India’s LNG imports during May-July 2024 at 4-year high
India’s imports of liquefied natural gas (LNG) rose to a multi-year high during May-July 2024 driven by an unprecedented heat wave coupled with record high temperatures pushing electricity consumption to a new high. According to energy intelligence firm Vortexa, India’s monthly LNG imports in May, June and July 2024 hit a four year record, averaging 2.57 million tonnes (MT). “This was largely driven by record high temperatures that plagued the country since May, resulting in a spike in gas-fired power generation to meet increased cooling demand. This comes despite Asian spot LNG prices reaching a seven month high of around $12 per million British thermal units (mBtu),” said Vortexa’s LNG Analyst Miko Tan. The previous LNG import highs across 2020 occurred in a significantly different market where LNG prices fell to record lows, creating an incentive for coal-to-gas switching in power generation across India, she added in a commentary earlier this week. However, power demand has softened in July with the start of the monsoon season and easing temperatures, thereby putting downward pressure on gas-fired power generation, Tan said. Power demand India’s power demand has been rising at around 7-9 per cent on an annual basis driven by an expanding industrial and commercial base coupled with rising household consumption. Tan pointed out that record high temperatures led to an uptick in total power generation across the country in May and June 2024. While the increased demand was met largely by hydropower, the share of gas-fired power generation doubled from level in the first quarter. Capacity utilisation and electricity generation by gas-based power plants, with 23.64 gigawatts (GW) capacity under operation, was the second highest on record during April-June 2024. In April-June 2024, gas-based plants clocked a capacity utilisation, or plant load factor (PLF), of 25.8 per cent generating 13,338.23 million units (MU) on a provisional basis. This is second only to April-June 2020 when PLFs hit 28.6 per cent producing 14,961.55 MU of electricity. Higher production by gas-based power plants pushed up gas’ contribution in India’s power generation mix increasing from 2 per cent in June 2023 to 2.8 per cent in June 2024, Crisil Market Intelligence & Analytics said in a report. However, power demand fell in July with the start of the monsoon season and easing temperatures, thereby putting downward pressure on gas-fired power generation, Tan said. “While LNG imports remained strong, demand is likely to taper off as the current price point is unattractive to most buyers in the country. GAIL and state-owned refiner IOC did not award their recent tenders seeking cargoes in September and October, as offers were deemed unattractive,” she added.
Reliance to Invest Rs.10 billion in CBM
Reliance Industries Limited (RIL) has announced a significant investment of Rs.10 billion to enhance coal bed methane (CBM) production from its existing blocks in India. This move is aimed at reversing the recent decline in CBM production. BM, a form of natural gas extracted from coal seams, is considered a cleaner alternative to conventional fossil fuels. Reliance Industries has been a major player in the CBM sector, with substantial reserves in its blocks located in the eastern part of India, particularly in the states of Madhya Pradesh and west Bengal o address this issue, RIL’s Rs.10 billion investment will focus on several key areas. These include the deployment of advanced technologies for drilling and extraction, enhancing the efficiency of existing wells, and exploring new reserves within the existing blocks.
Oil & gas firms’ prioritise green hydrogen, carbon capture to achieve net-zero targets
India’s oil and gas companies are focussing on initiatives such as green hydrogen and carbon capture, utilization and storage (CCUS) as they move towards achieving net-zero emission targets. The companies are committing large investments towards energy transition, particularly in the renewable space, an oil ministry journal on net-zero plans has said. The first-of-its kind report, which was released on August 25, list various steps being taken by these companies to reduce emissions and their carbon footprint. India’s largest oil and gas explorer ONGC said the company is advancing in the field of CCUS with a capacity to sequester 2.21 million MT of CO2 emissions. “This technology is vital for reducing the carbon intensity of industrial processes and achieving long-term sustainability targets,” the company said. CCUS is a set of technologies that capture carbon dioxide and use it or store it safely to prevent it from contributing to climate change. These technologies can also remove existing CO2 from the atmosphere. There is debate over its feasibility, with critics saying it is too expensive to be viable. In the Budget FY25, Finance minister Nirmala Sitharaman said the Centre planned to introduce a policy for hard-to-abate industries to nudge them towards lower emissions. The decision comes as India plans to achieve net zero by 2070, while the oil and gas companies have pledged to attain the emission target much earlier.
Domestic gas drives industrial consumption
Natural gas consumption in India is recovering from the post-COVID-19 slump, primarily driven by the fertiliser, city gas distribution (CGD) and industrial sectors. Even though the power sector has shown an incremental increase in gas use for peak power demand in the last two fiscal years, it has not reached pre-pandemic levels yet. Small- to medium-scale industries, including tea plantation, manufacturing, liquefied petroleum gas (LPG) shrinkage and sponge iron, are driving consumption growth. The industrial sector, including refinery, petrochemicals and other industries, witnessed a 37% increase in gas consumption in FY2023-24 from the pre-pandemic levels of FY2019-20. However, gas consumption by other industries – excluding refinery and petrochemicals – surged 136% over the period. Gas consumption by other industries shot up from around 7,000 million metric standard cubic meters (MMSCM) in FY2019-20 to over 16,000MMSCM in FY2023-24, accounting for almost two-thirds of the total gas consumption by the industrial sector.
GAIL inks MoU with Petron Scientech to setup bio-ethylene plant in India
GAIl (India) said that it has signed Memorandum of Understanding (MoU) with Petron Scientech Inc (Petron) to jointly explore setting up of a 500 Kilo Tons per Annum (KTA) bio-ethylene plant in India. Petron specializes in setting up biomass and grain processing biorefinery projects to produce ethanol, bio-ethylene, bio-chemicals (ethylene oxide / mono ethylene glycol, Methanol) and various bio-fuel projects worldwide. In line with the MoU, GAIL and Petron will jointly undertake feasibility studies to ascertain technical viability and financial prospects of the project. Both the parties endeavour to secure investment approval from their respective management for investment in the project and forming a JV company. The company will set up bio ethylene plant along with its downstream units in India, based on bio -ethanol produced in the plant in a 50:50 Joint Venture (JV) mode. Singhal said, GAIL is a proud member of Indias clean energy infrastructure and is always committed to incorporate initiatives for sustainable development of the nation. We are elated to enter into this strategic relationship with Petron, a pioneer in bio-ethanol to bio-ethylene technology. The MoU signifies a major step towards enhancing sustainable practices and advancing the bio-economy in India. The skills and strengths of both the companies would create a synergy for achieving the objective of MoU. The collaboration between GAIL and Petron is poised to not only foster technological advancements but also drive economic growth and environmental sustainability in India.
India Beats China To Become Russia’s Top Oil Buyer In July
India became the largest importer of Russian oil in July beating China which reduced its purchases due to lower profit margins in fuel production Data on Indian shipments from trade and industry sources revealed that Russian crude imports increased by 12% year-on-year to 44% of India’s total imports last month, reaching a record high of 2.07 million barrels per day (bpd). The imports increased 4.2% from June. According to Chinese customs data, India’s July oil imports from Russia exceeded China’s 1.76 million bpd, which included both pipeline and shipment deliveries. Indian refiners have been taking advantage of discounted Russian oil following Western nations’ sanctions against Moscow and their reduced energy purchases in response to Russia’s invasion of Ukraine. Data on Indian shipments from trade and industry sources revealed that Russian crude imports increased by 12% year-on-year to 44% of India’s total imports last month, reaching a record high of 2.07 million barrels per day (bpd). The imports increased 4.2% from June. According to Chinese customs data, India’s July oil imports from Russia exceeded China’s 1.76 million bpd, which included both pipeline and shipment deliveries. Indian refiners have been taking advantage of discounted Russian oil following Western nations’ sanctions against Moscow and their reduced energy purchases in response to Russia’s invasion of Ukraine.
Environmentalists Sue UK for Oil and Gas Licenses
An ocean conservation entity is suing the UK state for 31 oil and gas exploration licenses issued by the previous government earlier this year. Oceana UK claims the issuing authorities had failed to consider the effects of exploration on marine life, Reuters reported. The entity is part of a group called the Ocean Alliance Against Offshore Drilling, which wrote to the current Energy Secretary Ed Miliband asking him to concede the lawsuit. “By conceding the case, the government can make good on promises made to the public and signal a clear departure from the previous administration’s continuing reliance on fossil fuels,” the group said. The UK’s North Sea Transition Authority, previously the Oil and Gas Authority, issued 31 exploration licenses back in May as the Sunak government tried to juggle energy security and the transition that required an end to oil and gas production, per advocates. The licenses were expected to add an estimated 600 million barrels of oil equivalent to 2060, or 545 million barrels of oil equivalent by 2050. Interestingly, some of the awarded in May were in areas previously earmarked for offshore wind power licenses. “Following discussions with our partners in The Crown Estate and Crown Estate Scotland, we have introduced a new clause for overlapping oil and gas licences and wind leases for the first time,” NSTA said. However, when the Starmer government took office, they were quick to go on the offensive against the oil and gas industry, after promising to raise taxes further and end exploration licensing. The ban has not been made official but media have reported that it is in the works. That course of action could put the government in the legal crosshairs as well, The Guardian reported recently, as companies could challenge Downing Street for costing them a lot of money spent on successful exploration bids.
Europe’s Gas Supply Tightens as Norway Begins Field Maintenance
Europe is facing a tighter gas market as Norwegian field operators enter scheduled maintenance season. Any unplanned extension of the maintenance period would cause an imbalance on gas markets on the continent and leas to price rises, Bloomberg reported. “Europe is already struggling,” Florence Schmit, a European energy strategist at Rabobank, told the publication. “Any deviation to the planned maintenance season can cause significant fluctuations in gas availability and in turn market prices, especially this year.” Norway supplies about 30% of Europe’s natural gas, becoming the biggest supplier after the halt of most Russian gas flows. Right now, there is a risk of a suspension in remaining flows passing through the Ukraine after the latter’s incursion into Russian territory, which would tighten supply even further. Bloomberg points out that an extension to Norway’s gas field maintenance season would not be unusual due to the complexity of the work involved in those operations. “The repairs involve careful balancing of pipeline pressure, while the complexity of the facilities and the North Sea’s harsh environment means it’s not unusual for additional work to be discovered,” Bloomberg explained. “You will always see a shift from what was planned; something will take longer or less time and that has ripple effects across the rest of the work,” a senior executive from Norway’s gas pipeline operator Gassco told Bloomberg. Earlier this month, Saxo Bank’s head of commodity strategy, Ole Hansen, noted that the European Union’s gas inventories were at 86.7% full and the expected slowdown in filling rates due to Norway’s maintenance season should not really affect final targets before heating season. The EU has a target of 90% full gas storage before winter begins. “However, any major disruption in the coming months would heighten the need for alternative supplies, primarily via LNG, driving up prices as Europe competes with Asia and South America,” Hansen added at the time.
Why Lack Of Government Support On LPG Loss Could Hit Oil Firms Hard
Oil marketing companies saw weaker earnings in the first quarter of fiscal 2025, mainly on the back of loss on cooking gas sales ranging from Rs 20 billion to Rs 40 billion. At the run-rate seen in the April-June quarter, companies like Indian Oil Corp., Bharat Petroleum Corp. and Hindustan Petroleum Corp. could record losses from liquified petroleum gas sales to the tune of Rs 80 billion to Rs 164 billion, as per NDTV Profit’s calculations. This is why the LPG subsidy provided by the government of India in fiscal 2025 is important for the profitability of these oil companies. Why Are Companies Incurring Losses On LPG? Currently, LPG prices in India are subsidised to ensure affordability for domestic consumers. Oil companies like Indian Oil, Bharat Petroleum and Hindustan Petroleum not only produce their own LPG, but also import it from international sources and sell them domestically. Thus, higher production costs, as well as import costs, exert pressure on the companies’ profitability in the segment as the domestic selling prices remain capped. Government Support The government of India has provided oil marketing companies one-time subsidies as a part of a buffer mechanism. In fiscal 2023, when LPG losses of companies swelled up to around Rs 250 billion in the quarter, due to rise in international LPG prices, the government of India announced a one-time budget subsidy of Rs 220 billion to cover the loss. While a similar subsidy announcement was expected in the 2024 Union Budget, no provision of the same disappointed the street.
The World’s Biggest Gas Reservoir Is At A Tipping Point
Iran is embarking on a US$70 billion investment programme of measures to attempt to halt a dramatic decline in output from its crucial South Pars gas field. A failure to do so will result in the loss of 40 percent of the country’s petrol output from the Persian Gulf Star gas condensate refinery, and the addition of up to US$12 billion a year of petrochemical costs, according to Iranian Gas Institute forecasts. “South Pars’ gas output provides nearly 80 percent of the our [Iran’s] total gas production, so it is vital to all segments of business and society that this does not drop significantly,” a senior energy industry source who works closely with Islamic Republic’s Petroleum Ministry exclusively told OilPrice.com last week. In broad terms, the South Pars site spans 3,700 square kilometres and holds an estimated 14.2 trillion cubic metres (tcm) of gas reserves plus 18 billion barrels of gas condensate. In addition to generating 78 percent of the country’s gas production, it also accounts for around 40 percent of Iran’s total estimated 33.8 tcm of gas reserves (mostly located in the southern Fars, Bushehr, and Hormozgan regions). Crucially in the current context as well is that it is one part of the two that constitute the world’s biggest gas reservoir by far, with 51 tcm of reserves. The other part is Qatar’s 6,000 square kilometre North Dome (or ‘North Field’), which is the foundation stone of its world-leading liquefied natural gas (LNG) exporter status. Iran split South Pars into 24 phases for development, with broad production targets ranging from around 28 million cubic metres per day (mcm/d) to about 57 mcm/d – the latter being a target for the perennially controversial Phase 11. After the Joint Comprehensive Plan of Action (‘JCPOA’, or colloquially ‘the nuclear deal’) had been implemented on 16 January 2016, France’s then-Total renewed its 2009 commitment to develop the Phase, which had been dropped in 2012 as the E.U. ramped up sanctions against Iran. The French oil and gas giant held a 50.1 percent stake in the Phase 11 project, ahead of the 30 percent stake of the China National Petroleum Corporation and a 19.9% holding by Petropars, a wholly owned subsidiary of the National Iranian Oil Company. Total quickly invested around US$1 billion in the Phase and made progress on the site, until in May 2018 came the withdrawal by the U.S. from the JCPOA, as analysed in full in my new book on the new global oil market order. Given the size and scope of Phase 11, it became a focal point of Washington’s attention in the aftermath of the withdrawal, and it put the French under extreme pressure to pull out of the project. Under the terms of the contract, CNPC then took charge and little progress has been made since then. This provides a microcosm of what has happened to Iran’s oil and gas sector since then. The key problem in the substitution of leading Western oil and gas firms with Chinese ones has been that the latter lack the latest technology available to the former. The same is now true of Russian oil and gas firms which have been denied much of the same technology through various sanctions since it invaded Ukraine’s Crimea region in 2014. According to assessments from Iran’s own National Development Fund, the country’s gas production will fall by at least 25 percent within the next 10 years due to falling pressure in the fields, with South Pars seeing a 30 percent decline. To attempt to redress this, March saw Iran’s Petroleum Ministry agree to a US$20 billion programme with various local firms to build 28 massive platforms to boost pressure on the South Pars site. However, little progress has been made on these, as neither the domestic companies nor their Chinese and Russian backers have the required technology and know-how. The latest programme to be announced by the Petroleum Ministry – the drilling of 35 new wells across the South Pars site – appears geared towards maximising production from the field while it still can, rather than addressing the fundamental causes of the reduction in pressure and attempting to slow them down. Indeed, according to official Petroleum Ministry statements, the new drilling is intended to boost output over the site by 35 million mcm/d over the next three years. “Part of the problem is the geology of the site, with a natural drift towards the Qatari side in several places rather than the Iranian one,” the Iran source told OilPrice.com last week. “But another part has been the many clumsy attempts by local contractors at optimising extraction over the years with no thought of the longer-term consequences,” he added. “There are multiple examples of the wrong areas being drilled, which has weakened the surrounding structures, so drilling 35 new wells having done this is only likely to make situation worse,” he said. Given this, Iran is looking to China to increase its pressure on Qatar to take a more cooperative approach to developing the two halves of the supergiant gas reservoir, the source added. “Qatar had a moratorium on gas production from its own North Dome field from 2005 to 2017, during which time it often accused Iran of drilling activity that reduced pressure on this side, and asked China to intervene on its behalf with Iran, which it did,” the source told OilPrice.com. “At that stage in early 2017, the two sides [Qatar and Iran] sat down and agreed to work together to ensure the sustainability of the site, so Iran wants the same assurance now from Qatar,” he added. This is even more urgent on Iran’s side, as Qatar is now embarked on its own drive to dramatically increase its production from the North Dome. The Emirate’s expansion program will see six major new developments in the North Field East (NFE) and North Field South (NFS) to 2029. Four new ‘trains’ (production facilities) – each with 8 million metric tonnes per annum (mtpa)