Inox India and the LNG Boom
A few months ago, Hertz, a rental giant, was in news for dumping its EV fleet in favour of gas cars. The reason? The hidden costs of EV ownership. The move led to some correction in Tesla and another EV maker Polestar. Back in India, while the EV penetration is unfolding in two and three wheelers, lack of infra and cost related reasons have led to slow adoption in 4 wheelers and heavy-duty vehicles. As the future of electrification is being discussed amid subsidy related developments, a new fuel trend is about to emerge. For its long-haul trucks and heavy-duty vehicles, India is planning to use LNG. The target is to have a third of the fleet run on LNG instead of diesel in five to seven years. With this move, India plans to target pollution and cut dependence on diesel and increase the share of natural gas from 6% to 15% in the energy mix. Is this just another target or a real opportunity? Well, other countries give some confidence. While China has a fleet of over 800,000 LNG trucks on its roads, the number in the US and Europe is estimated to be 15,000. In comparison, India is still taking baby steps, with hardly 500 such trucks on the road. To be sure, at present, this is a bit of chicken and egg situation. A large-scale adoption needs infrastructure of LNG filling stations which is lacking. For LNG filling stations to be viable, there needs to be an LNG based fleet that can justify that investment (which isn’t there yet). To start with, the government is setting up first 50 LNG fuel stations along the Golden Quadrilateral. By 2030, the plan is to develop 1,000 such stations. This side of the supply chain will be catered by companies in the oil and gas sector – IOCL, BPCL, HPCL, GAIL, Petronet LNG, Gujarat Gas and their joint ventures/ subsidiaries.
India Looks to Balance Short-Term Energy Needs with Long-Term Vision
India’s growing energy needs are a complex puzzle, with pieces shaped by global politics, economic realities, and a pressing need for cleaner solutions. It’s a balancing act, with the country walking a tightrope between ensuring a reliable and affordable energy supply and pursuing a sustainable future. In a world where energy security is paramount, India isn’t shying away from securing the best deals, even if it meansturning to discounted Russian crude amidst Western sanctions. Yet, India’s energy story is about more than just securing the cheapest barrels, says Micheal Kern in Oilprice.com There’s a parallel narrative of ambition and aspiration, with the country setting bold renewable energy targets and envisioning a future where clean energy plays a leading role. It’s a delicate dance, juggling the immediate needs of a developing nation with the long-term vision of a sustainable and green future And global energy giants like BP aren’t just watching from the sidelines. They’re actively participating in this unfolding narrative. The company’s recent high-profile board meeting in India and its expanding collaborations across the energy spectrum – from traditional oil and gas exploration to investments in renewable energy and electric mobility – signal a clear intent: BP sees India as a crucial player in the global energy arena and is eager to contribute to its evolving story. This is about more than tapping into a lucrative market. BP’s approach in India reflects a broader understanding of the country’s complex energy landscape. It recognizes that India’s energy choices will have global repercussions and that collaboration and innovation are key to navigating this complex landscape. Of course, it’s not all smooth sailing. Some challenges BP and other international players will encounter are navigating regulatory hurdles, addressing infrastructure gaps, and adapting to shifting geopolitical dynamics. But the potential rewards are immense. India’s growing energy demand and commitment to a greener future presents a unique opportunity for companies willing to invest in the long term. India’s energy transformation is a story of balancing competing priorities – energy security, affordability, and sustainability. While the country’s reliance on cheaper Russian crude underscores its pragmatic approach to energy security, its commitment to a green transition remains unwavering. Global energy majors like BP are recognizing this dynamic landscape and aligning their strategies to contribute to India’s energy future. As India continues its journey towards a cleaner and more secure energy mix, the collaboration between international players and domestic stakeholders will be crucial. While challenges persist, the opportunities for growth and innovation in India’s energy market are immense, making it a focal point for the global energy industry in the years to come.
Petrol, diesel price cut before Maha elections? Oil Minister official says prices volatile
International oil prices continue to be extremely volatile, falling on one day and rising thereafter, a top oil ministry official said explaining the reason behind no reduction in petrol and diesel prices despite softening in input cost, but could not say if the rates will be cut before Maharashtra elections. Global oil benchmark Brent crude futures fell below USD 70 per barrel last week — the first time since December 2021 — but gained thereafter. Brent was trading at USD 74.58 per barrel on Thursday while West Texas Intermediate advanced to trade at USD 71.71. A decline in price of crude oil — which is converted into fuels like petrol and diesel at refineries — had rekindled hopes for a reduction in petrol and diesel rates that have been on a freeze for over two years now barring a pre-election reduction earlier this year. “Oil prices continue to be volatile. They fell one day last week to below USD 70 but rose the day after,” the official, speaking on condition of anonymity, told reporters here. Until such time that the oil prices stay volatile, the state-owned fuel retailers are unlikely to revert to daily revising rates in line with cost, he said. While petrol and diesel pricing is deregulated (meaning oil companies have freedom to fix retail rates), the state-owned fuel retailers, Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL), have since late 2021 not revised prices in line with cost. They froze rates in April 2022 only to cut prices by Rs 2 per litre each just before general elections this year before again freezing the rates. Petrol costs Rs 94.72 per litre in the national capital and diesel comes for Rs 87.62 a litre. Asked if the oil companies will cut fuel prices ahead of the crucial assembly elections in Maharashtra, the ministry official said, “it is a good question but I can’t say (either ways).” Last week, Oil Secretary Pankaj Jain had stated that the oil companies will be taking appropriate decisions on reducing fuel prices if international oil prices were to settle lower on a sustained basis. Industry sources said the three state-owned fuel retailers are making good profits on petrol and diesel but want the trend to continue before deciding on a revision. “They don’t want a situation where they cut prices and are faced with a situation where international prices rise,” an official explained. Brokerage Emkay GLobal Financial Services in a note last week stated that it expects IOC, BPCL and HPCL to cut petrol and diesel prices before the November assembly elections in Maharashtra. “We believe there are expectations of a retail price cut in auto fuels for oil marketing companies (OMCs) amid the upcoming state elections. While we do not rule out the same, the model code of conduct for J&K and Haryana is on for a month. There could be a cut only toward Diwali and before Maharashtra election’s model code of conduct, which could be Rs 2 per litre each for petrol and diesel and possibly coupled with an equivalent increase in excise duty,” it had said. However, during the next month, OMCs can earn supernormal marketing margins, covering LPG under-recoveries and inventory losses to a large extent. “We estimate implied July-September gross marketing margins at Rs 9.7/8 per litre for petrol/diesel vs Rs 4.7/3.8 in Q1 (April-June) and a normative range of Rs 3.5-4 each,” it said. India imports 85 per cent of its oil needs and its fuel pricing is indexed to international rates. IOC, BPCL and HPCL had reported bumper profits totalling about Rs 81,000 crore in fiscal year ended March 31, 2024, which far exceeded their annual earnings of Rs 39,356 crore in pre-oil crisis years. The retailers have resisted calls to revert to daily price revision and pass on softening in rates to consumers on grounds that prices continue to be extremely volatile — rising on one day and falling on the other — and that they needed to recoup losses incurred in the year when they kept rates lower than cost. The three companies, which control roughly 90 per cent of India’s fuel market, have not ‘voluntarily’ changed petrol, diesel and cooking gas (LPG) prices for the past two years, resulting in losses when input cost was higher and profits when raw material prices were lower. The fuel price freeze that began on April 6, 2022, had a loss as high as Rs 17.4 a litre on petrol and Rs 27.7 per litre on diesel for the week ended June 24, 2022. However, subsequent softening led to losses being eliminated. And in mid-March, they cut petrol and diesel prices by Rs 2 per litre each just before general elections were announced. International oil prices have been turbulent in the last couple of years. It dipped into the negative zone at the start of the pandemic in 2020 and swung wildly in 2022 – climbing to a 14-year high of nearly USD 140 per barrel in March 2022 after Russia invaded Ukraine, before sliding on weaker demand from top importer China and worries of an economic contraction. But for a nation that is 85 per cent dependent on imports, the spike meant adding to already elevated levels of inflation and derailing the economic recovery from the pandemic. So the three fuel retailers froze petrol and diesel prices for the longest duration in the last two decades. They stopped daily price revision in early November 2021 when rates across the country hit an all-time high, prompting the government to roll back a part of the excise duty hike it had effected during the pandemic to take advantage of low oil prices. The freeze continued into 2022 but the war-led spike in international oil prices prompted a Rs 10 a litre hike in petrol and diesel prices from mid-March 2022 before another round of excise duty cut rolled back all of the Rs 13 a litre and Rs 16
India plans oil, gas exploration licensing round in early 2025, source says
India aims to launch an oil and gas exploration licensing round early next year, a source at the oil ministry told Reuters on Thursday.
Indian refiners using Russian insurance for oil above $60/bbl, govt source says
Indian refiners are using Russian insurance cover for Russian oil cargoes priced above $60 per barrel, a government source told Reuters on Thursday. The Group of Seven (G7), European Union and Australia imposed a price cap of $60 per barrel on Russian sea-borne crude exports aiming to limit Russia’s oil revenue following its invasion of Ukraine. Russian firms provided insurance cover for 60% of Moscow’s oil cargoes to India in July, up from 40% in December last year, according to Reuters calculations based on the vessels’ documents. By using Russian insurers, Moscow can sell the oil above a $60 per barrel price cap that the Group of Seven (G7), the European Union and Australia imposed aiming to limit Russia’s oil revenue following its invasion of Ukraine. Over 60% of Russia’s seaborne oil exports go to India. Western services such as shipping and insurance can only be used for Russian cargoes sold at or below the price cap. Russian companies providing the insurance for exports to India in July included Ingosstrakh, Rosgosstrakh, Alfastrakhovanie and VSK Insurance. Prior to the Ukraine war, shippers mainly used large western insurers for protection and indemnity (P&I) cover. Earlier this year, India extended approval to several Russian insurers for providing marine cover to tankers after state-run Russian National Reinsurance Company provided a financial guarantee. In July, India overtook China to become the top buyer of Russian oil, even with China receiving pipeline and seaborne deliveries. For seaborne cargoes alone, India has been the largest market for Russian oil since an EU embargo on Moscow’s oil took effect in 2022. Russia’s leading insurer Ingosstrakh was the largest insurance provider for tankers carrying Russian oil to India in July, the data showed. Ingosstrakh said in an email response to Reuters that its “relations with India are long-term – the company has been present on this market since 1967”, adding that it was not able to assess its share or a share of Russian insurance of oil tankers supplying to India. Ingosstrakh also said that its entire shipping P&I portfolio accounts for less than 1% of its total premiums. Rosgosstrakh declined to comment. Alfastrakhovanie and VSK Insurance did not reply to Reuters’ requests for comments. Insurance cover for the remaining 40% of tankers that shipped oil to India in July was provided by western companies. Russian insurance companies are mostly used by oil shippers with strong links to Russia, such as Russian shipping company Sovcomflot. Shipping firms based in countries such as Greece, the United Arab Emirates and China more often use western insurance when transporting Russian oil, the data shows. While many western insurers withdrew from covering Russian oil shipments for fear of breaching the G7 price cap, some still provide cover.
Oil Prices Resume Post-Cut Rally Despite Demand Doubts
Crude oil prices were climbing on Thursday morning following the Fed’s announcement of a 0.5% cut in interest rates on Wednesday. The announcement pushed prices up for a short while on Tuesday but the rise quickly fizzled out as it sparked worry about the state of the U.S. economy. Later in the day prices began to climb higher again, and early on Wednesday morning that trend was continuing. “While the 50 basis point cut hints at harsh economic headwinds ahead, bearish investors were left unsatisfied after the Fed raised the medium-term outlook for rates,” ANZ analysts said, as quoted by Reuters. “Crude’s buoyancy earlier this week was from expectations of a bumper Fed rate cut,” Vandana Hari, founder of Vanda Insights, told Bloomberg. “Now that it has been delivered, attention is likely to return to oil market fundamentals, which are weak.” Pessimism about Chinese demand appears to have remained strong and even indications that the war in the Middle East could expand, potentially leading to the involvement of Iran, failed to move the benchmarks up. Earlier in the week, the news broke that thousands of pagers used by Hezbollah fighters had exploded in Lebanon. Today, more explosive news came from the country, this time with walkie-talkies and solar equipment. The AP cited Lebanon’s health ministry as saying that this second wave of explosions has killed at least 20 people and wounded more than 450. “We are at the start of a new phase in the war — it requires courage, determination and perseverance,” Israeli Defense Minister Yoav Gallant said, adding words of praise for the country’s army and security service, noting that “the results are very impressive,” without specifying the nature of those results. This geopolitical uncertainty does seem to have boosted bullish sentiment, with some analysts now believing the recent bearishness in markets to have been “overdone”. Citi, meanwhile, had good news about China, forecasting a rebound in oil prices driven by higher refinery run rates in the final quarter of the year. According to the bank, the increase in run rates could add 300,000 bpd to Chinese demand.
Government Removes Windfall Tax On Crude Petroleum
The Centre on Tuesday, slashed windfall tax on domestically produced crude oil to zero, according to a government notification. This marks the second instance when the tax is scraped to zero since the tax’s implementation. The earlier cut was announced on April 4, 2023. The government reviews and revises the tax on a fortnightly basis. The last such revision took place on August 31 when the windfall tax on crude petroleum was reduced to Rs 1,850 per tonne from Rs 2,100 per tonne. Prior to that, the government revised the windfall gains tax on petroleum products on August 17, lowering it to Rs 2,100 per tonne from Rs 2,400 per tonne.
Declining shipments of petroleum products hurting India’s overall export figures
A substantial decline in shipments of petroleum products is one of the key reasons behind the moderating exports globally, including in India which exports refined products to various countries. Commerce Secretary Sunil Barthwal agreed that export was a “huge challenge”. “Look at global trade data, there has been a decline of imports by many countries, almost by 5 per cent to 6 per cent negative growth. It shows that there is a slowdown in China. There is still recession fears, which is persisting in Europe and the US.” “There are a lot of challenges in trade, but I’m very happy to see in terms of figures, so far, in cumulative terms, we have been able to manage our exports in the positive territory,” the secretary told reporters on Tuesday. India’s petroleum exports have plummeted by a staggering 37.56 per cent, dropping from USD 9.54 billion in August 2023 to just USD 5.95 billion in August 2024. This dramatic decline has significantly impacted India’s overall merchandise trade, leading to a 9.33 per cent reduction in August 2024 compared to the previous year. Over the past month, international crude oil prices have slipped by over USD 10 per barrel to about USD 70 per barrel, due to subdued demand. Ajay Srivastava, the founder of the Global Trade Research Initiative (GTRI) in an interesting anecdote noted that crude oil prices remained relatively stable between these two periods, suggesting that the drop in petroleum product exports is linked to ongoing disruptions in the Red Sea.
Russian insurance shores up oil exports to top buyer India
Russian insurers are playing a growing role facilitating the country’s oil shipments to India, its biggest buyer, data obtained from trade and shipping sources shows, helping to protect Moscow’s export revenue despite western sanctions. Russian firms provided insurance cover for 60% of Moscow’s oil cargoes to India in July, up from 40% in December last year, according to Reuters calculations based on the vessels’ documents. By using Russian insurers, Moscow can sell the oil above a $60 per barrel price cap that the Group of Seven (G7), the European Union and Australia imposed aiming to limit Russia’s oil revenue following its invasion of Ukraine. Western services such as shipping and insurance can only be used for Russian cargoes sold at or below the price cap. Russian companies providing the insurance for exports to India in July included Ingosstrakh, Rosgosstrakh, Alfastrakhovanie and VSK Insurance. Prior to the Ukraine war, shippers mainly used large western insurers for protection and indemnity (P&I) cover. Earlier this year, India extended approval to several Russian insurers for providing marine cover to tankers after state-run Russian National Reinsurance Company provided a financial guarantee. In July, India overtook China to become the top buyer of Russian oil, even with China receiving pipeline and seaborne deliveries. For seaborne cargoes alone, India has been the largest market for Russian oil since an EU embargo on Moscow’s oil took effect in 2022. Russia’s leading insurer Ingosstrakh was the largest insurance provider for tankers carrying Russian oil to India in July, the data showed. Ingosstrakh said in an email response to Reuters that its “relations with India are long-term – the company has been present on this market since 1967”, adding that it was not able to assess its share or a share of Russian insurance of oil tankers supplying to India. Ingosstrakh also said that its entire shipping P&I portfolio accounts for less than 1% of its total premiums. Rosgosstrakh declined to comment. Alfastrakhovanie and VSK Insurance did not reply to Reuters’ requests for comments. Insurance cover for the remaining 40% of tankers that shipped oil to India in July was provided by western companies. Russian insurance companies are mostly used by oil shippers with strong links to Russia, such as Russian shipping company Sovcomflot. Shipping firms based in countries such as Greece, the United Arab Emirates and China more often use western insurance when transporting Russian oil, the data shows. While many western insurers withdrew from covering Russian oil shipments for fear of breaching the G7 price cap, some still provide cover.
Italy Shuts the Door on New Oil Exploration
Itay will no longer grant concessions for oil and condensate exploration and production, a draft of a new government decree shows. The decree, seen by Reuters, specifies that the oil exploration and production ban will only apply to new concessions—not existing ones that have already secured government approval. The ban is part of Italy’s green ambitions, which include abandoning coal-fired electricity by the end of 2025 in favor of gas-fired power plants. To that end, Italy approved four new gas-fired power plants in the past few years, capable of producing 3,400 MW of power, with upgrades to existing power plants expected to add another 700 MW by 2026 as the country attempts to move entirely away from Russian-supplied natural gas. Oil exploration and production in Italy is regulated primarily through state legislation, with operators holding no title to exploration and production areas. The Italian government is due a 10% royalty for onshore oil production and 7% for offshore. While taking a step back from oil and gas exploration and production, Italy’s Central Bank is pushing for developed economies with higher per-capital emissions to help developing economies transition away from fossil fuels in hopes of accelerating the clean energy rollout. The call to assist, made by bank governor Fabio Panetta at the G7 – IEA Ensuring an Orderly Energy Transition conference in Rome, would help to reduce the overall cost of the energy transition globally, Panetta said. But last week, Italy’s power utility Enel scrapped its plans to participate in the energy transition of Vietnam, deciding to exit the country’s wind and solar markets, which have been categorized by a rather complicated grid connection mechanism that has prompted even a transition-eager Italy is unwilling to tackle.