Top Indian refiner IOC to raise Barauni processing capacity by 50%
Indian Oil Corp, the country’s top refiner, will invest 137.79 billion rupees ($1.94 billion) to expand the capacity of its Barauni refinery in eastern Bihar state by 50% to 180,000 barrels per day by April 2023, the company said on Friday. The state-run company is raising its refining capacity to meet growing demand for petroleum products in the country. India has emerged as a bright spot for refined fuel demand. Refined fuel consumption – a proxy for oil demand – in the December quarter rose 2.6% from a year earlier. India’s oil demand growth is set to overtake China by mid-2020s, priming the country for more refinery investment but making it more vulnerable to supply disruption in the Middle East, the International Energy Agency (IEA) said earlier this month. Indian Oil Corp reported a threefold rise in third-quarter profit on Thursday, mainly due to inventory gains.
Govt outlays infrastructure investments of Rs 102 lakh crore in FY 2020-25
India needs to invest more than 1.4 trillion dollars (Rs 100 lakh) crore in infrastructure to achieve the goal of becoming a five trillion dollar economy by 2024-25, according to the Economic Survey 2019-20 tabled in Parliament on Friday. The survey emphasised that investment in infrastructure is necessary for growth. Power shortages, inadequate transport and poor connectivity affect overall growth performance. Since the provision of adequate infrastructure is essential for inclusive growth, India recently launched the National Infrastructure Pipeline (NIP) for 2020-2025. “The NIP is expected to enable well-prepared infrastructure projects that will create jobs, improve ease of living and provide equitable access for infrastructure for all thereby making growth more inclusive,” said the survey tabled by Finance Minister Nirmala Sitharaman. As per the NIP, the Centre and state governments are expected to have an equal share of funding of the projects ((39 per cent each) followed by the private sector (22 per cent). Projects worth Rs 42.7 lakh crore (42 per cent) are under implementation. Financing of the NIP will be a challenge but the survey hoped that a bouquet of well-prepared project will attract investments from the Centre, state governments, urban local government, banks, financial institutions, private equity funds and private investors. The survey gave an overview of sectoral developments relating to railways, road transport, civil aviation, shipping, telecom, petroleum and natural gas, power, mining, housing and urban infrastructure. Total investment in the roads and highways sector has gone up more than three times in five year period of 2014-15 to 2018-19. Indian Railways carried 120 crore tonnes of freight and 840 crore passengers, making it the world’s largest passenger carrier and fourth largest freight carrier. India has 136 commercially-managed airports by the Airport Authority of India and six under public private partnerships for operation, maintenance and development of airports. To ease the strain on existing airport capacities, 100 more airports are to be made operational by 2023-24. The survey said about 95 per cent of India’s trade by volume and 68 per cent in terms of value is transported by sea. The Ministry of Shipping is striving to improve operational efficiencies through mechanisation, digitisation and process simplification. In telecom, the government is implementing the Bharat Net programme in a phased manner for providing broadband connectivity to all the 2.5 lakh gram panchayats in the country. Major reforms have been undertaken by the Ministry of Petroleum and Natural Gas in exploration and licensing policy to enhance exploration activities, attract domestic and foreign investment and accelerate domestic production of oil and gas from existing fields. There has been a surge of reserves of crude oil in 2019. However, there is a need to augment refining capacity to meet the growing demand for petroleum fuels and petrochemicals. Constant efforts by the government to foster investments in the power sector has resulted in India improving its ranking to 76th position in Energy Transition Index by the World Economic Forum. The installed capacity has increased from 3.56 lakh megawatt in March 2019 to 3.65 lakh megawatt by October 31, 2019. India produces 95 minerals which include four hydrocarbon energy minerals, five atomic minerals, ten metallic, 21 non-metallic and 55 minor minerals. There has been a notable turnaround in mineral production because of policy reforms and production of major minerals. The construction sector accounts for 8.24 per cent of GDP which includes housing and employs about 12 per cent of the workforce. The Pradhan Mantri Awaas Yojana Urban (PMAY-U) was launched in June 2015. The survey said it is one of the largest housing schemes of the world covering entire urban India and is being implemented through four verticals. Besides, since the launch of the Smart City Mission in 100 cities, about 5,151 projects worth more than Rs 2 lakh crore are at various stages of implementation. A total of 1,290 projects worth Rs 22,569 crore have been completed and are operational.
Govt outlays infrastructure investments of Rs 102 lakh crore in FY 2020-25
India needs to invest more than 1.4 trillion dollars (Rs 100 lakh) crore in infrastructure to achieve the goal of becoming a five trillion dollar economy by 2024-25, according to the Economic Survey 2019-20 tabled in Parliament on Friday. The survey emphasised that investment in infrastructure is necessary for growth. Power shortages, inadequate transport and poor connectivity affect overall growth performance. Since the provision of adequate infrastructure is essential for inclusive growth, India recently launched the National Infrastructure Pipeline (NIP) for 2020-2025. “The NIP is expected to enable well-prepared infrastructure projects that will create jobs, improve ease of living and provide equitable access for infrastructure for all thereby making growth more inclusive,” said the survey tabled by Finance Minister Nirmala Sitharaman. As per the NIP, the Centre and state governments are expected to have an equal share of funding of the projects ((39 per cent each) followed by the private sector (22 per cent). Projects worth Rs 42.7 lakh crore (42 per cent) are under implementation. Financing of the NIP will be a challenge but the survey hoped that a bouquet of well-prepared project will attract investments from the Centre, state governments, urban local government, banks, financial institutions, private equity funds and private investors. The survey gave an overview of sectoral developments relating to railways, road transport, civil aviation, shipping, telecom, petroleum and natural gas, power, mining, housing and urban infrastructure. Total investment in the roads and highways sector has gone up more than three times in five year period of 2014-15 to 2018-19. Indian Railways carried 120 crore tonnes of freight and 840 crore passengers, making it the world’s largest passenger carrier and fourth largest freight carrier. India has 136 commercially-managed airports by the Airport Authority of India and six under public private partnerships for operation, maintenance and development of airports. To ease the strain on existing airport capacities, 100 more airports are to be made operational by 2023-24. The survey said about 95 per cent of India’s trade by volume and 68 per cent in terms of value is transported by sea. The Ministry of Shipping is striving to improve operational efficiencies through mechanisation, digitisation and process simplification. In telecom, the government is implementing the Bharat Net programme in a phased manner for providing broadband connectivity to all the 2.5 lakh gram panchayats in the country. Major reforms have been undertaken by the Ministry of Petroleum and Natural Gas in exploration and licensing policy to enhance exploration activities, attract domestic and foreign investment and accelerate domestic production of oil and gas from existing fields. There has been a surge of reserves of crude oil in 2019. However, there is a need to augment refining capacity to meet the growing demand for petroleum fuels and petrochemicals. Constant efforts by the government to foster investments in the power sector has resulted in India improving its ranking to 76th position in Energy Transition Index by the World Economic Forum. The installed capacity has increased from 3.56 lakh megawatt in March 2019 to 3.65 lakh megawatt by October 31, 2019. India produces 95 minerals which include four hydrocarbon energy minerals, five atomic minerals, ten metallic, 21 non-metallic and 55 minor minerals. There has been a notable turnaround in mineral production because of policy reforms and production of major minerals. The construction sector accounts for 8.24 per cent of GDP which includes housing and employs about 12 per cent of the workforce. The Pradhan Mantri Awaas Yojana Urban (PMAY-U) was launched in June 2015. The survey said it is one of the largest housing schemes of the world covering entire urban India and is being implemented through four verticals. Besides, since the launch of the Smart City Mission in 100 cities, about 5,151 projects worth more than Rs 2 lakh crore are at various stages of implementation. A total of 1,290 projects worth Rs 22,569 crore have been completed and are operational.
Transport Policy in a month; Focus will be on innovation, reforms in public transport: Gadkari
The government is planning to come out with a new transport policy, that will focus on innovation and reforms in the country’s public transport system and will also have provisions for financial support for such initiatives, Union Minister Nitin Gadkari said on Thursday. The minister also urged State Transport Corporations to switch to alternative fuels like CNG, LNG and bio-fuel like ethanol to save costs and reduce India’s dependence on crude import which amounts to a massive Rs 7 lakh crore per annum. “Within a month, a new transport policy will be declared. We will promote new innovations and research and there will be provisions for financial support to players who want to bring new technology and innovation,” Gadkari said at International Conference and Exhibition on Public Transport Innovation 2020 at Manekshaw Centre here. The Road Transport, Highways and MSME Minister said, the policy is being designed in such a fashion that it will focus on innovation and reforms and all obstacles on the way have already been removed. “All clearances will be there for those showing innovation and research,” he said and called upon State Road Transport Corporations to switch to alternative fuels for change in cost dynamics and promoting pollution free transport. “Fuel change results in cost economics change,” the minister said adding diesel buses can be converted into CNG-powered buses with a cost of barely Rs 3 lakh. “CNG can be used for school buses and city buses while LNG can be used for long-route buses. Conversion of diesel buses into LNG costs Rs 8 lakh,” he said. He further said that “corporations should use alternative fuel instead of diesel. Using LNG will result in savings to the tune of 60 per cent. The life of diesel buses is 9 years and CNG buses is 15 years. Public transport buses in India need to be developed on the pattern of European countries.” He also urged them to come out with electric buses to reduce cost saying that manufactures were working fast in this direction. “I have not been able to deliver much in public transport space. The condition of the state transport corporations is not good and is specially in a very bad shape in rural areas. … Fresh capital is needed here. Foreign agency funds among others should be sought. …There is need for correction,” the Minister said. He also called upon auto-makers to be “quality centric and not cost centric” saying this was one of the reasons people were going for imported buses and cars and added that people are ready to shell out more for quality services. The minister said that 22 green express highways are on the anvil including Rs one lakh crore Delhi-Mumbai express highway which will be completed in three years time. He said work on seven out of 22 projects have already started and added that a stretch of it will be developed as the country’s first electric highway on pilot basis. “We are acquiring land on the sides of all new express highways. About 2,000 petrol pumps and gas stations will come up on these and revenue generated will come into the kitty of National Highways Authority of India. We will have Rs 2,000 crore income from these,” he said. Asserting that there is no dearth of funds, the minister said that post FASTag system on national highways for electronic toll collection, the revenue per day has swelled to Rs 87 crore, from Rs 68 crore. Once the system is implemented totally, NHAI expects Rs 100 crore toll income per day and annual income will swell to Rs 10,000 crore, he said and added that NHAI’s annual income from various sources was estimated at Rs 40,000 crore this year which will swell to Rs 1 Lakh crore in coming years. The minister said that his Ministries in the previous tenure had seen award of work worth Rs 17 lakh crore and this tenure will see award of Rs 15 lakh crore in the highways sector.
Convert diesel buses to run on CNG & LNG; cut operational costs, Gadkari tells STCs
Union road transport minister Nitin Gadkari on Thursday suggested state transport corporations convert their buses to run on CNG in place of diesel to reduce the cost of operation and also to put an end to the malpractice of diversion of diesel to the black market. “Only change of fuel and automation of ticketing system will reduce your loss and you will be able to deliver better and efficient service without even increasing the fare. There can’t be any diversion of CNG and LNG. Diesel ki chori puri tarah se ruk jayega (You will put an end to the diversion of diesel),” the minister said while addressing a conference organised by Association of State Road Transport Undertakings and industry body, FICCI. He also said a new national transport policy will be out in the next one month and it will focus on innovation and reforms in the country’s public transport system. It will also have provisions for financial support for such initiatives by the state transport undertakings, including sourcing finance from foreign agencies subject to their willingness to undergo a major transformation. “We will financially support innovations and research in the sector. I will also ask the automobile manufacturers to bring in new technologies, like the electric mobility card used for a bus ride. We can save much both in diesel and tickets,” he said. The minister said fuel change results in cost economics change and diesel buses can be converted into CNG-powered buses with a cost of barely Rs 3 lakh. “CNG can be used for city and school buses while LNG can be used for long-route buses. Conversion of diesel buses into LNG costs Rs 8 lakh,” he said.
Indian Oil in talks with Rosneft for sourcing crude oil: Chairman Sanjiv Singh
Indian Oil Corporation (IOC), the country’s largest fuel retailer is in talks with Russian state-owned oil giant Rosneft for sourcing crude oil under a term contract, Chairman Sanjiv Singh told reporters at a press conference here. Singh, on the occasion of the company’s third quarter financial results, shared information on a host of issues including price premium for BS VI fuel, impact of IMO 2020, and the status of the mega west coast refinery. Edited Excerpts.. Q. Is the company in talks with Rosneft for sourcing crude oil? Ans. We have been exploring this possibility seriously for quite some time and we are close to finalising our deal with Russia, there are certain commercial terms which are being finalized, it should happen. We cannot disclose the quantity and other details as we are still in talks with Rosneft. Q. Could you provide an update on the mega west coast refinery? Was the MoU signed with Saudi Aramco for the west coast refinery binding for Aramco? Originally the site was indicated to be in ratnagiri district, subsequently Raigad was being looked at. An updated configuration study has been carried out keeping in mind the new location. Presently the cost estimates of shortlisted configurations are being worked out. The issue of land is yet to be firmed up, after the new state government was formed talks are again underway on land location. It was not to that extent binding, as they have committed to the investment approval stage initially, because no such final binding commitment can be made by any stakeholder until we have the finality with respect to the overall cost, configuration and land. Q. Do you plan to sell BS VI fuel at a premium? Will the hike be staggered? Ans. We are under the process of working out the implications on pricing. There will be a quality premium as far as BS VI is concerned. The premium will be applicable only when the BS VI fuel starts being dispensed at retail outlets. I do not think that the premium will be very large to require staggering. As there is no exact product like BS VI being traded internationally, prices will have to be calculated indirectly based on the closest available international product. Q. What has been the impact of IMO 2020? Have shipping costs increased since the maritime fuel specification came into force? Ans. The impact of IMO 2020 has been more on bunker fuel trade rather than overall shipping cost, as there are many other factors impacting shipping costs today. IOC was first to supply IMO 2020 bunker oil in India in October. We supplied around 0.4 MT of bunker fuel and this year we will supply around 1.2 MT. We are able to place the product in all major ports of the country. Gujarat and Haldia refineries are producing IMO 2020 bunker fuel. As IMO compliant bunker fuel is more expensive than the conventional fuel there is a marginal impact on shipping cost also. Q. What was the trend of overall petroleum demand in the third quarter? Ans. Diesel demand is still positive today if we look at the first nine months of the current fiscal as compared to last year. It has picked up especially in the last two months, not too high though. Petrol is close to 8 per cent, it had always been robust. Auto sales have also fared better during the third quarter as compared to the second quarter. We are seeing positive growth in almost all the products now. Q. Most petroleum products do not fall under the ambit of GST, what kind of costs had the company had to bear in the form of stranded taxes as input credit cannot be availed on these products? Ans. On the revenue account it is close to Rs 2,000 crore per year annually. Q. How has been the capacity utilisation of Ennore LNG terminal? Ans. We are now pricessing 2.6-2.7 MMSCMD from Ennore terminal. We have already commissioned the first phase of the pipeline from Ennore to Manali. By the end of this year we should be able to connect Bangalore on one side and Trichy, Madurai on the other side. After that the capacity utilisation of the terminal will quickly ramp-up.
First CNG private bus set to roll out in Kochi
Private bus operators in the city are gearing up to introduce buses running on Compressed Natural Gas (CNG) . They will soon bring in 400 such buses to the city. The first bus, which was converted to CNG in New Delhi has already arrived and is expected to begin plying on city roads in 10-15 days. Tripunithura-based Thiru Kochi Motor Vehicle Owners Credit Cooperative Society Ltd will fund the bus operators for launching 300 of these 400 buses while Kochi Metropolitan Transport Cooperative Society Ltd (KMTC) will operate another 100 buses. It is KMTC which has brought the first CNG bus to the city, and it expects to begin its operations a fortnight. At present, the bus is maintained as a demo vehicle. First CNG private bus set to roll out in Kochi “All relevant documents will be submitted before RTO to change the fuel from diesel to CNG in the RC book. Once the process is completed, the bus can ply on city roads. We have obtained all other approvals required for operating the bus,” said TK Raju, president of KMTC. The bus was brought to Kochi from Delhi via Indore, Pune and Bengaluru. It underwent testing and has obtained certification from International Centre for Automotive Technology (ICAT). Sabu T John, president of Thiru Kochi Motor Vehicle Owners Credit Cooperative Society, said the society worked in association with the bus operators’ forum. They fund individual bus operators to convert diesel buses to CNG buses, which will be ply in Ernakulam district. “The society will sanction loans based on applications the society receives from individual bus operators. It costs Rs 3-3.5 lakh for converting a diesel-run bus to a CNG-fuelled one. It is expected that within a month’s time we will be able to help bus operators launch 300 CNG buses,” said John. He also said the Thiru Kochi Motor Vehicle Owners Credit Cooperative Society is keen to associate with the bus operators’ forum as they are quick to get involved when there are issues related to non-payment of dues by individual bus operators. “The society hardly faces issues related to repayment and non-performing assets,” added John. However, on a question regarding the ticket fares in CNG buses, the bus operators maintained that the CNG buses will also charge the same rates charged by diesel buses.“CNG will help bus operators, who are going through a tough time, make profit. Even autorickshaws and other public transport vehicles running on CNG, charge the same rates charged by diesel vehicles,” he said.
India’s ‘blue flame revolution’ gathers pace
During the first term of Narendra Modi’s National Democratic Alliance (NDA) government, the prime minister and his petroleum and natural gas minister, Dharmendra Pradhan, spoke often of wanting to build a gas-based economy in India. Pradhan says he wants to see a “blue flame revolution transform India’s energy landscape”. With the government now in its second term—following the NDA’s landslide victory in last May’s general election—gas remains a policy priority. The aim is to boost the share of natural gas in primary energy supply from 6.2pc to 15pc by 2030. Given that primary energy supply is forecast to grow by 4.2pc/year, according to Pradhan, the scale of this ambition is breathtaking. If Pradhan’s forecast proves correct, primary energy supply by 2030 will be 50pc greater than today. So, to meet the 15pc target, gas supply would need to grow almost fourfold. To even get close to meeting this target, domestic production and gas imports would need to grow at unprecedented rates. With pipeline imports still a distant prospect and domestic production growth uncertain, LNG imports—which already account for 52pc of the nation’s gas supply—would need to rise steeply. Encouragingly, over the past five years they have been growing at 12pc/yr (see figure 1). Challenges and ramifications India faces “challenges of a magnitude and character unseen in any IEA member country”, according to a review of India’s energy policy published this month by the International Energy Agency (IEA). “The way these challenges are met will have major ramifications for other sectors, such as water, food, urban planning and transport.” Narendra Modi is no stranger to controversy—perhaps never more so than today as widespread protests persist over recent changes to citizenship laws. But there were good reasons for the landslide victory of his Bharatiya Janata Party (BJP), which makes up the rump of the NDA, in last year’s elections. Among these were notable policy successes, especially in energy. Since Modi came to power in 2014, his administration has brought electricity to hundreds of millions of people who previously lacked it. It is claimed that household electrification, while it can be intermittent, is now 99.9pc. A target of full electrification, without interruption, by 2022 now looks doable. LPG coverage is up to 90pc, bringing significant health benefits as traditional biomass cooking fuels are displaced and freeing (mainly) women from the drudgery of collecting firewood. City gas distribution (CGD) is growing rapidly, though from a small base; today only 5mn households are connected to the gas grid, compared with the 80mn using LPG. Chronic energy shortages that were constraining the nation’s economic growth have been ameliorated. According to the Ministry of Power, the nation’s energy deficit in fiscal year 2018 (ending in March 2018) was just 0.7pc, down from 4.2pc in the year to March 2014. This matters enormously because “India has set a target growth rate of 9pc/year, which would place it on a trajectory towards becoming a $5tn economy by 2024/25, making it the fastest-growing large economy in the world”, according to the IEA. Renewables by 2022 A hugely ambitious renewables investment programme is on target to reach 175GW of installed capacity by 2022. “Installed solar generating capacity is targeted to reach 100GW by 2022,” says minister Pradhan. “We are well on our way to achieving this target. India has more than doubled the renewable power installed in the country to 82GW in 2019 during the last five years.” Energy efficiency has been boosted through initiatives such as the widespread replacement of incandescent light bulbs with LEDs. “India’s achievements in the energy sector have been outstanding. The scale of these achievements is hard to overstate,” Birol, IEA And, the prospects for upstream oil and gas production growth have been rejuvenated with major reforms, such as 2016’s Hydrocarbon Exploration and Licensing Policy (Help). These reforms have created a new licence for exploration and production of all forms of hydrocarbons, under an open-acreage licensing model, with a revenue-sharing rather than a cost-sharing recovery mechanism, and marketing and pricing freedom for the oil and gas produced. “India’s achievements in the energy sector have been outstanding. The scale of these achievements is hard to overstate,” says the IEA’s executive director, Fatih Birol. But big challenges lie ahead. Climate pledge pressure Primary energy demand is forecast to double by 2040, as the economy continues to grow apace. To contain the nation’s heavy dependence on coal—which accounts for more than half of primary energy supply—and to enable it to meet the climate pledges it has made under the 2015 Paris Agreement, India is again ramping up its renewable energy ambitions. Modi announced at the United Nation’s Climate Summit, held in New York last September, that the electricity mix would eventually include 450GW of renewable capacity. For that to be possible India will need a lot more natural gas in the electricity sector to manage renewables’ intermittency and to provide synchronous generation for grid stability. India is also working hard to extend the reach of city gas to as many people as possible to improve the appalling air quality in many of its cities. The government has now held ten CGD bidding rounds, which together cover 53pc of India’s geographical area and 70pc of its population. 12pc/yr Growth rate of LNG over the last five year To provide the necessary transportation pipeline infrastructure, a huge investment programme is underway that will add another 15,000km of pipeline to the existing 16,800km long-distance network. The highest-profile such project is the Jagdishpur-Haldia & Bokaro-Dhamra Pipeline (JHDGPL) project, which is being executed by Gail at a cost of INR12,9400mn ($1.81bn), 40pc of which is being funded by a government grant. It will bring gas to five states in the east and north-east of the country: Uttar Pradesh, Bihar, Jharkhand, Odisha and West Bengal. Moreover, India is unusual in that its largest gas-consuming sector is fertiliser production; that too will continue to grow as India struggles to feed its huge population of 1.3bn and rising. For gas to meet 15pc of primary energy
Oil-linked LNG deals add to India’s discomfort as gas prices plunge
Potential deal re-negotiation with Qatar a win-win for all: Platts Analytics Qatar may ask for bigger volume commitment for any price flexibility Platts JKM at 10-year low, has dipped below the $4/MMBtu mark. Singapore — India is stepping up pressure on Qatar to re-negotiate term LNG deals and move away from oil-linked contracts as gas prices hit multi-year lows, but any flexibility in the future may come at the cost of a larger volume commitment, analysts told S&P Global Platts. Like the rest of Asia, the bulk of India’s LNG term import deals are oil-linked, but falling spot LNG prices amid bulging global supply have resulted in a pushback from Asian buyers, who are seeking to either re-negotiate those deals or diversify procurement to spot markets. “As India follows other Asian economies to consider contract re-negotiations, India’s proximity to Qatar and the potential to grow volumes could make a re-negotiated deal a win-win situation for both countries,” said Chinmayee Atre, LNG analyst at Platts Analytics. “But it’s unlikely Qatar will accept lower prices unless it’s compensated for by higher volumes.” Qatar’s energy minister Saad al-Kaabi held talks recently with India’s petroleum and steel minister Dharmendra Pradhan amid hopes that India and Qatar might look into re-negotiating annual LNG contracts. “Al-Kaabi and I explored ways to make LNG more affordable for a price sensitive market like India, especially in our long-term contact,” Pradhan said in a tweet after his meeting with Kaabi. But there has been no commitment from Qatar on whether they would look into renegotiating deals, although some analysts said that they won’t completely rule out pricing flexibility in the future. “The price is always negotiated business to business. We don’t disclose commercial terms. We don’t negotiate long-term contracts,” Kaabi told reporters in New Delhi. Mounting pressure However, some analysts said India may have an upper hand in the future as it won a price concession from Qatar in 2015 in exchange for a higher volume commitment. “This is clearly a good time for LNG buyers to request a re-negotiation in their oil-indexed long-term contracts and buyers globally will continue to make these requests,” said James Waddell, senior global gas analyst at Energy Aspects. “Spot cargoes are abundant and around half the price of gas under typical oil-indexed contracts. We see this situation continuing at least through 2021.” The benchmark for spot Asian LNG prices, JKM, has plunged to a more than 10-year low, falling below $4/MMBtu for the first time since July 2009 due to a wave of new supply from Australia and the US amid slowing demand. Meanwhile, the DES West India assessment sunk to an all-time low of $3.725/MMBtu in January 2019, the lowest since Platts started the assessment in January 2010. The drop in spot prices has spurred LNG buyers to issue a flurry of tenders since the beginning of the year. The added pressure on India to renegotiate term contracts emerges from the growing disparity in term prices against spot prices. The average spread between term Dated Brent prices with an estimated slope of 13.5% against spot LNG prices in 2019 was $2.69/MMBtu compared to minus 29 cents/MMBtu in 2018. This would mean that a buyer purchasing a standard 3.4 TBtu cargo linked to Brent prices would be paying $9.15 million more for a cargo compared to purchasing against spot LNG prices in 2019. In 2018, a buyer would save about $0.99 million purchasing on Brent-linked contracts against procuring spot LNG cargoes. The term prices are based on a lagged “3-0-1” pricing formula, which takes the average of the three months prior to the month of delivery. The average spot Brent slope — obtained by dividing the Brent crude oil price by the spot LNG price — dropped to 8.70% in 2019 from 13.70% in 2018, Platts data showed. Limited bandwidth Waddell said it’s tough for two types of firms to take oil-indexed LNG supply with a slope between 10% and 14% of Brent — those with a relatively smaller gas portfolio to absorb those volumes, and secondly those who face competition from firms who are able to source cheaper spot cargoes. “These customers of oil-indexed LNG are then forced to sell their surplus cargoes on the spot market or pay penalties for not lifting them, both creating heavy financial losses.” he added. Pradhan has repeatedly said that India is open to a review of LNG prices under its long-term contracts, reflecting market concerns about high prices. “This is a test of India’s buying power in the international market,” said Anupama Sen, Senior Research Fellow at the Oxford Institute for Energy Studies. “The Indian government indicated that it was investing on expanding gas transmission and distribution infrastructure in the country in an attempt to scale up the market for gas. As gas cannot currently compete with cheaper substitutes in the domestic market in many uses, the price will be an important factor in determining how quickly this happens,” she added. India currently has long-term LNG supply contracts with Qatar for about 8 million mt/year.
India working on new strategy to meet the target of 10 per cent cut in oil imports by 2022: Oil minister Pradhan
With the government’s aim of reducing India’s oil import dependence by 10 per cent by 2022 not picking up pace, oil minister Dharmendra Pradhan today said his ministry is developing a new strategy to achieve the target. “Crude oil will continue to play a critical role at this stage of our development in meeting our energy requirements. Our government had set a road-map on reducing India’s crude oil import dependence by 10 per cent by 2022. We are developing a new strategy and initiatives to achieve this target,” he said, speaking at the World Sustainable Development Summit 2020 organised by TERI here. India’s oil import dependence has steadily increased to 85 per cent during the April-December period of 2019-2020 as compared to 78.3 per cent in financial year 2014-2015, according to data sourced from the ministry. The increase in oil import dependence is mainly attributed to the decline in domestic oil production, which fell to 34.2 Million Tonne (MT) in 2018-2019 from 37.5 MT in 2014-2015. In the April-December period of the current financial year (2019-20), the country’s domestic crude oil production declined 6 per cent to 24.4 MT. Pradhan had in December last year said the oil ministry expects natural gas production to increase significantly from the current levels. However, domestic oil production is expected to plateau. In a bid to curb the country’s rising dependence on imported crude, the oil ministry has been trying to push for higher adoption of natural gas and alternative fuels to displace the demand of crude oil. “Our energy consumption is projected to grow 4.2 per cent per annum till 2035. India’s share of total global primary energy demand is said to double by 11 per cent by 2040 driven by strong economic development,” Pradhan said. Speaking on India’s renewable energy sector, Pradhan said it is expected to create around 3.30 lakh jobs by 2022 and more than 24 million jobs by 2030.