Asian LNG Prices Could Soar Amid Tighter European Market
The price of liquefied natural gas in Asia could surge to above $20 per million British thermal units this winter as supply tightens in Europe, Goldman Sachs has predicted. “That’s the near term dynamic, given this vulnerability of Europe, the lack of spare capacity, the loss of the residual Russian volumes currently going through Ukraine, and I should say, a colder than average start of the winter,” the co-head of global commodities at the bank, Samantha Dart, said as quoted by Reuters. For the past two years, Europe has been lucky with milder than usual winters that led to lower than usual gas demand although the seasonal pick-up in demand did cause increases in LNG imports, tighter global markets, and higher prices then as well. Now, the European winter seems off to a regular start, which means low temperatures and significantly higher demand for electricity—and gas. Earlier this year, gas prices in Europe spiked following a production outage at a Norwegian platform and geopolitical jitters about the Middle East. Prices normalized soon enough but they did highlight the precarious situation that Europe has put itself in with regard to energy security. A massive buildout of wind and solar capacity, which both tend to underperform consistently during the winter months has been the chosen path. This has only boosted reliance on imported gas, leading to still higher prices—and prices wars with Asia. At the end of last week, the European gas benchmark, the Title Transfer Facility price, hit the highest in two years as winter began settling in and demand for heating jumped. LNG traders have already started diverting cargoes from their Asian destinations to send them to Europe, which is paying a premium. Per Argus data, at least 11 such cargoes have been diverted in the past few weeks. The price jump is only a matter of time.
Petrobangla cancels ongoing negotiations
The interim government has cancelled ongoing negotiations with several companies, including a couple of Indian ones, over inking contracts to import re-gasified liquefied natural gas (RLNG) from India through cross-border pipelines. State-run Petrobangla has cancelled the negotiations in line with directives from the Energy and Mineral Resources Division under the Ministry of Power, Energy and Mineral Resources, said sources. The potential deals that got axed during the negotiation stage include RLNG import by Petrobangla from India’s privately-owned H-Energy and that by Bangladeshi private firm Dipon Infrastructure Services from GAIL, a state-run corporation in the neighbouring country. Both Petrobangla and Dipon Gas had been involved in negotiations over the past several years to import RLNG via cross-border pipelines, said sources. With the two deals, India was eyeing its emergence as the world’s lone RLNG exporter by laying down 265 kilometres of cross-border pipelines. GAIL and H-Energy were planning to supply RLNG after importing LNG from global suppliers. Market insiders said both the Indian companies had moved to export RLNG to Bangladesh having noticed the sluggish LNG consumption in their country over the past several years. India imported around 23.3 million tonnes of LNG during the fiscal year 2023-24, which was 7.17 per cent lower than its highest import volume of 25.1 million tonnes in FY21, according to the country’s Petroleum Planning and Analysis Cell. Unlike Bangladesh, India’s fiscal year is from April to March. After importing its highest volume of LNG in FY21, India witnessed a slide in imports mostly due to LNG price spikes in the international market and Russia’s invasion of Ukraine. The two aforementioned Indian companies were to export around 1.6-2 million tonnes per year (MTPA) of RLNG to Bangladesh initially. The figures could have been increased on the basis of negotiations with the parties concerned. H-Energy, a subsidiary of Hiranandani Group, was eyeing to supply half of the volume, 0.8-1 MTPA, while the remaining half was to be exported by GAIL. H-Energy intended to supply RLNG from Digha in West Bengal to Khulna in Bangladesh by laying 155km cross-border pipelines from East Midnapore’s Kanai Chatta to Srirampur. 90km pipelines were to be laid in India and 65km in Bangladesh. The company was to lay the pipelines at its own expense, while Petrobangla was supposed to pay the wheeling charge for using those to import RLNG. H-Energy’s RLNG selling price was set to be linked to Brent Crude, keeping the price flexible to adjust with price changes in the international market. On the other hand, GAIL was supposed to supply RLNG to Bangladesh’s south-western Jashore district through the Benapole border after laying 110km cross-border pipelines. 65km pipelines were to be laid in India and 45km in Bangladesh. The corporation was to lay the pipelines in India at its own expense, while Dipon Gas was supposed to bear the expenses of doing so in Bangladesh. “Petrobangla was at the final stage of inking RLNG import deals with H-Energy. All relevant details, including the mode of payment, pipeline management, RLNG prices, and so on, have already been discussed,” said a senior Petrobangla official. H-Energy was supposed to supply RLNG to Bangladesh within two years of signing the deals, which included laying pipelines, RLNG purchase, and sales, he said. Petrobangla was expecting to get RLNG from H-Energy by 2027, said the official. He further said the RLNG from H-Energy was supposed to be used mainly to feed the 800MW Rupsha combined-cycle power plant, owned by the state-run North West Power Generation Company, for 22 years. The remaining RLNG was to be used in industries and other gas-fired power plants in the south-eastern region, he added. The Asian Development Bank provided around $600 million, and the Islamic Development Bank nearly $200 million, to implement the Rupsha power plant project with two gas-fired units, each with a capacity of 400MW. The Bangladesh government provided the remaining $150 million. GAIL could have started supplying RLNG in less time if it could avoid the major hassle of land acquisition to lay down the pipelines, said a top Dipon Gas official. Dipon Gas was eyeing to utilise funds from Saudi Arabia to implement the pipeline project on the Bangladesh side and then import RLNG. The company was planning to sell RLNG initially to Petrobangla and other interested private clients, including industries and power plants. It also had plans to set up a fertiliser factory and a power plant using GAIL’s RLNG. Keeping this end in view, Petrobangla inked a memorandum of understanding with H-Energy a couple of years ago. It also signed the first agreement with Indian Oil Corporation in 2018 for the same purpose. However, the deal was later shelved and still remains so.
OPEC Has Little Room to Revive Oil Supply, Iran Official Says
OPEC has little scope to reverse its oil production cuts, which have triggered a wave of rival supply from the US shale industry, Iran’s representative to the group said. “This strategy in support of prices has effectively encouraged higher supply outside the group, particularly on the part of the US,” Iranian OPEC governor Afshin Javan said of the curbs in an article on state-run news agency Shana. “That would leave a limited room for maneuvering by OPEC to ease its restrictions.” The article, unusually critical of OPEC policy for one of the group’s founding members, comes days before the producers meet to decide on plans for reviving halted supplies. Javan also wrote that some smaller African members, including Gabon and Congo, may quit the organization because they can’t afford to pay membership fees. OPEC , an alliance of OPEC nations such as Saudi Arabia and non-members led by Russia, is seeking to revive production halted since 2022, but has been forced to delay the restart amid faltering crude prices. The planned supply increases by OPEC are “likely to bring about oversupply in 2025,” Javan cautioned. Production cutbacks by the coalition over the past four years have financed a surge of US shale oil, which has climbed by 2 million barrels a day since 2020, he wrote. As governor, Javan assists the country’s oil minister, Mohsen Paknejad.
Pak Cabinet approves MoU with US, oil import from India
The cabinet which met here under Prime Minister Raja Pervez Ashraf also approved the memorandum of understanding (MoU) with the United States on new terms of engagements and restoration of Nato supply routes. Briefing the media representatives later, Information Minister Qamar Zaman Kaira said this is in line with parliamentary committee’s guidelines that there would be no hidden or unwritten agreement with any foreign country and every agreement would be in black and white. Draft of the MoU was finalised after extensive consultations and input from all relevant ministries and armed forces which reflects transparency in government’s foreign relations, he noted. Referring to POL imports from India, the minister said: “For import of gas from Iran, we will have to lay about 1,000km pipeline but for import of natural gas from India, we will have to lay only 60km pipeline and if it is feasible, it can provide instant relief to the nation.” Import of these products could be inexpensive due to proximity factor. Pakistan may export Naphtha to India. The ministry of petroleum was further permitted to initiate talks with India for RLNG import
Dip in international oil prices hits Indian petroleum product exports
Subdued international oil prices have depressed India’s per unit realisation of petroleum product exports that plunged over two-and-a-half times to $312.50 per tonne in the first half of 2024-25 from around $792 a tonne in H1 of 2023-24 despite a robust jump in volume-wise shipments, according to official data. Poor realisation through exports of refined petroleum products has been a major drag for India’s overall export performance, an official said requesting anonymity. “This is not because of the demand contraction as India’s petroleum product exports jumped significantly in volume terms during this period,” the official added.
Goldman Sachs Expects Brent Oil to Average $76 Per Barrel in 2025
Brent Crude oil prices are set to average $76 per barrel next year, down from an expected average of $80 a barrel in 2024, amid an expected surplus on the market, according to Goldman Sachs. “Our base case is that Brent stays in a $70-85 range, with high spare capacity limiting price upside, and the price elasticity of OPEC and shale supply limiting price downside. However, the risks of breaking out are growing,” the investment bank’s analysts wrote in a note carried by Reuters. Goldman Sachs expects 400,000 barrels per day (bpd) of surplus on the market in 2025. This surplus is expected to grow to 900,000 bpd in 2026. Therefore, the Wall Street bank sees Brent Crude prices averaging $71 per barrel in 2026. Goldman Sachs kept its 2025 average price forecast from last month when it said that it sees limited upside for oil prices next year amid sufficient supply and ample spare capacity. However, there is an upside risk to prices in the near term, if the U.S. enforces stricter sanctions on the Iranian oil industry and exports, according to Goldman Sachs. Brent Crude prices have the potential to spike to the mid-$80s early next year if Iran’s oil supply declines by about 1 million bpd in case of stricter sanction enforcement when Donald Trump becomes U.S. President, the bank’s analysts noted. Early on Friday, Brent Crude prices were up by 0.4% at $74.57, and the U.S. benchmark, WTI Crude, traded 0.36% higher at $70.40, amid renewed Ukraine-Russia tensions. Oil prices were on track to post a weekly gain after Russia shot a new kind of ballistic missile at Ukraine in the latest sign that the escalation there continues. The strike, featuring a hypersonic medium-range missile that has not been used before in warfare, came in response to a Ukrainian attack with U.S. and British ATACMS missiles on Russian territory.
Reliance Industries: Navigating Retail and Refining Challenges
Reliance Industries is tackling two significant challenges impacting its performance. The first challenge, a rebound in refining margins, signals a shift in market dynamics, while sluggish retail growth poses a more unpredictable hurdle, according to a JP Morgan report. Reliance’s stock has fallen 22% from its July peak as the NIFTY index dipped just 3.3%, erasing earlier gains. Despite this, its relative market valuations remain attractive amid generally high market pricing. The company, led by Mukesh Ambani, leverages its oil-to-chemical unit, telecom arm Jio, and retail sector, now constituting 50% of its 2023-24 EBITDA. A potential listing of Jio/retail could be delayed due to market conditions.
Guyana: No agreement with India to sell oil
The Guyana government says it has not entered into any agreement with India regarding the sale of crude oil to the Asian country, even as it left open the possibility of that being undertaken in the future. “We have not discussed any element of direct transaction for the sale of our crude to India,” Vice-President Bharrat Jagdeo told reporters as the Indian Prime Minister Shri Narendra Modi ended an official visit to Guyana. The communique issued following bilateral talks between the two countries “is very clear” and the two countries have expressed an interest in collaborating in several areas. “India has enormous expertise in many areas, but also clean energy, India is leading in solar in the world…on the fertiliser plant they are doing some studies for us to use the gas to build a fertiliser plant. “So in the whole hydrocarbon sector, there are lots of areas we can utilise Indian skills, Indian technology and also Indian investments. “We have not discussed any element of a direct sale to India at this stage because our crude for the next year, we have people who will market our crude. We just went through a public process for tender, and two companies won the right to market our crude for next year,” said Jagdeo. Jagdeo said in the communique “there’s lot to work on and in the future, I think, if it makes sense for both parties…we should work towards something like that. We don’t have a problem with that, but there is nothing that we have worked on that will result in any sale of crude in the next year or so because we already have people to market our crude,” Jagdeo said. He told reporters some of the Indian companies do buy from other places “that market our crude, so some of our crude have gone to India already”. Asked what would make it more likely for an agreement to be reached in the future, Jagdeo replied, “I do not want to speculate before there is a specific proposal on the table. But those concerns have been raised a long while a back, not now.
India’s Domestic Oil Production Dips While Refinery Output Surges in October 2024
India’s domestic crude oil and condensate production experienced a 4 per cent year-over-year decline in October 2024, reaching 2.3 million metric tonnes (MMT), according to recent data released by the Petroleum Planning and Analysis Cell (PPAC). Oil and Natural Gas Corporation (ONGC) remained the dominant producer, contributing 1.6 MMT, while PSC/RSC and Oil India Ltd. (OIL) added 0.5 MMT and 0.3 MMT, respectively. Despite the downturn in domestic production, Indian refineries demonstrated robust performance, processing 21.3 MMT of crude oil in October 2024, marking a 4.4 per cent increase from the previous year. Public sector and joint venture refineries handled 14 MMT, with private refiners processing the remaining 7.3 MMT. The vast majority of processed crude—19.2 MMT—came from imports, while domestic crude accounted for just 2.1 MMT. The petroleum product sector showed significant growth, with total output reaching 23 MMT in October 2024, representing a 5.3 per cent increase compared to the same period last year. Refineries contributed 22.7 MMT to this total, with fractionators adding 0.3 MMT. High-speed diesel dominated the product mix at 41 per cent, followed by motor spirit at 16.8 per cent, naphtha at 6.8 per cent, aviation turbine fuel at 6.6 per cent, and petcoke at 5.3 per cent. Import trends revealed mixed patterns, with crude oil imports rising by 4.2 per cent in October 2024 and showing a 3.5 per cent increase during the April-October period of FY 2024-25. While petroleum product imports declined by 2.2 per cent in October, they registered a 7.7 per cent growth during the seven-month period, driven primarily by increased imports of petcoke, LPG, and lubricants. Export performance remained particularly strong, with petroleum products showing a substantial 12.7 per cent increase in October 2024 and a 4.2 per cent rise during the April-October period. This growth was largely attributed to increased international sales of petcoke/CBFS, fuel oil, motor spirit, and aviation turbine fuel. The cumulative data for April-October FY 2024-25 indicates a 1.8 per cent growth in crude oil processing compared to the previous year. The PPAC findings suggest that while enhanced refinery throughput and export growth have helped counterbalance the decline in domestic crude production, India’s dependence on imported crude oil continues to grow as the nation works to meet its expanding energy requirements.
Gautam Adani’s company announces another 13% reduction in gas supply from GAIL
Adani Total Gas has announced a 13 percent reduction in its gas supply from GAIL (India) starting November 16, 2024, according to reports. This follows an earlier cut of 16 percent in October under the Administered Price Mechanism (APM). The company warned that this reduction would negatively affect its profitability. In a regulatory filing, Adani Total stated, “This reduction impacts the entire City Gas Distribution (CGD) industry. While discussions with key stakeholders are ongoing, this will have an adverse impact on the company’s profitability.” The company is reviewing the situation and may adjust retail gas prices to minimise the impact while ensuring uninterrupted supply to consumers, according to reports. The October reduction, effective from October 16, was communicated by GAIL, citing lower APM gas allocations for Compressed Natural Gas (CNG) and Domestic Piped Natural Gas (PNG). Adani Total had then emphasised the need for industry-wide resolutions to support end consumers and the growth of CNG vehicles in India.Despite these challenges, Adani Total reported strong financial results for the quarter ending September 30, 2024. The company’s consolidated net profit rose by 7.5 percent year-on-year to Rs 1.86 billion, while its revenue from operations increased by 12 percent to Rs 13.18 billion.