Russian oil prevails in India’s July imports despite refinery shutdowns
Despite a slew of local refining shutdowns, low discounts on Russian crude and a reduction in crude output, Russia continued to prevail in India’s crude basket in July and displaced Gulf grades and US oil, according to industry sources and shipping data. Russian oil accounted for close to 43.8 per cent of India’s overall 4.52 million barrels per day in July, marginally lower from 44.4 per cent share in June of 4.6 million bpd of imports, and from a 44 per cent share a year earlier, according to market intelligence data from Paris-based Kpler. Russia had a record 46 per cent share of the Indian oil imports market in May 2023.
Route clear for Mannar basin gas; in the interim, India’s LNG for Kerwalapitiya power plants
An Indian proposal to sell liquefied natural gas (LNG) for Sri Lanka’s gas-powered generation plants is an “interim solution” until gas production finally starts in the Mannar Basin, a plan long-delayed by incomplete regulatory frameworks and political wavering. Those requirements are all now in place. The final set of laws—the Petroleum Resources (Joint Study Agreements) Regulations No. 3 of 2024—was gazetted last week. It defines the procedure by which companies could conduct one or more joint studies with Sri Lanka’s Petroleum Development Authority (PDA) in any of the areas contained in the country’s Petroleum Resources Exploration and Development Block Map. The Petroleum Resources (Exploration and Development Block Map) regulations No. 1 of 2024 were also published in March. Since the production of local gas will take several more years, however, the Indian government made an offer last year for the New Delhi-headquartered Petronet LNG Ltd. (PLL) to export gas to Sri Lanka in liquid form, to regasify it and to transport it to the gas-powered generation plants run by LTL Holdings (Pvt) Ltd. in Kerawalapitiya. This will be a direct procurement contract between PLL and LTL. Sri Lanka’s cabinet has approved the arrangement. Geopolitical compromise The arrangement with India has a strong geopolitical flavour. In the past, Sri Lanka has twice reneged on agreements reached with India. For instance, in 2019, it signed a memorandum of cooperation with India and Japan to develop the Colombo Port’s East Container Terminal. It pulled out of the deal two years later, citing worker dissatisfaction and trade union unrest. Separately, in 2017, Sri Lanka approved an India-Japan joint venture for a US$ 250 million LNG import terminal to supply gas to Kerawalapitiya. The state-owned PLL and Japan’s Mitsubishi and Sojitz struck a deal to build the terminal, which was even approved by the Public Utilities Commission of Sri Lanka. In 2022, the Sri Lankan government cancelled this project. Sri Lanka then awarded a tender to China Harbour Engineering Company (CHEC) and Pakistan’s Engro Corporation to develop a floating storage and regasification unit (FSRU) at Kerawalapitiya and an offshore and onshore regasification LNG transmission pipeline network. It later deemed that project to be unfeasible amidst worsened economic conditions and pulled out before awarding PLL the latest LNG supply contract. Earlier, two other LNG projects were also shelved. One was an unsolicited bid in 2019 from Korea’s SK E&S Co. Ltd. for an FSRU, a pipeline, and an LNG supply deal. It was opened to a Swiss Challenge (where other bidders were invited to compete on its terms) and subsequently dropped. In 2021, there was an agreement that a United States company, New Fortress Energy, would buy a 40 percent stake in Sri Lanka’s Yugadhanavi power plant, develop an FSRU and supply gas to the plant. This also didn’t make the cut.
Oil Prices Are Set for a Third Consecutive Weekly Loss
Crude oil prices looked on track for a third weekly loss in a row, pressured by the perception of weaker-than-desired Chinese demand. Even so, oil made some gains earlier in the week, mostly on substantial inventory draws as reported by the American Petroleum Institute and the Energy Information Administration. The latest push for oil prices came from the U.S. Commerce Department, which reported GDP growth of 2.8% for the second quarter, attributing it to higher consumer spending and business investment. More U.S. economic data is due out later today when the Fed will report personal consumption expenditure data—the inflation metric that the U.S. central bank favors. Meanwhile, prices are getting some support from expectations that the PCE data would be positive, strengthening hopes of an interest rate cut in September. On the other hand, Goldman Sachs analysts said this week that weak demand and slower GDP growth next year could shave some $11 off oil prices—if the U.S. imposes new tariffs on imported goods. The decline could deepen to $19 per barrel, the analysts said, if the Fed delays rate cuts until after 2025 on persistently high inflation. Interestingly, some oil market watchers appear to be bracing for more OPEC supply coming online in the second half of the year. That’s according to Bloomberg, which said in a report earlier today that market observers were “split over whether the producer cartel will ease their curbs next quarter.” OPEC did indeed suggest it might begin to roll back some production curbs but it made a point of clarifying this would only happen if prices are where OPEC wants them to be. With prices sliding, it is quite unlikely that the group would bring back any supply, since that would only serve to pressure prices even more, betraying the very purpose of the cuts.
ONGC signs PML deed with Coal India for Coal Bed Methane Block
India’s Maharatna Oil PSU ONGC has signed the first-ever Petroleum Mining Lease (PML) deed with Coal India for the Jharia Coal Bed Methane (CBM) block on 24 July 2024. he agreement was signed in the presence of Bokaro’s Deputy Commissioner Vijaya Jadhav, IAS, and District Mining Officer Ravi Kumar Singh, this joint venture (JV) marks a significant milestone in energy collaboration. Earlier, in January 2024, ONGC commenced oil production from the Block KG-DWN-98/2 Cluster-2 asset via a floating production, storage, and offloading (FPSO) vessel.
India’s natural gas consumption jumps 7.1% in June 2024: PPAC
India’s total consumption of natural gas, including internal usage, saw a significant increase to 5,594 million metric standard cubic meters (MMSCM) in June 2024, marking a 7.1% rise from the same month last year, according to a report by the Petroleum Planning and Analysis Cell (PPAC). “The increase in natural gas consumption underlines its growing importance as a versatile energy source across various sectors of the economy,” a PPAC official said. This upward trend reflects the expanding application of natural gas from electricity generation and heating to its use as a critical feedstock in industries such as fertilizers and plastics. For the fiscal year up to June 2024, cumulative consumption reached 16,707 MMSCM, a 3.8% increase compared to the same period in the previous year. “This consistent rise in usage showcases natural gas’s pivotal role in supporting India’s energy security and sectoral energy needs,” the spokesperson added. Sector-specific consumption data for April and May 2024 reveals diverse applications of natural gas across the economy. The fertilizer sector led with 26% of the total consumption, followed by city gas distribution at 20%, and power generation at 18%. Refineries and petrochemicals also showed significant usage, accounting for 9% and 3% respectively, while miscellaneous sectors comprised 24% of the consumption in May 2024.
Budget 2024: Govt allocates ₹1190 billion for petroleum and natural gas, focus on strategic reserves and infrastructure
The ministry of petroleum and natural gas has been allocated a total budget of ₹1194.0252 billion for the fiscal year 2024-2025, reflecting a significant financial commitment to bolster India’s energy infrastructure and capabilities. This allocation, comprising both budget support and Internal and Extra Budgetary Resources (IEBR), underscores the government’s focus on securing energy resources and supporting the sector’s growth. The Oil and Natural Gas Corporation (ONGC) has been a major beneficiary, with an allocation of ₹308 billion for 2024-2025. This represents a steady increase from ₹305 billion in the revised budget for 2023-2024 and ₹301.25 billion in the initial 2023-2024 budget. This continuous increase highlights ONGC’s critical role in India’s energy sector and the government’s intention to support its exploration and production activities. In contrast, the Gas Authority of India Limited (GAIL) has seen a significant reduction in its budget allocation. For 2024-2025, GAIL has been allocated ₹48.86 billion, a sharp decrease from ₹68.88 billion in the revised 2023-2024 budget and ₹60.0249 billion in the initial budget for 2023-2024. This reduction might indicate a shift in strategic priorities or a realignment of GAIL’s project pipeline. Bharat Petroleum Corporation Limited (BPCL) is set to receive ₹20 billion for the fiscal year 2024-2025, down from ₹21.50 billion in the revised budget for 2023-2024 and ₹23.60 billion in the initial 2023-2024 budget. This decrease could reflect the completion of key projects or a strategic pivot in BPCL’s operational focus. Indian Oil Corporation Limited (IOCL) has been allocated ₹273.7404 billion for 2024-2025, a slight increase from ₹270.6445 billion in the revised 2023-2024 budget and significantly higher than the ₹257.4131 billion allocated in the initial 2023-2024 budget. This increase suggests continued investment in refining and marketing operations, crucial for maintaining India’s energy supply chain. Oil India Limited has received an increased allocation of ₹68.80 billion for 2024-2025, up from ₹56.48 billion in the revised 2023-2024 budget and ₹48.96 billion in the initial budget for 2023-2024. This significant boost underscores the company’s growing role in exploration and production. Oil and Natural Gas Corporation Videsh Limited(OVL) has also seen a notable increase in its budget, with ₹55.8001 billion allocated for 2024-2025, up from ₹33.1123 billion in the revised 2023-2024 budget. This increase highlights the strategic importance of OVL’s international ventures and the need to secure overseas energy assets. The Refinery and Marketing Sector as a whole has been allocated ₹571.7604 billion for 2024-2025, compared to ₹547.5795 billion in the revised 2023-2024 budget. Within this sector, Hindustan Petroleum Corporation Limited (HPCL) has been allocated ₹107.70 billion, up from ₹102.10 billion in the previous year, reflecting ongoing and new refining projects. Numaligarh Refinery Limited’s budget has increased to ₹89.86 billion from ₹87.6550 billion, highlighting the expansion and modernization efforts.
IndianOil to triple gas sales, boost renewable energy to 31 GW by 2030
Indian Oil Corporation plans to increase its natural gas sales threefold and expand its renewable energy capacity to 31 GW by 2030. Additionally, the company aims to establish a 5 GWh lithium-ion battery production capacity by 2031 as part of its strategy to diversify its energy portfolio. As the largest oil refiner and retailer in India, Indian Oil has been focusing on developing its non-oil sectors, including investments in petrochemicals and natural gas. In response to the growing global emphasis on combating climate change, the state-owned enterprise is also incorporating renewable energy and battery technologies into its offerings, the report said. Indian Oil has signed a strategic partnership with Panasonic Energy of Japan to explore the potential for producing lithium-ion battery cells within India. Lithium-ion batteries The company has entered into a strategic agreement with Panasonic Energy Company, Japan, to explore opportunities for advanced cell manufacturing of Lithium-ion batteries in India. In its report titled ‘Integrated Annual Report 2023-24’, Indian Oil said, “With a vision to propel ‘Make in India’ for the world, the JV plans to establish a one GWh capacity factory by 2027, with an ambitious expansion to 5 GWh by 2031. This collaboration aims to position India as a global hub for advanced battery technology, supporting the nation’s transition to sustainable energy and transportation solutions.” Battery swapping stations Indian Oil is also leveraging its broad network of fuel retail locations by investing in battery swapping stations and expanding its electric vehicle charging infrastructure Currently, the company has provided battery swapping services at 99 fuel stations for electric vehicle users. “Battery swapping offers a quick and convenient solution for EV users, eliminating long charging times, extending battery life and reducing electronic waste,” the report said. It plans to develop a renewable energy capacity of 31 GW by 2030, focusing mainly on solar and wind initiatives. “The company aims to enhance our renewable energy capacity to 31 GW by 2030, primarily through solar and wind projects. This expansion aligns with India’s target to achieve 500 GW of installed renewable capacity by the same year,” the report further said
Indian refiner BPCL sees further cuts in oil OSPs as fuel margins drop
Bharat Petroleum Corp, India’s third-biggest refiner, expects Middle Eastern producers to cut the official selling prices (OSPs) of their crude in coming months to reflect lower margins on fuel sales, its head of finance said . Lower fuel cracks – the difference between the cost of crude oil and refined product sales – are hitting the profitability of refiners globally. Complex refining margins in Asia have dropped by half to USD 4.10 per barrel as of July 19 compared with about USD 8.20 per barrel in February. “Compared to April-May the OSPs are moderate and these OSPs will be further moderated because cracks are on lower side,” Vetsa Ramakrishna Gupta told an analysts call. “I don’t think OSP premiums will be on higher side when cracks are on lower side,” he said. BPCL on Friday said its net profit for the three months ended on June 30 fell 71% from a year earlier to 30.15 billion Indian rupees (USD 360 million), partly due to lower margins. Earlier this month, Saudi Aramco cut prices for crude to Asia a second straight month, with its flagship Arab Light crude price for August loadings at its lowest since March. [CRU/OSP]
Oil Ministry announces plans for energy security fund
Oil Minister Hardeep Singh Puri on Saturday said that the ministry will set up an energy security fund, emphasising that it will help domestic oil and gas firms stay relevant in the future. The Ministry of Oil and Natural Gas (MoPNG) held a day-long strategising session in Bangaluru on Saturday, holding deliberations with top ministry and CPSU officials on India’s energy mix for 2040. “Started the day with an engaging discussion with top officials of oil sector PSUs & @PetroleumMin on strategizing India’s energy mix for 2040 and creating an energy security fund which are crucial for keeping our oil companies relevant in the future. These discussions will show the way forward to India’s journey towards energy sufficiency under the leadership of PM @narendramodi Ji & prepare our energy sector for the future,” Puri tweeted on X. According to different global outlooks and PPAC’s transition scenario, India’s CAGR growth from 2022 to 2040 is estimated at 3 per cent, with the share of oil in total Primary Energy at 41 per cent in 2040. The integration of refineries and petrochemicals into an oil-to-chemical model is the way forward for the industry. This will not only enhance efficiency but also create new opportunities, he added. The Minister did not provide any details on the fund or how it will be utilised. However, sources said that the fund could be used to acquire oil and gas assets in foreign countries. Rare earth minerals The CPSUs under the charge of MoPNG will now explore rare earth minerals. The Minister emphasised that oil and gas companies have the prowess to extract and refine natural resources as demand for renewable energy and battery storage intensifies. “We will also assess the need to acquire rare earth minerals. Discussed the sources, value chain, domestic and international reserves and the way forward for our oil companies to engage in mining of rare earth minerals in our brainstorming session today,” he added. Gas-based economy Puri noted that India’s natural gas consumption has risen steadily to 187 million standard cubic meters per day (MSCMD) in FY24 from 137 MSCMD in FY15. “Under the visionary leadership of PM @narendramodi Ji, we are exploring new pathways and initiatives to move towards a cleaner, greener, more affordable fuel, natural gas. In our brainstorming session, we discussed key drivers of global LNG demand, forecasts of LNG shipping, LNG terminals demand assessment and key policy drivers necessary to push the transition,” he added. Many states such as Assam, Andhra Pradesh, Maharashtra and others have taken the progressive and visionary step to reduce VAT on natural gas, the minister said, adding that he hopes that more states will reduce VAT on natural gas as it will help in movement towards a gas-based economy.
India supasses United States to have 15 per cent blended fuel as base fuel last month: Hardeep Singh Puri
Under PM Narendra Modi’s leadership, India has even surpassed United States to have a 15% blended fuel as base fuel, last month, Union Minister for Petroleum and Natural Gas, Hardeep Singh Puri said on Saturday. Union Minister engaged in discussion with top officials of oil sector PSUs & Petroleum Ministry on strategizing India’s energy mix for 2040 and creating an energy security fund which are crucial for keeping our oil companies relevant in the future. He had an in-depth discussion to examine and track the availability of feedstock, the roadmap beyond E20, biodiesel production process, and significance of promoting both ethanol and biodiesel blending. He said, “Over the past decade, India has made remarkable strides in ethanol blending. We achieved 10% ethanol blending 5 months in advance in June 2022 & also advanced availability of E20 blend by 5 years to 2025. 20% ethanol blended fuel is now available at more than 12,000 retail outlets. While before 2014 India managed only 1.4% ethanol blending.” “Since May this year, OMCs have begun dispensing E15 as a base fuel. Expanding our ethanol blending program and promoting biodiesel blending are crucial steps towards achieving a greener and more sustainable energy sector.” Puri further added. According to the Petroleum Planning & Analysis Cell (PPAC) Monthly Ready Reckoner report, Ethanol blending with Petrol was achieved at 15.90 per cent during June 2024 and cumulative ethanol blending during November 2023-June 2024 was 13.0 per cent.