Domestic Natural Gas Prices Reduced, Government Caps Prices
The Ministry of Oil has reduced the price of domestic natural gas to USD 8.44 per million metric British thermal units (mmBtu) for June 2024, down from USD 8.90 in the previous month. Despite this reduction, the price will remain capped at USD 6.5 per mmBtu under the current pricing formula, as part of the government’s efforts to stabilise the market. The new pricing mechanism, introduced by the government, sets a floor price of USD 4 per mmBtu and a ceiling price of USD 6.5 per mmBtu for domestic gas. This applies to natural gas produced from legacy and oil fields managed by Oil and Natural Gas Corporation Ltd (ONGC) and Oil India Limited (OIL). Under this regime, domestic gas prices are linked to imported crude oil prices, pegged at 10 per cent of the Indian crude basket, with monthly updates to reflect current market conditions. This pricing reform follows recommendations from a government-appointed panel led by Kirit Parikh, an energy expert and former member of Niti Aayog. Established in 2022, the panel aimed to overhaul the pricing structure for domestically produced natural gas to stabilise the market for both producers and consumers. The primary goals included boosting domestic gas production to meet the target of deriving 15 per cent of India’s energy from natural gas by 2030 and ensuring fair pricing for consumers. Key recommendations from the Parikh committee included a fixed pricing band for gas from legacy fields, which constitute two-thirds of the country’s total natural gas production. The panel advised linking the price of gas produced by state-owned companies from fields allocated on a nomination basis to imported crude oil prices, with a minimum floor price of USD 4 per mmBtu and a ceiling of USD 6.5 per mmBtu. The ceiling rate for APM gas from legacy fields will see an annual increment of USD 0.5 per mmBtu. The current pricing formula will remain for gas fields with challenging geologies, such as Reliance Industries and British Petroleum’s KG-D6. Additionally, the committee recommended integrating natural gas into the Goods and Services Tax (GST) regime to streamline taxes and prioritise city gas in the allocation of APM gas. This ensures the city gas sector falls under the ‘no-cut’ category, meaning supplies to other consumers will be curtailed first in the event of a production decline.
India explores for crude oil on sweeter terms after end of Iran oil waiver
India is trying to leverage its robust ties with West Asian crude oil producers such as Saudi Arabia, Kuwait and the United Arab Emirates (UAE) to source additional volumes at terms similar to those of its annual contracts in a bid to avert any sharp rise in its domestic oil prices. India, the world’s third-largest oil importer, is in discussions with oil producers in West Asia as well as in other geographies to procure a total of about 15 million tons of extra crude over the year to urgently bridge a supply gap that will be caused by the exit of Iran from its energy basket. US secretary of state Mike Pompeo on Monday announced that the Donald Trump administration would no longer grant exemptions to some countries to import Iran oil with the conditional waiver set to expire on 2 May. India’s attempt to boost crude supplies from the Gulf nations also comes at a time when they plan to increase their investments in India. Crude purchased under the annual contract terms would be more lucrative for India than under spot contracts. Such contracts would also allow for purchasing additional quantities of crude at similar terms. “Talks with West Asian suppliers such as Saudi Arabia, United Arab Emirates and Kuwait are in advanced stages. They have been our long-term suppliers and will be leaned on for extra cargoes at old terms and conditions,” an Indian government official said, requesting anonymity.
India targets global renewable ammonia market, aims for energy leadership
With the goal of achieving leadership in sustainable energy through smart international partnerships, India is staking its claim in the global market for renewable ammonia. India emphasises its commitment to renewable energy with plans to produce 5 million metric tonnes of renewable hydrogen by 2030 and gain a 10 per cent share of global trade. To help with project funding and implementation, leading organisations like ReNew-Jera and ACME-IHI have started to sign non-binding supply agreements for renewable ammonia, and more will follow. India’s affordable renewable hydrogen is well-positioned to compete internationally, despite challenges in the form of inconsistent policies and market competition from established ammonia manufacturers in South Korea and Japan. India’s competitive edge is further strengthened by the National Green Hydrogen Mission 2023, which eliminates interstate transmission fees and offers incentives. The industry is quite hopeful about India’s ability to achieve the demanding European standards for renewable fuels at more affordable rates than other global markets, as it has the capacity to produce hydrogen at a significantly lower cost than other countries.
CoolCo reveals more details on GAIL LNG carrier charter deal
LNG carrier operator CoolCo has revealed more details regarding its recent 14-year charter deal with India’s largest gas utility GAIL. CEO Richard Tyrrell said during the company’s first quarter results earnings call on May 22 that this charter deal with GAIL is the largest single contract CoolCo has ever entered into. He said GAIL is a “significant importer of LNG into one of the highest potential markets”. “It is great to establish our relationship and we’re aiming to work together on future projects,” Tyrrell said. GAIL is an end user for LNG and sells regasified LNG to customers in the fertilizer, city grid, power, refinery, and petrochem sectors, amongst others in India. The state-owned firm owns and operates a network of over 16,000 km of natural gas pipelines in India. It holds a stake in India’s largest LNG importer, Petronet LNG, and the company buys volumes under long-term LNG deals, including from the US and Qatar. GAIL charters LNG carriers to ship these volumes and currently has 4 vessels in its fleet. It also operates the 5 mtpa Dabhol LNG terminal in India. Tyrrell said growth in India is underpinned by a booming economy and high growth niches like the compressed natural gas and LNG markets for transportation. “You can see how LNG imports have bounced back now that the prices have stabilized after the Ukraine shock and are now back on their upward trajectory,” he said. “The high-teen return on equity that we achieved on the newbuild sets a supportive precedent for the second vessel, around which active discussions continue,” Tyrrell said. Kool Tiger and Kool Panther Under the long-term deal announced on May 16, CoolCo will charter one of the company’s two newbuild 174,000-cbm LNG carriers currently under construction at South Korea’s Hyundai Samho. CoolCo will deliver the newbuild to GAIL in the Gulf of Mexico, with the time charter starting in early 2025. Also, GAIL has the option to extend the charter by two additional years beyond the firm 14-year period. CoolCo purchased this and the other LNG carrier from its largest shareholder Eastern Pacific Shipping, and they feature GTT’s Mark III Flex membrane cargo tank system, reliquification, air-lubrication, and shaft generators. The shipping firm exercised its option with affiliates of EPS Ventures in June 2023 to acquire newbuild contracts for the two 2-stroke LNG carriers scheduled to deliver in the fourth quarter of 2024. CoolCo will pay about $235 million for each of the LNG carriers which will be named Kool Tiger and Kool Panther. This is much lower than the current prices in South Korea of about $260-270 million for a newbuild 174,000-cbm LNG carrier.
Petronet expects 15 percent rise in India’s LNG imports
India’s largest LNG importer Petronet LNG expects a 15 rise in the country’s imports of liquefied natural gas during this financial year, according to Petronet LNG’s management. Petronet’s executives said during the company’s earnings call on May 23 that the company expects India’s LNG imports to rise to 27 millions tons in the fiscal year 2025/2026 which ends in March next year. The reasons behind the growth are lower prices as India is a price-sensitive market and the hot weather during this season which has “substantially” increased power demand. India imported about 23.3 million tonnes during the April 2023-March 2024 financial year, up by 17.5 percent, according to PPAC data. At the moment, India imports LNG via seven facilities with a combined capacity of about 47.7 million tonnes. These include Petronet LNG’s Dahej and Kochi terminals, Shell’s Hazira terminal, and the Dabhol LNG, Ennore LNG, Mundra LNG, and Dhamra LNG terminal. Hindustan Petroleum’s 5 mtpa Chhara LNG import terminal in Gujarat should also receive its commissioning cargo later this year. Dahej expansion and Kochi pipeline Petronet is currently expanding its 17.5 mtpa Dahej LNG terminal with about 5 mtpa of new capacity, and is also constructing two additional LNG tanks on top of the six existing tanks. The company’s executives said that the 5 mtpa additional capacity at the Dahej terminal should be available by March 2025. During the financial year which ended March 31, 2024, the Dahej terminal processed 865 TBTU of LNG as against 704 TBTU processed during the previous financial year. The overall LNG volume processed by the company in the financial year was 919 TBTU, and this compares to 752 TBTU in the financial year before. Besides the Dahej LNG terminal, Petronet operates the 5 mtpa Kochi LNG facility and is working on the Gopalpur FSRU project. The Kochi terminal is currently operating at about 20 percent capacity. Petronet expects the Kochi-Bangalore pipeline to be completed by the end of this year or by the end of March next year and this will substantially boost the utilization of the facility. Moreover, Petronet’s executives said during the call that the construction of the Gopalpur project will take about three years to complete and the project is currently in its initial stage. In December last year, the firm executed binding deals with Gopalpur Ports for its first LNG terminal on India’s east coast. Petronet and Gopalpur Ports signed sub-concession agreement, sub-lease deed, and port service agreement for the first phase of the 4 mpta FSRU-based terminal, with provision for converting to a 5 mtpa land-based terminal at the port. The company’s executives noted during the call that Petronet may opt for a land-based terminal because of limited availability of FSRUs in the international market.
India’s robust LNG imports are Asia’s standout, but higher prices may weigh: Russell
Asia’s imports of liquefied natural gas(LNG) are displaying contrasting dynamics in May, with strength in usually price-sensitive buyers like India, but a softer trend in the developed economies such as Japan and South Korea. The top-importing continent is on track to receive about 23.61 million metric tons of the super-chilled fuel this month, according to data compiled by commodity analysts Kpler. This is up slightly from April’s 23.23 million tons, although on a daily basis May’s arrivals are a touch weaker, while they are stronger than the 20.75 million from May 2023. But while the overall LNG import figures are relatively stable for Asia this month, the breakdown is somewhat at odds with recent movements in the spot price. India’s May imports are estimated at 2.46 million tons, up from 2.03 million in April and the strongest month since October 2020. The surge in arrivals comes even as the spot price for delivery to North Asia has been rallying, rising from a near three-year low of $8.30 per million British thermal units (mmBtu) in the week to Feb. 23 to a five-month high of $12.30 last week. What is worth noting is that the cargoes arriving in India in May would have been secured in a window from later February to early April, a time when spot prices were rising but were still below the $10 per mmBtu level. Now that the spot price has risen decisively above that level, it raises the possibility that Indian utilities will scale back purchases as LNG will no longer be competitive in the domestic market.
Petroleum Secy Inaugurates GAIL’s 10 MW Green Hydrogen Plant
n May 25th, Mr. Pankaj Jain (1987-batch IAS officer), the incumbent Petroleum Secretary of India, inaugurated the state-of-the-art Green hydrogen plant at GAIL Vijaipur in Madhya Pradesh, as a testament to the union’s National Green Hydrogen Mission (NHM). Present at the event were GAIL Chairman and Managing Director (CMD), Mr. Sandeep Gupta, Director (Projects), Mr. Deepak Gupta, Director (Human Resources), and Mr. Ayush Gupta, among other senior officials. The Maharatna PSU GAIL’s Green Hydrogen Plant has a capacity of producing 4.3 TPD of Hydrogen, through 10MW PEM (Proton Exchange Membrane) Electrolyzer units, by electrolysis of water using renewable power. The purity of hydrogen from this plant shall be 99.999% (by volume.) and will be produced at a pressure of 30 Kg/cm2. The hydrogen thus produced from this unit shall be used as a fuel along with natural Gas for captive purposes in the various processes and equipment running in the existing plant at Vijaipur, after which it shall be dispensed to retail customers in the nearby geographies, transported through high-pressure cascades.
India, Egypt top destinations for Russian seaborne fuel oil, VGO exports in April, LSEG data shows
India and Egypt were the top destinations for Russian seaborne fuel oil and vacuum gasoil exports in April, traders said and LSEG data showed. In total, Russian fuel oil and VGO seaborne exports fell in April by 10% month-on-month to about 3.32 million tons, as refining capacity idled due to maintenance, technical outages and drone attacks, increased last month by 13.6% from March, Reuters calculations showed. The European Union’s full embargo on Russian oil products went into effect in February 2023 and the bulk of Russia’s fuel oil and VGO was redirected to other regions, mostly Asia. In April 2024, direct fuel oil and VGO shipments from Russian ports to India increased to 0.6 million metric tons from 0.4 million tons the previous month. Russian fuel oil loadings to China decreased last month to about 450,000 tons from 660,000 tons in March, according to LSEG data and Reuters’ calculations. China and India import straight-run fuel oil and VGO for refining, partially replacing more expensive Urals barrels, traders said. Fuel oil supplies to Egypt increased in April to almost 0.5 million tons from 0.1 million tons in the previous month. All the cargoes were discharged at Ain Sukhna Terminal, shipping data showed. Traders use Ain Sukhna Terminal as storage and blending facilities, buying fuel oil for power generation ahead of the summer season, market sources said. At least 200,000 tons of fuel oil had been loaded in Russian ports so far in May to supply the Ain Sukhna Terminal, according to LSEG data. Russian VGO and fuel oil loadings to Fujairah increased in April to about 260,000 tons from 60,000 tons in March.
India’s use of crude tankers to export diesel slows in May
Indian refiners’ use of crude oil vessels to ship refined fuels such as diesel to key European markets has diminished in May after volumes neared two-year high levels last month, trade sources and analysts said. That is because rising inventories in the Antwerp-Rotterdam-Amsterdam region and shaky east-west diesel price spreads undermine the case for sellers to ship large volumes of the industrial fuel West. While more April shipments from India to Europe provided a floor for Asian margins, fewer such voyages in May will likely compel Indian refiners to shift diesel sales back to Asia, exacerbating a supply glut in the region, analysts and traders said. Diesel exports using Suezmax and Aframax vessels Mesta, Pertamina Halmahera and Marlin Santorini – mostly from Reliance Industries’ Jamnagar refinery – reached a near two-year high of around 380,000 metric tons (2.831 million barrels) in April, Kpler, Vortexa and LSEG shiptracking data showed. Reliance did not respond to a Reuters email for comment. Shiptracker Kpler in February estimated a switch by 35 Aframax crude tankers to carry refined products instead of crude. Traders switched to using Suezmax and Aframax tankers – that typically load so-called “dirty” crude oil and residue fuel – for carrying “clean” refined products after freight rates for long-range (LR) tankers spiked following Houthi attacks on ships in the Red Sea that forced longer voyages and tightened vessel availability. “At the time it was a reflection of how tight the LR1 and LR2 clean product tanker market was given the additional tonne miles vessels were having to do to avoid the Red Sea, and the lack of available prompt tonnage to book because ships were massively displaced given the additional sail times,” said Wood Mackenzie’s research analyst Emma Howsham. The crude oil market was also weaker, as refinery maintenance in the United States and Middle East dented demand for dirty vessels, making it attractive to ship diesel using them, she added. Even after the cost for scrubbing and cleaning a vessel to load ultra-low sulphur diesel, that was still nearly twice the cost for shipping up to 130,000 tons of fuel on a Suezmax vessel on a similar route, traders said. Traders have been among the biggest shippers of Indian-origin diesel, and they have the option for several discharge destinations and thus have room to ship using bigger vessels, one Europe-based trade source said. The trend has abated for May with no dirty tankers carrying diesel on the India-northwest Europe route, shiptracking data showed, as analysts expect Europe’s supply to be long. The economics for Indian refiners to supply to Europe via the Cape of Good Hope looks challenging as “European supply looks ample in the coming months”, said Woodmac’s Howsham.
GAIL To Set Up 26 Bio CNG Plants In JV Partnership
State-owned GAIL (India) Ltd. plans to set up around 26 Bio CNG plants over the next two to three years, both as producers as well as joint venture partners with raw material suppliers or biogas producers. The company has issued an Expression of Interest across India, for companies qualifying with certain parameters to form joint ventures for raw materials such as paddy straw, municipal solid waste and sugarcane press muds. The company alongwith joint venture partners is likely to invest up to Rs 13 billion, including equity contributions of 30%. Earlier, in February, Gail announced plans to import ethane from ethane-surplus countries to be transported through its pipeline systems to demand centres.