GAIL, Adani, Petronet LNG join IGX; gas price of $4.07 per unit discovered
At a time when the price of domestic natural gas is as low as $2.39 per million metric British thermal unit (mmBtu), the Indian Gas Exchange (IGX) — the country’s first natural gas exchange — has got a market-discovered price of $4.07 per unit within the first two days of operation. Launched on Monday, the platform — set up by the Indian Energy Exchange — has so far traded 100 mmBtu gas. Giving major boost to IGX, big liquefied natural gas (LNG) players like state-run GAIL (India) and Petronet LNG have joined the exchange as members. Private sector majors like Adani Gas, too, have joined IGX as its member partner. “We have brought in 12 members and over 350 clients so far. GAIL and Petronet have joined as our members,” said Rajiv Srivastava, managing director and chief executive officer, IEX. Other members of the platform include Manikaran Power, GMR Energy Trading, Zak Venture, Kreate Energy, Gita Power and Infrastructure, Abja Power, Arunachal Pradesh Power Corporation, Andhra Pradesh Gas Power Corporation, and Instinct Infra and Power. Trade members facilitate trade on the exchange on behalf of their clients. They act as the link between the exchange and the clients registered on the exchange. A source indicated that 100 mmBtu of overall trade was for daily contracts only, even though there were bids for fortnightly and monthly contracts as well. The market-discovered price for first two days was Rs 309 per mmBtu or $4.07 per mmBtu. The exchange is LNG-driven, while the price of domestically produced natural gas is notified by the government. At present, the domestic natural gas price is at $2.39 per mmBtu, which most producers, including Oil and Natural Gas Corporation, have cited as unviable. Launching the IGX, Petroleum Minister Dharmendra Pradhan had endorsed a market-driven pricing mechanism and hinted at the introduction of a new tariff policy on gas. He said the IGX would help in finding market-driven pricing in India.
India’s gas policy change to widen LNG’s reach, draw new investors
India’s decision to ease rules on setting up LNG stations will help expand the fuel’s accessibility as well as attract more private investors as the country nurtures a dream to become a gas-based economy, the head of India’s oil and gas regulator told S&P Global Platts in an interview. This decision will help to tap in smaller scale and well as commercial transport sector for LNG use, a step towards boosting gas consumption in India where the share of gas in the energy mix is as low as 6%, compared with a global average of close to 25%, said Dinesh Kumar Sarraf, chairperson of India’s Petroleum and Natural Gas Regulatory Board. “The traditional ‘LNG premium over gas’ has narrowed down significantly. Therefore, India needs to develop this LNG fuel alternative. We have studied and found out that the City Gas Distribution companies are not necessarily the best bet to develop LNG stations. Therefore, we have opened up the LNG sector,” Sarraf said. Earlier this month, PNGRB issued a notice declaring that LNG stations would be excluded from the purview of CGD exclusivity licenses issued for specific geographical areas. Any entity can set up an LNG station in any geographical area or anywhere else, even if it is not the authorized entity for that area. According to Platts Analytics, the move would benefit integrated players and could also increase the penetration of LNG in the transport sector. Commenting on how the LNG-based transport sector — trucks and buses — would grow after the recent policy decision, Sarraf drew a comparison, saying currently there were 400,000 LNG trucks in China, an indication that the potential can be huge in India. “The rationale is that gas is cheaper than high-speed diesel. It’s more environment friendly too. But on the issue of how many LNG trucks and buses would come on road, how many LNG stations would come up and how much of LNG would be consumed through this route, it would depend how seriously various industries would take this development,” Sarraf said. “But we can already see that some companies have already initiated action on this. The government has always been supportive of gas as a product,” he added. Pipeline tariff structure Sarraf said that under the existing “cascading pipeline tariff structure” if gas travels through several pipelines, tariff for each pipeline have to be paid. Therefore, gas becomes unaffordable by the time it reaches a customer located at a distance from the gas source. “We want to address this issue of affordability by rationalization of tariffs. Soon we would initiate industry consultation to decide what’s the best way forward. The objective is to keep gas affordable in far flung areas,” he added. Earlier in the week, India launched its first natural gas trading platform, a move which government officials expect will bring more price transparency to the market and aid in boosting consumption of the clean fuel. The trading exchange for physical delivery of gas was launched by IGX, a wholly owned subsidiary of Indian Energy Exchange, or IEX. For the first phase of the launch there will be three pricing nodes, with ex-terminal prices at two of India’s busiest LNG terminals Dahej and Hazira in Gujarat on the west coast of India along with domestic gas price in Oduru, Andhra Pradesh on the east coast. “This will give confidence to consumers of natural gas who until now were not able to take a decision on whether to shift from other energy sources to natural gas as they were not sure whether they were getting a transparent price or not,” Sarraf said. India’s gas consumption is split between locally produced gas and imported LNG. However, a large portion of the gas which is allowed to be marketed freely is re-gasified LNG. India’s domestic gas output falls under the Administered Pricing Mechanism under which it’s sold at a price set by the Petroleum Planning and Analysis Cell on a half-yearly basis. Prices for LNG cargoes delivered to the west coast of India is currently benchmarked against the Platts West India Marker or WIM. Sarraf said that the extended countrywide lockdown that India recently witnessed had slowed down pipeline construction activity. “However, pipeline entities like GAIL and the GSPL consortium can catch up on the lost time. Good news is that many of the pipelines which were stuck-up for years have shown good progress in the recent quarters due to the excellent cooperation from the states and the efforts of the pipeline entities. Notable among them are the Kochi-Mangalore pipeline, the Ennore-Tuticorin pipeline and the Mehsana-Bhatinda pipeline,” Sarraf added. Commenting on the outlook for global LNG prices, he said that we would expect LNG prices to remain soft in the foreseeable future because of the additional capacity that’s coming up globally. “This would be good for a country like India which is looking to boost its gas consumption.”
Kerala: Collector asks oil firm to expedite city gas project
In a proactive step to expedite the works on city gas project, the district collector has asked Indian Oil-Adani Gas Pvt Ltd (IOAGPL) to come up with a proper schedule to give 40,000 piped natural gas (PNG) connections in the district within five or six months. Meanwhile, IOAGPL has started efforts to get extension for the project, the deadline of which is in October, 2020. TOI had on Monday carried an article regarding the slow pace of the project, which was launched in October 14, 2015. In the past four-and-a-half years, IOAGPL could give less than 2,000 connections whereas it should have given around 40,000 connections as per target. On Tuesday, collector S Suhas summoned IOAGPL officials and sought clarification for inordinate delay on their part in implementing the project. Then, the officials said that there were various reasons for the delay, including shortage of workers due to the lockdown and subsequent restrictions. Even though the lockdown has been eased, labourers who mainly hail from other states are not available, the officials said. In the next three months also, there may not be much progress in the work due to rain and shortage of workers. “The district collector has asked us to prepare a schedule for completing the project. We should give 40,000 PNG connections and set up 50 compressed natural gas (CNG) outlets as part of the city gas project. We will submit a report to the district collector in this regard in consultation with our head office,” an official with IOAGPL said. Efforts for seeking nod from Petroleum and Natural Gas Regulatory Board (PNGRB) for giving extension for completing the project have also been made. According to IOAGPL officials, many man-hours were lost due to various reasons like floods in 2018 and 2019. “We expect that there will be a positive response from PNGRB,” an IOAGPL official said. According to IOAGPL officials, though the agency could give just 1,900 PNG connections so far, it has completed the plumbing works in around 15,000 households in various local bodies in Kochi. “Moreover, we have laid pipeline for supplying PNG. We have also started seven CNG outlets and work on another eight is progressing. So, we will be able to achieve the target without much delay,” an official said.
IGL Q4 results; Net profit up 12 per cent on higher gas sales
Indraprastha Gas Ltd, the largest CNG distribution company of the country, on Wednesday reported a 12 per cent rise in March quarter net profit on the back of higher gas sales. Net profit of Rs 252.63 crore in January-March compared with Rs 224.72 crore in the same period a year back, the company said in a statement. The firm, which retails CNG in Delhi and neighbouring cities of Noida, Greater Noida, Ghaziabad, Muzaffarnagar, Rewari, Gurugram and Karnal, saw overall sales volume rise to 567 million standard cubic metres in Q4 of 2019-20 from 564 mmscm a year back. Turnover was marginally higher at Rs 1,697 crore. The company’s gross turnover rose to Rs 7,131 crore in FY20 from Rs 6,337 crore in FY19, showing an increase of 13 per cent. Net profit in FY20 was up 44 per cent to Rs 1,135 crore from Rs 786 crore in FY19, driven by higher volumes and reduction in corporate tax rates, it said. During 2019-20, total sales volume grew by 9 per cent over the previous year, with CNG recording 7 per cent growth in volumes and piped natural gas posting volume growth of 12 per cent. The average daily gas sale during the year has gone up to 6.44 million standard cubic metres per day from 5.91 mmscmd in the previous year. IGL board recommended a dividend of 140 per cent for consideration of the members in the Annual General Meeting. IGL has well laid out its city gas distribution infrastructure in Delhi, Noida, Greater Noida, Ghaziabad, Rewari, Gurugram, Karnal and Muzaffarnagar which consists of over 13,000 kms of pipeline network. It supplies CNG to over 11 lakh vehicles in NCR through a network of over 550 CNG stations. IGL also supplies piped cooking gas to nearly 14 lakh households in these cities. The pipeline network is being further expanded by IGL to cover Ajmer, Pali and Rajsamand in Rajasthan, Shamli, parts of Meerut, Fatehpur, Hamirpur and parts of Kanpur in Uttar Pradesh and Kaithal in Haryana, the statement added.
Oil prices drop on demand worries as coronavirus cases rise
Oil prices fell more than 1 per cent in early trade on Thursday as a spike in new coronavirus cases in China and the United States renewed fears that people would stay home and stall a recovery in fuel demand even as lockdowns ease. US West Texas Intermediate (WTI) crude futures were down 1.6 per cent, or 60 cents, at $37.36 a barrel at 0035 GMT, adding to a loss of 42 cents on Wednesday. Brent crude futures fell 1.1 per cent, or 45 cents, to $40.26 a barrel. The benchmark contract declined 25 cents on Wednesday. Worries about fuel demand rose after a surge in coronavirus cases led Beijing to cancel flights and shut schools and several US states, including Texas, Florida and California, reported sharp increases in new cases. A rise in US crude stockpiles to a record high for a second week in a row also weighed on sentiment, even though US government data showed inventories of gasoline and distillate, which include diesel and heating oil, fell. “People are concerned about the coronavirus resurging in China and crude stockpiles rising,” said Lachlan Shaw, head of commodity research at National Australia Bank. While prices dipped, they remained in the $35 to $40 band they have been trading in so far in June, with the Organization of the Petroleum Exporting Countries (OPEC) and other major producers mostly sticking to promised supply cuts, US shale producers holding back output, and fuel demand gradually improving. “It’s going to be up and down, rangebound for the next little while on a balance of OPEC and ally cuts against the massive inventory build and demand recovery and potential restarts of production in the United States,” Shaw said.
Over 11,000 displaced by Assam gas-well blowout
The gas well blowout at Baghjan, in Assam’s Tinsukia district, has become a major humanitarian crisis as over 11,000 people have been displaced from the area. Staying in relief camps since the incident, all of them want to go back home as soon as possible. “We have survived floods and erosion for years but have never seen such a man-made disaster,” Rupali Saikia, a mother of two kids who have been staying at a relief camp since May 28, said. “After the gas well exploded, we fled. We could carry only a few clothes. Everything was left behind. We are farmers. We are worried about our future as the oil spill has damaged our crops and fields,” she added. Ranjan Gohain, a resident of Rangagora Natun Gaon, said, “The 500-odd families of our village fled. The people were dependent on crop farming, animal rearing, poultry farming and fish farming. Most of the farms have been damaged by the oil spill. People are worried.” District officials said on Wednesday the blowout triggered an exodus of 2,000 families, or approximately 11,020 individuals, from the area. While 1,510 displaced families (8,540 people) have taken shelter in relief camps, another 450 families (2,480 people) have been shifted to other places, including homes of relatives and acquaintances. The well blowout has also affected 3,160 farmers. According to official data, 1,210 hectares of agricultural crop area and 470 hectares of small tea gardens were affected.
Venezuelan oil production sinks to lowest output in 77 years
Crisis-wracked Venezuela’s relentless fall in oil production sunk to a new low in May, according to OPEC figures, a milestone in a decade of decline for the once proud petroleum powerhouse. Venezuela — heavily dependant on income from oil exports — produced just 570,000 barrels of oil a day, a drop of 54,000 bpd compared to one month earlier in April, according to Organization of the Petroleum Exporting Countries figures out Wednesday. The OPEC number was also 162,000 bpd lower than official Venezuelan statistics. Venezuela’s oil production peaked in 1970 at 3.7 million bpd, and even 12 years ago state oil company PDVSA — once among the world’s top five oil enterprises — was producing 3.2 million bpd. Not counting a December 2002-March 2003 oil workers strike, the current output is the lowest since 1943, when Venezuela had a population of barely four million, compared to 30 million today. Experts blame the production drop on government mismanagement, corruption and a failure over many years to invest in infrastructure upgrades and maintenance. These problems have been amplified by US sanctions aimed at starving President Nicolas Maduro’s regime of a major source of funds in a bid to force him from power. Between 2004 and 2015, Venezuelan oil exports raked in $750 billion, and the country had more than $42 billion in international reserves — now down to just $6.4 billion, according to the Central Bank. Venezuela’s economy has been devastated by six years of recession, and it is experiencing the world’s highest inflation rate — all before the COVID-19 pandemic even struck. On April 24, Venezuelan crude prices plunged to $9.90 a barrel — its lowest in two decades, although it rebounded to $13.45 by May 1. The oil ministry has not published any figures since. According to oil information firm S&P Global Platts, Venezuela was forced to scale back production in recent weeks due to storage limitations and a lack of light oil to process its heavy crude. Yet even if Venezuela were pumping at capacity, oil prices are at their lowest in years due to a huge drop in global demand, a result of worldwide economic crisis unleashed by the COVID-19 pandemic. – ‘Trump’s knee on our neck’ – Up to 2018, Venezuela was sending 500,000 bpd to the United States alone, and received in return 120,000 bpd of light oil, diluents and fuel-producing supplies. Sanctions, however, have forced Venezuela, which used to refine enough oil for its own needs, to turn to allies such as US nemesis Iran to alleviate a desperate gasoline shortage. All this is “sharpening Venezuela’s cycle of recession,” said economist Jose Manuel Puente, from the Public Policy Center at the Institute of Higher Education Administration (IESA). Venezuela is heading for a seventh straight year of recession, during which time its economic growth has halved. Making matters worse, Venezuela is selling the little oil it exports “at a loss” due to the global price drop and the dealings it must operate to work around US sanctions, said Puente. The country “is on the brink of collapse,” he said. Central Bank advisor Carlos Mendoza Potella is critical of the government’s policies, but says US sanctions played a major role in the oil industry’s demise. “They’re strangling us, we’ve got (President Donald) Trump’s knee on our neck,” said Mendoza Potella. Even without sanctions, though, he doesn’t see a future with oil as a “driver of development” due to the high costs in extracting Venezuelan crude. Venezuela has the world’s largest proven crude reserves, but “that serves no purpose” if you can’t extract and sell it at a profit. Puente believes the sector cannot recover without private investment. “Alone we can’t do it. We don’t have the technology, or the financial and human resources,” he said. The latest drop in production coincides with a flare-up of tensions between Maduro and opposition leader Juan Guaido, who declared himself acting president 18 months ago, earning recognition from more than 50 countries. Although the two agreed to cooperate to help fight the novel coronavirus, they have since clashed over upcoming legislative elections, which the opposition plans to boycott. Puente says there is no chance of an economic bailout without a political transition plan that would likely require Maduro to cede power. “We have no alternative, either we do it or we’ll continue in the cycle of disaster,” he said.
HPCL keeps Rs 12,000 crore capex plan despite slide in profit
State run-Hindustan Petroleum Corporation (HPCL) has retained its plans to spend 12,000 crore on capital expenditure in 2020-21 despite its net profit plummeting over 50 per cent year on year in 2019-20, hit by inventory losses due to sharp fall in crude prices and exchange rate fluctuations. Chairman Mukesh Kumar Surana added a word of caution that plans for new projects may be revisited. “We will have a capex of Rs 12,000 crore in the current year; there is no change in plans. Our Mumbai and Vizag refinery expansion projects are at an advanced stage. Barmer project is also going on but the expenditure would be later on because other work is going on there,” Surana told reporters. He said there may be some issues in project execution due to the flight of labours during the Covid-19 lockdown and the monsoon season. HPCL reported net profit of Rs 2,637 crore in FY20, down sharply from Rs 6,029 crore reported a year ago. Gross sales in the FY20 declined to Rs 2,86,250 crore from Rs 2,95,713 crore in the previous year. Of the Rs 12,000 crore capex planned, about Rs 7,000 crore would be spent on refineries and balance Rs 5,000 crore would be invested in expansion of marketing and retail networks. The company aims to add 500 fuel retail outlets every year. It commissioned 1,194 retail outlets and 245 new LPG distributorships during 2019-20, taking the total number of retail outlets to 16,476 and number of total LPG distributors to 6,110 as of end-March.
UK inflation drops to four-year low in May as oil prices slump
British inflation fell to its lowest level since June 2016 last month as the coronavirus pandemic sucked demand from the global economy and caused oil prices to tumble, leaving the Bank of England free to ramp up its stimulus programme again. Consumer price inflation slowed to 0.5 per cent from April’s 0.8 per cent, the Office for National Statistics said, in line with the average forecast in a Reuters poll of economists. Core inflation – which excludes typically volatile energy, food, alcohol and tobacco prices – showed less of a decline, falling to 1.2 per cent from April’s 1.4 per cent. Economists had forecast a small drop to 1.3 per cent. “There was a continued drop in prices at the pump in May, following the huge crude price falls seen in recent months,” ONS Deputy National Statistician Jonathan Athow said. Most economists polled by Reuters expect the BoE to announce an extra 100 billion pounds of bond purchases when its publishes its June policy decision on Thursday, following on from 200 billion pounds of bond purchases it started in March. “Inflation is not something that is going to worry the Bank for some time. It will be more concerned about growth,” Neil Birrell, chief investment officer at asset management firm Premier Miton, said. Britain suffered a record fall in economic output in April, when the economy shrank by more than 20 per cent due to the closure of non-essential businesses to the public to slow the spread of COVID-19. Last month the BoE said lower oil prices, as well as a regulatory cap on household energy and water bills, were likely to keep inflation below 1 per cent for several months. The central bank added that weaker demand was likely to put downward pressure on inflation overall – though it would not make sense for all businesses to cut prices in response to reduced demand, and measuring some prices would be hard. Major factors pushing down on inflation in May included fuel, clothing and transport costs, the ONS said. Prices for fuel and lubricants showed their biggest annual fall on record, down 16.7 per cent on a year earlier, while clothing prices were 3.1 per cent lower, the biggest drop since July 2010. Producer output prices – which can give a steer on upcoming price pressures – dropped by 1.4 per cent after declining by 0.7 per cent in April. Economists had pencilled in a 0.9 per cent fall.
China, India to dominate global LNG regasification sector by 2024
China is likely to lead with 25% capacity share in the global liquefied natural gas (LNG) regasification industry from new-build (planned and announced) projects between 2020 and 2024, according to a report by GlobalData, a leading data and analytics company. The country will have the highest LNG regasification capacity additions of 3.8 trillion cubic feet (tcf) globally by 2024 from 16 planned and announced new-build regasification terminals, revealed GlobalData in its report ‘Global LNG Industry Outlook to 2024 – Capacity and Capital Expenditure Outlook with Details of All Operating and Planned Terminals.’ Out of the total new-build capacity, 2.5 tcf comes from planned projects that have received required approvals for development and the remaining 1.3 tcf will come from early-stage announced projects. Adithya Rekha, Oil and Gas Analyst at GlobalData, said: “Among the upcoming regasification terminals in China, Tangshan II has the highest capacity of 584 billion cubic feet (bcf). This announced onshore terminal is expected to start operations in the Hebei province by 2022.” According to GlobalData, India is expected to have the second highest regasification capacity additions globally by 2024. The Asian major is expected to add 2.5 tcf of regasification capacity through 15 terminals by 2024. Of this total capacity, 2 tcf is expected to come from 11 planned projects while 0.5 tcf is likely to come from four early-stage announced projects, stated the report. The neighbouring Pakistan comes third on the list for the highest global regasification capacity additions of 1.3 tcf by 2024. Four planned regasification terminals are expected to add a total capacity of 1.1 tcf by 2024 while the remaining 219.0 bcf of LNG regasification capacity would be added by an announced terminal– Sonmiani Floating in the Karachi state, the report added.