Delhi govt aims to reduce 5 million tonne carbon emissions
Efforts are being made to reduce the increasing pollution levels in the national capital by improving the transport system in the state. The Delhi government believes that by improving the transport system as well as reducing traffic jams, harmful particles such as PM10 and PM2.5 which cause air pollution could be reduced by up to 5 million tonnes. Delhi’s public transport system and electric vehicle policy could prove to be a significant step in this direction. The Electric Vehicle policy focuses on making electric vehicles to 25 per cent by 2024 whereas till now this number is just 0.2 per cent. The clarity about the necessary measures to be taken for the transformation of electric vehicles has enabled the Delhi government to take concrete decisions. Delhi’s Electric Vehicle Policy would reduce carbon emissions by 4.8 million tonnes by 2024, said Jasmin Shah, Vice-Chairman of the Delhi Dialogue and Development Commission. At the same time, to make the public transport system more effective, the Delhi government is adding 1,000 low floor AC buses to the Delhi Transport Corporation (DTC) bus fleet. The new fleet of buses would also be used to reduce traffic jams in south, central and east Delhi. Such routes in Delhi would be identified where there is a need to strengthen the public transport system. This step by the Delhi government would not only solve the problem of traffic jams here but would also reduce the pollution caused by traffic jams. Chief Minister Arvind Kejriwal said the Delhi government is committed to making Delhi pollution-free by creating a world class public transport system. The Delhi government officially released information and said that if the drivers stop their vehicles only at the red light, by doing so they would reduce pollution caused by 1.5 lakh tonnes of PM 10 while in PM 2.5, there would be a reduction of 0.4 lakh tonnes. The Delhi government would train all the drivers associated with the public transport system for achieving this step. DTC’s fleet is going to add new buses after 12 years. Chief Minister Kejriwal said all such new buses would ply on the Delhi roads by September 20 this year. The total number of buses in DTC’s fleet would now reach an all-time high of 7,693. In the last two years, 1,681 new buses have been added to the bus fleet in Delhi. These buses would be equipped with BS-6 standard compliance, air-conditioned buses with real-time passenger information system, CCTVs, panic buttons, GPS and other facilities.
GAIL announces Rs 1,046.35 cr share buyback
GAIL (India) Ltd, the nation’s largest gas distribution firm, on Friday announced a Rs 1,046.35 crore share buyback programme as it looked to return surplus cash to shareholders, the biggest being the government of India. In a stock exchange filing, the company said its board has approved the buyback of 6.97 crore shares at a price of Rs 150 per share. The shares being bought represent 1.55 per cent of the total number of fully paid-up equity shares. The company board also declared an interim dividend of 25 per cent (Rs 2.50 per share) for financial year 2020-21. GAIL stock was down 2.2 per cent on the BSE and was trading at Rs 140.75 at 14.15 Hrs. The government owns 51.76 per cent of GAIL and is expected to participate in the share buyback. It stands to get Rs 583.6 crore from the dividend payout and another Rs 541.5 crore if it participates in the buyback by tendering a proportionate number of shares. The buyback plan of Rs 1,046.35 crore represents “2.5 per cent and 2.26 per cent of the aggregate of the fully paid-up equity share capital and free reserves of the company,” GAIL said in the filing. The plan was within the statutory limits of 10 per cent, it said. The record date for buyback of equity shares as well as payment of the interim dividend will be January 28, GAIL said. The government has asked at least eight state-run companies to consider share buybacks as it scours for ways of raising funds to rein in its fiscal deficit. The firms asked to consider share buybacks include miner Coal India, power utility NTPC, and minerals producer NMDC. A buyback, also known as a share repurchase, is when a company buys its own outstanding shares to reduce the number of shares available in the open market. Companies buy back shares for a number of reasons, such as to increase the value of remaining shares available by reducing the supply or to return surplus cash to shareholders. The government wants public sector undertakings to either meet their targets for capital expenditure or “reward the shareholder in the form of a dividend” or share buyback. The government, which holds 51.76 per cent of GAIL, is likely to participate in the GAIL buyback just as it did in the case of NTPC, Engineers India Ltd, RITES and KIOCL. Finance Minister Nirmala Sitharaman had in her budget for 2020-21 set a target of raising Rs 2.1 lakh crore from privatisations and the sale of minority stakes in state-owned companies. The share buyback, as well as the dividend, is counted as part of this target. According to the Department of Investment and Public Asset Management (DIPAM), the government has so far raised Rs 28,298.26 crore from disinvestment proceeds. This includes Rs 14,453.77 crore received as dividend from state-owned firms. The remaining Rs 13,844.49 crore proceeds include Rs 1,065.37 crore from selling shares in NTPC share buyback. The government is likely to miss its disinvestment target by a wide margin and the fiscal deficit is not likely to be anywhere near the target of 3.5 per cent of the GDP in 2020-21 (April 2020 to March 2021). While privatisation of firms such as Bharat Petroleum Corporation Ltd (BPCL) and Air India Ltd has been pushed into next fiscal due to COVID-19-related delays, tax collections have been hit hard as restrictions imposed to curb coronavirus dented incomes all around.
U.S. shale producers lock in future sales as oil prices rise to one-year high
shale producers are taking advantage of the oil market’s rally to levels not seen in nearly a year by locking in prices for future sales, sources familiar with the matter said. U.S. crude futures this month jumped above $50 a barrel to the highest since February. The rally has sparked optimism among shale companies, but after a bracing year of pandemic-induced demand destruction, they are not ready to ramp up production. Instead, they are using futures markets to lock in higher sale prices. Shale producers buy and sell contracts in the futures and options markets in a process known as hedging to secure cash flows for later-dated sales. U.S. oil production peaked at nearly 13 million barrels per day in late 2019, but is now around 11 million bpd after the coronavirus lockdowns crushed fuel demand and oil prices. Output is not expected to rise much in 2021, but those that hedged now are guaranteed sales of barrels at more than $50 even if prices drop again. “There’s a lot of hedging going on,” said Chris Wright, chief executive of Liberty Oilfield Services, the second-biggest fracking company in North America. “At the prices available today, producers with good acreage can do pretty well.” Producers’ short positions in U.S. crude futures and options, an indication of hedging activity, have been rising since autumn. They hit a five-month high in mid-December, according to the U.S. Commodity Futures Trading Commission. In 2020, 46 North American exploration and production companies declared bankruptcy, according to energy law firm Haynes and Boone, while others merged to reduce debt. Investors had already been pressuring shale companies to curb spending and boost returns even before the pandemic. “Producers locked in a certain amount of wells at a certain price and hedging at $50 makes you look like a rockstar. This year will be about free cash flow,” one executive at a U.S. shale producer said, on condition of anonymity. Producers that are hedging are likely locking in about 15% to 20% of production at a time, said Tom Petrie, chairman at energy investment bank Petrie Partners. Some companies are holding off because they anticipate prices to rise further, perhaps to $60 or $65. Global benchmark Brent crude, which also hit 11-month highs this week near $57, could rise to $65 per barrel by summer 2021, Goldman Sachs said this week. “Some of them (producers) are pretty torn between hedging at a level they would have killed for six months ago and their perpetually optimistic nature,” said Steve Sinos, vice president at consultancy Mercatus Energy, which advises corporations on hedging. Average 2021 U.S. crude prices have climbed above $52, also their highest since February. Signs of increased hedging activity can also be seen in U.S. crude futures time spreads. The premium for U.S. crude for delivery in December 2021 has climbed to more than $2.80 a barrel over those for delivery in December 2022 this week, a signal that producers are selling the later-dated contract to fund their hedges for 2021, dealers said.
MNGL to launch mobile CNG refuelling pumps in Maharashtra: Official
Maharashtra Natural Gas Ltd (MNGL) will launch mobile CNG refuelling pumps in Maharashtra, according to a senior official of the company. MNGL is a joint venture of Bharat Petroleum Corporation Ltd and Gas Authority of India Ltd. The research in underway for the mobile CNG refuelling units, said MNGL Independent Director Rajesh Pande on Wednesday. He added that the company will launch such refuelling pumps in the next 6 months in Maharashtra. On the occasion of the 15th foundation day, company officials and Pune MP Girish Bapat informed about the works undertaken by the firm since its incorporation in 2006. It will be the first-of-its-kind experiment in India. The company is already supplying gas through pipeline to 3.2 lakh houses and major industries in Pune and the Pimpri-Chinchwad region. It will also expand its operation in Nashik, Dhule, Sindhudurg, and other regions, Pande said.
Fuel prices flare up but no tax cut signs
Petrol price remained on a roll, claiming a new peak at Rs 84.7 a litre in the national capital and 2 paise short of its all-time high of Rs 91.07 in Mumbai on Thursday. Diesel price too rose as retailers continued to pass on the staggered impact of crude’s week-long rally. After the latest hike, diesel cost Rs 74.88 a litre in Delhi and Rs 81.6 in Mumbai. While consumers continued to pay through their nose, there was no sign the Centre or state governments were considering any reduction in the hefty taxes they levy on motor fuels, which amp up the impact of rise in crude price. In Delhi, for example, consumers pay Rs 32.98 as excise duty on each litre of petrol and Rs 31.83 on diesel. VAT amounts to Rs 19.32 on petrol and Rs 10.85 on diesel. The only hope for consumers, it seems, lies in a correction in the global oil market, which saw benchmark Brent easing to $55.64 a barrel, down from $57 days ago. Reports of lockdown following fresh virus surge in parts of China, the world’s second-largest oil consumer, and extended Covid-19 curbs in Europe on fresh scare tempered market sentiment that was buoyed by vaccine rollout and Saudi offer to cut production by an additional million barrels a day. While the market grapples with the challenge of these conflicting signals, consumers in India, which imports over 80% of its oil, keep hoping for relief by way of a reduction in fuel taxes that make up about 60% of the pump prices.
Azerbaijan set to boost gas exports via TANAP pipeline in 2021
Azerbaijan plans to raise gas exports via the Trans-Anatolian Natural Gas Pipeline (TANAP), mainly to Turkey, to 12.2 billion cubic metres (bcm) this year from 5 bcm in 2020, Saltuk Duzyol, head of the consortium, said on Thursday. By boosting gas supplies via the route, Baku is raising the stakes in its rivalry with Moscow for the lucrative European market following the start of Azerbaijan’s gas sales to the region in December via the Trans-Adriatic Pipeline (TAP) pipeline. Duzyol said that 6.2 bcm of the Azeri gas will be shipped to Europe via TANAP. On top of that, 6 bcm will be sold to Turkey’s domestic market. TANAP comprises the longest stretch of the $40 billion Southern Gas Corridor, a series of pipelines that carries gas from Azerbaijan’s Shah Deniz II field. The $6.5 billion TANAP crosses the breadth of Turkey, east to west, and could transport up to 16 bcm of Azeri gas a year. The pipeline connects to the TAP, which became operational in the end of 2020. TANAP’s shareholders are Azeri state energy company SOCAR (51%), Turkish pipeline operator BOTAS (30%), BP (12%) and SOCAR Turkey (7%).
Meaningful recovery in oil realizations key for ONGC’s earnings growth
There may be a ray of hope for ONGC as a rise in oil prices may support its net oil realization and, in turn, the oil producing company’s earnings. Volatility in crude prices during 2020, owing to pandemic-led disruptions had a significant impact on ONGC’s earnings prospects. Crude prices now are close to an 11-month high, which is improving the outlook for ONGC. However, sustaining these price levels remains crucial. Brent crude oil future prices, which ranged $37-40/barrel at the start of the December quarter, though volatile, moved to around $52/barrel towards the end of the quarter. The start of January has seen a further tightening of supplies by oil-producing nations. Thus, crude prices remain firm and Brent crude oil futures are now trading around $56 a barrel. This has improved realisations outlook for upstream oil producing companies such as ONGC further. This has been reflected in stock prices as ONGC has gained about 60% since October lows. ONGC is expected to report net realisations of $44 a barrel in the December 2020 quarter, an improvement from $41 a barrel in the September quarter. However, the expected net realisation is still 26% lower than that seen during the quarter ending December a year ago. For net realisations to improve further, crude needs to sustain the higher levels. Production discipline by oil-producing nations and continued improvement in global oil demand will thereby be watched for. An uptick in oil realisations is also necessary since the production is likely to maintain a flat trajectory. Though some promises are offered by fresh oil and gas discoveries, analysts at Motilal Oswal Financial Services model in flattish oil production for the next two years. Meanwhile, gas sales and prices also remain under pressure for ONGC. Natural gas sales volumes are to decline 3% year-on-year (YoY) to 4.7 billion cubic meters (bcm) during the December quarter (as per Kotak Institutional Equities estimates) reflecting lower production in the recent months. The earlier expectations of rising gas production boosting earnings growth have been dashed, with delay in demand and production ramp-up due to the pandemic. Meanwhile, gas prices are also under pressure. Domestic gas prices had been cut by 25% for the second half of FY21 looking at weak international prices. The same will only be reviewed at the end of March despite some uptick in spot gas prices being seen currently. Hence, gas segment contributions in the near-term may not provide a meaningful upside to earnings. So, while valuations remain attractive (about 3.2x FY22 estimated EV/Ebitda) and there is some improvement in prospects for the company being led by rising crude prices, more may be needed.
Natural gas price headed towards $3/MMBTU in a month
Natural gas is a commodity that has been heavily volatile in 2020. NYMEX natural gas prices made a low of $1.43/MMBTU in late June 2020, a high of $3.39/MMBTU in November 2020, and finally ended the year at $2.53/MMBTU, marking an annual gain of 16 per cent. Since MCX’s natural gas prices are a mirror reflection of NYMEX rates, the volatility was similar on the domestic bourse. MCX natural gas prices were up 17 per cent in 2020, settling at Rs.182.1 per MMBTU on December 31. Electricity generation via natural gas increased in the US in 2020. The use of natural gas, which is one of the main sources of generating electricity in the US, has been substantial in the past five years. Annual electricity generation from natural gas power plants in the US increased 31 per cent in the northeastern region, 20 per cent in the central region, and 17 per cent in the southern region between 2015 and 2019. In the western region of the continental United States, electric power generation from natural gas power plants remained relatively flat during the same period. Through November 2020, the central, southern and northeastern regions have generated similar amounts of electricity from natural gas power plants. While the electricity generation efforts via gas was commendable, the increase in LNG exports from the US also played a significant role for the rise in natural gas prices, while the world grappled with the pandemic in 2020. In November, estimated LNG exports surpassed the previous record set in January 2020. In December 2020, the US Energy Information Administration (EIA) estimated that November US LNG exports reached 9.4 billion cubic feet per day (Bcf/d), which was 93 per cent of peak LNG export capacity utilization. Several factors contributed to the increase in the US LNG exports in recent months. International natural gas and LNG prices increased in Asia and Europe with an increase in global natural gas demand after easing of COVID-19 restrictions and a fall in global supply due to unplanned outages at export facilities in Australia, Malaysia, Qatar, Norway, Nigeria, and Trinidad and Tobago. New US LNG export capacity of 2.7 Bcf/d was added in 2020, whereas several US LNG terminals, affected by hurricanes and annual maintenance, also resumed LNG shipments, according to the EIA. On the other side, working gas in storage was 3,460 Bcf as of December 25, 2020, according to EIA estimates. Stocks were 251 Bcf higher than last year at this time, and 206 Bcf above the five-year average of 3,254 Bcf. At 3,460 Bcf, total working gas is within the five-year historical range, which clearly indicates that the inventory is in a comfortable situation. Hedge funds positioning in natural gas Speculative positioning in natural gas increased in the second half of 2020, with hedge funds increasing their bets from net shorts to net longs. As of April 14, 2020, hedge funds were net shorts in natural gas at 86,154 contracts. As of, December 29, 2020, they were net longs at 7,744 contracts, indicating a rise in interest in the commodity. The tale of winter: Where is natural gas headed? While the winter in the US is a time when the demand for gas increases, this time around, the winter (2020-21) is warmer than normal. This US Winter Outlook 2020-2021 map shows above-average temperatures are likely in the south and below-average temperatures in parts of the north. Natural gas price headed towards $3/MMBTU in a month Winter in the US (October-March) does not offer a feasible demand-side situation for natural gas prices to rise. Moreover, with a comfortable inventory situation and more coronavirus-related restrictions, a warm winter is not favourable for gas prices from here on. We expect NYMEX natural gas prices to move higher towards $3/MMBTU in a month, while MCX gas prices have the possibility to move higher towards Rs 230/ MMBTU.
Goldman forecasts ‘perfect storm’ for global gas markets
Goldman Sachs raised its forecasts for key natural gas price benchmarks on Wednesday, saying falling supplies and colder weather in Asia and Europe made for a “perfect bullish storm”. It sees European balances even tighter on colder weather revisions in North-Western Europe and a deeper-than-expected drop in NW European Liquefied Natural Gas (LNG) deliveries. Goldman lifted its Dutch Title Transfer Facility (TTF) gas price forecasts for the rest of the winter, and calendar years 2021 and 2022, to $8.30 per one million British thermal units (mmBtu), $6.72/mmBtu and $6.48/mmBtu from $6.65, $5.63 and $6.03 previously. The European benchmark Dutch month-ahead gas contract retreated slightly on Wednesday from an over two-year peak scaled in the previous session. While Goldman expects tightness in coal markets to moderate from the summer, it sees a slower-than-expected return of Colombian coal supplies, implying higher TTF gas prices later. “We also raise our 2021/22 winter, 2022 summer and 2022/23 winter TTF forecasts to $6.60/mmBtu, $6.30/mmBtu and $6.90/mmBtu from $5.95, $5.85 and $6.75 previously,” the bank said. Supply disruptions, shipping delays and strong LNG demand, supported by heavy nuclear maintenance in Japan and a cold start to 2021 in North-Eastern Asia, have significantly tightened the market, Goldman analysts said in a note. The bank also raised its Japan Korea Marker (JKM) forecasts for balance of winter for 2020/21, and calendar years 2021 and 2022, to $14.30/mmBtu, $8.73/mmBtu and $7.85/mmBtu from $12.65, $7.56 and $7.37 previously. Goldman reiterated its expectation for a significant upside to NYMEX gas prices this summer to help correct what it sees as a 2.5 billion cubic feet per day market imbalance through October 2021, and maintained its $3.25/mmBtu 2021 summer U.S. gas price forecast.
Natural gas price headed towards $3/MMBTU in a month
Natural gas is a commodity that has been heavily volatile in 2020. NYMEX natural gas prices made a low of $1.43/MMBTU in late June 2020, a high of $3.39/MMBTU in November 2020, and finally ended the year at $2.53/MMBTU, marking an annual gain of 16 per cent. Since MCX’s natural gas prices are a mirror reflection of NYMEX rates, the volatility was similar on the domestic bourse. MCX natural gas prices were up 17 per cent in 2020, settling at Rs.182.1 per MMBTU on December 31. Electricity generation via natural gas increased in the US in 2020. The use of natural gas, which is one of the main sources of generating electricity in the US, has been substantial in the past five years. Annual electricity generation from natural gas power plants in the US increased 31 per cent in the northeastern region, 20 per cent in the central region, and 17 per cent in the southern region between 2015 and 2019. In the western region of the continental United States, electric power generation from natural gas power plants remained relatively flat during the same period. Through November 2020, the central, southern and northeastern regions have generated similar amounts of electricity from natural gas power plants. While the electricity generation efforts via gas was commendable, the increase in LNG exports from the US also played a significant role for the rise in natural gas prices, while the world grappled with the pandemic in 2020. In November, estimated LNG exports surpassed the previous record set in January 2020. In December 2020, the US Energy Information Administration (EIA) estimated that November US LNG exports reached 9.4 billion cubic feet per day (Bcf/d), which was 93 per cent of peak LNG export capacity utilization. Several factors contributed to the increase in the US LNG exports in recent months. International natural gas and LNG prices increased in Asia and Europe with an increase in global natural gas demand after easing of COVID-19 restrictions and a fall in global supply due to unplanned outages at export facilities in Australia, Malaysia, Qatar, Norway, Nigeria, and Trinidad and Tobago. New US LNG export capacity of 2.7 Bcf/d was added in 2020, whereas several US LNG terminals, affected by hurricanes and annual maintenance, also resumed LNG shipments, according to the EIA. On the other side, working gas in storage was 3,460 Bcf as of December 25, 2020, according to EIA estimates. Stocks were 251 Bcf higher than last year at this time, and 206 Bcf above the five-year average of 3,254 Bcf. At 3,460 Bcf, total working gas is within the five-year historical range, which clearly indicates that the inventory is in a comfortable situation. Hedge funds positioning in natural gas Speculative positioning in natural gas increased in the second half of 2020, with hedge funds increasing their bets from net shorts to net longs. As of April 14, 2020, hedge funds were net shorts in natural gas at 86,154 contracts. As of, December 29, 2020, they were net longs at 7,744 contracts, indicating a rise in interest in the commodity. The tale of winter: Where is natural gas headed? While the winter in the US is a time when the demand for gas increases, this time around, the winter (2020-21) is warmer than normal. This US Winter Outlook 2020-2021 map shows above-average temperatures are likely in the south and below-average temperatures in parts of the north. Winter in the US (October-March) does not offer a feasible demand-side situation for natural gas prices to rise. Moreover, with a comfortable inventory situation and more coronavirus-related restrictions, a warm winter is not favourable for gas prices from here on. We expect NYMEX natural gas prices to move higher towards $3/MMBTU in a month, while MCX gas prices have the possibility to move higher towards Rs 230/ MMBTU.