India Is Losing The Natural Gas Race To China
Coal as the primary fuel in both China and India is a reality that will not change anytime soon. But these giants have committed to using more natural gas, a cleaner fuel that is quickly becoming the world’s go-to source of energy thanks to its positive environmental attributes. Gas today is just 6-8% of China’s and India’s energy usage, compared to nearly 30% in the developed countries. India’s switch to using more gas to reduce an over reliance on coal has been much slower than China’s. Over the past decade, for instance, India’s gas demand has been rising at less than 5%, well below China’s growth of 15%. Immense India is the most energy-deprived nation on Earth. The need for all energy will be central to economic goals to lift hundreds of millions of Indians out of poverty. For example, some 300 million Indians have no electricity, with hundreds of millions more lacking adequate access. The average Indian uses just 1/20 of the electricity that the average American does. Having some 400 million kids under the age of 15, India will become the world’s most populated country before 2025. The future for gas in India is therefore very bright: PM Modi says that India has a plan to “increase the use of natural gas by 2.5 times by the end of next decade.” The main consuming sectors are electricity, city gas distribution, refineries, and petrochemicals. Cleaner gas will be critical to clearing India’s hazy skies. India has some of the worst air pollution in the world, especially particulate matter resulting from over coal use. Despite being so energy-deprived, India also has impressively strong commitments for the Paris climate accord signed in 2015 to cut CO2 emissions. With gas having 50% lower CO2 emissions than coal and 30% less than oil, more gas in India will be required. Although India wants to double gas production over the next four years, the import percentage of all domestic gas usage (today at 50%) should be expected to increase. Overall, tightly regulated gas prices have discouraged private sector interest in upstream gas production, particularly more costly offshore where huge deposits sit. For demand to significantly increase, gas must be reliable and affordable. Low cost energy solutions are especially important for poorer countries like India where residents have just 10% of the incomes that we rich, energy-fulfilled Westerners do. Building more gas pipelines and infrastructure in such an overwhelmingly coal-based economy like India’s is slow but ongoing: ” What India can learn from China: Experience of cross border gas pipeline projects.” LNG has generally been higher cost, hindering the chance of using more gas over coal. LNG though is normally linked to oil prices, so falling oil prices will help. In any event, partnerships to buy flexible and low cost U.S. LNG will be key for India. Russia and Iran also seek to supply. India better move quick, or China and others could snatch up too many of the gas buying contracts. Looking forward, India’s gas demand should rise 6-8% per year, which of course is the same rate of real GDP growth. Within a decade, if the focus can be maintained, gas could soar to being 20% of India’s total energy demand. The impact on the rapidly globalizing natural gas market will be huge: “What If India And China Used Natural Gas And Oil Like The U.S.”
Brace yourself! Oil is below $60 but petrol, diesel prices may still not fall; here’s what govt’s planning
Crude oil price fell below $60 a barrel — unexpectedly and in less than two months from $86.74. At the beginning of October, when oil prices were hovering around $85 a barrel, little did anyone, let alone the Indian government, know that oil will take a sudden u-turn. However, the government is in Catch-22 position as it announced an excise duty cut of Re 1 a litre on both petrol and diesel on October 4, which hurt its fiscal position in a poll year. With the oil prices falling drastically now, the government is now considering hiking excise duty by Re 1- Rs 2 a litre on fuel, The Indian Express reported. According to the national daily, the 30% fall in crude oil prices in the last two months has given room to the government to hike excise duty by Rs 1-2 per litre on petroleum products. “When we hiked the excise duty last month, crude oil prices were hovering above $85 a barrel and now it has come down to around $60 a barrel. The government may consider hiking the excise duty (on petroleum products) as there is a window to raise it by Rs 1-2 per litre,” The Indian Express reported quoting sources. Interestingly, while announcing the excise duty cut of Re 1 in October, Finance Minister Arun Jaitley had said that it would impact the centre’s coffer only by 0.05% and won’t impact the fiscal deficit target of 3.3% of the GDP. At the beginning of this week, the petrol price in Mumbai fell below Rs 80 a litre in a series of cuts following the crude oil price fall and the appreciation in the rupee. The excise duty currently being levied by the central government is Rs 18.48 a litre on petrol and 14.33 a litre on diesel, while VAT levied on fuel varies from state to state.
Wave of refinery shutdowns may push India into importing fuel next year
A wave of shutdowns will hit Indian state-owned refineries next year as the country prepares for cleaner fuels from April 2020, company officials said, in moves that could temporarily dent oil demand and push up imports of refined fuels. India, the world’s third-biggest oil importer and consumer, has surplus refining capacity and rarely imports gasoil and gasoline. It also means that demand for fuel produced by India’s privately owned refiners will likely climb during the period, as state refiners seek to fill the gap. State refiners – Indian Oil Corp, Bharat Petroleum , Hindustan Petroleum and Mangalore Refinery and Petrochemicals – account for about 60 percent of the country’s nearly 5 million barrels per day (bpd) capacity. The refiners will have to shut gasoil- and gasoline-making units at their plants for 15 to 45 days to churn out Euro VI-compliant fuels from January 2020 to be able to sell them from April of that year. “Next year will be challenging for us as I have to protect my crude throughput and finish the job at the refineries and get ready for Euro VI by April 2020,” said B.V. Rama Gopal, head of refineries at IOC, the country’s top refiner. IOC plans a roughly month-long shutdown of gasoline- and gasoil-producing units at all of its 11 refineries, he told Reuters. Key parts of the refineries requiring a revamp include naphtha hydrotreaters, catalytic reforming units, isomerisation units, diesel sulphurisers and diesel hydrotreaters. In addition, some refiners have to revamp or set up new gasoline treaters, hydrogen production and sulphur recovery units. India has been gradually reducing sulphur emissions from vehicles since 2000, when fuel sold in the country had 500 parts per million (ppm). Motorists in Delhi, which faces major air pollution, moved in April this year to Euro-VI standards, which allow up to 10 ppm sulphur and are known locally as Bharat Stage-VI. HPCL will shut its diesel and gasoline units while upgrading the crude units at its Vizag and Mumbai refineries for 30 to 45 days, its chairman M. K. Surana said. He forecast a slight reduction in the company’s crude intake. “We will take the shutdown in one shot so we don’t have multiple disruptions,” Surana said. Surana and MRPL managing director M. Venkatesh, who intends to shut some refinery units for up to a month, said they see no need to import fuel in 2019 given that state fuel retailers can access robust production at local private refiners. Their view is challenged by analysts who estimate weaker gasoil and gasoline prices would prompt state refiners to import auto fuel instead of going to private peers who levy coastal freight charges on top of normal prices. A similar phenomenon was witnessed when India migrated to Euro IV fuel in phases to April 2017, said Sri Paravaikkarasu, head of east of Suez oil for consultants FGE in Singapore. “There is a high possibility that the lengthy shutdown period could result in a shortage of current Euro IV products in the domestic market. In such an event, Indian NOCs (national oil companies) should turn to the international market for product purchases,” she said. FGE expects India could import 40,000 bpd of gasoline and 70,000 bpd of gasoil for about one quarter in 2019 because of the shutdowns. BPCL, India’s second-biggest state refiner, has upgraded two of its refineries to superior-grade fuels, and is revamping the fire-hit hydrocracker at its Mumbai refinery so it can produce cleaner diesel, its head of refineries R. Ramachandran said. BPCL plans to shut a crude unit and some other secondary units at the Mumbai refinery for maintenance and upgrades next year for 15-20 days to produce cleaner fuels. Ramachandran said there could be a need to import “some additional cargoes but it will not be a major hiccup”. “The shutdowns will be spaced out in a manner to ensure there is enough product in the market. It will be a well-orchestrated exercise,” he said.
Venezuela rejected BP bid to buy Total’s stake in gas block, say sources
Venezuela’s oil ministry last month turned down a proposal by BP to buy Total’s stake in a promising but inactive natural gas project along the maritime border with Trinidad and Tobago, five people briefed on the matter said. BP owns the rights to the Trinidadian side of the gas play. It could have used the output from the neighboring area, the Deltana Platform’s fourth block off Venezuela’s eastern coast, to feed its growing operations on the island, said the people, who were not authorized to speak publicly. The rejection highlights how Venezuela’s socialist government, often hostile to foreign companies, remains an obstacle to investment even as oil majors eye the OPEC nation’s barely tapped gas reserves to expand their liquefied natural gas (LNG) portfolios. The ministry told the parties the area’s reserves needed to be re-estimated, an argument it has used to reject other deals. Two of the people said the deal had been waiting for approval for two years. France’s Total said in a March filing that the sale of its 49 per cent stake was “awaiting approval from the authorities.” Norway’s Equinor owns the other 51 per cent. An Equinor spokesman said it finished exploration drilling 10 years ago, but declined to comment on Total’s plans. Gas investment could help Venezuela, which has the world’s largest crude reserves, compensate for lack of capital for its oil industry, whose production continues plummeting amid a political and economic crisis. Venezuela’s mostly undeveloped gas reserves were 225 trillion cubic feet (TCF) at the end of 2017, compared with Trinidad’s 9.2 TCF, according to BP’s Statistical Review of World Energy. BP and Royal Dutch Shell own stakes in all four of Trinidad’s LNG plants, known as trains. Shell, the world’s largest liquefied gas trader after buying BG Group for $52 billion, is pushing Venezuela to let it produce gas in the offshore Dragon field, close to its Hibiscus platform off Trinidad. “There’s a real shortage of gas supply in the downstream industries in Trinidad,” said Tanvir Malik, a research analyst at the Economist Intelligence Unit. Total’s attempt to sell comes as some Western oil firms seek to shrink their Venezuelan operations as reputational risk grows amid U.S. sanctions and corruption probes linked to government officials and state-run oil company PDVSA. Shell requested approval this year to sell its only crude asset in Venezuela to French firm Maurel & Prom. Total recently downgraded its Venezuelan projects to the lowest investment category, implying it could continue looking for buyers, two company sources said. BP declined to comment. Venezuela’s oil ministry and Total did not respond to requests for comment. NOT ALONE Venezuelan law requires PDVSA to take a majority stake in crude oil joint ventures, but is more flexible with gas, allowing foreign firms to individually operate projects through exploration and production licenses. But ownership changes in gas projects are still subject to regulatory approval, and the government is required to provide an explanation for rejections, said Eugenio Hernandez-Breton, a partner at the Baker McKenzie law firm in Caracas. Under late socialist President Hugo Chavez, PDVSA tried to take control of prominent gas projects, including the Deltana and Mariscal Sucre offshore plays, both close to Trinidad with total estimated reserves of about 22 TCF. Neither project has yet started commercial production due to long delays stemming from lack of funds and disputes over control between PDVSA and the private companies. “It is really difficult for a foreign investor to feel comfortable with Venezuelan laws applied in practice,” Hernandez-Breton said. “We don’t have the financial resources or technical expertise for developing natural gas projects, whereas Trinidad has the expertise and the backing of foreign investors.” While once an afterthought to crude oil, Big Oil is focusing increasingly on natural gas as global demand for less carbon-intensive fuels rises and LNG facilitates international gas trading. Both Shell and BP are ramping up gas operations in Trinidad, one of the world’s top 10 gas exporters. Efforts are under way to reverse the island’s 18 per cent decline in gas output in the past decade. A BP gas platform built by U.S. engineering firm McDermott International in Mexico recently set sail to Trinidad, a McDermott executive told Reuters. PDVSA and Trinidad’s state gas company signed an agreement in August to allow exports from Dragon into Trinidad, without specifying how to finance the construction of a $1 billion pipeline needed to transport the gas.
Italy’s SNAM signs deal with Volkswagen for gas-powered cars
Italian gas group Snam has a deal with Seat, a unit of German car maker Volkswagen , to boost the use of natural gas to power cars, the two companies said on Monday. Snam and Seat will explore ways to develop fuel station networks and create new products. “For SEAT, one out of every five vehicles sold in Italy uses compressed natural gas (CNG),” Seat President Luca de Meo said, adding that the deal would “further enhance the development of CNG in Italy and export this success case to other countries.” Italy has become the leading market for CNG technology, accounting for 55 percent of all vehicles sold in Europe this year powered by the fuel.
Kochi to get more CNG filling stations
With more motorists willing to the adopt vehicles running on compressed natural gas (CNG), public sector oil retailers are planning to set up more CNG filling stations in the city. Officials of the Indian Oil Corporation Ltd (IOCL) and Bharat Petroleum Corporation Ltd (BPCL) said they would commission about 15 CNG bunks in and around the city in the current financial year. A senior official with IOCL said the retailer has identified around 10 locations in the city for setting up CNG stations. “We are planning to install CNG pumps at the existing IOC bunks, mostly along the national highway and the seaport-airport road. The tentative locations include Aluva, Cheranelloor, Kakkanad, Irumpanam, Karingachira etc. We are also waiting for NOC clearance from the district collector and hope to complete the project before March 31,” he said. The BPCL will also open five CNG filling facilities at its fuel stations at Edappally, Vyttila Mobility Hub, Aluva, Thiruvankulam and Kakkanad. “We have applied for clearance from the petroleum and explosive safety organization, Nagpur. The licence to be issued by the district collector is also pending. We hope to commission the stations within three months,” said a BPCL official. The retailers are in talks with Indian Oil-Adani Gas Private Ltd (IOAGPL), which oversees city gas project. The setting up of new filling stations will depend on the gas project by IOAGPL as the natural gas is supplied through their pipelines. Therefore, all the CNG bunks will be in those areas where the gas pipelines are passing through. TOI had earlier reported that the lack of enough CNG bunks has been hindering the people from embracing CNG vehicles. In the light of frequent hikes in fuel prices, vehicle users, especially autorickshaw drivers, have been raising demands for more CNG pumps for its cheap rates and higher mileage compared to fossil fuels. The decision to set up more bunks will give a boost to the shift to CNG vehicles which is less polluting. As of now, there are only four CNG bunks in Ernakulam, which were commissioned in March this year, and are the first of its kind in the state.
London-based Foresight to invest $500 million in India in oil & gas, LNG projects
London-headquartered shipping-to-retail conglomerate, Foresight Group International, today announced it would invest $500 million in India over the next five years in projects across the offshore oil and gas drilling, shipping, ports, and liquefied natural gas (LNG) space. The $1.85-billion group has finalised expansion plan for its shipping division and acquired a Very large Crude Carrier (VLCC) this year, which is currently chartered with oil companies, and has decided to add five more VLCCs in 2019 focused on India’s demand of crude import. Apart from shipping, the company has decided to invest $250 million for development of LNG infrastructure and ports in India under the government’s Sagarmala project that covers the 7,500 kilometre coastline for coastal shipping. This will reduce congestion, pressure on roads of India and would also reduce carbon footprints, the company said. As a first step, the group has strengthened its India office located in Mumbai. “Having this investment done, India will contribute to up to 44 per cent of our global operations and we are bullish to see an increase of 55 per cent increase by 2025. And, by the time the company steps into its centenary in 2084, we are bullish to become a $50 billion International company,” Founder and Executive Chairman Ravi K Mehrotra said. The company has invested $600 million in the past three years in offshore drilling to acquire three new cyber offshore rigs. Two of these are currently working in ONGC and the third rig is getting delivered in January 2019. It will be deployed with Abu Dhabi National Oil Company beginning March 2019. The diversified group has set up an operations base in Dubai, UAE and has present in Europe, UK, China, India, Cyprus and Middle East.
Why the global crude oil crash isn’t showing on your petrol bill
Indian consumers do not seem to be getting the full benefit of the oil crash. Domestic rates of diesel and petrol have fallen 7-11% since early October, even as international fuel prices, which determine retail prices in India, are down by a quarter. Crude oil prices have fallen 32% from the peak of $86.70 a barrel on October 3 to below $60 last week, with global oversupply following Washington’s decision to exempt big buyers of Iranian oil from sanctions and increased production by the US, Russia and Saudi Arabia amid dwindling demand prospects. The Singapore benchmarks for petrol and diesel have fallen 26% and 25%, respectively, in this period. Oil companies determine the so called gate prices — at which a refiner sells to fuel retailers — by factoring in international rates of a fuels for the trailing fortnight, the prevailing exchange rate plus freight, insurance and some other charges. To this are added central and state taxes, as well as dealers’ commission, to make the final retail price, which is published daily. A senior Indian Oil CorpNSE -0.94 % executive said the price fall has globally contracted margins for fuel, mainly petrol, which is now selling for as low as the price of dirty fuel oil, which often sells cheaper than crude oil. But current retail rates in the domestic market do not seem to reflect this, sparking speculation that Indian refiners may be expanding margins at the cost of retail consumers by selling fuel to dealers at a price much higher than what the domestic price formula should throw up. A partial explanation for the slower decline in domestic prices is that Indian companies take the trailing 15-day average of international rates to determine their prices, and so the sharp decline of recent days in the international market will fully reflect only after a few days. There has been a 10% decline in the price at which oil companies sold petrol to pump dealers between October 8 and November 19 (see chart). But in the same period, the benchmark price based on international fuel and exchange rates is down 22%. (State firms release price build-up for fuel rates in Delhi every Monday). Similarly, price to dealers is down just 4.5% for diesel while the benchmark rate has fallen 11.5%. This means oil companies’ gross marketing margin may have expanded by Rs 4.98 per litre for petrol and Rs 3.03 per litre for diesel between October 8 and November 19. Company executives admit that margins have expanded but caution that figures deduced from the price build-up charts released by companies may not be accurate as prices are decided by a complex formula. State companies follow an opaque pricing formula and do not share all details with the public. But in the last four years of free pricing, there have been many instances of companies not following the international price trend and moderating prices, especially during elections and if prices sharply rise or fall in the international market. Indian Oil, Bharat Petroleum and Hindustan Petroleum control more than of fuel retail sales and set rates for the industry, which also has some private players such as Reliance Industries, Nayara Energy and Shell.
Tamil Nadu: As LPG prices soar, people turn to firewood in Madurai
Sky rocketing liquefied petroleum gas (LPG) prices are leaving a big dent in the monthly budget of households in the city. The beneficiaries under the central government’s visionary Ujjwala scheme are finding it difficult to purchase the cylinders at Rs 1,000, which is beyond their affordability. LPG price is a main concern of many during the winter season as consumption is higher than summer months mainly for heating water. M Meenakshi of Anna Nagar, a daily labourer, said that her two sons earn a daily wage of Rs 500 and now the LPG cylinder has become too expensive for her family, so they have started cooking on firewood again. “We never have Rs 1,000 in hand, so it is not feasible,” she said. Many houses have started rethinking their daily cooking plans to save LPG. “I have decided to make idlis more often, and not dosas and chappatis as it saves fuel,” said Archana D, a lecturer, who sets aside Rs 750 for her gas every month. Many middle class and upper middle class families have started using firewood to heat water this winter due to the high gas prices. Thangaraj, a LPG dealer, said that the Ujjwala scheme is a failure at least as far as Madurai is concerned as the beneficiaries do not buy cylinders even once in three months. Also, under the scheme they get the subsidy only for six months, after which the subsidy is accounted towards the cost of the stove, regulator, gas tube and other accessories, though it is initially made to look like they are given the connection for free, he said. Mix-ups in the bank accounts and Adhaar linking are also affecting these people. “Beneficiaries also have to cough up some money to be identified under the scheme,” he added. Madurai area LPG distributors association’s president, M Suresh Kumar said that they have noticed that the price of the gas is affecting the common public. “Rs 1,000 is beyond the reach of many and it would be better if the government sold the subsidised LPGs at the discounted price to the consumer as there were lot of problems in people getting their subsidy in the bank accounts,” he said. He said that some of the customers, who had opened a bank account to obtain the subsidy, did not receive it in their account and hence closed it. Then opening a new account and getting the pending subsidy took time, he added. “Many of them still sell the subsidized gas to the city dwellers and still use firewood due to the high price,” he said. Shanmugam, another dealer said that the banks offer zero-balance account status to the customers, who opened accounts only for a period of six months, after which they are fined for not maintaining a balance and they find money from their subsidy amount deducted.
Iran says China’s CNPC replacing France’s Total in gas project
China’s state-owned CNPC has replaced France’s Total in Iran’s multibillion-dollar South Pars gas project, Iranian Oil Minister Bijan Zanganeh said, according to the semi-official news agency ICANA on Sunday. “China’s CNPC has officially replaced Total in phase 11 of South Pars but it has not started work practically. Talks need to be held with CNPC … about when it will start operations,” Zanganeh told ICANA, without giving further details. Total, which had a 50.1 percent stake in the project, and CNPC could not immediately be reached for comment. The French company said in August it had told Iranian authorities it would withdraw from the South Pars gas project after it failed to obtain a waiver from U.S. sanctions against Iran.. In May, industry sources said CNPC was ready to take over Total’s stake in the project. The offshore field, which Iran calls South Pars and Qatar calls North Field, holds the world’s largest natural gas reserves ever found in one place. CNPC already holds a 30 percent stake in the giant field, while National Iranian Oil Company subsidiary PetroPars holds the remaining 19.9 percent.