Domestic gas prices may fall further in October
Sources in the government said that Covid-19 has severely impacted demand conditions in the market and has also affected gas prices globally. Gas prices have fallen by over 50 per cent in last few months and continued to remain suppressed CNG and piped natural gas prices could fall further this festive season, with price of domestically produced gas expected to come down in October by about 20 per cent to less than $2 per million British thermal unit. Sources in the government said that Covid-19 has severely impacted demand conditions in the market and has also affected gas prices globally. Gas prices have fallen by over 50 per cent in last few months and continued to remain suppressed. This has paved the way for further reduction in domestic gas prices that are revised twice every year – on April 1 and then on October 1. Following global developments, prices had already fallen sharply in last two revision cycles and if the trend continues, it would be third consecutive cycle of gas price fall in the country. In April this year, the price of natural gas was cut by 26 per cent, bringing it to $2.39 per MBtu. Reduction in gas prices is good news for consumers as it would have impact on CNG prices that is used for transportation and also piped gas supplies to households. Lower gas prices would also lower the cost for power projects being run on domestic gas and fertiliser plants. But they spell bad news for state-owned oil and gas producer ONGC as it would mean further suppressed margins and losses. The company is set to lose close to Rs 60 billion on low gas prices this year, brokerages have said.
Asia to import record LPG in 2020 as pandemic boosts demand for protective gear, cooking
Asia will likely import record volumes of liquefied petroleum gas (LPG) in 2020 as firms snap up the fuel to make petrochemicals used in protective gear against the coronavirus, while households under lockdown ramped up purchases for cooking. The region will buy some 67-69.5 million tonnes of the gas from abroad this year, surpassing last year’s record, analysts from consultancy firms IHS Markit, FGE and Wood Mackenzie said. That would represent a 1-3 per cent increase on 2019 import volumes. Strong Asian demand could weigh on supplies in coming months just as Europe is likely to step up purchases of the fuel for heating in winter, an industry source in Singapore said. While supply was hit by a cut in commodity production in the second quarter, output has recovered some ground since then. “We expect (LPG) import demand to increase in 2020 over 2019 with stronger demand in both residential and petrochemical sectors,” said Rui Hou, research analyst of Wood Mackenzie. He Yanyu, IHS Markit’s executive director of natural gas liquids research, said some 33 million tonnes of LPG had already been imported in the first half of 2020. In total, Asia would get some 52 per cent of its LPG supplies this year from the Middle East, 35 per cent from the United States and the rest from countries including Canada and Australia, said He. LOCKDOWNS BOOST COOKING While lockdowns and travel restrictions to curb the spread of the pandemic crushed appetite for oil products such as jet fuel and gasoline this year, there was growing demand for LPG as a cooking fuel in places like India and Indonesia, as more people stayed at home. India, Asia’s second biggest importer of LPG, is expected to buy a record 15.8 million tonnes of LPG from abroad this year, a 9 per cent rise from 2019, data from FGE showed. The country’s imports had surged 16 per cent in the first half of 2020 compared to the same period last year after the government said it would provide free LPG fuel for cooking for three months until June. Although India has overbought the fuel, the backlog could clear by September, with demand set to rise ahead of the Hindu festival of Diwali or Deepavali in November, industry sources said. “In general we should continue to see strong demand from India but maybe after a slight slowdown as stocks are absorbed,” said Alexander Booth, head of research at data intelligence firm Kpler. This sentiment was shared by consultant Jeslyn Chua at FGE. “We believe the Indians will definitely be back for October delivery (cargoes) given that their inventories would be drawn down by then. On top of that, the Indians will need to prepare for Deepavali,” she said. Another country which uses LPG predominantly as a cooking fuel is Indonesia, Asia’s fifth largest LPG importer. Indonesia’s LPG imports are expected to hit 6.1 million tonnes this year, a 7 per cent rise from 2019, and a record high volume for the country, said Chua. “The demand in the rest of Asia is largely being driven by good petrochemical demand, primarily to satisfy the explosion in global PPE (personal protective equipment) requirements,” said Kpler’s Booth. “There is no reason to think this will disappear quickly.”
IOC nears first deal to export fuels to Mauritius -sources
Indian Oil Corp, the country’s top refiner, is close to winning its first contract to export up to 720,000 tonnes of clean products to Mauritius under an annual deal from November, two sources familiar with the matter said. IOC will supply 205,000 tonnes of 95 RON gasoline, 235,000 tonnes of 10 parts per million (ppm) gasoil, 175,000 tonnes of jet fuel and up to 105,000 tonne of marine gasoil, sources said. The sources did not wish to be identified as they are not authorised to speak to media. IOC and State Trade Corporation of India did not respond to Reuters email seeking comments.
Natural gas prices may be cut to decade low of $1.9, dent ONGC revenues
Prices of natural gas in India are likely to be cut to $1.9-1.94 – the lowest in more than a decade – from October, denting revenues of producers such as ONGC who are already incurring huge losses on gas production. A gas price revision is due from October 1 and going by the changes in the benchmark rate in gas exporting nations, the price is likely to be anywhere between $1.90 to $1.94 per million British thermal unit (mmBtu), sources privy to the development said. This will be the third straight reduction in rates in one year. Prices were cut by a steep 26 per cent to $2.39 per mmBtu in April. Prices of natural gas, which is used to produce fertiliser and generate electricity and is also converted into CNG for use in automobiles as fuel and cooking gas for households, are set every six months — on April 1 and October 1 each year. Sources said the cut in prices would mean a widening of losses for India’s top oil and gas producer ONGC. Oil and Natural Gas Corp (ONGC) 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. The current $2.39 per mmBtu rate is the lowest in more than a decade. 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 $5-9 per mmBtu. In previous years, loss from the gas segment was getting offset from the gain from the oil business. But with oil business itself coming under severe strain due to a sharp slump in benchmark prices, it has become difficult for the company to meet even the operating expenses, they said. In May 2010, the government had raised the rate of gas sold to power and fertilizer firms from $1.79 per mmBtu to $4.20. ONGC and Oil India Ltd (OIL) got $3.818 per mmBtu price for the gas they produced from fields given to them on nomination basis and after adding 10 per cent royalty, the fuel cost $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 rates at the first revision, using the new formula, came to $5.05 but in the subsequent six-monthly reviews kept falling till they touched $2.48 for April 2017 to September 2017 period. Subsequently, they rose to $3.69 in April 2019 to September 2019 before being cut by 12.5 per cent in October 2019 to $3.23.
Govt asks oil firm to expedite Kochi gas project
The government has asked Indian Oil Adani Gas Private Ltd (IOAGPL), the agency which is to implement the city gas project, to expedite the works. The government also authorized chief secretary Viswas Mehta to conduct meetings to review the progress of the project every week. Officials with IOAGPL have been asked to rope in more contractors if needed. Government has instructed the district administration to provide all support to IOAGPL for implementing the project.Officials with IOAGPL said that they have completed laying of gas pipeline in many places and plumbing works for providing 14,450 piped natural gas connections have been done. However, the number of connections given so far is just around 2,000.
Sindh will not have surplus gas from 2021 onwards: Pak Energy Minister
Pakistan Minister for Energy Omar Ayub Khan acceptance that Sindh will not have surplus gas from 2021 onwards and the province will not be able to meet its own demand from its production has revealed the crisis that awaits in the future. Dawn quoted Khan as saying that the country is currently facing a gas shortage of about 3.5 billion cubic feet per day. He was testifying before a panel of the parliament’s upper house. Khan further said that the gas load shedding would continue during the upcoming winter as the production of indigenous gas was decreasing while the demand was on the rise, reported Dawn. This revelation comes after Prime Minister Imran Khan had commented that the country has reached a “tipping point” after which it will see only success has fallen flat. He was speaking at the inauguration ceremony of Ravi Riverfront Urban Development Project. The Energy Minister’s statement has come amid Saudi Arabia’s strong stance against Pakistan. The decade-long friendship between both countries took a sharp turn when Pakistan Foreign Minister Shah Mehmood Qureshi issued a blunt warning to Saudi Arabia after the latter refused to act against India over Kashmir issue. As a retaliation, Saudi Arabia issued a statement that loans or oil supply will no longer be given to Pakistan. Islamabad was also made to pay back USD 1 billion to Riyadh, which was part of a USD 6.2 billion package announced by Saudi in November 2018, which included a total of USD 3 billion in loans and an oil credit facility amounting to USD 3.2 billion. The deals were then signed when Crown Prince Muhammed Bin Salman made a visit to Pakistan in February last year, the Middle East Monitor reported. Islamabad has been pushing for the foreign ministers’ meeting of the Organisation of Islamic Cooperation (OIC) since India abrogated Article 370, which gave special status to the erstwhile state of Jammu and Kashmir. After Pakistan failed to gather support from the OIC members on Kashmir on May 22, Prime Minister Imran Khan said, “The reason is that we have no voice and there is a total division amongst (us). We cannot even come together as a whole on the OIC meeting on Kashmir.”
Indian Lab Develops Technology to Convert Used Cooking Oil Into Biodiesel and Glycerine
India has been exploring alternatives to fossil fuels and trying to reduce its dependence on oil imports. One of the options being explored by the country is biofuel, made from various raw materials like waste plastics, used cooking oil, tree-borne oils and fats or oils from slaughterhouses, poultry farms, and fisheries. A state-funded Indian laboratory has designed a technology to convert used cooking oil in homes and restaurants into biodiesel and glycerine. The portable unit can be set up in every village in the country to help fuel self-sufficiency and generate revenue from glycerine for cosmetics and the pharmaceutical industry. Dr Anjan Ray, Director of the Dehradun-based Indian Institute of Petroleum (IIP) under the federal Science and Technology Ministry, told Sputnik, biofuel produced via this method would be less expensive than diesel. The scientist said one litre of used cooking oil could produce 900-950 ml of biodiesel. He added that glycerine output is about 10 percent. Dr Ray said a technology demonstration plant is already functioning at the Institute, while four or five trial units would be set in the states of Chhattisgarh, Uttar Pradesh, Uttarakhand, and the national capital Delhi by March next year in collaboration with IIP’s partner agencies. IIP had earlier launched the first of its kind technology to convert plastic waste to diesel. The demonstration plant has a capacity to convert 1,000 kilograms of plastic waste daily into 800 litres of diesel. The diesel is automotive grade, meets specifications for use in vehicles, and can be directly used to fuel cars, trucks, and power generators. The raw material used is polyolefin waste, which accounts for approximately 70 percent of total plastics consumed. IIP had also developed a technology to produce bio jet fuel, and the first commercial flight using a mix of bio jet fuel and aviation turbine fuel was operated between Dehradun and New Delhi in August 2018.
India’s weak fuel demand drags on as virus crisis worsens
India’s fuel demand dragged lower in July, posting its fifth consecutive year-on-year decline, government data showed on Tuesday as a spike in coronavirus cases and floods in many parts of the country restricted economic activity. Consumption of refined fuels, a proxy for oil demand, fell to 15.68 million tonnes in July, 11.7 per cent lower compared with a year earlier and 3.5 per cent below the prior month, data from the Petroleum Planning and Analysis Cell (PPAC) of the Ministry of Petroleum & Natural Gas showed. Diesel consumption, which accounts for about two-fifths of India’s overall fuel usage and is widely used for transportation as well as for the country’s irrigation needs, fell to 5.52 million tonnes last month from 6.31 million tonnes in June. On an annual basis, demand for diesel declined about 19.3 per cent. Sales of gasoline, or petrol, fell by 10.3 per cent from a year earlier to 2.26 million tonnes, and were down 0.8 per cent from 2.28 million tonnes in June. Demand for fuel was also impacted as higher retail prices dented demand in the world’s third-biggest oil consumer and as virus cases continue to explode. With over 2 million people infected with the novel coronavirus, India stands third with the most cases after the United States and Brazil. In addition, heavy rains and floods have affected millions of people and battered industrial and construction activity in some Indian states. India’s top refiner, Indian Oil Corp, said last month it would continue to operate its refineries below capacity in 2020/21, and that it didn’t see a recovery in demand to pre-COVID levels “in the near future.” Fuel consumption in India nearly halved in April as a nation-wide lockdown to curb the outbreak halted economic activity and travel. July naphtha sales fell 12.4 per cent to 1.28 million tonnes from a year earlier but rose 10 per cent from June. Sales of bitumen, used for making roads, slipped 4.4 per cent on an annual basis and about 45 per cent month-on-month.
Brookfield in talks to buy Cheniere’s stake from Blackstone – BBG
The infrastructure arm of Brookfield Asset Management Inc is in talks to buy Blackstone Group Inc’s minority stake in Cheniere Energy Partners , Bloomberg News reported on Tuesday, citing people familiar with the matter. Cheniere Energy Partners is a limited partnership formed by Cheniere Energy Inc, the biggest liquefied natural gas producer in the United States. Brookfield Asset Management is working with a partner to buy Blackstone’s interest, Bloomberg said, adding no final decision has been made and the alternative asset manager could opt to not proceed. Blackstone held 203.2 million shares, or about 58.3%, of Cheniere Energy Partners as of March 31, according to Refinitiv Eikon data. Blackstone declined to comment and Brookfield did not immediately respond to Reuters’ request for a comment.
Petronet says invoked force majeure on 9 cargoes
Petronet LNG Ltd (PLL), the country’s biggest gas importer, on Tuesday said it invoked the force majeure on nine cargoes after COVID-19 lockdown cut offtake by consumers. Petronet imports natural gas in its liquid form (LNG) from countries such as Qatar and Australia and pipes it to users such as power plants and fertiliser units after re-converting it into its gaseous state. Petronet invoked the force majeure on eight liquefied natural gas (LNG) cargoes of Qatar and one from Exxon for loading from March to May. “Due to a nationwide lockdown imposed by the Government of India from the last week of March 2020, the offtake of regasified-LNG (RLNG) from the Dahej terminal (in Gujarat) was reduced. “This decline in throughput was due to partial/full shutdown of a number of industries, refineries, power plants, etc, which reduced their offtake of natural gas as the demand of their respective products decreased,” Petronet said in a regulatory filing. Average gas send-out from the Dahej terminal fell to less than 60 per cent of the capacity in April, down from over 88 per cent in the previous month. “Post first week of June when the lockdown was relaxed, the demand of RLNG has seen gradual recovery and since then, PLL”s Dahej terminal is operating at its full capacity of 17.5 million tonnes per annum (63 million standard cubic meters per day),” it said. Before COVID 19, average send-out during January-February was around 58 mmscmd (92 per cent of the capacity) at the Dahej terminal and 3.57 mmscmd (20 per cent) at 5 million tonnes a year at the Kochi terminal in Kerala. “Owing to the COVID-19 pandemic and a consequent reduced RLNG demand during the lockdown period, PLL was constrained to invoke the force majeure for nine long-term cargoes with its suppliers and discussion on the same are ongoing,” the company said without giving details.