Indraprastha Gas And Mahanagar Gas’ Margin Pain Likely To Continue In Near Term—Here’s Why
Indraprastha Gas Ltd. and Mahanagar Gas Ltd. may experience further decline in unit margin after having contracted by over 20% year-on-year in the second quarter of fiscal 2025 due to several negative developments ranging from lower subsidised-gas allocation to higher gas costs and increased competitions. This has led analysts to cut these companies’ earnings estimates for fiscal 2025 and 2026. Lower APM Gas Allocation Indraprastha Gas and Mahanagar Gas reported over a 20% reduction in the administered price mechanism, or APM, gas allocation for their CNG sales in October 2024, resulting in lower subsidised gas, which negatively impacts profitability. Emkay Research estimates this cut could reduce CNG margins by Rs 2 per standard cubic meter. Nuvama predicts gas costs for Indraprastha Gas may rise by $0.4 to $0.6 per million British thermal unit, potentially leading to an 18-25% decline in fiscal 2026 Ebitda, while that of Mahanagar Gas would drop by 13-22% Ebitda during the same fiscal. Indraprastha Gas’ management suggested that CNG prices in Delhi may need to increase by Rs 5-6 per kilogram to maintain their earlier margins, though the timing of these hikes still remains uncertain. Higher Gas Costs The companies with reduced APM gas allocations will need to rely on gas imports. Due to a series of project delays and stronger-than-expected fuel demand in Asia, market expert Javier Blass expects the LNG market to remain tight next year and possibly until mid-2026. Blas suggests that buyers won’t regain leverage in terms of price until early 2027, when new supply becomes available. This scenario is unfavorable for Indraprastha Gas and Mahanagar Gas..
Cairn Oil & Gas joins UN’s methane reduction initiative, first in India
Cairn Oil & Gas, a Vedanta Group company, has become India’s first oil and gas producer to join the United Nations Environment Programme’s Oil & Gas Methane Partnership (OGMP) 2.0, signing a memorandum of understanding on Monday, in Abu Dhabi. The shares of Vedanta Limited were trading at ₹455.65 down by ₹11.70 or 2.50 per cent on the NSE today at 11.50 am. The partnership requires Cairn to set a five-year methane reduction target and report progress transparently, supporting its commitment to achieve net-zero carbon emissions by 2030. The move brings approximately one-fourth of India’s oil and gas production under OGMP 2.0 oversight. OGMP 2.0, UNEP’s flagship methane reporting and mitigation program, currently covers over 40 per cent of global oil and gas production. The framework provides measurement, reporting, and verification protocols for methane emissions management.
India’s fuel consumption rises in October; Petrol demand up 8.3%, diesel steady
India’s petrol consumption rose by 8.3% year-on-year in October 2024, reaching 3,401 thousand metric tonnes (TMT) compared to 3,140 TMT in the same month last year, according to the latest data from the Petroleum Planning and Analysis Cell(PPAC). Diesel consumption, however, remained flat, inching up only 0.08% to 7,640 TMT from 7,634 TMT in October 2023. Aviation turbine fuel (ATF) saw a notable rise, with consumption increasing by 8.58% to 751 TMT, up from 692 TMT in October 2023. This reflects the ongoing recovery in the aviation sector as both domestic and international travel continue to rise toward pre-pandemic levels. Meanwhile, LPG consumptionalso climbed 7.46% year-on-year to 2,820 TMT, up from 2,625 TMT in October 2023, signaling stable demand in Indian households for cooking fuel. Compared to pre-COVID levels in October 2019, the report shows substantial growth across fuel categories. Petrol usage surged by 33.95% with a compound annual growth rate (CAGR) of 6.02%, reflecting increased reliance on personal transportation. Diesel demand, while showing slower growth, registered a 17.36% increase over the same period, with a CAGR of 3.25%, underscoring diesel’s continued importance in sectors like freight and logistics.
Crown executes final agreements for LNG projects
Crown LNG Holdings Ltd, a leading provider of LNG liquefaction and regasification terminal technologies for harsh weather locations, has announced the conclusion of two strategic acquisition agreements forming the basis of Crown LNG’s entry into the global LNG infrastructure network: KGLNG and Grangemouth. The KGLNG agreement finalises the acquisition of all shares of KGLNG, which owns the operating license for the Company’s planned LNG import terminal in Kakinada, India. The Grangemouth agreement finalises the acquisition of LNG import terminal assets in Grangemouth, Scotland, from GBTron Lands Ltd. The Kakinada project, located on the East coast of India, is licensed to operate 365 days a year, a first for the harsh weather prone area. Imported gas from the planned terminal would reach demand centres via the East-West Pipeline, helping to support the Indian government’s drive to more than double the share of natural gas in the country’s energy mix to 15% by 2030. Total consideration for the KGLNG acquisition will be made in shares of Crown LNG equal to $60 million. The Grangemouth project, located on the East coast of Scotland, seeks to support the UK’s increasing drive for energy security post-Brexit and in the context of geopolitical impacts on energy markets. Currently, the UK relies on just three facilities for all of the country’s LNG imports, which increased 74% from 2021 to 2022. Total consideration for the GBTron acquisition will be made in shares of Crown LNG equal to US$25 million. “We are excited and proud to announce the execution of these two transactions and move these two projects down the path,” said Swapan Kataria, CEO of Crown LNG. “With Crown LNG and our subsidiaries now firmly in control of the Kakinada and Grangemouth projects, we look forward to driving the success of these two transformative projects for both India and the UK.”
ONGC fails again to attract bids for stake in Deen Dayal gas field
State-owned Oil and Natural Gas Corporation’s (ONGC) third attempt to get a partner to rescue the Deen Dayal gas field in the KG basin in Bay of Bengal has met with the same fate as previous efforts as it got no bids, sources said. The tender offering stake to technical and financial partners in the Deen Dayal field, which ONGC had acquired from a Gujarat government firm for USD 1.2 billion, received no bids, two sources aware of the matter said ONGC on June 12 sought expression of interest from “global oil and gas companies with requisite technical expertise and financial strength to join as partner (with participative interest) for firming up a viable strategy” for the field, according to the tender document. Bids closed on September 12.
VTTI looks to buy into LNG terminals in Asia
Energy storage company VTTI BV, backed by Abu Dhabi’s main oil company and Vitol Group, is looking to invest in LNG import terminals in Asia as demand for the fuel increases in the region, according to Bloomberg. “There is a lot of potential in India, Bangladesh, Pakistan and the Philippines,” Chief Executive Officer Guy Moeyens said in an interview on Tuesday in Fujairah in the United Arab Emirates. “There will be a disproportionate need for regasification facilities in that region. More than, I would say, in Europe or the Americas.” The Rotterdam-headquartered company acquired a 50% stake in Dragon LNG, one of the UK’s three LNG import terminals, in August and agreed to buy a majority stake in Italy’s Adriatic LNG earlier this year. It also has an agreement with Hoegh LNG to jointly develop an energy terminal in the Dutch province of Zeeland. It’s now keen to expand in similar facilities in Asia by investing alongside a partner, Moeyens said. LNG is taking on an increasingly important role in the world’s energy supply as countries look to use more of the cleaner-burning fuel amid concerns over climate change, while they also build more renewable energy projects. The US and countries in the Middle East are among regions expanding their LNG export capacities in order to meet the rising demand. VTTI counts Abu Dhabi National Oil Co. and Vitol as shareholders. Adnoc this year approved the construction of a new LNG export terminal, and bought stakes in projects in the US and Africa.
India’s natural gas production dips 1.6% in September; LNG imports surge by 13.5%
India’s natural gas production for September 2024 recorded a gross output of 2,977 MMSCM, showing a decline of 1.6% compared to the same month last year, according to the Petroleum Planning & Analysis Cell (PPAC). Despite this drop, LNG imports surged by 13.5%, reaching 2,932 MMSCM, highlighting the country’s increasing reliance on imports to meet its energy demand. The total availability of natural gas for sale was 5,411 MMSCM, marking a 5.8% increase year-on-year, demonstrating that higher imports are compensating for the reduced domestic output. Natural gas consumption for September 2024 stood at 5,752 MMSCM, with the fertilizer sector accounting for the largest share at 29%, followed by city gas distribution (CGD) at 20%, and the power sector at 12%. The CGD sector saw a significant growth of 16% compared to the previous year, reflecting the sector’s expansion and the rising adoption of gas for urban utilities. In contrast, power sector consumption declined by 13%, with its share dropping, possibly due to shifts in energy preferences and the integration of renewables.
India eyes higher ethanol blend post-2025 mandate
The Indian government has begun discussions to develop a post-2025 roadmap to further raise the ethanol blend in gasoline from 20%, said Hardeep Singh Puri, Minister of Petroleum and Natural Gas in an industry event on Oct. 14. Talk of raising the blend target has come about as the 2025 target of 20% appears likely to be met, the oil minister said at the 12th CII Bioenergy Summit in New Delhi. “I am not in a position to make announcement but I can tell you there are lot of people in Government of India including me, who are already working about preparing a roadmap for the post 20 per cent blending after 2025,” he said. India may be able to produce enough ethanol to support a higher blending percentage with its existing ethanol production infrastructure, according to market sources. This increased ethanol production could also boost the domestic sugar industry, which is a key source of feedstock for ethanol thereby boosting the agricultural sector. The minister shared notable results from the ethanol program, revealing that from 2014 to August 2024, it has led to foreign exchange savings of 1,060 billion rupees with a reduction of CO2 emissions by 54.4 million mt, and a crude oil substitution of 18.1 million mt. During the event, Minister Puri predicted that India’s robust economic growth will account for 25% of global energy demand over the next two decades. He stressed that bioenergy will play a vital role in meeting this demand while also supporting climate goals and rural development. Emphasizing India’s agricultural strength and vast biomass potential as key to the transition to clean energy, Puri stated that India is recognized as an agricultural powerhouse, being a leading producer of rice, wheat, cotton, sugar, and various horticultural and dairy products. He mentioned that the country has over 750 million mt of available biomass, with about two-thirds used for domestic purposes like cattle feed and compost The oil ministry also noted that India’s status as a major biofuel producer and consumer has been bolstered by coordinated policies, political support, and abundant feedstocks. He cited the International Energy Agency forecast predicting a growth potential of 3.5-5 times for biofuels by 2050 due to net-zero targets, representing a substantial opportunity for India. Indian government’s ambitious SAF targets, aiming for 1% blending by 2027 and 2% by 2028 were also highlighted at that event. Platts, part of S&P Global Commodity Insights, assessed SAF production costs in Southeast Asia at $1,725.41/t on Oct. 14, rising $1.67/t from the previous day.
ONGC looks at mini-LNG plants to evacuate natural gas from isolated fields
State-owned Oil and Natural Gas Corporation (ONGC) is looking to set up mini-LNG plants to evacuate natural gas from wells located in areas that are not connected with pipelines. The firm has identified five sites in Andhra Pradesh, Jharkhand and Gujarat for setting up mini plants at wellhead that will convert the gas pumped out from under the ground into liquefied natural gas (LNG) by super cooling it to minus 160 degrees Celsius. This LNG will be loaded on cryogenic trucks and transported to the nearest pipeline where it will be reconverted into its gaseous state and pumped into the network for supply to users like power plants, fertilizer units or city gas retailers. ONGC has floated a tender seeking manufacturers/service providers to tap stranded natural gas, according to the tender. The locations identified for setting up mini-LNG plants in the tender are two sites at Rajahmundry in Andhra Pradesh and one each at Ankleshwar in Gujarat, Bokaro in Jharkhand and Cambay in Gujarat. ONGC in the tender document said while the country has an extensive network of pipelines that connect supply and demand centres, there remains a substantial volume of stranded gas (non-connected) that is required to be tapped for enhancing domestic supplies and meeting the needs of nearby demand centres.
Gujarat Leads India’s Green Transition
Gujarat has taken center stage in India’s renewable energy revolution, notably under the leadership of Prime Minister Narendra Modi. The state, historically under Modi’s transformative governance, has demonstrated significant progress over the last 23 years. With a total power generation capacity of 52,424 MW, Gujarat stands as a beacon for renewable energy, attributing 50 percent of this to renewable sources. The state’s commitment to clean energy saw a remarkable leap from 45,912 MW to 52,424 MW in just a year, showcasing impressive advancements and a determination to lead India’s sustainability mission. Strategic investments in solar, wind, and hybrid projects, bolstered by a conducive policy environment, have been pivotal. The recent Renewable Energy Summit 2024 further highlighted Gujarat’s role as a leader, involving global stakeholders to discuss the future of clean energy. Having invested substantially in plants producing renewable energy, surpassing its conventional power investments, Gujarat’s advancements are not confined to infrastructure alone. Its policies, such as extending the Gujarat Renewable Energy Policy to 2028, underline the state’s emphasis on a sustainable agenda, empowering solar and wind energy solutions. Landmark projects like Modhera Solar Village and Charanka Solar Park exemplify Gujarat’s successes in renewable energy. These initiatives have yielded not only environmental benefits but have also been drivers for economic growth and social inclusion, as seen with the energy self-sufficiency at Modhera, which reduced resident electricity costs significantly.