up marginally to USD 1.82 next week while the same for difficult fields like one operated by Reliance-BP may fall below USD 4, sources said. The price of gas, which is used to generate electricity, make fertiliser and convert into CNG for automobiles and cooking gas for households, is due to bi-annual revision next week. The rates paid for gas produced from fields given to Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL) are most likely to go up to USD 1.82 per million British thermal unit for six month period beginning April 1 from a decade low of USD 1.79 currently, two people aware of the matter said. Simultaneously, the price for gas produced from difficult fields such as deepsea, which is based on a different formula, is likely to fall below USD 4 per mmBtu from the current price of USD 4.06. This is the maximum price that Reliance Industries Ltd and its partner BP plc are entitled to for gas they produced from deepsea blocks they won under New Exploration Licensing Policy (NELP). While the government sets the price of gas produced by ONGC from fields given to it on a nomination basis, it bi-annually announces a cap or maximum price that operators who won exploration acreage under NELP can get. The operators are supposed to do a market price discovery by seeking bids from users but that rate is subject to the price ceiling announced by the government, they said. Reliance-BP had in recent price discovery for new gas from their Krishna Godavari basin block, got rates of over USD 6 per mmBtu but they would get less than USD 4 as per the pricing formula. Natural gas price is set every six months — on April 1 and October 1 — each year based on rates prevalent in surplus nations such as the US, Canada and Russia. At the last revision, the price was cut by 25 per cent to USD 1.79 per mmBtu for six months beginning October 1 from USD 2.39. This is the third straight reduction in rate in one year. The price was cut by a steep 26 per cent to USD 2.39 in April last year. The rate paid to producers of new gas from difficult fields such as deepsea was cut to USD 4.06 per mmBtu from USD 5.61. The rate from October 1 is equivalent to the price paid to ONGC and Oil India Ltd (OIL) prior to May 2020 when formula-based pricing was first introduced. ONGC, sources said, had posted Rs 4,272 crore loss on gas business in 2017-18, which is likely to widen to over Rs 6,000 crore in the current fiscal (April 2020 to March 2021), they said. ONGC has seen incurring losses on the 65 million standard cubic meters per day of gas it produces from domestic fields shortly after the government in November 2014 introduced a new gas pricing formula that had “inherent limitations” as it was based on pricing hubs of gas surplus countries such as the US, Canada, and Russia. Sources said ONGC in a recent communique to the government has stated that the break-even price to produce gas from new discoveries was in the range of USD 5-9 per mmBtu. In May 2010, the government had raised the rate of gas sold to power and fertiliser firms from USD 1.79 per mmBtu to USD 4.20. ONGC and OIL got USD 3.818 per mmBtu price for the gas they produced from fields given to them on a nomination basis and after adding a 10 per cent royalty, the fuel cost USD 4.20 per mmBtu for consumers. The Congress-led UPA had approved a new pricing formula for implementation in 2014 that would have raised the rates but the BJP-led government scrapped it and brought a new formula. The new formula takes into account the volume-weighted annual average of the prices prevailing in Henry Hub (US), National Balancing Point (the UK), Alberta (Canada), and Russia with a lag of one-quarter. Prices are set every six months – on April 1 and October 1 each year. The rate at the first revision, using the new formula, came to USD 5.05 but in the subsequent six-monthly reviews kept falling till it touched USD 2.48 for April 2017 to September 2017 period. Subsequently, it rose to USD 3.69 in April 2019-September 2019 before being cut by 12.5 per cent in October 2019 to USD 3.23.
White House adviser to meet oil on climate goals -sources
Representatives from the oil and gas industry will discuss potential methane regulation and how companies can align with the Biden administration’s climate goals with national climate adviser Gina McCarthy on Wednesday, four people familiar with the meeting said. The meeting, which will take place on Zoom, will focus on emissions of methane, a potent greenhouse gas, from oil and gas production and more broadly discussing the role of the oil and gas industry in the administration’s plans to decarbonize the U.S. economy, four sources familiar with the meeting said. President Joe Biden’s administration is due to propose new regulation on methane from oil and gas operations by September, McCarthy told Reuters in a previous interview. It will also unveil a new economy-wide emissions reduction target for 2030 to comply with the Paris climate agreement by April 22, when Biden convenes world leaders on climate change. Representatives from industry trade groups including the American Petroleum Institute, American Gas Association and the American Exploration & Production Council, a group representing independent producers, and some of their member companies will participate. API has started to shift some of its rhetoric on climate change as the climate-focused Biden administration came to power. In January, the group said for the first time it would support mandatory methane regulations, a change from its previous support of voluntary actions. This month it came out in support of carbon pricing. AXPC president Anne Bradbury, who will participate in the meeting, said the group believes “we are part of the solution” on climate change and will make the case for continued use of natural gas. Industry groups have criticized Biden’s early executive orders canceling a permit for the Keystone XL pipeline and pausing new leases for oil and gas drilling on federal land.
Domestic fuel prices set to reduce as international crude oil rates plunge 10 per cent
State-run oil companies will now have some room to cut domestic fuel prices as international crude oil rates have slumped 10% in about a fortnight. Crude oil has fallen to $64 a barrel from $71 a barrel earlier this month on weakening demand recovery prospects as European cities planned mobility restrictions amid rising Covid cases. Oil prices had risen on producing countries’ decision to extend the supply cut pact into April. The anticipation of quicker demand recovery due to wider vaccine roll out and the big US stimulus also helped boost prices. With some major economies again imposing lockdown in some cities, the demand recovery is expected to falter, resulting in pressure on prices, analysts said. Falling prices could help state-run companies cut fuel prices ahead of assembly polls, an industry executive said. Domestic fuel prices have been unaltered since February 27 across the country, with rates of petrol and diesel frozen at Rs 91.17 and 81.47 per litre, respectively, in Delhi. Petrol and diesel prices are up by Rs 7.5 per litre since the beginning of the year. Higher prices have affected the demand for fuels in February. The demand for diesel, which makes up about 40% of the local oil demand, contracted 8.5%. Petrol sales declined by 6.5%. State-run oil companies are expected to daily revise the prices of petrol and diesel by aligning them with international rates and factoring in currency movements. But they do not always do so, making it harder to predict domestic price patterns. Taxes comprise nearly 60% of the current fuel prices, which are at record levels. The central government has refused to bring down taxes while a few states have made small cuts.
Gas under GST will help sector and enhance consumption: Petroleum Secy
There’s a lot happening in the oil and gas sector to boost gas consumption and make India Atmanirbhar, even as the most tracked divestment of BPCL is underway. CNBC-TV18 spoke to the person crafting the many moves across the sector on the several pieces of the reform agenda, Tarun Kapoor, Secretary, Ministry of Petroleum and Natural Gas. “Crude price internationally has been going up and down, it has been fluctuating between USD 66 per barrel and USD 70 per barrel. Our price is depended on the product price which means that the price of petrol and diesel internationally and it has been fluctuating between USD 70 per barrel and USD 75 per barrel,” he said. The government doesn’t get into the pricing because the oil marketing companies (OMCs) take their own decision. “We don’t get into this pricing issue,” he mentioned. In terms of getting gas under goods and services tax (GST), he said, “In the ministry, we feel that it is important to get gas under GST because gas is moved in pipelines across the country. We are also in the process of setting up a complete trunk network for the entire country. So that gas would be available in every state through these piped networks. So GST would really help because different taxes in different states and some states imposing high taxes doesn’t open up the gas sector for the entire country. However, this is a decision which is to be taken by the GST council and we hope that something would happen soon.” “Prime Minister Narendra Modi is very keen on building a gas-based economy for this country. He has mentioned this in his speeches several times,” he added. On Bharat Petroleum Corporation Ltd (BPCL) divestment, he pointed out, “That is a process which is with the Department of Investment and Public Asset Management (DIPAM). From our side, all I can say is that government is keen and we are moving ahead and the role of the ministry is to provide the information which is required to assist DIPAM in this massive exercise that is going on because BPCL is a huge company.” With regards to biofuel plants, he mentioned, “The first step is to get the companies to sign up to set up this plant. Our target for this financial year is that we will have a letter of intents for 1,500 plants. We have issued a letter of intents for over 1,000 and around 300 more applications are there which are being processed. Hopefully, in the next two-three days, they will be issued. Then we hope that we will reach the figure of 1,500.” “Besides these 1,500, we have also signed a memorandum of understanding (MoUs) for around 2,000 more plants which are broad MoUs, which means that the interest is there in the market. The scheme is new, so around 10 plants are commissioned right now,” Kapoor added.
Indian Oil Corporation enters into joint venture with Israeli company Phinergy
Indian Oil Corporation (IOC) on Wednesday entered into a collaboration with Phinergy, an Israeli start-up company specialising in hybrid lithium-ion and aluminium-air/zinc-air battery systems, to form IOC Phinergy Private Limited. According to a press release, the collaboration took place in the presence of Union Minister Dharmendra Pradhan and Israel Energy Minister Yuval Steinitz. The joint venture will manufacture Aluminum-Air systems in India to boost India’s flagship programme – “Make in India” and recycle used Aluminum to strengthen India’s energy security. In a significant boost to India’s pursuit of e-mobility, two of the leading Automotive manufacturers in India- Maruti Suzuki and Ashok Leyland signed a Letter of Intent (LOI) with the newly incorporated JV IOC Phinergy Limited, said the release. Speaking on the occasion, Pradhan said that the fruition of the vision of Prime Minister Narendra Modi has, inter alia, resulted in this Joint Venture being launched today. He said that the joint venture will help India in its journey towards clean, sustainable, affordable, safe, and long-lasting energy options and facilitate much faster adoption of e-Vehicles in the country. “Our energy sector will be growth-centric, industry-friendly, and environment conscious. We have the onerous task of ensuring ample access to energy to improve the lives of Indians coupled with the need to have a smaller carbon footprint. In this scenario, this technology to develop indigenous batteries using locally available Aluminum fits into the energy vision of India as espoused by Prime Minister Modi, wherein he has given a clear call for increasing the contribution of electricity to decarbonise mobility,” he said. The minister further said that based on domestically available Aluminum, the joint venture plans to manufacture Aluminum-Air systems in India, which will provide a boost to India’s flagship programme – Make in India and at the same time, recycling of used Aluminum will help India in becoming “Aatmanirbhar” for energy requirements. He expressed the happiness that apart from Maruti Suzuki, leading automobile industry representatives such as Ashok Leyland and Mahindra Electric are part of the validation of the technology, while urging the Indian industry, primarily the automotive manufacturers, to extend all necessary support to the joint venture for commercializing the Aluminum-Air technology. Steinitz also lauded the initiative, saying that this is indicative of increasingly close cooperation between the two countries. Tarun Kapoor, Secretary, MoP&NG, said that India’s energy demand is going to increase at a faster pace compared to the world, and the country is looking for a breakthrough in storage technology-batteries that are compact, cheaper, lighter and have higher energy density. He described today’s initiative as pathbreaking, according to the release. “With one of the most extensive customer interfaces in the country, IndianOil has been working continuously to improve customer’s experience and provide solutions for all kinds of energy needs. The JV between IndianOil and Phinergy for commercializing Aluminum-Air technology is an important initiative towards technology-driven Energy Transition. Al-Air technology will help us overcome most of the current challenges for e-Vehicles and address most of the potential customers’ pain-points, including range anxiety, higher cost of purchase, and safety issues. This technology will also boost India’s existing aluminium industry and help the nation become Self-reliant in the energy field and promote the ‘Make in India’ drive,” said IndianOil chairman SM Vaidya. Dr SSV Ramakumar, Director (R&D) spoke about the game the changing technology of metal-air battery which would define a new e-mobility paradigm in the Indian context.