India’s ONGC sells 3rd Oct-loading Sokol crude cargo at steady premium
Indian oil explorer ONGC Videsh has sold a cargo of Russian Sokol crude at a premium of about $5.75 a barrel to Dubai quotes via a tender, two trade sources told Reuters on Wednesday * Oil major Chevron is believed to be the buyer of the 700,000-barrel cargo, the sources said, declining to be identified as they were not authorised to speak to media on the matter * ONGC offered the cargo to load between Oct. 25 and Oct. 31 * Earlier this month, ONGC sold its second cargo to be loaded over Oct. 12-18 at a premium of about $5.65 a barrel to Dubai quotes * Companies do not typically comment on such transactions
Reliance-BP Plc joint venture eyes opportunity in EV charging points across petrol pumps
Reliance Industries Ltd (RIL) has entered into a joint venture(JV) with UK’s petroleum giant BP plc with plans to operate a nationwide network of petrol pumps in India. The newly formed JV will have a 51% ownership stake by RIL while BP will own the rest, and the duo may roll out Electric Vehicle (EV) charging stations on their proposed petrol pumps in India. RIL which currently has over 1,400 operational pumps in India, will hand over the ownership to the JV and has plans of expanding to over 5,000 energy station in the next 5 years. Mukesh Ambani’s RIL will be looking to take advantage of the government’s efforts to push EV acceptance in the mainstream market, as the Union Budget announced earlier this year had a gamut of benefits to encourage EV adoption in India. Finance Minister Nirmala Sitharam had announced an outlay of Rs 100 billion working towards the government’s goal of achieving 15% electric vehicle adoption in five years. Apart from the additional income tax rebate of Rs 1,50,000 to EV buyers, GST rates on both EVs and their chargers/components were reduced to 5%. RIL would be leveraging its partnership with BP to foray into developing a much-needed EV infrastructure in India as the latter have the experience of operating EV charging stations in its local market (United Kingdom). BP, a traditional hydrocarbons producing company blitzed into the electric vehicle ecosystem after it acquired UK’s biggest EV charging station operator Chargemasters which runs a 7,000 strong network of EV charging stations across the UK under its brand name Polar. It provides subscription-based access to these charging stations by providing a smart card with plans costing around £8 per month. Notably, this move comes on the heels of Ambani’s announcement at RIL’s 42nd annual general meeting on August 12, that the company will sell a 20% stake in its oil and petrochemicals business to Saudi refinery giant Aramco for $15 billion ( around Rs 1000 billion). RIL’s dilution of stake in the traditional petrochemical business and entry into EV infrastructure points towards the diversification of RIL’s businesses as Ambani readies the conglomerate for the future ahead.
GAIL to invest ₹450 billion in expansion of pipelines, city gas network
State-owned gas utility GAIL India Ltd will invest over ₹450 billion over the next five years to expand the National Gas Grid and city gas distribution network, its chairman Ashutosh Karnatak said on Tuesday. “At present, your company is expanding the natural gas pipeline network by executing more than 5,700 kilometers of major projects,” Karnatak said at the company’s annual general meeting of shareholders here. GAIL currently operates 11,000-km of pipeline network and markets two-thirds of all natural gas sold in the country. “Investments worth over ₹450 billion are envisaged in coming few years, across major cross country pipeline projects along Urja Ganga Project, Koch-Kootanad-Bangalore-Mangalore, Indradhanush North East Gas Grid and other crucial pipelines connecting supply and demand centres envisaged under the National Gas Grid,” he said. Later talking to reporters, he said the investment would span over the next five years. Of this, ₹320 billion would go into pipeline laying and another ₹120 billion in city gas distribution (CGD) networks for retailing of CNG to automobiles and piped natural gas to household kitchens. Investments would also go into the expansion of petrochemical plants. GAIL is looking to put up 400 CNG stations and give out a record 1 million piped natural gas (PNG) connections to household kitchens in the next 3-5 years. It is rapidly building infrastructure to support the government push towards a gas-based economy by raising the share of natural gas in the energy basket to 15 percent by 2030 from current 6.2 per cent. The company is building a 2,655-km gas pipeline from Jagdishpur in Uttar Pradesh to West Bengal and Odisha. “Around 1,050 km of pipeline projects along Varanasi-Dobhi-Patna/Barauni, Auraiya-Phulpur and other last-mile connectivity were completed during the 2018-19 fiscal,” he said at the AGM. Jagdishpur-Haldia & Bokaro-Dhamra Natural Gas Pipeline (JHBDPL) project, also known as the ‘Pradhan Mantri Urja Ganga’ project, was inaugurated by Prime Minister Narendra Modi in July 2015. The pipeline would be extended to Guwahati by laying an additional 750-km line. At Guwahati, it would interconnect with the upcoming 1,500-km ‘Indradhanush’ pipeline network conceived to operate in northeast by the public sector oil and gas majors. “Your company has recently been authorised by (regulator) PNGRB to lay the 600 km Srikakulam-Angul natural gas pipeline through the recently-concluded bidding process. This limb is expected to be an important segment of the National Gas Grid and enhance your company’s coverage of natural gas markets along the eastern coast as well,” he said. Karnatak said the company’s board has approved the utilisation of existing assets and premises of LPG plant at Usar in Maharasthra by converting it into 500,000 tonnes polypropylene complex at an investment of around ₹88 billion. “This is first of its kind project in India,” he said, adding GAIL Board has also approved setting up of 60,000 tones polypropylene unit at the existing petrochemical facility at Pata in Uttar Pradesh. Polypropylene is used in a variety of applications, including packaging of consumer products, plastic parts of various industries including the automotive industry, special devices like living hinges, and textiles.
A $4 billion bet by Asia’s richest man is hurt by too much gas
A global glut in natural gas is threatening to undermine a $4 billion investment by Reliance Industries Ltd. aimed at boosting profits at the world’s largest oil refining complex. The project made all the sense in the world when energy magnate Mukesh Ambani’s conglomerate announced it in 2012: convert petroleum coke, or petcoke, one of the cheapest and dirtiest refinery by-products, into gas needed to power the massive Jamnagar complex on India’s west coast. Then it hit about three years of delays, and global gas markets crashed amid growing supplies of liquefied cargoes from the U.S., Australia and Russia. The 10 synthetic gasifiers that make up the project are now finally commissioned. But the imported LNG they’re meant to displace has fallen from about $15 per million British thermal units in 2012 to less than $5. And that price slump has reduced the project’s viability, according to a person with knowledge of the company’s finances. Reliance predicted in 2014 that the project would boost Jamnagar’s refining margins by as much as $2 a barrel. Now, Mumbai-based brokerage Centrum Broking Ltd. sees an uplift of about $1.30 to $1.50 a barrel by the 2021-2022 fiscal year, according to a July 21 report by analysts Probal Sen and Akshay Mane. “It’s not the most conducive environment to bring the petcoke project on stream,” said Somshankar Sinha, head of India equity research at Jefferies Financial Group Inc. “The LNG surplus has caused prices to fall much more than the usual decline in summer months,” the Mumbai-based analyst added. Jefferies said it expects a full ramp-up of Reliance’s project in the financial year 2021. Project Status The gasifiers, originally scheduled to begin operations in 2016, are now in the final stages of being stabilized and integrated with other facilities, with an expected increase to full capacity in March, according to people with knowledge of operations, who asked not to be identified as the information isn’t public. Reliance has said the units are still profitable at current LNG prices and it will cut down on imports of the fuel when they come online. “Whenever it comes, gasification will be cost-effective,” Joint Chief Financial Officer V. Srikanth said in Mumbai last month. With the plant still not fully operational, the company is still importing LNG, recently picking up several cargoes for delivery between July and October. Meanwhile, it has also been selling petcoke, according to a trader who distributes the product. Reliance spokesman Tushar Pania didn’t respond to an email seeking comment. Refining Returns A recovery in LNG prices “should aid economics for the gasifier,” according to Centrum Broking, even as LNG prices are set to stay low due to surging supplies from producers such as the U.S. shale drillers. Based on the forward curve for Asia’s dominant LNG benchmark for supplies in Japan and South Korea, the super-chilled gas is priced at between $5.50 and $8 per million Btu from 2020 to 2023. Prompt LNG prices are pegged at around $4.70 per MMBtu. Low LNG spot prices could encourage Reliance to take more spot volumes in the coming quarters, although the company won’t shift its long-term strategy away from eliminating petcoke residue, said Senthil Kumaran, a Singapore-based analyst at industry consultant FGE. The payoffs from Reliance’s investment in gasifiers, however, “won’t be as rich as it was originally thought,” he added.
India to achieve highest-ever ethanol blending in petrol this year
India’s average blending of ethanol in petrol is expected to reach a record-high of 5.8 per cent in 2019, as a result of a surplus sugar season and stronger incentives to convert excess sugar to ethanol, United States Department of Agriculture’s Foreign Agriculture Service said in a recent report. The report titled India Biofuels Annual 2019 added that biodiesel blending in diesel will remain muted at 0.14 per cent due to limited supply, insufficient feedstock, supply-chain constraints and restriction on imports. “A surplus sugar season coupled with a stronger financial incentive to convert excess sugar to ethanol should help the oil marketing companies (OMCs) procure upwards of 2.4 billion litres in 2019. As a result, India will be able to achieve its highest fuel ethanol market penetration at 5.8 per cent, compared to last year’s record of 4.1 per cent,” the USDA report said. It further added that in theory, all ethanol available in 2019, if used completely for Ethanol Blending Programme, would meet a 6.6 per cent blend rate. India’s National Biofuel Policy 2018 has stipulated an ethanol blending target of 10 per cent by 2022 and 20 per cent by 2030, while biodiesel blending target has been set at 5 per cent by 2030. According to the report, ethanol consumption for fuel and non-fuel use will outgrow production for the fifth consecutive year, more so in 2019 due to the upsurge in demand of fuel ethanol for blending with petrol. In 2019, supply to industrial and potable sectors will be limited by higher prices, which would lead to more demand being met by imports as compared to the previous year. India’s total ethanol consumption in 2019 is predicted to rise 22 percent to a record 3.8 billion litres, as compared to 3.1 billion litres consumed a year ago. Also, ethanol production is expected to reach 3 billion liters in 2019, 11 percent higher as compared to 2.7 billion liters produced in 2018. According to the report, India’s five-year average ethanol consumption growth of 14 percent, has been outperforming the country’s five-year average production growth of 8 percent. “Both have risen, but in response to different drivers: The rise in fuel prices coupled with very attractive purchase price of ethanol is driving ethanol consumption; consecutive year bumper harvests is supporting production growth,” the report read. The report highlights that the US will continue to be the largest ethanol supplier and India’s ethanol imports from the country are likely to grow upwards of 750 million liters (mostly denatured), the highest recorded in a decade. In spite of a steady increase in ethanol production, India remains a net importer of ethanol (for all end uses). Moreover, for the sixth consecutive year US will remain the single-largest ethanol supplier to India. The Directorate General of Foreign Trade (DGFT), the government body responsible for regulation and promotion of foreign trade, last month declared biofuel as a restricted commodity, the import of which would require a license from DGFT. According to the report, import license requirement for importing ethanol (for non-fuel use) is most likely to delay imports, if not stop them altogether. Moreover, a few bulk importers may use current stocks and are likely to make fresh purchase agreements to cover for the lapse or procedural delay in the coming months since local demand is strong. India has about 330 distilleries, which can produce over 4.8 billion litres of rectified spirits (alcohol) per year. Of this total, about 166 distilleries have the capacity to distil 2.6 billion litres of ethanol (denatured and undenatured) to be used in fuel, industrial chemicals, and beverages. According to oil ministry’s latest monthly report, OMCs have floated a tender for 329 crore litres of ethanol of supply year 2018-2019. OMCs have allocated 269 crore litres against the offers received. They have received close to 150 crore litre of ethanol up to 29 July 2019. The government has in the past few years has come up with various policy initiatives in order to incentivize the production of ethanol through various sources. The Cabinet Committee on Economic Affairs (CCEA) in February 2019 approved ‘Pradhan Mantri JI-VAN Yojana’ for providing financial support to integrated bioethanol projects using lignocellulosic biomass and other renewable feedstock. Under the scheme; 12 commercial scale and 10 demonstration-scale second-generation (2G) ethanol projects will be provided a viability gap funding (VGF) support in two phases, with a total financial outlay of Rs 1,969.5 crore for the period from 2018-19 to 2023-24. Moreover, CCEA in March 2019 approved funds amounting to Rs 2,790 crore towards interest subvention for extending loan amount of Rs 12,900 crore by banks to the sugar mills under ‘Scheme for extending financial assistance to sugar mills for enhancement and augmentation of ethanol production capacity’ for 268 applications, in addition to Rs 1,332 crore already approved by CCEA in June 2018. Also, the government which has started administering the price of ethanol, has set an ex-mill price of ethanol derived out of C-heavy molasses to Rs 43.70 per litre, for the ethanol supply period between 1 December 2018 to 30 November 2019, as compared to a price of Rs 40.85 per litre in the corresponding period a year ago. OMCs under the National Biofuel Policy 2018 have agreed to sign ethanol purchase agreements (EPAs) with 2G ethanol suppliers for a period of 15 years to provide a secure market to private stakeholders and support 2G ethanol initiatives.
Indonesia’s 2020 energy subsidy policy “flexible,” price freeze may stay
Indonesia’s 2020 policy on energy subsidies will be “flexible” and loosely based on global oil price moves, government officials told reporters on Tuesday, but an extension of the current policy to freeze fuel and power prices wasn’t ruled out. President Joko Widodo ordered energy prices to be kept flat in 2018 and 2019 by hiking subsidies, which the government said was aimed at boosting domestic consumption though others criticised it as a populist move before a tough re-election campaign. Widodo won the April election by a comfortable margin and is set to begin his second term in October. Some economists now expect the president to unfreeze prices to redirect subsidy spending to more productive use. In Widodo’s 2020 budget proposals, submitted to parliament on Friday, the government requested a cut in diesel subsidies to 1,000 rupiah ($0.0701) a litre, from 2,000 rupiah a litre this year. The proposals, which need parliamentary approval, allotted 137.5 trillion rupiah of subsidies for diesel, liquified petroleum gas, and electricity in 2020, down slightly from this year’s 142.6 trillion rupiah. However, Finance Minister Sri Mulyani Indrawati said the budget plan didn’t mean the government will allow energy prices to freely float in line with market moves in 2020. Next year’s proposal on subsidies was calculated assuming a certain volume of fuel consumption and factors affecting prices, like the rupiah exchange rate to the dollar and global oil prices, she told reporters after attending a parliamentary hearing. “In reality, other than volume, from the price side there could be dynamics that do not follow our assumptions,” Indrawati said. “What we did in 2018, we focused on stabilisation, that’s why our subsidy policy followed that direction. In 2020, we will see the dynamics and we will decide how we want to face them,” she added. Askolani, director-general of budgeting at the finance ministry, said the government’s position for 2020 subsidies was “flexible”. “If there is a fluctuation in crude prices, subsidies could be increased or the other way around,” he said. The government proposal assumes the rupiah exchange rate will average at 14,400 a dollar in 2020 and Indonesian crude price will average at $65 a dollar. In 2018, Southeast Asia’s largest economy spent 153.5 trillion rupiah for energy subsidies, up more than 60% from the original budget, to fund the populist measure.
Shell exits city gas business in India
Shell India, the local arm of the Netherlands-based Royal Dutch Shell Plc, on Tuesday exited the city gas business in the country after it sold its 10 percent stake in Mahanagar Gas Ltd for Rs 770 crore. According to stock exchange data, BG Asia Pacific Holdings (BGAPH), a wholly-owned subsidiary of Shell, sold 9.98 million shares in the company through block deals at Rs 780 apiece. Mahanagar Gas Ltd (MGL), where the majority stake is owned by state-owned GAIL India Ltd, sells compressed natural gas (CNG) to automobiles and piped-cooking gas to households in and around Mumbai. When MGL was listed in July 2016, Shell and GAIL held 32.5 percent stake each in the company. Last year, Shell sold 24 percent of its shareholding in two tranches — 8.5 percent in April and 14 percent in August — in the open market through bulk deals. The government of Maharashtra has 10 percent shareholding in MGL, while the remaining is with the public. Shell sold its stake in the open market after GAIL waived off its first right of refusal. According to the shareholding agreement, partners had the first right to buy in case either one of them wanted to exit. “We already have a controlling stake. What purpose would it have served to buy the additional stake at market price,” a senior GAIL official said. He said the sale price was “too high”. “It doesn’t make any sense for us to buy the stake at the market price,” he added. When Shell first started diluting its take in MGL in April last year, the company had stated that this was “part of Shell’s ongoing portfolio optimization to transform Shell into a simpler company, delivering stronger returns”. “Our investment in the Hazira LNG receiving terminal in Gujarat and the recent creation of Shell Energy India, our gas marketing and trading business, shows our commitment to grow in India and to increase gas penetration in the country,” it had said. Shell operates a 5 million tonnes a year liquefied natural gas (LNG) import terminal at Hazira in Gujarat. Founded in 1995, it sells CNG to over 6 lakh vehicles and piped natural gas to over 10 lakh households. It operates 203 CNG stations and has a pipeline network of 4,838 kilometers. MGL originally was an equal joint venture of GAIL and UK’s BG Group. Shell became a partner after it in February 2016 acquired BG worldwide. Shell exercised its option to exit the city gas distribution business as the lock-in period for minimum promoter holding after listing of a company expired last month. MGL was listed in June 2016 and the three-year lock-in period, according to the market regulator’s listing norms expired on July 1, 2019.
Indian Oil Corporation to invest Rs 25,000 cr in green energy
Indian Oil Corporation (IOC), the nation’s largest refiner and fossil fuel retailer, plans to invest Rs 25,000 crore in green energy projects, including solar and wind power plants, bio-fuels plants, and solar panels at filling stations. “Indian Oil has developed a road map and action plan to usher in clean and green energy alternatives to mitigate the risk of global warming,” the company said in its annual report. Rising environmental concerns are increasingly swaying government energy policies across the globe, prompting energy companies to invest in greener options. Over the next 5-7 years, Indian Oil aims to invest Rs 2 lakh crore to “evolve into a future-ready corporate that provides comprehensive energy solutions to diverse user groups”, company chairman Sanjiv Singh said in the annual report. “Indian Oil is aggressively leveraging its R&D expertise to move into horizon technologies like 2G & 3G (second and third generation) ethanol, biofuels, coal gasification, hydrogen-CNG, hydrogen fuel cells, battery technologies, etc.,” he said. Indian Oil plans to scale up its solar and wind power portfolio to 260 MW by 2020 from 216 MW now, which includes 167 MW of wind and 49 MW of solar. An interesting transition is visible at more than half the company’s filling stations where solar panels are helping cut dependence on grid power. Pumps have experienced increased sales after solar installation in areas that suffered from unreliable grid supply. Of the total 27,800 fuel stations, 14,173 are solar-operated with a combined installed capacity of 77 MW. In 2018-19, 5,000 stations were converted to operate on solar. The biggest push is set to come in the biofuel space. “Biofuels is a space the corporation is gearing up with great zest, emboldened by the renewed policy thrust on modern bioenergy,” the company said. It plans to invest in setting up 2G ethanol plants and a pilot facility for 3G ethanol plant, and integration of refinery processes with biofuel production. It has issued letters of intent to entrepreneurs to set up 75 plants to supply 792 tonnes per day of compressed biogas (CBG) under the government’s sustainable alternative towards affordable transportation (SATAT) scheme that targets setting up 5,000 CBG plants over the next few years.
India’s LNG imports rise 4.6% year-on-year in June
India’s liquefied natural gas (LNG) imports rose 4.6% year-on-year and 15.6% month-on-month to 91 million metric standard cubic meter per day (mmscmd) in June, according to data from the Petroleum Planning & Analysis Cell and Ministry of Petroleum and Natural Gas. Lower domestic natural gas production in June coupled with higher demand and lower prices at Henry Hub—major distribution centre–led to the rise in LNG imports. During the first quarter of the current fiscal, imports increased 6.8% year-on-year to 86 mmscmd following a five-month period–from November 2018 till March 2019– of lower imports, with average LNG imports 10.4% lower at 69.5mmscmd than the corresponding five-month period last year. “The recovery can be largely attributed to a gradual decline in Henry Hub prices to $2.4/metric million British thermal unit (mmBtu) in June 2019 from $4.1/mmBtu in November 2018,” said India Ratings and Research (Ind-Ra) in a report published today. During April-June, the average Henry Hub prices were 11.8% lower year-on-year at $2.5 per mmBtu due to global supply-demand equations. Domestic natural gas (NG) production declined 1.6% YoY to 88mmscmd during June and declined 0.5% YoY to 88 mmscmd during 1QFY20. During the month, Oil and Natural Gas Corporation (ONGC) and Oil India Limited (OIL) registered a 2.8% YoY and 1.8% YoY rise, respectively, in NG production volume, while private/joint venture fields recorded a fall of 20.0% YoY. Natural gas consumption increased 1.3% YoY in June and rose 2.8% YoY during 1QFY20. Henry Hub prices were stable at $2.4/mmBtu in July, which would likely keep LNG imports largely stable during the month. NG prices have moderated over the last few months, in line with historical trend. In June, India’s crude oil production fell 6.8% YoY. Production volumes at ONGC and OIL declined 5% YoY and 4% YoY, respectively, and that of fields under production-sharing contracts fell 11.7% YoY.
Spot LNG prices have no impact on PNG-LNG contract arbitration: Australia’s Oil Search
Australia’s Oil Search Ltd said on Tuesday that current weak spot liquefied natural gas (LNG) prices would have no impact on any arbitration over a long-term contract between Japan’s Osaka Gas and the Papua New Guinea PNG LNG project, operated by Exxon Mobil Corp. “The current market has no impact on the discussions,” said Ian Munro, Oil Search’s executive vice president for gas marketing told analysts at am earnings briefing on Tuesday. He was asked to comment on what terms Osaka Gas was seeking to change in its long-term sale and purchase agreement (SPA) with PNG LNG, in which Oil Search is a partner. Munro said each SPA with a customer is tailor-made, so it was hard to generalize how arbitration might play out. “An arbitration may or may not be able to rule on price. Any subsequent negotiations may or may not be retroactive,” Munro said. “It’s very much bespoke and it will certainly play out over the next few years.” Exxon Mobil Corp and Osaka gas earlier this month declined to comment on arbitration earlier this month.