Reliance has a 15-year plan to convert itself into a new energy company
Billionaire Mukesh Ambani’s Reliance Industries Ltd has a 15-year vision to build itself as a new energy company that aims to recycle CO2, create value from plastic waste and has an optimal mix of clean and affordable energy, analysts said. While the oil-to-chemical conglomerate has in recent times seen focus on consumer business, RIL’s core oil-to-chemical (O2C) business is well placed to generate sustained free cash flow, BofA Securities said in a report. “Until demand normalises, RIL is looking to maximise throughput, focus on cost by leveraging deep petrochemical integration and continue to focus on domestic fuel marketing,” it said. Future of O2C is new energy company and partnerships. “RIL has a 15-year vision to build itself as one of the world’s leading new energy and new material companies. It also intends to be a net carbon zero company by 2035. To achieve this, the company is open to work with global financial investors, reputed technology partners and start-ups working on futuristic solutions,” it said. This new energy business based on the principle of carbon recycling and circular economy is a multi-trillion opportunity for India and the world. The brokerage said a key focus for RIL is renewable energy, and for that it intends to build an optimal mix of clean and affordable energy with hydrogen, wind, solar, fuel cells and battery. “It intends to use proprietary technology, recycle CO2, create value from plastic waste; RIL is also looking to make its operations cleaner and more customer-centric,” it said. Reliance has the largest single site refinery at Jamnagar in Gujarat with crude processing capacity of 1.24 million barrels per day. The brokerage said RIL is looking to make CO2 as a recyclable resource, rather than treating it as an emitted waste. While the company will remain a user of crude oil and natural gas, it is looking to embrace new technologies to convert CO2 into useful products and chemicals. “One viable application RIL has found for such ‘end of life-cycle’ plastic waste is in road construction. Road constructed with post-consumer, non-recyclable plastic waste ensures enhanced durability, higher resistance to deformation, increased resistance to water induced damages and improved stability and strength,” it said. In November last yera, RIL confirmed plans to invest Rs 70,000 crore to establish a crude oil-to-chemicals (COTC) complex at the company’s Jamnagar facility. The company is proposing to develop a total area of 2,000 acres adjacent to its world-scale facilities at Jamnagar to build the COTC complex. The plan is also to convert the Jamnagar site’s existing fluid catalytic cracking (FCC) unit to a high severity FCC (HSFCC) or Petro FCC unit, to maximise ethylene and propylene yields. “RIL’s strategy is to transform the Jamnagar refinery from a producer of transportation fuels to chemicals. The company ultimately wants to achieve a rate of more than 70 per cent in the conversion of crude to olefins and aromatics,” it said. RIL in its recent annual general meeting stated that potential partnerships will help it remain competitive and better serve the Indian/ international markets. The company intends to approach the National Company Law Tribunal with a proposal to spin off its oil-to-chemical (O2C) business into a separate subsidiary to facilitate this partnership opportunity. BofA said Saudi Aramco picking 20 per cent stake in O2C business is a win-win for both companies. “RIL will be able to better utilise its refinery capabilities with availability of several grades of crude oil from super light to heavy being supplied by Aramco,” it said adding the partnership going ahead will leverage the O2C value chain to maximize margins and meet the evolving needs of consumers by supplying energy, base chemicals and new materials. The strategic partnership with Aramco will help in increasing its crude oil to chemicals conversion ratio, which presently stands at 20 per cent. “With the deal RIL will get technological expertise from SABIC (Saudi Basic Industries Corporation), in which Aramco recently bought a controlling stake,” it said. For Aramco, it creates a long-term crude supply contract of 0.5 million barrels per day (about 5 per cent of current production) to RIL’s Jamnagar refinery, with reduced demand risks. Aramco currently covers only about 40 per cent of its crude output via refining and strives to increase it further. “It would give Aramco the opportunity to participate in Indian market growth story where demand will likely be strong over the next two decades,” it added.
Indian researchers show how Covid-19 PPE can turn into biofuel
Plastic from used personal protective equipment (PPE) can and should be transformed into renewable liquid fuels, according to Indian researchers. The study, published in the journal Biofuels, suggested a strategy that could help to mitigate the problem of dumped PPE – currently being disposed of at unprecedented levels due to the current Covid-19 pandemic – becoming a significant threat to the environment. The research from the University of Petroleum and Energy Studies (UPES) in Uttarakhand shows how billions of items of disposable PPE can be converted from its polypropylene (plastic) state into biofuels – which is known to be at par with standard fossil fuels. “The transformation into biocrude, a type of synthetic fuel, will not just prevent the severe aftereffects to humankind and the environment but also produce a source of energy,” said study lead author Dr Sapna Jain from UPES. There is high production and utilisation of PPE to protect the community of health workers and other frontline workers of Covid-19. The disposal of PPE is a concern owing to its material i.e. non-woven polypropylene. “The proposed strategy is a suggestive measure addressing the anticipated problem of disposal of PPE,” Jain said. During the current Covid-19 pandemic specifically, PPE is being designed for single-use followed by disposal. Once these plastic materials are discharged into the environment they end up in landfills or oceans, as their natural degradation is difficult at ambient temperature. They need decades to decompose. Recycling these polymers requires both physical methods and chemical methods. Reduction, reuse and recycling are the three pillars of sustainable development that can help to prevent the disposal of plastic in the environment. The research team reviewed many related research articles as they looked to explore the current policies around PPE disposal, the polypropylene content in PPE, and the feasibility of converting PPE into biofuel. In particular, they focused on the structure of polypropylene, its suitability for PPE, why it poses an environmental threat and methods of recycling this polymer. Their conclusive findings call for the PPE waste to be converted into fuel using pyrolysis. This a chemical process for breaking down the plastic at high temperature – between 300-400 degrees centigrade for an hour – without oxygen. According to the researchers, this process is among the most promising and sustainable methods of recycling compared with incineration and landfill. “Pyrolysis is the most commonly used chemical method whose benefits include the ability to produce high quantities of bio-oil which is easily biodegradable,” said study co-author Bhawna Yadav Lamba. “There is always a need for alternative fuels or energy resources to meet our energy demands. The pyrolysis of plastics is one of the methods to mitigate our energy crisis,” she noted.
Explained: How move to open up city gas distribution will benefit customers, impact incumbents
City gas distribution companies may soon face competition from third parties, with the Petroleum and Natural Gas Regulatory Board (PNGRB) set to notify regulations to allow competition for these companies, which have thus far enjoyed exclusive marketing rights in their respective geographies. Indraprastha Gas Ltd. in Delhi, Mahanagar Gas Ltd. in Mumbai and Gujarat Gas Ltd. are three city gas distribution companies set to be affected by the opening up of these markets and their pipeline infrastructure to third parties. What is the current scenario? These players currently have exclusive right to lay, operate and expand gas distribution infrastructure in their respective geographies as well as market both Compressed Natural Gas (CNG) and Piped Natural Gas (PNG) in these areas. The government had decided to grant exclusivity to gas distribution companies to incentivise them to invest in infrastructure to deliver PNG and CNG widely across cities. These companies supply PNG to household, industrial and commercial use and CNG for vehicles through retail sites of state-owned oil marketing companies Indian Oil Corporation Ltd, Bharat Petroleum Corporation Ltd and Hindustan Petroleum Corporate Ltd. What is the proposed change? Under the proposal by the PNGRB, distribution companies would have to provide access to third-party companies to pay to use their infrastructure to market CNG and PNG based on a transportation tariff set by the incumbent players but regulated by the PNGRB in case of disputes. The PNGRB has sought comments from stakeholders on how the tariff for use of the pipeline network of the city gas distribution companies should be decided. What is the impact on consumers? According to experts, the end of marketing exclusivity may lead to some competition and lower prices for CNG. City gas distribution companies market CNG at the retail pump sites of state-run oil marketing companies. CNG sales are the most profitable market segment for city gas distribution companies with margins at around 30% of the retail price of the fuel, according to experts. OMCs which currently receive a commission on the sale of CNG sold through their retail points may seek to take some market share in the CNG distribution business by using the distribution network of the city gas distribution companies to retail CNG directly to customers.
India’s fuel demand may take 6-9 months to reach normal levels: IOC
India’s fuel demand may take 6 to 9 months to rebound to normal levels as several states impose lockdown to curb the spread of coronavirus, Indian Oil Corp (IOC) Director-Finance S K Gupta said on Tuesday. Fuel sales had fallen by a record 45.8 per cent in April when a nationwide lockdown was in place to check the coronavirus infections. Lockdown restrictions have been progressively eased beginning May but now several states are imposing lockdown to curb record daily infection rates. Speaking at an investor call on first-quarter earnings, Gupta said it was difficult to predict the demand recovery rate given the rising infections in India and around the world. “It may take 6 to 9 months to return to normal,” he said. After making a smart recovery in May, fuel sales have dipped from the second-half of June. Diesel, which accounts for two-fifths of the overall petroleum product demand in India, fell 13 per cent to 4.85 million tonne in July from the previous month and by about 21 per cent from a year earlier, according to provisional PSU sales data. Petrol sales fell 1 per cent to 2.03 million tonne in July from June, and by about 11.5 per cent from a year ago, while jet fuel sales in July rose 4 per cent from the previous month to about 218,000 but fell 65 per cent from July 2019 as air travel curbs continued. The only fuel that has consistently seen a rise in demand is cooking gas LPG which at 2.27 million tonne was 10 per cent more than June and 3.5 per cent higher than a year ago sales, the data showed. A tough initial lockdown was imposed beginning March 25 but dreams of a V-shaped recovery after it was eased in May have been obliterated by a surge in cases and new lockdowns. Last week, IOC Chairman Shrikant Madhav Vaidya had stated that demand would begin to rebound only by year-end. New lockdowns in India had knocked capacity utilisation at refineries down from 93 per cent in early July to 75 per cent by the end of the month but it was predicted to stabilise in the coming months. “The number of lockdowns states are now announcing, that is taking its toll on the demand numbers,” he had said on July 31. “One thing is sure, we aren’t going back to the normal times at least in the near future.” New lockdowns are hitting the country’s economic recovery as there appear no signs of the infection rate slowing. Gupta said a capital spending of Rs 262.33 billion is planned in fiscal year 2020-21 (April 2020 to March 2021). Of this, around Rs 42 billion is planned to be spent on refinery upgrades and pipelines, Rs 50 billion on marketing infrastructure, Rs 22 billion on petrochemical projects, and Rs 50 billion on group companies.
Minimum ₹5 billion net worth must for licence to sell petrol, diesel to retail, bulk users
The government on Tuesday said any entity with a net worth of at least ₹5 billion is eligible for obtaining the liberalised licence to sell petrol and diesel to retail and bulk consumers. Clarifying on the November 2019 liberalised fuel licensing regime, the Ministry of Petroleum and Natural Gas said any entity with a net worth of ₹2.50 billion can get a licence to retail petrol and diesel to either bulk or retail consumers. For those seeking authorisation for both retail and bulk should have a minimum net worth of ₹5 billion at the time of application, it said in a statement. Last year, the government had relaxed norms for retailing of auto fuels, allowing non-oil companies to venture into the business — a move that could help private and foreign firms to enter the world’s fastest-growing market. Prior to that, a company had to invest ₹20 billion in either hydrocarbon exploration and production, refining, pipelines or liquefied natural gas (LNG) terminals to obtain a fuel retailing licence in India. In the statement, the ministry said the government had on November 8, 2019, notified simplified guidelines for grant of authorisation for bulk and retail marketing of motor spirit (petrol) and high-speed diesel (diesel). “The simplified guidelines aim at increasing private sector participation in the marketing of petrol and diesel,” it said. “An entity desirous of seeking authorisation for either retail or bulk must have a minimum net worth of ₹250 crore at the time of making an application — ₹5 billion in case of authorisation for both retail and bulk.” Applications, it said, may be submitted in the prescribed form directly to the ministry. “For retail authorisation, the entity is required to set up at least 100 retail outlets,” the statement said adding that the new policy has opened up the marketing sector of petroleum products by removing the strict conditions applicable earlier. The other requirements as per the November 2019 notification include the need for companies to install facilities for marketing of at least one new generation alternative fuel, such as CNG, LNG and biofuels, or electric vehicle charging within three years of the start of operations. The retailers will necessarily have to set up 5% of the total outlets in rural areas within five years. The new policy liberalises fuel retailing by increasing private sector participation, including foreign players. “It will also encourage dispensing of alternate fuels and augmentation of retail network in remote areas and ensure higher levels of customer service,” the statement added. The government had last set fuel marketing conditions in 2002 and the November 2019 change was based on the recommendation of a high-level expert committee. The move will facilitate entry of global giants such as Total SA of France, Saudi Arabia’s Aramco, BP Plc of the U.K., and Trafigura’s downstream arm Puma Energy. Total SA in partnership with Adani Group had in November 2018 applied for a licence to retail petrol and diesel through 1,500 outlets. BP too has formed a partnership with Reliance Industries to set up petrol pumps. While Puma Energy had applied for a retail licence, Aramco was in talks to enter the sector. State-owned oil marketing companies Indian Oil Corp (IOC), Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corp Ltd (HPCL) currently own most of the 69,924 petrol pumps in the country. Reliance Industries, Nayara Energy (formerly Essar Oil), and Royal Dutch Shell are the private players in the market but with limited presence. Reliance, which operates the world’s largest oil refining complex, has 1,400 outlets. Nayara has 5,756 pumps, while Shell has just 194. Currently, IOC is the market leader with 29,368 petrol pumps in the country, followed by HPCL with 16,707 outlets, and BPCL with 16,492 fuel stations.
IndianOil predicts recovery to pre-Covid levels only by year-end
The chairman of Indian Oil Corporation, the country’s biggest refiner, predicted demand would begin to rebound only by year-end as the coronavirus pandemic hits one of the world’s largest energy markets. Shrikant Madhav Vaidya said new lockdowns in India had knocked capacity utilisation down from 93 per cent in early July to 75 per cent by the end of the month but predicted it would stabilise in the coming months. “There is demand destruction but then the country is recovering,” Mr Vaidya told the Financial Times after reporting a sharp fall in year-on-year net profit in the quarter ended June 30. “By the end of the year, I expect that things will be nearly back to pre-Covid times.” New lockdowns in India are hitting the country’s economic recovery as coronavirus rips through the population of 1.4bn people. India is adding more than 50,000 infections daily, bringing its tally of Covid-19 cases to more than 1.6m, the third-largest in the world, with no sign of the infection rate slowing. IOC reported a 47 per cent drop in net profit to Rs19bn ($253m) in the quarter ended June 30 compared with a year earlier. This followed a sharp loss in the three months ended March 31. he economy was hit by a tough initial lockdown imposed by Prime Minister Narendra Modi while dreams of a V-shaped recovery have been obliterated by a surge in cases and new lockdowns. The country’s crude imports fell 19 per cent year on year to a five-year low in June, according to oil ministry data released on Friday. Mr Vaidya said that once the turmoil had settled, he expected appetite for fossil fuels in India, the world’s third-largest oil importer, to recover more strongly than in other markets. Unlike other refiners, Mr Vaidya said IOC had no plans to cut capital expenditure. “The energy demand for the country is going up, unlike the US or Europe, where it is either stagnant or there is negative growth,” said Mr Vaidya. “No single one form of energy will be able to satisfy it all. The Indian bouquet will [consist] of traditional fossil fuels with an increasing amount of gas.”
IOC plans to invest Rs 855 crore in Maharashtra in FY21
Indian Oil Corporation said that it has plans to invest Rs 855 crore in the state in the period between April 2020 and March 2021 and it hopes that the spending activity will be accelerated in the first three months of the year. It said that work has resumed at several of its facilities since the easing of lockdown restrictions. However, in Maharashtra, the demand is back at only 60 per cent compared to 80 per cent across the country due to several local lockdowns. Much of the new investment, the upstream oil company said will go into setting up new fuel stations and creating new capacities. “New LPG plant coming up at Nagpur will increase bottling capacity by 16 per cent (60 TMT/year against existing 360 TMT/year),” the company said. However, it has been facing difficulties in many places to hit the ground running and has been able to spend only about 10 per cent of its planned expenditure. “Indian Oil has targeted a capital expenditure of Rs 26,143 crore during FY 2021 and in the first quarter achieved an approximate expenditure of Rs 2,674 crore, overcoming various issues faced on-ground due to the Coronavirus pandemic,” the public sector oil company said. All the fuel that rolls out of the IOC plants is Bharat Stage-VI emission grade fuel.
Gas supplies to power plant rise over 13 pc in June
Gas supplies to power plants in the country rose by over 13 per cent to 36.16 million metric standard cubic metre per day (MMSCMD) in June this year from 31.95 MMSCMD in the same month a year ago, showing improvement in the beleaguered segment. However, the Central Electricity Authority (CEA) data showed that total plant load factor (PLF) or capacity utilisation of the gas base power plants in the country rose to just 29.4 per cent in June 2020 from 25 per cent in the same month last year. An expert said the consumption of gas by the power sector has improved mainly due to competitive imported gas prices. Data showed that imported gas supplies to power plants rose to 15.78 MMSCMD in June from 12.26 in the same month last year and from 13.02 MMSCMD in May this year. Power plants got imported gas supplies of 10.41 MMSCMD in April this year, up from 8.9 MMSCMD in the same month a year ago. Another expert said that due to economical gas prices in the international market, there could be further rise in the consumption by power plants in the country, especially during monsoon when coal loading is lesser. The expert was of the view that gas consumption also increased due to lower coal loading in the post lockdown period. The government had imposed lockdown from March 25 to contain the coronavirus spread in the country. Gas supplies to power plants in the country increased by 11.65 per cent to 104.78 MMSCMD in April-June from 93.84 MMSCMD in the same quarter last year. However, data showed that PLF of gas-based power plants in the country rose to just 28.6 per cent in April-June this fiscal from 24.8 per cent in the same quarter last year. In November 2018, a high-level committee had given a host of suggestions to address issues related to the stressed power assets in the country in its report. Majority of the recommendations of the committee were considered and implemented by the central government, except related to gas-based power plants. Earlier, the government had given subsidy to buy expensive imported gas for running power plants. The panel recommended to revive the scheme to provide subsidy to buy imported gas for running power plants in the country in view of reduced domestic production. It had said, “Ministry of Power and Ministry of Petroleum and Natural Gas may jointly frame a scheme for revival of gas-based power plant on the lines of earlier e-bid RLNG (Regasified Liquefied Natural Gas) scheme (supported by Power System Development Fund).
India’s fuel demand loses steam in July: Industry data
India’s refined fuel consumption in July slipped from June, according to preliminary industry data, indicating slower industrial activity as high retail prices, floods and renewed coronavirus lockdowns in parts of the country dented demand. Local fuel sales – a proxy for oil demand – plunged to historic lows in April when India imposed a country-wide lockdown. State-refiners’ diesel sales, which account for two-fifth of overall refined fuel sales in India, fell by 13% to 4.85 million tonnes in July from the previous month, and by about 21% from a year earlier, according to data compiled by Indian Oil Corp (IOC). State companies, IOC, Hindustan Petroleum Corp and Bharat Petroleum, own about 90% of India’s retail fuel outlets. Falling local sales and subdued refining margins have forced refiners to curtail crude processing. IOC, the country’s top refiner, doesn’t see fuel sales recovering to pre-COVID-19 level in the near future. Local fuel demand had gathered pace from May when India, the world’s third-biggest oil importer and consumer, partly eased lockdown to bolster its sagging economy. But a spike in domestic coronavirus infections has led to renewed imposition of lockdowns and addition of containment zones in several states. Also, floods caused by rains have displaced and affected millions of people in some states and hit industrial and construction activity in the country. Petrol sales by state companies fell by 1% to 2.03 million tonnes in July from June, and by about 11.5% from a year earlier, the data showed. State retailers sold 10% more liquefied petroleum gas (LPG) in July from June at about 2.275 million tonnes and posted a growth of 3.5% from a year ago. Jet fuel sales in July rose 4% from June to about 218,000, but fell 65% from a year ago as curbs on air travel continued.
Reliance Power, JERA sign loan deed for full financing of gas-fired thermal power project in B’desh
Reliance Power Limited and JERA Co., Inc. through their project company, are developing a new gas-fired power generation project in Bangladesh. The project company has now signed a loan agreement for full financing totaling $642 million with a group of banks that includes the Japan Bank for International Cooperation (JBIC). According to a Reliance Power filing with the exchanges, this project is to build, own, and operate a 745 MW (net output: 718 MW) natural gas combined-cycle power project in Meghnaghat, Naranganj, located approximately 40 km southeast of Dhaka. The electricity generated will be sold under a long-term power purchase agreement with the Bangladesh Power Development Board (BPDB) for a period of 22 years from the start of commercial operation. Reliance Power and JERA have taken the initiative in promoting the project. The project company agreed an EPC contract with Samsung C&T in July 2020. With this loan agreement, all major contracts required for the development of the Project have been completed. Going forward, Reliance Power and JERA will focus on full-scale construction and work steadily towards achieving commercial operation in 2022. “We are delighted to achieve financing tie-up for this landmark project, which is the largest foreign direct investment and the largest IPP in Bangladesh, with a consortium of banks led by JBIC. It represents one of the largest funding tie-ups for a project in Bangladesh’s Power Sector.” said Anil D. Ambani, Chairman of Reliance Power. “In Bangladesh, where the high growth in electricity demand is expected to accompany the steady economic development, we aim to contribute to the country’s economic expansion through our participation in power generation and infrastructure businesses, including this Project.” said Satoshi Onoda, President of JERA. While Reliance power holds 51 per cent, JERA holds the remaining 49 per cent equity in the project company, Reliance Bangladesh LNG and Power Limited. As per the power purchase agreement, it will sell to Bangladesh Power Development Board for 22 years with Government Guarantee. As per the Gas Supply Agreement, it will purchase from Titas Gas Transmission and Distribution Company (Titas) for 22 years. The commercial operation date planned is year 2022.