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. COST FACTOR The cost for shipping 65,000 tons of fuel on a LR1 tanker averaged $75 per ton in March and April from India to northwest Europe, compared to $60 a ton in February, pricing data from SSY Tanker showed. 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.
Auditors flag unpaid ‘use or pay’ charges of Rs 18.32 billion at Petronet LNG
Auditors have flagged the unpaid ‘use or pay’ charges of Rs 18.32 billion at Petronet LNG, the country’s largest operator of natural gasimport terminals Customers must pay for the regasification capacity they book at Petronet’s import terminals even if they don’t use it. Some customers, however, have not done so in the last three financial years, resulting in unpaid dues climbing to Rs 18.32 billion, which includes Rs 6.10 billion for the year 2023-24, Rs 8.45 billion for 2022-23, and Rs 3.79 billion for 2021-22. The company has made a provision of Rs 3.58 billion towards this. Petronet reported a 20% year-on-year rise in the fourth quarter profit to Rs 7.38 billion on higher utilization of its import terminals. Revenues for the Jan-March quarter marginally fell to Rs 137.93 billion from Rs 138.74 billion in the year-ago period.
Adani Total Gas Launches CBG Production
Adani Total Gas has commenced production at its inaugural compressed bio-gas (CBG) plant, the Barsana Biogas Project, in Uttar Pradesh. This marks a significant milestone in the company’s renewable energy initiatives. Mathura district, the plant is designed to process up to 600 tonnes of agricultural waste per day across its three phases, producing over 42 tonnes per day of CBG and 217 tonnes of organic fertiliser The plant employs advanced anaerobic digestion technology to convert organic materials into renewable biogas, significantly reducing greenhouse gas emissions and reliance on fossil fuels. This sustainable approach supports India’s goals for fuel security and emission reduction.
Kochi Port Welcomes LNG Carrier
Kochi Port marked a significant milestone in its green initiatives with the docking of the LNG-powered container carrier, MSC ROSE. This 365-meter-long vessel, capable of carrying 15,500 TEUs, is the first LNG-powered ship to berth at the Vallarpadom Container Terminal. LNG, or Liquefied Natural Gas, offers a more environmentally friendly alternative to traditional diesel fuel, reducing greenhouse gas emissions and improving air quality.
Gail may line up Rs 500 billion capex in big petrochemical bet
Gail (India) plans to invest up to ₹500 billion to build a 1.5 million tonnes per annum ethane cracking unit at Sehore, Madhya Pradesh, three officials aware of the development told ET. This is among the biggest proposed capital expenditures by the state-run gas utility. The new facility is expected to help Gail meet the robust domestic petrochemicals demand, which is expected to nearly triple to $1trillion by 2040. Ethane is a component of natural gas. An ethane cracker breaks down ethane into ethylene, which is the key chemical input for making plastics, adhesives, synthetic rubber, and other petrochemicals. “Gail is very bullish on the petrochemicals segment. This new facility is still in the planning stage and will almost double Gail’s existing 810 KTA (thousand tonnes per annum)petrochemicals facility in Pata near Kanpur, UP,” said an official aware of the development.
Why Oil May Regain Upward Momentum
Dynamics in the global oil markets have shown little change over the past couple of weeks with pessimism still high and hedge funds still leaning towards the short side of the market. Over the past week, Brent prices remained range-bound in the $83.45-83.60/bbl range with the prolonged sideways price movement pushing volatility lower. The realized annualized 30-trading-day front-month Brent volatility clocked in at just 16.9% at settlement on 20 May, a 2.1 ppt w/w reduction while the 10-trading-day volatility measure came in 7.4 ppt w/w lower at just 12.5%. Front-month Brent settled at $83.71/bbl on 20 May, good for a 0.35/bbl w/w increase but considerably lower than the $1.44/bbl increase predicted by Standard Chartered’s machine-learning oil price modeling tool, SCORPIO. Oil markets continue to be lackluster compared with the strength displayed by metals and gas markets. StanChart has predicted that the bearish sentiment coupled with low market volatility are likely to persist until OPEC+ announces its new policy during its next meeting scheduled for early June. However, StanChart notes that the exact timing of that unilateral announcement is uncertain because voluntary cuts are outside the scope of the OPEC+ ministerial meeting. The experts have predicted that positive developments by OPEC+ could trigger another oil price rally. In contrast to oil markets, natural gas markets have turned much more positive in recent weeks thanks in large part to improved supply/demand balances. Henry Hub gas prices are up 55.2% over the past 30 days to $2.78/MMBtu while TFF gas has jumped 42.0% from its February lows to change hands at €34.6/MWh. An early heatwave in Texas has helped make U.S. natural gas the strongest of the major commodities for a second successive week while the positive sentiment in Europe’s gas markets is being driven by concerns about prolonged maintenance outages in Norway, with the Troll field and Kollsnes processing plant still offline. Pipeline gas supplies to Europe hit a low of 178.9 mcm/day on Tuesday, the lowest since September while the previously huge inventory buildup has slowed down. The latest data by Gas Infrastructure Europe (GIE) shows that EU gas inventories stood at 77.88 billion cubic meters (bcm), good for a 2.11 bcm y/y increase. However, it’s important to note that whereas inventories are still 16.83 bcm above the five-year average, that surplus is being steadily eroded, having fallen on 32 of the past 34 days for a cumulative decrease of 5.5 bcm over the timeframe. Last week, the continent’s gas inventories increased by 2.28 bcm,lagging the 2.61 bcm increase over the same period last year and the five-year averageof 2.67 bcm. The muted pace of inventory increases coupled with evidence of strong LNG demand in Asia have been supporting the ongoing natural gas rally. However, it’s going to be interesting to see if the gas rally will hold, with predictions that Europe’s gas flows will gradually return to normal by the end of May. Meanwhile, warmer weather forecast until the end of May has dampened gas demand, resulting in European gas storage facilities surpassing 67% capacity. Energy Stocks Giving Up Gains The end of the early-year oil price rally has forced energy stocks to give up some gains. The sector has lost 5% over the past six weeks bringing its gains in the year-to-date to 11.46%, slightly below the 11.56% return by the S&P 500. The energy sector has slipped several spots in sector rankings and is now the 5th best-performing sector behind Communication Services (21.32%), Information Technology (16.60%), Utilities(14.51%) and Financials (11.80%). Only the Real Estate sector is in the red with a -4.21% return so far in the current year. That said, Wall Street largely remains bullish on oil and gas stocks. A week ago, Oppenheimer Asset Management revealed it holds a favorable outlook on the equities market, especially the Energy and Consumer Discretionary sector. “We remain positive on equities” as “92% (459 firms) of the companies in the S&P 500 index having reported Q1 results, earnings are exceeding expectations. Profits are up 5.5% overall on the back of 3.8% revenue growth,” Oppenheimer stated in an investor note. “Eight of the 11 sectors are showing positive earnings growth, with six up at double digit rates. These include communication services (+42%), consumer discretionary (+39%), utilities (+31%), information technology (+14%), financials (+11%) and real estate (+11%),” the investment firm added. Despite posting another disappointing earnings season, Oppenheimer has indicated that Energy likely has further upside though not necessarily in a straight line. Meanwhile, we recently highlighted that oil and gas stocks are likely to continue outperforming the market regardless of whether Biden or Trump ascends into the Oval Office come 2025, though clean energy investments could face considerable risk if Trump wins.
Oil India signs agreement with NRL for transportation of additional petroleum productsthrough NSPL
Oil India Limited (OIL), India’s oldest Oil & gas Company and Numaligarh Refinery Limited (NRL), OIL’s material subsidiary company on Wednesday signed a new long-term Definitive Agreement for the transportation of additional petroleum products through OIL’s Numaligarh-Siliguri Product Pipeline (NSPL) following the commissioning of Numaligarh Refinery Expansion Project. The Agreement will be effective from the date of commencement of augmented pipeline operations for a period of 25 years. Currently, OIL evacuates 1.72 MMTPA of petroleum products through NSPL, delivering to the Marketing Terminal of NRL at Siliguri. Since its commissioning in 2008-09, the NSPL has served as the lifeline for evacuating products from NRL’s Refinery to Siliguri Marketing Terminal for onward distribution to various demand centres in eastern and northern India. In line with Hydrocarbon Vision 2030 for Northeast India, NRL is executing Numaligarh Refinery Expansion Project to enhance capacity from 3 to 9 MMTPA. To evacuate NRL’s additional petroleum products through existing NSPL, OIL & NRL entered into an MOU in December 2020 under which, OIL agreed to invest for augmenting the capacity of the NSPL from 1.72 MMTPA to 5.50 MMTPA by way of establishing additional booster pump stations and other facilities at different pump stations along its right of way. Dr Ranjit Rath, CMD, OIL & Chairman NRL lauded the efforts of both Companies in framing the Definitive Agreement, “which will go a long way in the transportation of petroleum products to Siliguri & beyond, thus fuelling the growth trajectories of energy availability in the days to come,” according to an exchanges release.
New U.S. LNG Export Projects Risk Delays Due to Stricter Pollution Rules
New U.S. LNG projects risk delays amid the Biden Administration’s push for lower emissions and the ongoing reviews about the environmental impact of the planned export facilities. After President Joe Biden halted new LNG project approvals in January for a review of the current permitting process, the U.S. Administration is looking to implement stricter rules on pollution the export facilities are allowed to emit in the community. These new requirements are holding back projects, one being Venture Global’s CP2 LNG in Louisiana, and the company’s second such project in Cameron Parish, Louisiana. Last week, the Federal Energy Regulatory Commission (FERC) asked Venture Global to provide more details to prove its emissions would be below the stricter threshold. Venture Global criticized FERC’s move as an “eleventh hour data request” that would “encourage further baseless claims,” the company said in a letter to the regulator seen by the Financial Times. Venture Global says its project is in line with standards and has filed new information with FERC. Cheniere Energy, the top U.S. LNG exporter, also has projects that need approvals. Cheniere is working closely with FERC to progress the permitting approval process for trains 8 and 9 at Corpus Christi, CEO Jack Fusco said on the Q1 earnings call earlier this month. “We expect to receive our environmental assessment soon and remain confident that we will receive all necessary regulatory approvals to be able to sanction the project in 2025,” Fusco said. The halt of new LNG project approvals has been criticized by the U.S. oil and gas industry while environmentalists are pressuring the Administration to reject new project approvals. “We trust that when the government reviews the climate and environmental justice harms, they will fully reject all LNG export projects, because anything less would reveal this pause to be nothing more than a strategic and self-serving PR campaign,” Candice Fortin, 350.org US Campaign Manager, said. Charlie Riedl, Executive Director at the Center for LNG (CLNG), responded to the halt in permits saying “This is a short-sighted and damaging action that weakens U.S. relations with our allies. It undermines U.S. energy leadership in the world without any benefit to our shared climate goals and with considerable risk to the U.S. economy by endangering future projects and the jobs associated with them, as well as destabilizing international energy markets.”
Amlekhgunj-Lothar petroleum pipeline set for extension
The work of extending the petroleum pipeline from Amlekhgunj in Bara to Lothar in Chitwan will start soon. According to Nepal Oil Corporation, after the completion of the Motihari-Amlekhgunj pipeline, it will be extended to Lothar. Binitmani Upadhyay, head of Amlekhgunj, Madhesh regional office of the Corporation, said that a technical team is studying to start the pipeline work on Amlekhganj-Lothar 69 km. “Studies are being conducted by high-level technical teams from both Nepal and India,” he said, “Work will start after receiving the report of the teams.” One hundred thousand liters of petroleum products will be stored in Lothar by extending the pipeline. More than 70 percent of the second phase of the Motihari-Amlekhgunj pipeline project has been completed. According to Upadhyay, in the second phase, Indian Oil Corporation has installed two ‘petrol tanks’ of 4,100 kiloliters capacity, two ‘transmix tanks’ of 250 kiloliters capacity, 24 fully automatic ‘loading way-refillers’, ‘pump house’ and laboratory at the depot at Amlekhgunj in Bara. An agreement has been reached with the Indian Oil Corporation to build two transmix tanks for storing mixed fuel, which can be both petrol and diesel, and a firewater tank with a capacity of 3,000 kiloliters for security inside the depot. Although it is possible to import petrol and kerosene through the same pipeline, due to the lack of storage capacity, petroleum products have to be brought by tankers. When petroleum products are imported through pipelines, the technical loss will be zero, transportation costs will be avoided and environmental pollution will be reduced.
India greenlights massive green hydrogen and electrolyser production projects
India has taken a significant step in green energy by awarding tenders for 412,000 tonnes of green hydrogen production and 1.5 GW of electrolyser manufacturing, according to the Ministry of New & Renewable Energy (MNRE). Speaking at the World Hydrogen Summit 2024 in the Netherlands, MNRE Secretary Bhupinder S Bhalla highlighted India’s progress under the Strategic Interventions for Green Hydrogen Transition (SIGHT) program. He emphasised India’s advantages as a green hydrogen producer, particularly due to its low-cost renewable energy sources. Launched last year, the National Green Hydrogen Mission aims to establish a robust electrolyser manufacturing base and green hydrogen production facilities. Under SIGHT’s Component 1, the MNRE has allocated ₹44.40 billion for electrolyser manufacturing from FY26 to FY30. Component 2 includes ₹130.50 billion for green hydrogen production during the same period. The total financial incentive under SIGHT is ₹174.90 billion. The Solar Energy Corporation of India (SECI) will implement these projects, aiming to make India a global hub for green hydrogen production, usage, and export. The mission targets 5 million tonnes of annual green hydrogen production and 125 GW of associated renewable energy capacity, significantly reducing fossil fuel imports and CO2 emissions. By 2030, India expects to avert nearly 50 million tonnes of CO2 emissions and reduce ₹1000 billion in fossil fuel imports. In August 2023, the government set standards for green hydrogen production, ensuring it is derived from renewable energy with minimal carbon emissions.