CNG, piped natural gas prices to increase from July 1 in Mumbai
The Mahanagar Gas Limited will hike prices of Compressed Natural Gas (CNG) and Piped Natural Gas (PNG) in Mumbai region from Monday. The price of CNG has been hiked by 42 paise per kg while piped cooking gas rates will go up by 26 paise/unit. The revised price of CNG in Mumbai will be Rs 51.99 per kg while the price of PNG will be Rs 31.79/scm (slab 1) and Rs. 37.39/scm (slab 2) respectively. The existing of price of CNG (till June 30) was Rs 51.57 while the rates for piped gaswere Rs 31.53 (slab 1) and Rs 37.13 (slab 2). MGL officials said they were “constrained to partially pass-through its increased gas costs resulting into increase in the basic price of CNG in Mumbai.” “The CNG price hike is in view of increase in MGL’s gas costs due to increase in regulated tariff of Trombay RCF pipeline network from Rs 1.04 / MMBTU to Rs 25.15 / MMBTU and that of Uran-Thal-Usar pipeline network from Rs 3.49 / MMBTU to Rs 6.03 /MMBTU,” an official stated. This increase would have a marginal impact of one paise per km and two paise per km on the per km running costs of autos and taxis respectively, said MGL spokesperson Neera Asthana. “Even after the above revision, CNG still continues to be a very attractive proposition and offers savings of about 51% and 22% as compared to petrol and diesel respectively at current price levels in Mumbai. Also, piped gas continues to deliver unmatched convenience, safety, reliability and environmental friendliness to consumers,” she added.
LPG transport operators begin indefinite strike across south India
The Southern Region Bulk LPG Transport Operators Association (SRBLPGTOA) began their indefinite strike from Monday. The association made the announcement on June 22, based on the decision taken at their general body meeting that was held in Namakkal town on June 20. Talking about the strike, president of SRBLPGTOA, M Ponnambalam said that, three oil companies including Indian Oil, Bharat Petroleum and Hindustan Petroleum are not providing job orders to many bullet tank owners for the past nine months. “Many of our association members raised opposition against the oil companies during general body meeting,” he said. He also said that, the general body has authorized the association to announce for indefinite strike within seven days from the general body meeting. “Based on the decision, the SRGLPGTOA commenced the strike,” he said. The Namakkal based SRBLPGTOA comprising LPG bullet operators from Tamil Nadu, Karnataka, Telangana, Andhra Pradesh, Kerala and Puducherry. The association members operate more than 5,500 bullet tankers across South India. They transport LPG from the refineries of those three oil companies to bottling plants. The oil companies will make an agreement with the bullet tank operators. The companies will renew the agreement once in five years. Such an agreement was ended with the bullet tank operators on October 31, 2018. When the oil companies came forward to renew the agreement, the SRBLPGTOA demanded to give job orders for all the 5,500 bullet tankers. The oil companies also had agreed to their demand. “But, they have not fulfilled their promises,” Ponnambalam said, adding that, they have given the orders only for 4,800 tankers and they did not considered the rest. Meanwhile, officials from the oil companies said that, their LPG agencies have sufficient stocks for the next 15 days. “There will not be any demand for LPG cylinders and we will settle the issue as early as possible,” said an official.
India lowers tariff for KG Basin pipeline network by 64 per cent
India has fixed about 64% lower tariff for the Krishna Godavari basin gas pipeline network at 16.14 rupees per million British thermal units (mmbtu), according to an order by the Petroleum and Natural Gas Regulatory Board (PNGRB). The previous tariff was 45.32 rupees and India’s biggest pipeline operator, GAIL, had proposed a revision to 47.20 rupees/mmbtu for the pipeline network that begins from Krishna Godavari basin in the east coast, the order issued late on Friday said. However, the Board has fixed tariffs for Jagdishpur-Haldia-Bokaro-Dhamra pipeline and Hazira-Vijaipur-Jagdishpur pipeline in line with GAIL’s proposal. The new tariffs are applicable from Monday.
Petronas-Saudi JV to restart crude unit at Malaysia refinery in July
Pengerang Refining and Petrochemical (PrefChem), a joint venture between Petronas and Saudi Aramco, is expected to restart a crude distillation unit at its oil refinery in Malaysia in July, three sources familiar with the matter said. The Pengerang Refining development, part of Petronas’ $27 billion Pengerang Integrated Complex, consists of a 300,000 barrels-per-day (bpd) oil refinery and a petrochemical complex with a production capacity of 7.7 million tonnes per year in the southern Malaysian state of Johor. The refinery stopped trial runs in April for safety checks after a fire occurred at the atmospheric residue desulphurisation (ARDS) unit. Contractors are still assessing the extent of damage at the fire-hit ARDS unit and repairs could take between three months and two years, one of the sources said, citing initial estimates. The CDU will be processing low-sulphur crude in the absence of the desulphurisation unit, the sources said. The ARDS unit was set up to remove sulphur from fuel oil which is then passed through a residue fluid catalytic cracker (RFCC) – a secondary refining unit that upgrades residual fuels into higher quality products such as gasoline. The ARDS unit is located close to the refinery’s CDUs. The refinery is expected to produce fuel in August-September although output may not meet commercial specifications yet. A 1.2-million-tonnes-per-year naphtha cracker at the site started trial runs this month. By restarting the CDU in July, the refinery is working towards producing fuel that meets commercial specification by the end of the year, the sources said. The project, originally known as RAPID, or Refinery and Petrochemical Integrated Development, was to resume operations by the end of this year, Petronas said in a statement last month. Petronas and PrefChem have not responded to emailed requests for comment.
OPINION: Unlike crude oil, LNG takes Gulf tensions in its stride
The subdued reaction of global liquefied natural gas (LNG) prices to the latest tensions around the Persian Gulf not only stands in contrast to the excitable crude oil market, but perhaps offers a more reasonable assessment of the risks. While spot prices for LNG did move somewhat higher in the wake of the attacks on two tankers in the nearby Gulf of Oman on June 13, the reaction wasn’t as pronounced as the spike in global oil benchmark Brent. In some ways this could be viewed as surprising as LNG is actually more exposed to the threat of closure of the Strait of Hormuz, the narrow sea lane that links the Persian and Oman gulfs. About 26% of all LNG transited the Strait of Hormuz in 2018, the vast majority from Qatar, which is now the world’s second-largest producer of the super-chilled fuel behind Australia. For crude oil, the figure is less than 20% of global demand, with about 17.4 million barrels per day (bpd) going through the Strait out of world consumption of around 100 million bpd. The attacks on two oil product tankers were blamed on Iran by the United States and some of its Gulf allies, the subsequent rise in tensions has already resulted in Iran shooting down a U.S. drone and U.S. President Donald Trump cancelling a retaliatory strike minutes before it was due to be carried out. The June 13 attacks sent crude prices up, with Brent rising 3.6% on the day, and extending the gains since to end at $66.49 a barrel on Wednesday, up 11% from the day before the incidents. In contrast LNG has been far more subdued, with Singapore Exchange contracts rising from $4.10 per million British thermal units (mmBtu) the day before the attacks to $4.37 the day after, a gain of 6.6%. But since that spike, the price has slipped back to $4.34 per mmBtu. The weekly assessment for LNG delivered to China lifted from $4.25 per mmBtu the week prior to the attacks to $4.60 in the week to June 21, a rise of 8.2%. Of course, the tensions in the Middle East aren’t the only factors influencing crude and LNG prices, with trade tensions between the United States and China, and a slowing global growth outlook also playing a role. However, it’s worth noting that spot LNG prices usually start to rise around this time as utilities in North Asia restock ahead of peak summer power demand. LITTLE THREAT? Another possible explanation for LNG’s more relaxed reaction is that Qatar sells very little of its output on the spot market, meaning that traders saw little threat to immediate supplies. However, if the LNG market was genuinely worried about the Strait being blocked, the spot price would surely be considerably higher to reflect the risk premium associated with the potential loss of a quarter of global supplies. The paper-traded market for LNG is also considerably smaller than that for crude oil, and is used predominantly by professionals already deeply engaged in LNG. This means that it is less subject to the influence of speculators and “hot money” investors who chase news headlines for short-term gains. While LNG traders are aware of the risks surrounding an escalation of conflict around the Strait, they are also aware that as the situation stands right now, the chances of the vital passage being blocked are small. Even the so-called tanker war of the late 1980s didn’t result in the Strait being closed, even though it was mined by Iran and there was military conflict between the U.S. and Iranian navies. An Iranian civilian airliner was also downed by a U.S. missile, killing 290 people. It would probably take a serious escalation from the current tensions before the LNG market would start to price in a realistic chance of the Strait being blocked. However, the more volatile crude market is likely to react far more quickly to developments, even if these don’t actually do much to the overall chances of the loss of shipments through the Strait.
ONGC invites partners for enhancing production from 64 marginal fields
Oil and Natural Gas Corporation (ONGC), the country’s largest producer of oil and gas has invited partners to help the company enhance production from 64 marginal fields, the company said in an official statement today. “ONGC announces Notice Inviting Offer (NIO) seeking partners for enhancement of oil and gas production from its 64 marginal nomination fields with the intention to maximize recovery from these fields by infusion of new technology,” the statement read. According to the release, the offer shall allow interested companies to participate in the International Competitive Bidding (ICB) process being announced for 17 onshore contract areas comprising of 64 oil and gas producing fields with total in-place Oil and Oil Equivalent of Gas (O+OEG) volume of about 300 Million Tonne Of Oil Equivalent (MMTOE). The contractor will be selected on revenue sharing basis, with the revenue being shared on incremental production over and above the baseline production under Business-As-Usual (BAU) scenario. Moreover, selected contractors will not be required to reimburse any expenditure already incurred by ONGC. Companies can either alone or in consortium or through a joint venture bid for one or more contract areas. Contract period for these contracts will be for a period of 15 years with an option to extend by five years. Royalty rate will be reduced by 10 per cent in case of additional production of natural gas over and above BAU scenario, according to the statement. The contract will allow complete marketing and pricing freedom to sell oil and gas on an arm’s length basis.
State oil firms’ credit profile to improve a tad in FY20
Financial profiles of state-owned oil marketing companies would improve marginally in FY20 driven by higher Ebitda and better gross refining margins (GRM), India Ratings and Research has said. The rating agency projects combined gross leverage of the three large state-run OMCs — Indian Oil Corporation, Hindustan Petroleum and Bharat Petroleum — to be between 1.9x and 2.2x during FY20 compared with 2.5x of FY19 and 2.5x in FY18. However, any higher-than-expected shareholder payout or subsidy receivable could have a negative impact on the expected credit profile, it added. Hopes of a stable government and a strong March 2019 quarter helped by record marketing margins have driven a 10-12 per cent rally in shares of IOC, BPCL and HPCL since January 1. IOCL and HPCL gained 12 per cent since the beginning of the year while BPCL rose 4 per cent as against 9 per cent Sensex return. Ind-Ra expects shareholder returns including dividends and share buybacks, which increased to ₹223 billion in FY19 to reduce in FY20.
GST Council has to decide on levy of GST on petroleum products: Pradhan
Minister of Petroleum & Natural Gas Dharmendra Pradhan on Wednesday said that any decision regarding levy of GST on petroleum products has to be decided as per recommendation of the GST Council. As per the section 9(2) of the CGST Act, inclusion of all excluded petroleum products, including petrol and diesel in GST will require recommendation of the GST Council, Pradhan in a written reply in the Rajya Sabha said. “Goods and Services Tax Council shall recommend the date on which goods and services tax shall be levied on petroleum crude, high speed diesel, motor spirit, natural gas and aviation turbine fuel. Thus while, petroleum products are constitutionally included under GST, the date on which GST shall be levied on such goods, shall be as per the decision of the GST Council,” Pradhan said. The prices of petroleum products in the country are benchmarked to international product prices. Generally, the prices of sensitive petroleum products in the country are higher/lower than other countries due to various factors, including prevailing tax regime and subsidy compensations by the respective governments, Pradhan had earlier said.
Start-up of H-Energy’s Jaigarh LNG import terminal in India delayed
Indian natural gas company H-Energy Pvt Ltd will delay the start of its liquefied natural gas (LNG) import terminal at Jaigarh to the fourth quarter of 2019, the company’s Chief Executive Officer Darshan Hiranandani said on Wednesday. H-Energy, a unit of real estate group Hiranandani, initially aimed to start full commercial operations at the new floating LNG terminal at Jaigarh, on India’s west coast, by the fourth quarter of 2018, but later pushed this back to the first quarter of this year. The terminal is a floating storage and regasification unit (FSRU) capable of handing 4 million tonnes per year of LNG. It will connect to the national gas grid at Dabhol through a 60-km (36-mile) pipeline that is expected to also be ready by the fourth quarter, according to a presentation by Hiranandani at an LNG conference in Singapore. Monsoon rains and the Indian elections have delayed the start-up of the terminal, he told reporters on the sidelines of the conference. The company is also building a 635-km pipeline connecting Jaigarh to Mangalore, which will likely be ready by 2023, he said. Work on that pipeline has also been moving slower than initially expected due to a road highway widening in the region, he said. On the east coast of India, H-Energy is developing a terminal using an offshore floating storage unit (FSU) in Andhra Pradesh. The company aims for that project to serve as an “LNG hub” for other LNG projects in the region including the Kukrahati LNG terminal in West Bengal that it is also developing. The contract for the Andhra Pradesh FSU is expected to be awarded by end of this year, he said. The Kukrahati LNG terminal will have an initial capacity of 3 million tonnes per year and will be connected through a gas pipeline to Shrirampur, near the Bangladesh border in the Nadia district of West Bengal. The pipeline will supply natural gas to power customers in West Bengal and Bangladesh, he said. Both the projects in eastern coast of India as well as the pipeline connecting to Bangladesh are expected to be ready by mid-2022.
Cut cess on production: Oil firms
Even as tensions over US-Iran conflict is keeping India’s oil & gas industry on its toes, the stakeholders are looking forward to a spate of measures from the government in the upcoming Budget. Some of the major demands the industry players are looking forward in this year’s Budget includes, rationalisation of cess, natural and gas products to be brought under GST, increase in fuel subsidy among others. According to K Ravichandran, senior vice president & group head-corporate ratings, ICRA, at the current elevated crude oil prices, the ad valorem cess of 20% limits the realisations and cash accruals of upstream companies as compared to the earlier fixed cess per MT. “Thus, a downward revision in the cess on crude oil production from the current level of 20% may help upstream companies improve their earnings in a higher crude oil price regime,” said Ravichandran. Additionally, one of the prominent demands of the industry has been the exemption from the levy of GST on exploration activity. Also, the sector has been demanding the reduction in Minimum Alternate Tax (MAT) rate for exploration and production operations, which, at about 20% of book profits, is a significant deterrent for investment. Hence, the industry insiders are of the view that it would help in government clarifying the eligibility for a tax holiday under Section 80-IB of the Act and the definition of “mineral oil” which would include natural gas retrospectively, a long-running demand of the industry. BUDGET EXPECTATIONS • Rationalisation of cess, which currently stands at an ad valorem rate of 20% • Exemption of exploration activity from the levy of GST • Reduction in MAT rate for exploration and production operations • Natural gas and other four petroleum products to be brought under GST • Reduction in customs duty on LNG import to encourage consumption in various sectors • Increase of fuel subsidy for sensitive petroleum products from Rs 336 billion for 2019-20 (BE) • Benefit of deduction under Section 35AD to be extended to the city gas distribution entities Further, the industry has been demanding that natural gas and other four petroleum products be brought under the GST to enable free flow of credit and avoid stranded taxes. However, the proposal has so far faced severe resistance from States, who are of the view that it will eat away a large part of their revenue. Commenting on the pre-budget expectations, Abhishek Bansal, chairman, ABans Group of Companies, said, “ The government has opted out of keeping petrol and diesel prices under GST ambit in this budget session, but has indicated that it may bring it soon, which has given hope to the industry.” Petroleum products like kerosene, naphtha and LPG are under GST, however crude oil, natural gas, aviation fuel, diesel and petrol have not been kept under this ambit. “If the government brings ATF under GST, then it would help the troubled and loss-making airline industry,” Bansal added. Also, the industry stakeholders claim that in order to promote the use of natural gas as fuel, liquified natural gas (LNG) imports should be exempted from the customs duty as crude attracts nil duty in comparison to LNG, which attracts 2.5% duty.