India’s Diesel & Petrol Exports Decline 20% To USD 33 Bn In 2023-24
India’s exports of diesel and petrol witnessed a significant decline of 20 per cent year-on-year, amounting to USD 33 billion in the fiscal year 2023-24. This drop in export revenues can be attributed to the stabilisation of international fuel prices after the market disruptions caused by the Russia-Ukraine war in early 2022. Despite the decline in value, the combined export volumes of petrol and diesel remained relatively unchanged at 41.6 million metric tons during the same period, according to data from the oil ministry. Diesel, which accounts for the largest share of export revenues for Indian refiners, fetched USD 22 billion out of the total USD 48 billion earned from refined fuel exports in 2023-24. While the value of diesel exports fell by 24 per cent year-on-year, the export volumes decreased marginally by 1 per cent. On the other hand, petrol exports saw a 2.5 per cent increase in volume, but a 13 per cent decline in value, totalling USD 11 billion in 2023-24. Other refined products, including jet fuel, naphtha, and fuel oil, contributed the remaining USD 15 billion to India’s fuel export earnings. Reliance Industries and Rosneft-backed Nayara Energy, the two major private sector refiners in the country, are the primary exporters of diesel and petrol from India, catering to markets in Europe, Africa, and elsewhere. The stabilisation of global fuel prices in 2023-24, with petrol and diesel rates averaging 15-20 per cent lower than the previous year, led to a normalisation of earnings for Indian refiners after the record-high margins achieved during the 2022-23 fiscal year. Lower import costs for petroleum products, particularly liquefied petroleum gas (LPG), have provided relief to India’s import bill. The country’s LPG import bill decreased by 21 per cent to USD 10.5 billion in 2023-24, as India imports 60 per cent of its LPG consumption, primarily for cooking purposes. Overall, India’s refined products import bill shrank by 13 per cent year-on-year to USD 23 billion in 2023-24. Domestically, India’s fuel consumption continues to rise rapidly, driven by an expanding economy, increased vehicle sales, and growing access to fuel. The consumption of petrol increased by 6.4 per cent, diesel by 4.4 per cent, and LPG sales grew by 4 per cent in 2023-24, reflecting the country’s growing energy demands.
QatarEnergy and Nakilat shake hands on deal for 9 largest LNG vessels ever built
With a capacity of 271,000 cubic meters each, these nine QC-Max vessels constitute half of the 18 advanced QC-Max class LNG vessels that will be constructed at China’s Hudong-Zhonghua Shipyard, thanks to a $6 billion contract, which the Qatari heavyweight signed with China State Shipbuilding Corporation (CSSC). These vessels, which will adopt a dual-fuel low-speed engine propulsion system and the NO96 Super+ containment system, will come with a total length of 344 meters, a beam of 53.6 meters, a depth of 27.2 meters, and a designed draft of 12 meters. The deal with Nakilat was penned on May 8 by Saad Sherida Al-Kaabi, Qatar’s Minister of State for Energy Affairs, President and CEO of QatarEnergy, and Abdullah Al-Sulaiti, CEO of Nakilat, at QatarEnergy’s headquarters in Doha. The signing ceremony was attended by senior executives from QatarEnergy, QatarEnergy LNG, and Nakilat. Commenting on this occasion, Al-Kaabi noted: “We are very proud to have Qatar’s flagship LNG shipping and maritime champion join a list of world-class shipowners operating our state-of-the-art QC-Max LNG vessels – the largest ever built. There is no doubt that this is another testament to Nakilat’s significant capabilities.”
EU Proposes First Batch Of Sanctions On Russian LNG
Over the past two years, the U.S. and its Western allies have imposed a raft of sanctions on Russian energy commodities, including a $60-a-barrel cap on Russia’s seaborne exports of crude oil. Europe has, however, shied away from placing limitations on Russian gas, hardly surprising considering that the share of Russia’s pipeline gas in EU imports exceeded 40% before Russia invaded Ukraine. Since then, the continent has been largely successful in weaning itself off Russian energy, with gas imports from Russia falling dramatically. And, now Europe is getting ready to pull the trigger: Politico has reported that the European Commission has proposed sanctions on Russia’s LNG sector as part of Brussels’ 14th sanctions package against Russia. The proposed sanctions would prevent EU countries from re-exporting Russian LNG after receiving it and also ban EU involvement in upcoming LNG projects in Russia. However, the measures wouldn’t directly bar Russian LNG imports to the EU. Similar to previous sanctions, the import ban is intended to disrupt Putin’s ability to continue financing his war in Ukraine. Although Russian LNG accounted for just 5% of the bloc’s energy consumption in 2023, it still netted the Kremlin ~$8 billion in revenues. The proposal also suggests prohibiting the use of EU ports, finance and services to re-export Russian LNG, essentially meaning that Russia would have to overhaul its LNG export model. Currently, Russia supplies LNG to Asia through Europe, where Spain, Belgium and France are major hubs. “If they can’t transship in Europe, they might have to take their ice-class tankers on longer journeys,” Laura Page, a gas expert at the Kpler data analytics firm, has told Politico, adding that Russia “may not be able to get out as many loadings from Yamal because their vessels can’t get back as quickly.” Norway and the U.S. have replaced Russia as Europe’s biggest gas supplier: Last year, Norway supplied 87.8 bcm (billion cubic meters) of gas to Europe, good for 30.3% of total imports while the U.S. supplied 56.2 bcm, accounting for 19.4% of total. Natural Gas Rally Lately, natural gas has staged a big rally, with Henry Hub prices jumping from $1.61/MMBtu on 26th April to $2.40 on Monday before pulling back to trade at $2.19/MMBtu in Tuesday’s intraday session as markets increasingly price in more risk premium on the heated-up situation in the Middle East and Europe gets ready to ditch more Russian gas. Although ceasefire talks kicked off again in Egypt on Monday, Israel has started its ground offensive in Gaza’s southern city of Rafah with a deal far from certain. Israel has, however, assured the U.S. that its Rafah offensive will be limited and will be focused on blocking weapons and financial support from being smuggled into Gaza. Meanwhile, Australian LNG exports are expected to drop substantially with Chevron Corp’s (NYSE:CVX) Gorgon plant expected to remain offline for at least five weeks after the oil major discovered leaks. Long-suffering gas producers appear set to enjoy a rare boon if Europe weans itself off more Russian energy commodities. TotalEnergies (NYSE:TTE) CEO Patrick Pouyanne has predicted that natural gas and LNG prices will spike after EU sanctions Russian gas from the Yamal LNG project. “If the EU sanctions Yamal LNG, the price of LNG will go up quickly and globally our portfolio will benefit. It’s a positive if there were sanctions, not a negative, because the cash from Yamal is quite limited. European leaders understand that their security of supply today relies on LNG and they don’t want to see price rises again… what I understand is that they might have some ideas, but from 2027 on, not before,” Pouyanne told Reuters. TotalEnergies owns a 19.4% stake in private Russian LNG producer Novatek, owner of the Yamal LNG project in eastern Russia. Meanwhile, U.S. natural gas futures have climbed to their highest since January, driven by rising LNG feedgas demand, a decline in U.S. gas production, and a strong demand outlook thanks to hot weather forecasts for Texas. Gas flows to the seven big U.S. LNG export plants have so far hit 12.4B cf/day in the current month up from 11.9B cf/day in April. That said, it’s going to be interesting to see whether the natural gas price gains will hold with Europe having exited the winter withdrawal season with record amounts of natural gas in storage. The continent ended the season with more than 70 bcm of natural gas in its stores, the highest on record for this time of the year. The continent’s ongoing injection season was recently interrupted by more than a week of withdrawal due to a surprise cold spell; however, Standard Chartered has predicted that the reversal in trend will only delay the timing of when Europe’s gas stores fill up again by around three weeks.
LNG futures trading surges in April as India prepares for summer demand surge
In the wake of rising demand and geopolitical tensions, liquefied natural gas (LNG) futures traded volumes experienced a notable surge in April, marking robust activity in anticipation of the summer season. Amidst these dynamics, India, a significant player in the LNG market, continues to see an upward trajectory in its LNG imports, driven by various sectors including power, industry, and transportation. According to data from March 2024, India’s total LNG imports, including long-term and spot purchases, stood at 1.9 million metric tonnes (MMT), amounting to USD 1113 million. For the fiscal year 2023-24, India’s cumulative LNG imports reached 23.3 MMT, valued at USD 13266 million. Forecasts suggest a further 7-8 per cent increase in LNG imports in 2024, fuelled by burgeoning demand and ongoing infrastructure development initiatives.
Gautam Adani in talks with banks to borrow $600 million for gas unit
Billionaire Gautam Adani’s conglomerate is seeking an offshore loan of about $600 million to refinance existing debt, according to people familiar with the matter. The loan will be raised by Dhamra LNG Terminal Pvt., a unit of Adani Total Pvt., the people said, asking not be named because the details are private. The debt’s tenor could range from three to five years, with the pricing likely linked to the Secured Overnight Financing Rate, they said. The port-to-power group is discussing the planned transaction with lenders including Credit Agricole, DBS Bank Ltd., BNP Paribas, Mitsubishi UFJ Financial Group Inc., and Mizuho Bank Ltd., two of the people said. Adani is likely to conclude the borrowing in the next two months. Adani Group did not immediately respond to Bloomberg’s requests for comment. The conglomerate is regaining the confidence of investors since being targeted early last year by US short seller Hindenburg Research. In March, the group saw robust demand for its first public bond sale since the shortseller crisis. Adani Total is an equal venture between Adani and TotalEnergies. Prime Minister Narendra Modi’s government is trying to increase the country’s ability to import LNG to lift the share of natural gas in its energy mix to 15% by 2030 from about 7% now. The move is to help lower the dependence on dirtier fossil fuels, such as coal and oil.
Reliance renews bid for US license to import Venezuelan oil, sources say
Indian oil refiner Reliance Industries has resubmitted a request to the U.S. for an authorization to import crude oil from sanctioned Venezuela, three people close to the matter said, and resume oil trade between the OPEC producer and the once second-largest destination for its oil. French oil producer Maurel & Prom separately on Monday said the U.S. on Friday granted it a license to conduct oil and gas operations in Venezuela for the next two years. The U.S. in April did not renew a general license for Venezuela to export oil and fuel to its chosen markets, and gave 45 days to companies to wind down transactions. But the U.S. had said some individual authorizations to foreign firms seeking to do oil business with Venezuela would be issued. The license had broadly eased Venezuela oil sanctions first imposed in 2019, moving to reimpose punitive measures in response to President Nicolas Maduro’s failure to meet his election commitments.
April fuel consumption rises by 6.1% year-on-year: Oil ministry data
India’s fuel consumption rose by 6.1 per cent year-on-year in April, data from the Petroleum Planning and Analysis Cell of the oil ministry showed on Tuesday. WHY IT IS IMPORTANT India is the world’s third-biggest oil importer and consumer. The data is a proxy for the country’s oil demand. KEY QUOTE “The rise in total fuel consumption in April can be attributed to the increased activity in the run up to elections across the country,” said Prashant Vasisht, vice president and co-head, corporate ratings at ICRA. “We expect Indian fuel demand to grow by 3 per cent-4 per cent, with the GDP set to grow. The bulk of the rise will be lead by petrol and diesel demand. Air travel in India also has shown good growth.” BY THE NUMBERS Total consumption totalled 19.86 million metric tons (4.85 million barrels per day) in April, up from 18.71 million tons last year, data showed. Demand was down 5.8 per cent on a monthly basis from the 21.09 million metric tons consumed in March. Sales of diesel, mainly used by trucks and commercially run passenger vehicles, rose by 1.4 per cent year-on-year to 7.93 million tons in April. Sales of gasoline in April rose 14 per cent from the previous year to 3.28 million tons. Demand for bitumen, used for making roads, fell by over 5 per cent annually. Cooking gas, or liquefied petroleum gas sales rose by nearly 10 per cent to 2.36 million tons, while naphtha sales gained by 3.9 per cent to about 1.16 million tons, compared with last April, the data showed. Fuel oil use decreased by more than 16 per cent year-on-year in April. CONTEXT Asia’s third-largest economy is the fastest growing among major peers and its GDP is expected to expand 6.5 per cent this fiscal year. Growth in India’s manufacturing sector slowed marginally in April but remained robust thanks to strong demand, prompting firms to ramp up purchases of raw materials at a near-record pace, a business survey showed last week.
Oil Demand Likely To Surprise To The Upside
Oil prices have recorded the biggest weekly decline in three months thanks in large part to challenging economic indicators and growing demand concerns. Last week, U.S. crude inventories posted an unexpected rise, with the American Petroleum Institute (API) reporting a build of 4.91 million barrels, a sharp contrast from the anticipated decrease of 1.1 million barrels. This build has come after reports that U.S. crude production surged to 13.15 million barrels per day in February, up from 12.58 million barrels in January, suggesting supply is outpacing demand. But it’s not just bearish crude oil metrics driving the oil price decline. The EIA has provided an initial estimate that U.S. gasoline demand declined 4.4% Y/Y in April, a negative sign for oil bulls that has triggered a rapid pivot by speculative funds towards the short side of the market. However, commodity analysts at Standard Chartered have argued that the demand pessimism is overblown. According to StanChart, there appears to be a systemic downwards bias in the weekly estimates of U.S. fuel demand, with actual gasoline demand exceeding estimates in 22 of the past 24 months, while distillate demand (mainly diesel) has been revised higher in all of the past 24 months. The analysts point out that last September, the EIA put gasoline demand at 8.014 million barrels per day (mb/d), a stark contrast from the 9.465 mb/d recorded for in September 2022. Across the whole month, the EIA data implied a y/y demand drop of 5.6%, eliciting talks of demand destruction with some experts contending that demand was at its weakest since 1999. However, it later turned out that actual gasoline demand only fell 0.4% Y/Y, far milder than the EIA estimate of a 5.6% decline. StanChart believes the EIA’s estimate for April gasoline demand is too low with actual demand likely to be surprise to the upside. May & June Critical To Oil Fundamentals Weekly data by the Energy Information Administration (EIA) reveals U.S. crude stockpiles shot up to 7.3 million barrels for the week to April 26, a sharp swing from a draw of 6.4 million barrels posted the previous week marking the highest inventory levels since last June. Adding to the bearish data are expectations that the Fed will keep its benchmark federal-funds rate unchanged at around 5.3% as inflation appears to have reversed course. However, Standard Chartered has predicted that global oil markets will record the biggest stock draws in the first half of 2024 in May and June, implying we have entered a key period for oil fundamentals that will determine whether the market will tighten further or disappoint. StanChart says to watch global oil demand closely, predicting demand will hit an all-time high of 103.1 mb/d in May and increase further to 103.8 mb/d in June. The analysts have also predicted a y/y demand growth of 1.62 mb/d in May and 1.74 mb/d in June. Meanwhile, OPEC+ is set to hold its next ministerial meeting on June 1 in Vienna. StanChart’s model shows that the organization has ample room to increase output by over 1 mb/d in Q3 without negatively impacting global inventories. However, analysts have pointed out that OPEC is unlikely to make any drastic moves when it meets in June because it won’t have full information on whether the expected H1 tightening was fully delivered. Given this backdrop, StanChart sees the global supply deficit exceeding 2 mb/d in August if production stays at current levels, noting the markets are yet to price in the potential deficit. In contrast to oil markets, natural gas markets have suddenly turned bullish thanks to EU mulling cutting off more Russian gas as well as a late cold snap in Europe forcing EU gas inventories to reverse course. TotalEnergies (NYSE:TTE) CEO Patrick Pouyanne has predicted that natural gas and LNG prices will spike after the EU sanctions Russian gas from the Yamal LNG project. Henry Hub prices are up 4.7% in Friday’s intraday session and have gained 24.4% over the past week to trade at $2.14/MMBtu. However, it’s going to be interesting to see whether these gains will hold considering that experts still expect Europe’s spare storage capacity to become constrained in late summer, although the cold snap has pushed back the timing of the tightness by about three weeks.
LNG spot prices have fallen. What does it mean for India
Global LNG market has been well-supplied in 2024, which has resulted in lower prices of the fuel since the beginning of the year. India—which is dependent on gas imports for 50 percent of its needs—has been a beneficiary of this ample supply in the market and has ramped up its consumption so far. Increasing natural gas consumption has been a priority of the government given lower emissions of the fuel. India aims to increase the share of gas in its energy basket to 15 percent by 2030. What resulted in softer LNG prices in the global market? From the highs reported in 2023 and 2022 due to the Russia- Ukraine war, global LNG prices have significantly cooled down in the current year. The drop in prices comes amid weaker-than-expected gas demand in Europe due to milder winters and high inventories in the market especially from the US. Spot gas prices are trading around $10 per million metric British thermal unit (mmBtu) currently compared to highs of $23 per mmBtu in early 2023. Gas prices have, however, risen since mid-April due to the geopolitical crisis in the Middle-East. Spot prices had declined to around $8- $9 mmBtu in the first quarter of 2024. How did India respond to lower LNG prices? Price-sensitive India has witnessed a rise in consumption of natural gas in 2024 amid lower prices of LNG. Sectors including power, fertilisers and industries ramped up intake of the fuel as prices hit three-year low due to ample supply in the market. On account of low gas prices, the power ministry said in April that it is considering to impose a mandate on generating companies to mandatorily operate their gas-based power plants to meet the country’s increasing power demand this summer. Why has India shied away in using the cold fuel? According to official data, total natural gas consumption in March was around 3 percent higher at 5,594 MMSCM from last year. However, consumption of gas in India has remained limited due to higher prices and difficultly to compete with other fuels such as oil and coal. Despite the push given by the government, consumption of gas in the power sector remains low. Power sector contributes only around 13 percent of the total gas consumption in India while fertiliser, CGD and industrial sector contribute for the rest. Where does India’s domestic production stand? India’s domestic gas production has remained steady despite efforts by the government to boost production. In March, domestic gas production rose 6.2 percent compared with the corresponding month of the previous year. The cumulative gross production of natural gas for the financial year 2023-24 was higher by 5.8 percent from last year. Why is it important for India to scale up gas consumption? Natural gas is seen as a transition fuel as the world moves from coal to renewable energy sources, given that it generates less carbon than most other fossil fuels. Globally, natural gas-based power generation is commonly used as back-up for the intermittent wind and solar power. With India moving towards its target of net-zero emissions by 2070, the Indian government is pushing for an increase of natural gas use in the country. The target is to increase the share of natural gas in the total energy basket to 15 percent from the current six to seven percent. For the same, the government has increased focus on city gas distribution (CGD) companies to PNG connections and wide-spread CNG network. Meanwhile, the government is also working towards using LNG as a fuel in transportation.
Indian gas exchange expects trading in green certificates
Indian Gas Exchange, India’s only gas trading platform, expects trading in green gas certificates to start early next year as the mandatory usage of compressed biogas by city gas distribution companies gets triggered next April. The Union government has made it mandatory that the CGD companies must use 1% of their requirement as CBG from financial year 2026 and take it to 5% by fiscal 2029. “We have proposed to (the) government to create green gas certificates on the lines of renewable energy certificates used by companies to meet their mandatory renewable targets,” Rajesh Mediratta, chief executive officer of IGX, told NDTV Profit in an interview. Compressed biogas producers can sell it to the local buyers at nominal rate and take CBG certificates for the premium price that can be sold on the exchange to the buyers in need of the certificates, according to Mediratta. The CGD companies, in locations where there is no access to the CBG, can buy green gas certificates. It will also increase adoption of green gas produced by using agricultural and municipal waste. It will also have a larger shelf life and will save lots of expenses in transmission tariffs for buyers to transport gas over large distances. “We expect the government to come out with the guidelines detailing the green gas certificates this year that could be implemented from April 2025 when the mandatory CBG usage will get triggered,” Mediratta said.