Fuel prices rise again in Delhi, troubled commuters urge govt to provide relief
The rates of fuel have been increased again in the national capital on Wednesday causing more troubles for the commuters. With the hike in fuel prices, the petrol prices stand at Rs 77.28/litre (increase by Rs 0.55), and the diesel prices stand at Rs 75.79/litre (increase by Rs 0.69) in Delhi, according to a price notification of state oil marketing companies. The daily commuters, who were spotted filling the tanks of their vehicles at petrol pumps today morning. “Even a one rupee increase has an effect on us. The government should not increase prices like this, they should try to stop this hike as and when they can,” a commuter told here. Another customer, Naresh, at the same pump said that the hike in prices, especially during the phase when the city is trying to recover from the effects of COVID-19 induced lockdown is making it worse for the people and urged them to take immediate steps in this direction.
AK Jana takes over as IGL’s new Managing Director
Indraprastha Gas Ltd (IGL) said on Tuesday that AK Jana has taken charge as its Managing Director. He has taken over from ES Ranganathan who ceases to be a Director and Managing Director. IGL is a joint venture of GAIL India Ltd, Bharat Petroleum Corporation and Delhi government. Before joining IGL as Managing Director, Jana was Chief Executive Officer of Gail Gas Ltd (a wholly-owned subsidiary of GAIL) engaged in the business of city gas distribution. Jana is a graduate in Production (Mechanical) Engineering and has over three decades of experience in the gas sector. He has vast experience in project execution of construction, commissioning, operation and maintenance of gas processing plant and LNG terminal, rotary equipment, natural gas and LPG pipelines.
Uniform transmission tariff will boost liquidity, ensure robust price discovery: Rajesh Mediratta, IGX
A uniform transmission tariff in the gas market will ensure more liquidity and active participation of industry players resulting into effective and robust price discovery, according to Rajesh Kumar Mediratta, Director at Indian Gas Exchange (IGX), the country’s first gas trading platform launched Monday. “Tomorrow if there is a uniform gas transmission tariff policy across the country, then there will be one virtual hub for quoting the price which will facilitate more active participation, more liquidy and more competition leading to an effective and robust price discovery,” Mediratta told ETEnergyworld in an interview. At the launching ceremony of the IGX platform, oil minister Dharmendra Pradhan said that the downstream regulator Petroleum and Natural Gas Regulatory Board (PNGRB) will soon announce a new “pro-business” tariff policy for gas transport. Speaking on the move, Mediratta said that this is a very suitable move as reforms in transportation of gas will give a boost to trading through exchange. “We will be facilitating trade and taking care of delivery and financial settlement through this delivery based platform,” he said. Presently there are three hubs for physical delivery of liquified natural gas (LNG) – Dahej and Hazira in Gujarat and Kakinada in Andhra Pradesh. Since gas transmission through pipelines is based on distance, the buyer located in some other state will have to include the transportation cost while buying the LNG from any of these three hubs. “The buyer in some other state can quote a price which is taking care of the transportation and transmission charge as well,” Mediratta said, adding that gas exchange will be working on the basis of daily, day-ahead, weekly, fortnightly and monthly market. Speaking on the potential of gas market in the country, he said that currently 30 per cent of natural gas is traded in the short term spot market. IGX focus will be on LNG spot agencies which sell gas under short term contract of upto one year. “We are eyeing around 4 to 5 per cent of this 30 per cent market share as our first year target,” he said. India has set the target to increase the proportion of natural gas in the country’s energy mix from current 6.2 per cent to 15 per cent by 2030 and for this the government will come up with a new pipeline tariff policy which will replace existing practice of seven different pipeline operators charging separate rates. “With improving gas infrastructure and more terminals getting connected across the country like the Urja Ganga pipeline providing connectivity to the North-Eastern region, will really boost the gas demand,” Mediratta said. He also added when the gas demand goes up, the supply automatically comes and the real expansion of market takes place. At present there are 12 members and 350 clients registered at IGX which includes buyers, sellers and users. “There are many industries that use gas as fuel and they can actually move to the gas exchange as gas is going to become cheaper, once you have a robust pipeline connectivity,” he said. India has around 24,000 megawatt of stressed gas based power plants, according to the Standing Committee Report on Energy submitted in parliament in January 2019. Speaking on this stranded gas based capacity, Mediratta said that these power plants can actually utilise their stranded gas capacity through exchange. “Today what is happening is when a gas plant wants to buy gas, they have the option to buy under a one year contract, which means that if the gas is not consumed, they will still have to pay for the gas,” he said. He added that with the introduction of gas exchange, these buyers can check the price of gas in the market and if it is low they can purchase it, which will ultimately benefit them by making their cost of power production only be Rs. 2 to 2.5 per unit. Speaking on the future of trading through gas exchange platform, Mediratta said that he is quite optimistic as today there is around 10 to 12 per cent of electricity market available for short term trading but here there is much higher 30 per cent of LNG available for trade in the spot market.
Dharmendra Pradhan visits Baghjan, vows action against guilty
Union minister of petroleum and natural gas Dharmendra Pradhan visited the Baghjan blowout site in Tinsukia district on Sunday and promised compensation for those affected and strict action against those found guilty. The minister took stock of the ongoing operation to control the gas well on the 19th day of the Baghjan gas well blowout, which erupted on May 27. Pradhan, accompanied by Assam chief minister Sarbananda Sonowal and Union MoS for food processing industries Rameswar Teli, surveyed the situation on ground zero and took stock of the ongoing efforts being undertaken to cap the well. They also had a detailed discussion with the team from OIL and ONGC and experts from Alert Disaster Control. The Union minister also visited three relief camps and inspected the inmates’ living conditions. Over 7,000 evacuated people are staying in 14 relief camps. Promising adequate compensation for those affected, Pradhan said, “Today, I have come here on the direction of Prime Minister Narendra Modi, who is closely monitoring the situation. The priority of the Centre is the well-being and safety of the people. On behalf of the Centre, I would like to assure you that no one found responsible for the well blowout incident will be spared. Accountability will be fixed and action will be taken against them, no matter how powerful they are,” Pradhan said. The Assam government as well as the Centre have ordered a high-level inquiry into the incident. The findings of will be known soon. “The affected people, who have suffered losses will be adequately compensated as suggested by the state government. Tea gardens, crops, farm, land, fish farms, homes affected by the blowout will all be properly compensated,” Pradhan said.
New pipeline tariff, authorisation policy to push for higher share of gas in energy basket
In a bid to raise the share of natural gas in the energy basket, India will soon have a new tariff policy that will help bring down the cost of transporting the environment friendly fuel. Also, oil regulator PNGRB is working on a new regime for authorisation of gas pipelines that will make it more investor friendly. Speaking at the launch of nation’s maiden online gas trading platform by IGX, both Oil Minister Dharmendra Pradhan and regulator PNGRB Chairman Dinesh Kumar Sarraf spoke of a new pipeline tariff policy that will replace existing practice of seven different pipeline operators charging separate rates and customers away from gas source paying more than those nearer to source. “PNGRB is also working on rationalisation of tariffs to make natural gas affordable in every part of the country. It will facilitate development of gas market in eastern and north eastern part of the country,” Pradhan said. Petroleum and Natural Gas Regulatory Board (PNGRB) Chairman Sarraf hinted of single rate across pipelines so as to make the price of fuel uniform for customers across the country. A draft regulation for the new tariff policy will be issued in next few weeks and after stakeholder inputs, the policy will be finalised, he said. Presently, customers near the gas source, such as those in Gujarat – where most of imported gas as well as domestic production from western offshore fields lands – pay less than those in other parts. The transportation tariff goes up as the gas travels into the hinterland, making the fuel up to USD 2-3 per million British thermal unit more than those near source. Sarraf said the regulator was also working on a new regime for authorisation of pipelines as well as open up city gas distribution networks for third party access after the end of exclusivity period. Proposal before PNGRB to have a single rate across all pipelines. But prior to that suggestions have been made to split state-owned GAIL to resolve the conflict of principal transporter also being the biggest gas marketer. Pradhan said GAIL has come up with a proposal to have pipeline and gas marketing business in separate divisions. “There will be an infrastructure company for pipelines.” The share of natural gas in India’s energy basket is 6.2 per cent and the government has set a target to raise this to 15 per cent by 2030 to replace some of the polluting liquid fuel and coal with the environment friendly fuel. Gas transportation through pipelines is the most economical means to transport in the country. At present, about 16,788 km long gas pipeline network is under operation in the country and around 14,500 km pipeline is approved/under construction. “Efforts are underway to complete the Gas Grid in a time-bound manner. PNGRB is in a process of bidding out the pipelines for missing sections to complete the national Gas Grid,” he said. The minister said since 2014, the government has given a thrust to expand the gas infrastructure coverage for increasing the share of natural gas in our primary energy mix. “In this direction, we are also progressively moving towards creation of a free gas market in the country,” he said adding the country’s s first online gas trading platform will help discover price of the fuel. This platform is going to support the government’s vision of a free gas market in the country, he said. “The gas trading platform will play a vital role to discover our own price benchmark for gas, address demand supply gaps, accelerate investments in the value chain. The transparency, reliability, flexibility, and competitiveness of our gas markets will contribute in reviving India’s industrial and economic growth,” Pradhan said. With evolution of gas markets, future policies and regulatory framework is also going to be more market-friendly and to accommodate the market needs, he said. “We are a price sensitive market in India and the Exchange will play in a key role in discovering gas prices,” he said.
Iraq agrees with oil companies on deeper output cuts in June
Iraq has agreed with major oil companies operating its giant southern oilfields to cut crude production further in June, Iraqi officials working at the fields told Reuters on Sunday. Baghdad aims to improve its compliance with its output cut targets under a global deal with OPEC and its allies to reduce oil supply. Iraq has agreed with Russia’s Lukoil to start an additional cut of 50,000 barrels per day (bpd) as of June 13 to lower production from the West Qurna 2 field to around 275,000 bpd. Lukoil cut output by 70,000 bpd in May in response to a request by Iraq’s oil ministry, two Iraqi oilfield managers told Reuters on Sunday. Production from West Qurna 2 was around 395,000 bpd in April, the managers said. The Iraqi oil managers, who oversee production operations, said state-run Basra Oil Company had asked BP to cut production from the Rumaila oilfield by around 140,000 bpd of its total production, which stands at between 1.4 million bpd to 1.45 million bpd. Exxon Mobile Corp has agreed also to cut an additional 70,000 bpd from the West Qurna 1 field to reduce production to around 350,000 bpd in June, the two Iraqi managers said. Production was cut by around 50,000 bpd in May and stood at around 420,000 bpd. Lukoil, BP and Exxon were not immediately available for comment. Iraq has told OPEC it would start an urgent plan to cut its oil production gradually to fully comply with its quota, after the group demanded that Baghdad and other laggards adhere to a pact on output curbs. “We will keep lowering production gradually to comply with OPEC quota,” said one Iraqi oil official. OPEC, Russia and allies agreed on June 6 to extend record oil production cuts until the end of July, prolonging a deal that has helped crude prices to double in the past two months by withdrawing almost 10 per cent of global supplies from the market. The group, known as OPEC+, also asked countries such as Nigeria and Iraq, which exceeded production quotas in May and June, to compensate with extra cuts in July to September.
India to get its maiden gas trading platform
India will on Monday get its very own natural gas trading platform that will help discover local market price for gas through transparent demand-supply matching. Oil Minister Dharmendra Pradhan will launch the Indian Gas Exchange (IGX) to kickstart natural gas trading, official sources said. IGX is India’s first automated national level trading platform to promote and sustain an efficient and robust gas market and foster gas trading in the country. The platform will feature multiple buyers and sellers trading in spot and forward contracts at designated physical hubs. IGX is a neutral and transparent market-place where both buyers and sellers will trade gas as the underlying commodity. The contracts traded at IGX are for compulsory specific physical delivery and settlement of the trade is subject to the condition that such contracts are non-transferable in nature and without any netting-off thereby. Sources said IGX will enable efficient and competitive discovery of gas prices and one of its most important objectives is also to maintain market integrity. Initially, trading is proposed to commence at the physical hubs at Hazira and Dahej in Gujarat and Oduru/Kakinada in Andhra Pradesh. Going forward, new hubs would be introduced, they said. For price discovery, the exchange will invite time scheduled bids from buyers and sellers, on which a price discovery mechanism will be run to settle delivery of gas. It will offer six market products — day-ahead, daily, weekly, weekdays, fortnightly and monthly. Some of these contracts will be available on Day 1 of trading, that is June 15, while some will be introduced later, they said. IGX has successfully held three mock trading sessions (March 20, April 9 and May 21) with significant participation from the industry. IGX technology platform provides rapid, accurate, secure and efficient trade, catering to the requirements of pre-and post-trade functionalities with the capability to handle complex orders. The bidding is done in an anonymous manner, where the buyer and seller do not know their counterpart. The price discovery will be either through double-sided closed auction with uniform price mechanism or through continuous trade mechanisms. In a double-sided closed auction, the participants input their bids to buy/sell at a specific price point. The market will determine one single uniform market clearing price. In continuous trade, the price will be matched based on bids and offers in continuous sessions. Sources said the bids will be monitored securely to ensure the highest integrity and efficacy of the marketplace. The platform also provides counterpart guarantee in terms of fund obligation to its members.
Mexico’s oil hedge to be pricier, but government likely doing it anyway
Mexico will have to pay more for less coverage under its giant oil revenue insurance policy for 2021, but will likely go ahead anyway to avoid further damaging its financial standing with international investors, sources said. The finance ministry’s billion-dollar oil hedge is the world’s largest. It has been a pillar of the budget for more than two decades for Mexico, which pumps about 1.7 million barrels per day of crude. The policy ensures Mexico can sell oil at a predetermined price, guaranteeing a portion of revenues crucial for the state budget – no matter what happens in the global oil market. Many countries dependent on oil revenues face massive budget shortfalls due to collapsing prices and demand during the coronavirus pandemic, yet Mexico’s insurance policy is expected to deliver a $6 billion payout this year – its largest ever. Bankers and officials on both sides of the secretive deal expect a smaller hedge this year since market volatility and lower crude prices have sharply hiked the cost of options Mexico typically uses to hedge oil sales. Those oil derivatives for 2021 are 40% more expensive than normal, several market sources said. At the same time, resources available to finance the hedge are dwindling. Despite the bumper hedge payout, lower revenues have forced Mexico’s government to plug the gap by spending more of the stabilization fund that also pays for the hedge. “There are lots of challenges, and everything points to it being more difficult,” said a Mexican source who worked on last year’s hedge. Finance ministry sources said internal discussions center on either hedging a smaller part of the country’s exports in 2021; buying cheaper options; or using a less costly strategy. Negotiations with banks on the hedge have yet to start, ministry and Wall Street sources said. The hedge is designed to protect about one-fifth of Mexico’s budget revenues, current and former Mexican finance and energy ministry officials said. The finance ministry, energy ministry and the president’s office did not reply to requests for comment. The government has grown more secretive about its strategy so other traders cannot easily profit from speculating on its giant options purchases with bets that can in turn make the hedge more expensive. Finance Minister Arturo Herrera is a strong proponent of the hedge and likely to keep it, said several Mexican sources familiar with his thinking. JPMorgan Chase & Co , Citigroup Inc , Goldman Sachs Group Inc , BNP Paribas SA and Shell are among those the finance ministry tapped to execute the hedge last year, sources familiar with the deal said. Investors and credit rating agencies consider the hedge a measure of fiscal prudence that offsets oil market volatility. Scrapping it might prompt some bond investors to demand higher yields. If Mexico’s borrowing costs rise, it could also mean even higher financing costs for ailing state oil company Petroleos Mexicanos [PEMX.UL], already a junk-rated company. Mexico is still rated investment grade, but all three major credit rating agencies – Fitch Ratings, Moody’s Investors Service and S&P Global Ratings – downgraded the country this year, and could lower its rating in coming months. “The hedge insures federal revenues,” said Luis Gonzali, a portfolio manager at Franklin Templeton, one of the world’s top investors in emerging markets. “Not having this insurance would put pressure on the country’s finances, investor confidence and eventually the credit rating.” Mexico estimates its main Maya crude export will average $30 per barrel in the coming year. Brent crude is expected to average about $46 in 2021, according to Reuters polling. As of Friday, Brent was trading at $38 a barrel, while Maya bound for the U.S. Gulf Coast traded at $33.37 on Thursday, according to S&P Global Platts. MORE EXPENSIVE Mexico typically hedges in a straightforward way: it purchases put options, which give the holder the right but not the obligation to sell at a predetermined price. The options have been trading at higher prices due to market volatility, the main driver of those prices. With coronavirus lockdowns slamming demand in April, oil prices plunged to multi-year lows. U.S. crude actually fell into negative territory for the first time in history. Mexico may try to save cash by buying put options at a lower level – known as a strike price. That would cost less, but such a hedge would only pay out if oil was at lower level. In the past, when oil prices were lower, Mexico has hedged fewer barrels to offset the higher cost, said one banker who has negotiated with Mexican officials in the past. “Without a doubt, the hedge for the coming year, if it’s done, will carry much higher premiums,” a source in the finance ministry said. “In this market, it’ll be complicated for the Mexican government.”
IndianOil refineries throughput crosses 80% commensurate with rising products demand
The crude oil throughput of IndianOil refineries crossed 80% as on date, with consumption of all petroleum products put together almost doubling in May ’20 as compared to April ’20 levels. The Corporation has been able to gradually raise the throughput of its refineries from about 55% of rated capacity in the beginning of May ’20 to about 78% by the month end, and 81.5% as on date. Capacity utilisation of the refineries had dropped to almost 39% in the beginning of Apr.’20. With Guwahati Refinery coming online after a prolonged maintenance shutdown in preparation for production of BS-VI fuels, IndianOil refineries are geared to operate at about 85% of their capacities this month, commensurate with rising products demand in the market. While the consumption of all petroleum products put together almost doubled in May ’20 compared to April ’20 levels, growth of petrol was higher at about 70% and diesel at 59%. Compared to May ’19, or the early months of the current year prior to the lockdown, the growth percentage has still to catch up by 24% to 26% for all products. In the case of LPG, with the Corporation rolling out about 25 lakh cylinder refills a day, the average backlog is less than a day. Along with growing consumption of white oils petrol and diesel (except ATF, which is still lagging at about 24% of normal level), the demand for black oils and specialty products like fuel oil, bitumen, petcoke and sulphur has also shown marked improvement, facilitating increase of refineries throughput. With the gradual lifting in lockdown restrictions, several downstream industries in the petrochemicals sector have resumed operations from late April ’20 and product evacuation from refinery stocks has increased gradually. With increase in demand, IndianOil’s Naphtha Cracker at Panipat is now operating at full capacity, along with downstream units for production of polypropylene, HDPE, LLDPE and MEG, together with PX/PTA production plants, also at Panipat. The polypropylene plant at Paradip Refinery and the LAB unit at Koyali Refinery have also gone online. IndianOil is on track to spend the approved capital expenditure of Rs. 261.43 billion for 2020-21. Work on almost 200 major projects (costing above Rs. 10 million) has restarted on ground. Major projects on which work has resumed include the Paradip-Hyderabad products pipeline; augmentation of Paradip-Haldia-Durgapur LPG pipeline and its extension to Patna and Muzaffarpur; and the Ennore-Tiruvallur-Bangalore-Pondicherry-Nagapattinam-Madurai-Tuticorin R-LNG pipeline. Also despite the lockdown, pipeline laying and other activities under city gas distribution resumed in 11 Geographical Areas. Work has also restarted on other projects like grassroots LPG bottling plants, upcountry terminals/depots and additional facilities/tankage at existing bulk storage locations.
HPCL delays $3 billion Vizag refinery expansion: Source
Hindustan Petroleum Corp Ltd has pushed back the completion of a billion-dollar expansion at its southeastern Vizag refinery to at least October-November due to a labour shortage and the onset of monsoon, a company source said. The state-run refiner had initially planned to complete the 209.28 billion rupee ($2.77 billion) expansion, which will nearly double the capacity of its coastal plant to 300,000 barrels per day (bpd), in July. Many workers have returned to their hometowns due to the nationwide lockdowns to curb the spread of coronavirus, while the onset of monsoon has made it difficult to carry out construction work, the source told Reuters. “Because of the lockdown we could not carry out the planned pre-monsoon work. We lost that window,” the source said, asking not to be named due to sensitivity of the issue. “We have not yet done our assessment but it seems completion of the project would be delayed to at least October-November.” HPCL did not respond to a Reuters’ request seeking comments. India has significantly eased the lockdown but a return to pre-COVID activity will take some time as inter-state transportation remain restricted and the virus cases are still rising. Construction and mechanical work is usually held off during monsoon as a safety precaution, the source said. The four-month Indian monsoon season starts from June. The expansion includes the replacement of a smaller crude distillation unit with a new 180,000 bpd at the refinery in Andhra Pradesh. HPCL is also building facilities including a 0.352 million tonnes per year (tpy) naphtha isomerisation unit, a 3.053 million tpy hydrocracker and a power plant that can run on either naphtha or natural gas. The project also involves the revamp of units including a 30% increase in capacity of naphtha hydrotreater to 1.5 million tpy and diesel hydrotreater to 2.86 million tpy, while the capacity of continuous catalytic cracker will be raised to 1.039 million tpy.