IRAN SANCTIONS LOOM OVER OIL MARKET
India will remain the fastest-growing major economy this year supported by increased government spending ahead of next year’s general election, but rising oil prices pose the biggest downside risk, a poll of economists showed. In contrast, analysts in the most recent poll expect China’s economy, the world’s second largest, to grow 6.6 percent this year. But record high costs of diesel and petrol – which are the biggest items on India’s import bill – at a time when the rupee is weakening and close to a record low has become a major burden, posing a risk to those forecasts. Over 60 percent of 41 economists who answered an additional question on risks to the outlook said the recent rise in oil prices was the biggest threat, as that would increase the prospect for more interest rate hikes by the Reserve Bank of India.
Oil prices, pace of banks’ balance sheet clean-up and investment remain the key credit risks in India, according to an investor survey by Moody’s Investors Service. While market participants in Singapore and Mumbai were unanimous in pegging high crude price as the main risk to India’s economy, views varied on the second biggest risk, according to the ratings agency.
India’s import bill of crude oil and petroleum products swelled 57 percent to $12.73 billion in June as compared to the same month last year. The ballooning of oil import bill comes on the back of a 60 percent rise in Brent, the benchmark for half the world’s crude, to $76 per barrel last month. India meets over 82 percent of its crude requirement through imports. The recent surge in international oil prices has resulted in worsening of CAD and fiscal deficit for the domestic economy apart from an inflated petroleum subsidy and high inflation. The increase in global crude oil prices led to CAD widening by $16.60 billion to a five-year high in June, wholesale inflation shooting up 5.77 percent, a four-and-a-half year high, and retail inflation growing to a five-month high of 5 percent. Total oil import bill in the first quarter of the current fiscal increased 49 percent to $34.64 billion, as compared to $23.18 billion in the corresponding quarter last fiscal. The country’s CAD is likely to hover between $22 billion to $31 billion in the current financial year ending March 2019. According to PPAC, the statistical arm of the oil ministry, India’s crude oil import bill, excluding petroleum products, is expected to increase 24 percent to $109 billion in the current fiscal. Moody’s Investor Services has said that the surge in international oil prices will result in the country’s petroleum subsidy ballooning to ₹ 530 billion, putting pressure on the country’s fiscal deficit. The Union Budget 2018-19 had allocated ₹ 249.33 billion as petroleum subsidy for the current financial year, a mere 2 percent increase over the Revised Estimate of ₹ 244.6 billion allocated last financial year. The finance ministry expects the country’s fiscal deficit to land at 3.3 percent GDP this fiscal.
Iran was the second-biggest oil supplier to Indian state refiners between April and June replacing Saudi Arabia as companies took advantage of steeper discounts offered by Tehran. India, Iran’s top oil client after China, shipped in 5.67 mt or about 457,000 bpd of oil, from the country in the first three months of this fiscal year. Data shows that India imported about 3.46 mt, or about 279,000 bpd, from Iran between April and June last year. The refiners – IOC, Chennai Petroleum Corp, BPCL and its unit Bharat Oman Refineries Ltd, HPCL and MRPL – shipped in 9.8 mt of Iranian oil in 2017/18, about a quarter less than a year ago. For this fiscal year, the refiners had decided to almost double imports from Iran, which offered almost free shipping and extended credit period on oil sales. Iraq continued to be the top oil supplier to India in the April-June period. New Delhi shipped in 7.27 mt of oil from Iraq, while shipments from Saudi Arabia totalled 5.22 mt, making it the third largest supplier. India had asked refiners to prepare for drastic reductions or even zero Iranian oil imports. The first set of sanctions will take effect on August 6 and the rest, notably in the petroleum sector, following a 180-day “wind-down period” ending on November 4. India’s overall oil imports from Iran in June declined by about 16 percent from May as refiners started weaning their plants off crude from Iran to avoid US sanctions.
India’s oil imports from Iran declined by 15.9 percent in June, the first month after the US said it would reimpose sanctions on the country, according to data from shipping and industry sources. In June, India imported 592,800 bpd of oil from Iran compared to 705,200 bpd in May, the data showed. India, Iran’s top oil client after China, has asked refiners to look for alternative oil supplies as the nation may have to drastically cut imports from Tehran to comply with the renewed US sanctions. Lower purchases by private refiners dragged down India’s June imports from Iran although state refiners stepped up purchases. State refiners, accounting for about 60 percent of India’s nearly 5 million bpd of refining capacity, lifted about 10 percent more Iranian volumes in June compared to May, at about 454,000 bpd, the data showed. In April to June 2018, the first quarter of this fiscal year, India’s oil imports from Iran rose by about 24 percent to about 647,000 bpd from the previous quarter, the data showed. Imports by state refiners during the period more than doubled to about 413,400 bpd from 191,700 bpd, the data showed.
IOC one of Iran’s biggest oil buyers said it has enough alternative sources of crude to replace any supplies cut off by US sanctions on the Persian Gulf state — even if shipments stop completely. IOC said Saudi Arabia alone can cover most of the world’s supply shortfall in case Iran’s oil exports dry up. Also a narrowing spread between Brent crude and Dubai oil gives IOC even more options, the head of the state-run refiner known as IOC, one of Iran’s largest customers, said. Some customers in Asia are already considering acquiescing to US demand to end trade with Iran by early November, when sanctions aimed at curbing the Islamic republic’s nuclear program come into effect. Several refiners in the largest oil market are looking at alternative supplies from Saudi Arabia to Iraq after the White House said it won’t offer extensions or waivers to US allies. IOC plans to buy 7 mt of crude from Iran in the year ending March 31 versus 4 mt in the previous fiscal year. India imported 771,000 barrels of crude oil a day from Iran in May, a 35 percent increase from the previous month, tanker tracking and shipping data show. IOC added 16 new grades of crude during 2017-18 and has the ability to process 175 different varieties, boosting flexibility in oil sourcing. It also expanded the capabilities of its refineries to process cheaper and heavier grades, which make up close to 60 percent of its crude diet. India’s government has so far been sending mixed signals about its stance on Iranian imports. While the country said it plans to seek exemptions from the sanctions and is also looking at alternate payment mechanisms to enable it to continue purchases from the Persian Gulf state, the government has also asked refiners to brace for all eventualities, including zero imports. India insists it will make sure its energy security is not compromised and a call on Iran oil imports will be guided by its own interests. India continued with purchases from Iran during the last round of sanctions.
PMUY is set to provide 50 million free cooking gas connections by August 15, seven months ahead of the March 2019 target it had set earlier. Ujjwala Yojana was launched on May 1, 2016 at Ballia district in Uttar Pradesh and has so far covered 47.3 million consumers in 715 districts. This is likely to be one of the key highlights in the list of achievements that the government will highlight in the run-up to next year’s Lok Sabha elections and may feature in his speech during the 72nd Independence Day celebrations. The price of subsidised LPG, however, has increased by 18.4 percent from ₹ 419.15 per cylinder to ₹ 496.26 from May 2016 till now in Delhi. OMCs such as IOC, HPCL and BPCL are speeding up the process to achieve the target before August 15. Moreover, the government has extended the ambit of the scheme to 80 million in the last Union Budget. However, safety remains one of the primary concerns for the scheme after a series of accidents in the last two years. Industry sources said that the rising LPG price too is a major concern for the poor. When a normal consumer is refilling at an average of 7.76 per year, the rate of refill on PMUY comes to the tune of 3.8 per year. The number of consumers who have not come back for a second cylinder is only 15 percent. On the back of the scheme’s success, LPG consumption in India has increased continuously for the last 57 months in a row. Consumption saw a cumulative growth of 13.7 percent for the period of April to May this year. According to the PPAC, the northern region had the highest share in consumption of 31.3 percent, followed by southern region at 28.3 percent, western region at 21.2 percent, eastern region at 16.5 percent and northeastern region at 2.8 percent during the period May 2018. In fact, the increase in the number of users had added pressure on companies as the government had to allow OMCs to have night shifts at bottling plants, raising safety concerns. Though the number of users went up, the number of bottling plants remained the same, resulting in the existing 180 plants working at a current capacity utilisation of about 120 percent. More than 30 bottling plant projects are still stuck at various stages of clearances, with an investment of around ₹ 50 billion. There were also reports that extra pressure is there on OMCs to achieve the target on time.
LPG subsidy has jumped by over 60 percent in last two months as the government maintains price line despite rising international rates. All LPG consumers have to buy fuel at market price. The government, however, subsidises 12 cylinders of 14.2 kg each per households in a year by providing the subsidy amount directly in bank accounts of users. The higher subsidy was meant to keep rates of subsidised LPG in check. International rates of LPG, which was used as a benchmark for pricing of domestic fuel, have been on the run since June. Non-subsidised or market priced LPG price was ₹ 653.50 per 14.2 kg bottle in the national capital in May, which rose to ₹ 698.50 (₹ 48 pr cylinder) in June. This month price has further risen by ₹ 55.50 to ₹ 754 in Delhi. Non-subsidised LPG is the one that consumers buy after exhausting their quota of below market rate fuel. It is also bought by those who have voluntarily given up subsidy and by commercial establishments. As per tax rules, GST on LPG has to be calculated at market rate of the fuel. The government may choose to subsidise a part of the price but tax will have to be paid at market rates. This has meant that GST is calculated every month on the rate at which domestic non-subsidised LPG is priced. With rates on the rise, the tax has also risen, resulting in a minor increase in rates for subsidised users. Subsidised LPG was priced at ₹ 491.21 per cylinder in May, which rose to ₹ 493.55 in June and ₹ 496.26 this month. As a result of higher global rates, the price of non-subsidised LPG in Delhi will increase by Rs 55.50 per cylinder. Oil firms revise LPG price on 1st of every month based on average benchmark rate and foreign exchange rate in the previous month.
The administered prices of subsidised household fuels has risen sharply, with kerosene up 65% and cooking gas or LPG up 17% in the past two years, but the subsidy on both products, which the government tried to cut with regular price hikes, has also risen sharply because of soaring oil prices. Kerosene, a cooking and lighting fuel which the rural poor purchase from the public distribution system, rose to ₹ 25.03 a litre on June 1 in Mumbai from ₹ 15.02 a litre on July 1, 2016 as state oil firms are increasing the price by 25 paise every fortnight. However, the under-recovery or the discount to market rates on the subsidised fuel has increased 54% to ₹ 18 per litre from ₹ 11.7 per litre in the past two years because of higher oil prices. In the same period, price of subsidised cooking gas rose ₹ 72.39 a cylinder, or about 17%. On 1 June, a 14 kg cylinder was priced at ₹ 493.55. Subsidy on cooking gas has increased 59% to ₹ 205 per cylinder from ₹ 129. The government controls the price of cooking gas and kerosene but has freed up the sale of all other petroleum products over the years. The government wants households to shift from the polluting kerosene to cleaner cooking gas and electricity. It has expanded cooking gas consumer base at a record pace in the past three years and is hoping to take grid electricity to every home quickly. The allocation of subsidised kerosene to states has been cut 42% in two years to 5 million kilolitres in 2017-18. But in many parts of the country, rural poor still depend on kerosene as electricity supply is patchy and cooking gas not so affordable. Petrol and diesel, the two key transportation fuels whose rates are no more controlled by the government, witnessed much smaller rate hikes in comparison to kerosene even though international oil rates, to which they are linked, have surged. Local rates of petrol rose 20% and that of diesel 26.5% in two years.
The government plans to launch the auction of 60 oil and gas fields being offered in the second round of bidding for DSF on August 9, DGH said. The 60 discoveries have been clubbed into 26 contract areas spread over 3,100 km2 spread over eight sedimentary basins, it said. The fields are being offered in Rajasthan, Gujarat, Kutch & Cambay shallow waters, Mumbai offshore, Assam and Tripura, Mahanadi shallow water, Andhra Pradesh onland and KG offshore. DGH said the main features of DSF-II include a single license for conventional and unconventional hydrocarbon, prior technical experience not a pre-qualification criterion, no upfront signature bonus and full pricing and marketing freedom. The fields on offer hold an estimated 1.4 billion barrels of oil and oil equivalent gas. The government had in 2016 brought a new DSF policy, offering “idle” small discovered fields of ONGC and OIL in an auction on liberalised terms including marketing and pricing freedom and lower taxes. The Union Cabinet had in February approved the second round of DSF auctions, under which the government is offering a total of 60 discovered small fields with an estimated 194.65 mtoe. These discoveries have been clubbed into 26 contract areas spread over 8 sedimentary basins. Of the 60 fields which will be up for auctions, 22 fields belong to ONGC, five to OIL and 12 are relinquished discovered fields from the NELP blocks.
The board of ONGC has given in-principle approval for exploring options for a restructuring of the group firms including the merger of subsidiaries MRPL and HPCL. The India’s largest oil and gas producer, ONGC has several subsidiaries and joint ventures including two in refining sector – HPCL and MRPL and two petrochemical units – OPaL and ONGC Mangalore Petrochemicals Ltd. It also has an overseas investment arm in ONGC Videsh Ltd. The board of the company will take a call on the options suggested by the advisor. ONGC is looking at trimming down the structure by merging some of the subsidiaries. While MRPL operates a 15 million tonnes a year refinery at Mangalore in Karnataka, HPCL has two refineries at Mumbai and Vizag. OPaL has built at ₹ 320 billion petrochemical complex at Dahej in Gujarat, while ONGC Tripura Power Company Ltd operates a 726 MW power plant at Palatana in Tripura. ONGC referred to the acquisition of government’s stake in HPCL earlier this year as part of government’s proposal to create a public sector ‘oil major’ which will be able to match the performance of international and domestic private sector oil and gas companies. ONGC has in past spoken of benefits of bringing all refining business under one company. HPCL management too has supported taking over MRPL to create India’s second-biggest public sector oil refining firm. The restructuring, it said, would be done taking into account the need for better value creation and synergy among group firms. Also, it would be done to meet the minimum public shareholding requirement in case of MRPL.
Utility vehicles major Mahindra & Mahindra is developing petrol engines for its product line-up to counter drop in sales of diesel models over the last few years due to high taxation. In its Annual Report for 2017-18, the Mumbai-based auto major said it is also working towards building cost effective BS-VI compliant solutions for its diesel engine portfolio. The company is in the process of developing and introducing petrol engines across most of its products and segments, it said. With BS-VI emission norms slated to come into effect from 1 April 2020, prices of both petrol and diesel vehicles are set to go up. However, pricing pressure on diesel vehicles is expected to be higher which could further impact sales of such vehicles in the domestic market.
Goa consumes more petrol and diesel on a per capita basis than any other state in the country, while Bihar uses the least. Per capita sales of petrol in Goa were 119.7 kg in 2017-18, over six times the national average of 19 kg, according to oil ministry data. In diesel, at 225.6 kg, Goans consumed almost three-and-half times the fuel than the national average of 66.9 kg. By contrast, in Bihar, per capita sales were 6.7 kg for petrol and 22 kg for diesel, about one-third the national average. Economic activity, tourist flow and inter-state variation in taxes largely contribute to the differences in per capita consumption of petrol and diesel among states, according to the IOC. Goa top fuel guzzler, per capita petrol sales 6 times national average of 19 kg Tourism as well as dependence on diesel for power drive up per capita consumption of petrol and diesel in some union territories as well. Puducherry, Andaman & Nicobar Islands, Dadra & Nagar Haveli and Daman & Diu have sharply higher consumption than the national average. A lower economic activity and higher population in Bihar keep it at the bottom of the fuel consumption chart. Some states with lower taxes on fuel benefit from higher fuel sales as vehicle owners from bordering states drive down to filling stations offering cheaper fuel. For instance, a resident of Noida, Uttar Pradesh, is more likely to tank up his car in Delhi as the fuel is relatively cheaper in the national capital. Similarly, a truck driver going to Mumbai from Delhi is more likely to stop at a filling station in Haryana where fuel is cheaper due to lower taxes. This is one key reason Haryana has the second highest per capita consumption of diesel at 203 kg. In overall volume, Maharashtra topped the chart with sales of 3226,000 mt of petrol and 8673,000 mt of diesel. Uttar Pradesh was the second-biggest consumer in both petrol and diesel.
The Supreme Court directed the Centre to apprise it as to whether petrol and diesel can have an equal pricing for four wheelers and private cars after the EPCA said pollution from diesel vehicles was a cause of concern. The court said that the government could contemplate fixing price of diesel and petrol on par for four wheelers, other than goods vehicles. EPCA’s report show there was “leakage” of funds from environment compensation charge which was levied by the apex court for purchase of diesel vehicles. The court then and said that Germany was contemplating banning use of diesel vehicles. European countries were trying to fix NOx pollution standards since they are grappling with pollution and Germany is trying to do away with diesel vehicles. The counsel, appearing for vehicle manufacturers, told the apex court that BS-VI fuel, which is likely to be made available in National Capital Region from April 2019, would solve the problem of pollution from diesel vehicles. IOC was upbeat about Hydrogen fuel cell-powered vehicles and they have the requisite technology for it. The government had also said that reducing the price gap between petrol and diesel would not be “economically viable” and would lead to inflation.
The CCI has dismissed a complaint alleging unfair business practices against oil marketing companies — IOC, BPCL and HPCL — with regard to terms and conditions in the tenders for transportation of liquefied petroleum gas through tank trucks. In an order, the fair trade regulator said “no case of contravention under Section 3 or Section 4 of the (Competition) Act” is made out against IOC, BPCL and HPCL. While Section 3 pertains to anti-competitive agreements, Section 4 relates to abuse of dominant market position. The complainants, whose identities were not revealed by the CCI, had challenged the alleged anti-competitive terms and conditions in the notice inviting tenders floated “identically/ jointly/ parallelly” in different states by IOC, BPCL and HPCL (Opposite Parties) for the transportation of bulk liquefied petroleum gas by road through tank trucks from the loading point to the unloading point. According to the order, under the tenders, there is no bar on quoting bids for tank trucks that are registered in a state other than the one for which tender is floated.
The GST Council will consider bringing petroleum products under the GST and it could happen in phases. Currently, diesel, petrol, crude oil, natural gas and aviation turbine fuel are outside the purview of goods and services tax, and states have the right to impose value added tax on these items. The civil aviation ministry has time and again voiced its concern on the high rate of taxes on aviation turbine fuel, which accounts for a significant chunk of an airline’s operational costs and also has a bearing on air fares. Earlier, the civil aviation ministry had also written to the finance ministry seeking the inclusion of jet fuel under the indirect tax regime with full input tax credit at the earliest. The finance ministry has expressed its intention to include natural gas and ATF within the purview of the goods and services tax soon. The GST currently has four slabs –5 percent, 12 percent, 18 percent and 28 percent. The GST Council, in November, had reduced the tax rate on 178 items from 28 percent to 18 percent.
Japanese oil refiners will likely stop loading Iranian crude by mid-September with final shipments arriving in the first half of October, the head of the nation’s oil refiners association said, as the US pressures countries to halt such imports. US administration has demanded nations cut all their imports of Iranian oil from November as it reimposes sanctions over Tehran’s nuclear programme. The president of the Petroleum Association of Japan (PAJ) said that the industry is asking the Japanese government to push to maintain current levels of Iranian imports in talks with the US. PAJ had said that Japanese refiners would likely stop importing from Iran, but gave more details on potential timings. Many refiners in Japan, the world’s fourth-biggest oil importer, say they are resigned to completely halting imports from one of their historically important suppliers, unlike during a previous round of sanctions when they substantially reduced imports from the Middle Eastern country. Japan last year imported 172,216 barrels per day of Iranian crude, down 24.2 percent from a year earlier, with Iranian oil accounting for 5.3 percent of the nation’s total imports.
South Korea will not lift any Iranian crude and condensate in July, halting all shipments for the first time in six years amid US pressure to cut all imports of Iranian oil from November. Japanese customers, however, are continuing to import for now, with multiple buyers considering buying Iranian oil through September loading, said a North Asia trading source familiar with Iranian oil shipping arrangements. The move by South Korea, one of Iran’s main customers in Asia along with China and Japan, comes as it is in talks to seek an exemption from US curbs on buying Iranian oil, in line with a waiver it received during previous sanctions. South Korea cancelled July loadings of crude and condensate cargoes from Iran as it was uncertain whether the country would receive an exemption from US sanctions on Iran trade. The cancellations mean South Korea will import no Iranian oil in August, the first month of zero imports since August 2012 when South Korean buyers put Iranian oil purchases on hold before getting a waiver to import limited amounts of Iran crude. Japanese oil refiners may have to stop loading Iranian crude oil from October 1 if the government does not secure another exemption.
South Korea has imported four times more CPC Blend crude so far in 2018 than in the same period last year, as the major Asian oil consumer seeks to replace Iranian supplies. South Korea, which consumes about 3 percent of the world’s oil output, is increasingly buying CPC Blend as its refiners prepare to halt imports from Iran and comply with US sanctions on Tehran that will kick-in from November. The Asian nation’s Iranian oil imports could fall to the lowest in three years in September. The most visible drop in Seoul’s imports from Iran was in May, when purchases fell to 179,444 bpd, the lowest since January 2016, data from the Korea National Oil Corp show. As Iranian imports have fallen, CPC Blend shipments to South Korea since May have been setting record monthly highs and are set to exceed 284,000 bpd in July. South Korea bought 4 mt of CPC Blend for delivery in January to July this year, compared to 1 mt in the same seven-month period of 2017. CPC Blend, mostly made of Kazakh oil with some crude from Russia’s Caspian fields, is named after the CPC pipeline through which it flows to the Russian Black Sea terminal of Yuzhnaya Ozereyevka. The pipeline is co-owned by US firm Chevron. The CPC pipeline capacity has been increased by 20 percent this year to 67 million tonnes, or 1.4 million bpd, which is expected to boost exports and make it cheaper.
Iran will allow private companies to export crude oil, part of a strategy to counter US sanctions, and is urging fellow OPEC members, including regional rival Saudi Arabia, not to break output agreements. Iran is looking at ways to keep exporting oil as well as other measures to counter sanctions after the US told allies to cut all imports of Iranian oil from November. Iran has an oil and petrochemicals bourse as part of its mercantile exchange. Iran had been pushing hard for oil producers to hold output steady as US sanctions are expected to hit its exports.
Investment bank Goldman Sachs expects volatile oil prices in the short-term on the back of uncertainty over possible disruptions to supply, with benchmark Brent crude in a $70-80 per barrel range. Oil prices have declined sharply the past week as the Sino-US trade war intensifies and were hovering below $72 per barrel, not far from their lowest since mid-April. The administration of US is pushing countries to cut all imports of Iranian oil from November as it reimposes sanctions over Tehran’s nuclear program. In certain cases, there could be waivers for countries that need more time to wind down imports of oil from Iran. Goldman said it still expects Brent to retest $80 per barrel, although this may occur only late this year depending on US oil policies, rather than this summer as it previously expected. The bank said that the recent escalation in trade tensions was unlikely to have much impact on its 2018 oil demand growth view, but would likely create downside risks to its 2019 oil demand growth forecast of 1.6 million barrels per day.
OPEC will continue to play an important role in the oil market to 2040, according to a new report by Wood Mackenzie. In the report, the global natural resources consultancy said it expects production growth to continue in the US Lower 48 over the medium-term, but added that once the US plateaus, total non-OPEC liquids production will “lose its growth momentum and begin to decline slowly post-2030”. In the report, Wood Mackenzie stated that OPEC has played a “critical” role in rebalancing the global oil market over the past 18 months.
OPEC said that volatility in the crude market was undesirable and OPEC prefers a more stable price environment, speaking after crude had its biggest one-day drop in two years. OPEC and other large producers are working on a long-term plan to build spare capacity that would cushion the market from unexpected outages. When Libya reopened key oil exporting ports, global oil prices fell sharply, with benchmark Brent futures plunging 6.92 percent, the steepest one-day drop in two years. Tripoli-based Libya NOC said four export terminals were being reopened after a standoff that had shut down most of the OPEC member’s oil output. Libyan oil production has fallen to 527,000 bpd from a high of 1.28 million bpd in February following port closures in late June, the NOC said.
OPEC and non-OPEC’s compliance with oil output curbs has declined to around 120 percent in June from 147 percent in May. OPEC and non-OPEC countries agreed to gradually bring compliance back to 100 percent at a meeting at the end of June. The move is designed to add more barrels to the market and reduce upward pressure on oil prices after unexpected outages in Venezuela and Libya pushed compliance to record high levels.
Oil prices gained, with US crude ending a choppy session higher on expectations for a Canadian production outage lasting until September, while global benchmark Brent gained on looming sanctions on Iran and falling output in Libya. US light crude futures gained 5 cents to settle at $73.85 a barrel. Brent jumped 96 cents at $78.07. In Canada, an outage at the 360,000 bpd Syncrude oil sands facility has reduced flows into Cushing, Oklahoma, the delivery point for US futures. Majority stakeholder Suncor Energy Inc said that some Syncrude production would come back online in July, sooner than expected. It will not resume full operations until September, however, which is later than expected. Libyan oil output has more than halved in five months, falling to 527,000 bpd. Saudi Arabia, fellow members of the OPEC and allies including Russia agreed to increase output to dampen price gains and offset global production losses in countries including Libya. The market has grown concerned that if the Saudis offset the losses from Iran, it will use up global spare capacity and leave markets more vulnerable to further or unexpected production declines.
Russia said it does not use stocks in tanks to help boost oil output and does not have enough stocks to influence the oil market. Russia does have some flexibility thanks to spare capacity in the Transneft pipeline system and in oil tanks at fields. Russia does not have storage capacity for accumulating of reserves, he said. Russian oil production last month rose by around 100,000 bpd from May. From July 1-15, the country’s average oil output was 11.215 million bpd, an increase of 245,000 bpd from May. Russia has raised oil output by increasing oil production, not by using stocks. He said that the market remains volatile and responds to verbal interventions. But the current oil price has already taken into account risks related to possible the US sanctions against Iran, he said. The OPEC and other oil producers led by Russia agreed to ease production curbs. The deal effectively increases combined oil output by 1 million bpd, of which Russia’s share stands at 200,000 bpd.
Russia plans to boost crude oil exports from the ExxonMobil-led Sakhalin-1 project to between 260,000 to 266,000 bpd in the third quarter after major oil producers agreed to lift production at the end of June. The exports include 10 to 11 cargoes of Sokol crude to be lifted in July and 12 cargoes scheduled to load in August and September. Each cargo is 700,000 barrels. Sokol crude exports averaged at 215,000 bpd in second quarter, with 9 to 10 cargoes exported each month. ExxonMobil had planned to raise output from Sakhalin-1 to 260,000 bpd at the start of this year but it was ordered by Russian authorities to cap its output at 200,000 bpd.
Russian oil producer Rosneft’s budget is based on an oil price of $63 a barrel. The OPEC and other producers led by Russia agreed to ease global output cuts, adding around 1 million bpd to the market from July 1 to curb a jump in the crude prices.
Saudi Arabia said it was suspending oil shipments through the Red Sea’s Bab al-Mandeb strait, one of the world’s most important tanker routes, after Yemen’s Iran-aligned Houthis attacked two ships in the waterway. Saudi Arabia and arch-foe Iran have been locked in a three-year proxy war in Yemen, which lies on one side of the Bab al-Mandeb strait at the southern mouth of the sea, one of the most important trade routes for oil tankers heading from the Middle East to Europe. The Houthis, who have previously threatened to block the strait, said that they had the naval capability to hit Saudi ports and other Red Sea targets. Iran has threatened to block another strategic shipping route, the Strait of Hormuz. Houthis attacked two Saudi oil tankers in the Red Sea, one of which sustained minimal damage.
Saudi Aramco plans to change the formula used to price its long-term crude oil sales to Asia starting from October, marking the first change in benchmarks for its OSP since the mid-1980s, the company said. The new formula will be based on the average monthly prices of Oman crude futures traded on the DME and the average cash price for Dubai assessed by pricing agency S&P Global Platts, instead of the average of Oman and Dubai prices assessed by Platts, Aramco said. Saudi Aramco’s OSPs for October will be based on the average settlement prices for the DME December Oman contract and the December Dubai cash price assessed by Platts, both of which are set in October. The DME launched the Oman contract in 2007 and it is the most liquid physically deliverable futures contract for Middle East crude oil. In comparison, there are rarely bids or offers for Oman cargoes during the Platts market-on-close price assessment.
Saudi Arabia expects its crude exports to drop by roughly 100,000 bpd in August as the world’s top oil exporter works to ensure it does not push oil into the market beyond its customers’ needs. Saudi Arabia’s crude oil exports in July would be roughly equal to June levels. Saudi oil exports in June were about 7.2 million bpd, while the latest official figures show May exports at 6.984 million bpd. Saudi Arabia’s policy is to work on satisfying customers’ needs, but to do so while adhering to OPEC and non-OPEC supply agreements. OPEC agreed with Russia and other oil-producing allies last month to raise output from July, with Saudi Arabia pledging a “measurable” supply boost but giving no specific numbers. OPEC and non-OPEC said they would raise supply by returning to 100 percent compliance with previously agreed output cuts, after months of underproduction. That would mean a roughly 1 million bpd increase in output.
US oil output from seven major shale formations is expected to rise by 143,000 barrels a day to a record 7.47 million bpd in August, the US EIA said. Production is expected to rise in all seven formations, with the largest gain of 73,000 bpd seen in the Permian Basin of Texas and New Mexico.
US crude oil production is expected to average more than 12 million bpd late next year for the first time ever, the EIA said. US oil production has soared, boosted by improved technology for tapping shale formations. Output rose 5.6 percent last year and is expected to grow 15.4 percent this year. If the forecasts are realized, that will make the US the world’s largest crude producer, surpassing Russia. The EIA expects production to average 10.91 million bpd this quarter and 11.29 million in the fourth quarter. If EIA’s forecast is realized, 2019 gasoline consumption would be the highest annual average on record, surpassing the previous record set in 2017.
CNPC is expected to sign a preliminary agreement with ADNOC to invest in oil and gas exploration and refinery projects. ADNOC announced in April its first ever competitive exploration and production licensing round of six oil and gas blocks, with bids due by October. CNPC is set to join the bidding. ADNOC plans to double its refining capacity and triple petrochemicals output potential by 2025, as the state energy firm focuses more on downstream expansion to capture new growth markets. CNPC, which runs its Middle East operation out of Dubai, last March won 10 percent stakes in two ADNOC offshore oilfield concessions under a 40-year deal that cost $1.2 billion. That followed an 8 percent interest CNPC won in 2017 for $1.8 billion in Abu Dhabi’s giant onshore oilfield concession. CNPC already operates refineries in Japan, Singapore, Sudan, Scotland and France, and is recently negotiating with Brazil for a partnership that could give China its first refining capacity in the Americas. CNPC said it will spend more than 150 billion yuan ($22 billion) by 2020 to boost oil and gas production in the western region of Xinjiang, aiming to offset falling output from ageing fields in northeast China. The increased spending will push output in the Xinjiang Autonomous Region to more than 50 mt of oil equivalent between 2018 and 2020, CNPC said. The investment is equivalent to the total expenditure by CNPC’s listed unit PetroChina, China’s top oil and gas producer, for oil and gas exploration and production in 2017. CNPC’s Xinjiang operations churned out 11.45 mt of crude oil last year, while the company produced 23.5 billion cubic meters of gas, equivalent to 17.1 mt of gas, from the Tarim in the region, one of China’s largest gas basins, according to PetroChina’s 2017 annual report.
Colombia is preparing changes to its bidding process for oil areas in an effort to increase investment and find new reserves, the head of the oil regulator said, after repeated cancellations of its latest oil round. The changes, including contracts adjusted to international crude price fluctuations and the chance for companies to propose exploration on land not yet on offer, will help attract spending and nearly double reserves to at least 10 years of consumption, Orlando Velandia of the National Hydrocarbons Agency (ANH) said. Colombia is the third Latin American country hosting oil auctions this year, after Mexico and Brazil. Its bidding round comes after a four-year pause when low oil prices stopped many Latin American countries from offering acreage. Colombia could offer at least 20 onshore and offshore Caribbean blocks with the changes, Velandia said. The country has 1.78 billion barrels of reserves, equivalent to about 5.7 years of consumption. Colombia produces about 860,000 bpd of crude, half for export.
Russia and China delayed a US push for a UN Security Council committee to order a halt to refined petroleum exports to North Korea, asking for more detail on a US accusation that Pyongyang breached sanctions, diplomats said. The US complained to the 15-member Security Council North Korea sanctions committee that as of May 30, there had been 89 illicit ship-to-ship transfers of refined petroleum products this year by Pyongyang. It asked the committee to notify all UN member states that North Korea has breached a refined petroleum cap of 500,000 barrels a year – imposed by the council in December – and order an immediate halt to all transfers. But Russia’s UN mission put a “hold” on the US request, telling the committee it is “seeking additional information on every single case of ‘illegal’ transfer of petroleum,” diplomats said. According to the Security Council North Korea sanctions committee website, only Russia and China have reported legitimate sales of some 14,000 tons of refined petroleum to North Korea in 2018.
Canadian oil sands production will rise more than half a million barrels per day in 2019 and growth will moderate thereafter, according to a forecast by data firm IHS Markit. Canada has emerged as the primary source of heavy oil supply in the world as output from other large producers, such as Venezuela, has declined. However, the pace of growth of Canadian oil sands is uncertain after 2019 and depends on the timing of investment decisions that are yet to be made. By then, ongoing projects will be completed and an initial boost to production will slow down, IHS Markit said. The investment decisions will also depend on new norms for global marine fuel quality to be adopted in 2020 and which are expected to reduce prices of high sulfur fuel oil, IHS Markit said. Canada is expected to produce an additional 1 million barrels per day by 2027 from current levels, IHS Markit said.
Iraq has extended the deadline for foreign companies and investors to bid for a project to build a 100,000 bpd refinery in Kut province. Investors interested in bidding have until 4 October to make offers. The refinery, south of Baghdad, is one of several crude oil processing projects offered by Iraq as part of its plan to become self-sufficient in oil products. Bidding documents provide for two investment models – build-own-operate and build-operate-transfer.
PPAC: Petroleum Planning and Analysis Cell, GDP: Gross Domestic Product, CAD: Current Account Deficit, mt: million tonnes, US: United States, bpd: barrels per day, IOC: Indian Oil Corp, PMUY: Pradhan Mantri Ujjwala Yojana, LPG: liquefied petroleum gas, OMCs: Oil Marketing Companies, HPCL: Hindustan Petroleum Corp Ltd, BPCL: Bharat Petroleum Corp Ltd, kg: kilogram, GST: Goods and Services Tax, DSF: Discovered Small Field, DGH: Directorate General of Hydrocarbons, KG: Krishna-Godavari, ONGC: Oil and Natural Gas Corp, OIL: Oil India Ltd, mtoe: million tonnes of oil equivalent, NELP: New Exploration Licensing Policy, MRPL: Mangalore Refinery and Petrochemicals Ltd, OPaL: ONGC Petro additions Ltd, EPCA: Environment Pollution Control Authority, NOx: nitrogen oxide, CCI: Competition Commission of India, ATF: aviation turbine fuel, PAJ: Petroleum Association of Japan, OPEC: Organization of the Petroleum Exporting Countries, NOC: National Oil Corp, OSP: official selling price, DME: Dubai Mercantile Exchange, EIA: Energy Information Administration, CNPC: China National Petroleum Corp, ADNOC: Abu Dhabi National Oil Company, UN: United Nations
7 August. Indian Oil Corp (IOC) has got clearance from the Odisha Pollution Control Board for expansion of its Paradip-Haldia-Durgapur LPG pipeline (PHDPL). The Paradip-Balasore section of the PHDPL is already operational for delivery of LPG to IOC’s bottling plant in Balasore. With an estimated length of about 678 km, PHDPL’s originating pump station is located at Paradip, with Balasore, serving as the scrapper and delivery station. With a capacity of 0.5 million tonnes per annum (mtpa), the pipeline would transport LPG (liquefied petroleum gas) from Paradip, the Haldia refinery and Indian Oil Petronas to LPG bottling plants in Balasore, Budge Budge, Kalyani, and Durgapur. Earlier, LPG delivery in Balasore was done through bullets. The 157 kilometre section from the Paradip refinery to Balasore was built for about Rs 2.50 billion. The cost of the project is pegged at around Rs 10 billion. IOC’s 15 mtpa crude oil refinery in Paradip is spread over 3,345 acres, with an estimated cost of Rs 345.55 billion. The refinery can process 100 percent high-sulphur and heavy crude oil to produce various petroleum products, including petrol and diesel of BS-IV quality, kerosene, aviation turbine fuel, propylene, sulphur, and petroleum coke. It is also designed to produce Euro-V premium quality motor spirit and other green auto fuel variants for export. The demand for LPG connections in India is set to rise from 18 million tonnes (mt) to 25 mt by 2022-23 and is seen growing at a rate of 11-12 percent annually. About 50 percent of India’s LPG requirement is being imported to meet the demand.
Source: Business Standard
7 August. Petrol prices have crossed the Rs 77 a litre mark for the first time in two months due to firming international rates. Petrol price in Delhi was hiked by 9 paisa a litre to Rs 77.06 while diesel rates went up by 6 paisa to Rs 68.50 per litre, according to daily price notification issued by state-owned oil firms. Fuel prices in Delhi are the cheapest in all metros and most state capitals due to lower sales tax or VAT (Value Added Tax). Retail selling prices have been firming up since July 30 as international rates inched up. Rates have risen by Rs 0.90 a litre in case of petrol in nine days while diesel prices have risen by Rs 0.88 per litre. Petrol price had touched an all-time high of Rs 78.43 a litre on May 29 and had since receded. On that day, the diesel price had touched an all-time high of Rs 69.30. Petrol was last above the Rs 77-mark on June 9 when it was priced at Rs 77.02 a litre in Delhi. On that day, diesel was priced at Rs 68.28 per litre. State-owned oil firms had in mid-June last year dumped 15-year practice of revising rates on 1st and 16th of every month in favour of daily price revisions. High prices have off-and-on triggered demands for a reduction in excise duty but the government had ruled out any immediate cut. The Centre currently levies a total of Rs 19.48 per litre of excise duty on petrol and Rs 15.33 per litre on diesel. On top of this, states levy VAT – the lowest being in Andaman and Nicobar Islands where a 6 percent sales tax is charged on both the fuel. Mumbai has the highest VAT of 39.12 percent on petrol, while Telangana levies the highest VAT of 26 percent on diesel. Delhi charges a VAT of 27 percent on petrol and 17.24 percent on diesel.
Source: Business Standard
7 August. Vedanta Ltd is likely to bag as many as 40 oil and gas (O&G) exploration blocks in India’s maiden open acreage auction. An Empowered Committee of Secretaries (ECS) has cleared award of blocks offered in OALP-1, bidding for which closed on May 2. The recommendations of the panel will now go to ministers of finance and petroleum for approval. The Union Cabinet had in April delegated its power to ministers of finance and petroleum to award O&G blocks to their winners in the Open Acreage Licensing Policy (OALP) auction. At the close of the bidding on May 2, Vedanta’s O&G arm, Cairn India had bid for all the 55 blocks on offer while Oil and Natural Gas Corp (ONGC) had bid for 37 blocks either on its own or in consortium with other state-owned firms. Oil India Ltd (OIL) bid for 22 blocks in a similar fashion. Neither local giants Reliance Industries Ltd (RIL) nor any foreign company participated in the auction, a first since India began offering oil and gas area for exploration and production through bids in 1999. India had in July last year allowed companies to carve out blocks of their choice with a view to bringing about 2.8 million square kilometre of unexplored area in the country under exploration. Under this policy, companies are allowed to put in an expression of interest (EoI) for prospecting of O&G in an area that is presently not under any production or exploration license.
Source: Business Standard
7 August. Reliance Naval and Engineering Ltd has approached the Bombay high court against Oil and Natural Gas Corp (ONGC) after the explorer ended a deal for the supply of a dozen vessels to support offshore oil exploration. In its petition, the firm controlled by Reliance Infrastructure Ltd said ONGC has refused to take delivery of the eighth vessel and also invoked a bank guarantee. The company, a part of billionaire Anil Ambani’s diversified Reliance Group, is seeking a refund of more than $6.6 million (about ₹ 45 crore), which ONGC has invoked as performance bank guarantee, along with $15.46 million (about ₹ 105 crore) as payment for the eighth offshore support vessel (OSV) that it built for India’s largest explorer. Reliance Naval also sought the court’s intervention to direct ONGC to take delivery of the eighth vessel. Reliance Naval said in its plea that ONGC had in 2008 floated a tender to build and supply the dozen vessels.
Source: Livemint
7 August. Hyderabad-based Megha Engineering and Infrastructure Ltd (MEIL) has bagged a city gas distribution project in ten districts of Telangana. The company said it would build 3,100 kilometre of pipeline over a period of eight years to supply cooking gas or LPG (liquefied petroleum gas) to about 550,000 households in these districts. The Centre had invited bids to establish a cooking gas distribution network in 22 states, covering 174 districts. Megha Gas is currently engaged in city gas distribution services at Agiripalli and Kanuru of Krishna district in Andhra Pradesh and Tumkur and Belgavi in Karnataka. The project awarded to Megha covers 550,000 families, according to the company.
Source: Business Standard
6 August. Oil and Natural Gas Corp (ONGC)’s highest ever pre-tax quarterly profit (EBITDA) provides cash flow to the state-owned firm to reduce borrowings, Moody’s Investors Service said. For the April-June quarter of the current fiscal, ONGC reported 47.2 percent increase in EBITDA or operating profit to Rs 142.4 billion. In a report, the global rating firm said the government has decided against asking ONGC to share in the cost of any fuel subsidies. The government’s decision, it said, is credit positive because it provides ONGC with cash flow to reduce its borrowings. ONGC increased its borrowings by about Rs 250 billion in January 2018, when it acquired a 51.11 percent stake in Hindustan Petroleum Corp Ltd for Rs 369.15 billion. The high levels of free cash flow will improve ONGC’s financial flexibility, especially at a time when the company is unlikely to reduce its borrowings by selling its 13.77 percent stake in Indian Oil Corp (IOC), given that the share prices of IOC have fallen by about 25 percent since September 1, 2017. Moody’s said the government could, however, ask ONGC to share fuel subsidies in the next few quarters or alternatively, look for higher dividends. The rating agency in its base case assumed an average oil price for the remainder of the year of between $45 and $65 per barrel and expects ONGC to maintain retained cash flow/net debt above 30 percent. Debt reduction from free cash flow generation because of high oil prices and the absence of subsidy sharing will provide the company with a buffer to absorb declines in oil prices, it said. While ONGC has only reported standalone financial results, its consolidated EBITDA which includes the results of ONGC Videsh Ltd, ONGC’s international exploration and production business will also benefit from the increase in oil prices.
Source: Business Standard
5 August. Chennai Petroleum Corp Ltd Managing Director S N Pandey said that as the increase in demand for energy globally is expected to be huge, more people are required in this sector. Pandey was speaking at the inauguration of the seventh batch of Post Graduate Programme in Business Management (PGPBM) at Indian Institute of Management – Trichy (IIM-T). Addressing the newly-admitted PGPBM students, Pandey spoke about the global economy and how the increase in the world’s population means that the demand for energy has increased significantly. He said that students with MBA degrees and good work experience would fit-in well for jobs in this sector.
Source: The Economic Times
3 August. The government gave out the last of the five crore targeted liquefied petroleum gas (LPG) connection, achieving the target almost eight months ahead of schedule. Oil Minister Dharmendra Pradhan said the target has been achieved in 27 months instead of 35 months. As many as 3 crore additional free cooking gas (LPG) connections will be given to poor households by March 2020, he said. Pradhan said the most number of LPG connections were given in Uttar Pradesh, where 87 lakh connections were released, followed by West Bengal (67 lakh), Bihar (61 lakh), Madhya Pradesh (45 lakh), Rajasthan (37 lakh) and Odisha (30 lakh). About 47 percent of the beneficiaries are from the weaker sections of the society — SC/STs. While till now the connections were given based on the 2011 Socio-Economic Caste Census (SECC), the list has been expanded to include providing free cooking gas connection to all SC/ST households, forest dwellers, most backward classes, inhabitants of islands, nomadic tribes, tea estates and beneficiaries of Pradhan Mantri Awas Yojana and Antyodaya Yojana.
Source: The Economic Times
2 August. India’s crude oil production is expected to increase by a marginal 1 million tonnes (mt) over the next four years through 2022, the oil ministry has said. This is despite Prime Minister Narendra Modi’s call for reducing the country’s crude oil imports by 10 percent by 2021-22. According to oil ministry’s projections, India will produce around 38.34 mt oil in 2021-2022 as compared to 37.34 mt produced in last financial year ended March 2018. According to the ministry, Oil and Natural Gas Corp (ONGC) would witness its crude oil production from nomination fields decline 2.25 percent to 22.55 mt in 2021-2022 from around 23 mt produced last financial year ended March 2018. The declining trend in the country’s domestic crude oil production has resulted in the country’s import dependence on crude deteriorate to 82.8 percent at the end of last financial year ended March 2018, as compared to an import dependence of 77.35 percent in financial year 2013-2014.
Source: The Economic Times
2 August. India’s monthly oil imports from Iran surged by about 30 percent to a record 768,000 barrels per day (bpd) in July, as state refiners’ intake surged ahead of US (United States) sanctions in November, preliminary tanker arrival data showed. The shipments also include some parcels that were loaded in June and arrived in India last month, the data obtained from traders showed. July volumes were about 85 percent higher than year ago shipments of about 415,000 bpd, the data showed. State refiners that had cut imports from Iran in 2017/18 due to a dispute over development rights of a giant gas field, have tied up significantly higher volumes for this fiscal year that began in April, drawn to the discounts offered by Iran. Tehran had offered almost free shipping and an extended credit period for oil sales to India, its top oil client after China. State refiners accounted for about four-fifth of Iranian oil imports in July with Indian Oil Corp along with its unit Chennai Petroleum Corp getting about 300,000 bpd oil from Tehran, the preliminary data showed. In April-July, the first four months of this fiscal year, India’s oil imports from Iran has risen by an annual 40 percent to about 677,500 bpd, the data showed. Hindustan Petroleum Corp Ltd had to cancel an Iranian oil shipment as insurers were not willing to provide cover for its two refineries for processing Iranian oil. In January-July, India’s oil imports from Iran rose by more than 17 percent to about 612,000 bpd, the data showed.
Source: Reuters
2 August. Less than 20 months after a cashback was offered at petrol pumps to promote digital payment, the incentive has been cut to 0.25 percent from 0.75 percent. Beginning December 13, 2016, a discount of 0.75 percent was offered to those using plastic money to buy petrol and diesel. This discount was given by way of cashback, which has been credited to the buyer’s account within three days of the transaction. Oil companies have informed the petrol pump operators that the discount has been cut to 0.25 percent. The 0.75 percent discount on payments made using either credit/debit cards, e-wallets or mobile wallets translated into a rebate of 57 paisa a litre on petrol and 50 paisa on diesel. The discount is reduced to about 19 paisa on petrol and 17 paisa on diesel. Petrol is currently sold at Rs 76.43 per litre in Delhi, while a litre of diesel costs Rs 67.93.
Source: Business Standard
3 August. India is planning to set up a liquefied natural gas (LNG) import terminal in Myanmar as it looks to expand energy diplomacy in its neighbourhood, Oil Minister Dharmendra Pradhan said. The terminal to import super-cooled natural gas will be in addition to the similar facilities planned by Indian firms in Bangladesh and Sri Lanka as part of larger plan of energy connectivity in the South Asian neighbourhood, he said. He said Numaligarh Refinery Ltd (NRL) in Assam is exploring supply of diesel to Myanmar and is looking at options to build fuel storage and distribution sector in that country. He said Petronet is also looking at building a 7.5 million tonnes a year LNG import terminal in Bangladesh to feed that country’s energy needs using imported gas. In Sri Lanka, India is jointly developing Trincomalee oil storage tank farm and is also working on setting up an LNG terminal and a 500 MW LNG-fired power plant near Colombo. Bangladesh and Myanmar have large gas reserves which can be explored as alternate sources of gas supply. The national energy systems — gas and electricity networks — in the South Asian countries are largely isolated from each other. Currently only India, Bhutan and Nepal trade electricity.
Source: Business Standard
5 August. The steep 70 percent spike in global liquefied natural gas (LNG) price is unlikely to curb domestic demand, but may crimp the margin of city gas distribution (CGD) companies to some extent as volume growth will support marketing margins, according to a report. Over the past five to six months, LNG prices in Asia have increased by over 70 percent, driven by rising Chinese imports. The spurt was also due to plant shutdowns and healthy demand from Japan, Korea, India and Pakistan, CRISIL said. It also noted that over the rest of this fiscal year, too, prices are expected to hold at $8-8.5 per million metric British thermal units (mmBtu) for non- peak months and reach $10-10.5 per mmBtu during the peak season even as supply is restored from plant turnarounds and incremental liquefaction capacity of 25 million tonnes coming on stream. Last fiscal, after stabilising at $8-8.5 per mmBtu during the lean months (between May-June and September- October), Asian spot LNG prices peaked at $10-10.50 per mmBtu, CRISIL said. What enhances the attractiveness of LNG as an industrial fuel is its improved competitiveness compared with alternatives like fuel oil and LPG. The regulatory push to expand CGD networks is also stoking demand. Though in the past, higher prices dented LNG demand in the country, things are different now with consumption rising 6-7 percent to 20 million tonne in FY18. At an average crude price of $75 a barrel, the landed cost of the fuel oil and LPG is expected to be $14.3 per mmBtu and $19.2 per mmBtu, respectively. In comparison, with LNG ruling at $9.5 per mmBtu, industrial piped natural gas is expected to rule at $14.8/mmBtu, the report said. CRISIL expects LNG demand in the medium term to be supported by development of gas infrastructure in eastern region which is largely untapped. Government focus on increasing the share of gas in the overall energy mix and the development of LNG terminals and pipelines, bode well for demand over the medium to long-term, it said.
Source: Business Standard
3 August. Billionaire Gautam Adani’s group emerged as the biggest winner of gas retailing licences, winning rights to sell CNG (compressed natural gas) in 11 cities, including Allahabad. Adani won the rights to retail CNG to automobiles and piped cooking gas to households in six cities on its own and another five in joint ventures with Indian Oil Corp (IOC), according to results of the 48 of the 86 cities that were bid in the country’s biggest city gas distribution (CGD) bid round. According to the Petroleum and Natural Gas Regulatory Board, Indian Oil Corp (IOC), on its own, won rights to four cities. Bharat Gas Resources Ltd, a unit of Bharat Petroleum Corp Ltd (BPCL), won a licence each for six cities, the same number for which Torrent Gas Pvt Ltd. too made winning bids. State gas utility GAIL’s retailing arm, GAIL Gas, managed to get rights for three cities. When the bid round closed, IOC, BPCL and Adani Gas Ltd were the top bidders. Of the 86 cities offered for retailing of CNG to automobiles and piped cooking gas to households in the ninth CGD bid round, IOC bid for 34 cities on its own and another 20 in partnership with Adani Gas Ltd. Adani Gas on its own bid for 32 cities. Bharat Gas Resources Ltd bid for as many as 53 cities while GAIL Gas Ltd put in offers for 34 cities. Gujarat-based Torrent Gas Pvt Ltd bid for 31 cities while Gujarat Gas Ltd put in offers for 21 areas.
Source: The Hindu
1 August. In a major blow to the government in the gas migration dispute between Reliance Industries Ltd (RIL) and Oil and Natural Gas Corp (ONGC), an international arbitration tribunal ruled in favour of a consortium led by the Mukesh Ambani-led conglomerate. The tribunal rejected the government’s claim of illegal gas production by the consortium from the neighbouring block of ONGC in the Krishna-Godavari (KG) basin. It awarded costs of $8.3 million (Rs 564.40 million), to be paid by the government to the consortium. The arbitration was over a dispute regarding a penalty of $1.55 billion slapped by the government on RIL and its partners, BP Plc and Niko Resources, for allegedly drawing gas from ONGC’s block.
Source: Business Standard
7 August. Coal India Ltd (CIL) will supply 4.65 million tonnes (mt) of coal a year for the cement industry for five years through e-auctions. It had recently offered 7 mt to sponge iron firms, and received bids that were 39% higher than the notified price for the non-power sector. The company hopes to garner similar premiums from cement producers as the sector faces a shortfall as coal was diverted to fuel-starved power plants. According to the CIL, of the 4.65 mt on offer annually, 1.14 mt can be procured each year through the railways, while the rest 3.51 mt would be supplied through roadways.
Source: The Economic Times
2 August. Coal India Ltd (CIL) said it produced 177.43 million tonnes (mt) of coal in the first four months of the ongoing fiscal, registering a growth of 14 percent. It had produced 155.53 mt of coal in the year-ago period, CIL said. In July CIL produced 40.56 mt coal, against 36.69 a year ago. The state-owned firm accounts for over 80 percent of the domestic coal production. CIL has pegged its production estimate at 630 mt in 2018-19. Coal supplies by CIL to TPPs (thermal power plants) perked up to 161.71 mt during the April-July period of the current fiscal, compared to 140.50 same period last financial year, it said. The increased supply was a result of higher rake loading to power sector which witnessed a growth of 12.5 percent during the referred period. With an assessment suggesting the current trend may not warrant pursuing the projected coal output target of 1 billion tonnes by 2020, the government had in April gave indication of revising the production target of the dry fuel. The government had earlier set a target of 1 billion tonnes of coal output by 2019-20 for CIL. However, the government had in December last year said that of 1.5 billion tonnes the country is expected to produce by 2022 and of this, 1 billion tonnes would come from CIL.
Source: Business Standard
2 August. Coal India Ltd (CIL) has identified seven coking coal assets in Australia for acquisition and is also in discussions with a few mine owners in Canada, a parliamentary panel said. The panel appreciated the work of the government in bringing down the import of non-coking coal. However, the panel was of a view that the use of indigenous coal by the imported coal-based thermal power plants is dependent on policy interventions by the Centre for allowing use of domestic coal along with imported coal as the existing consent is for use of imported coal only. The panel, while appreciating the efforts being initiated to operationalise the auctioned and allotted coal blocks, said that the issues which hinder operationalisation of these blocks should be addressed by the government in consultation with all stakeholders so that coal mine projects may commission expeditiously.
Source: Business Standard
7 August. The Revised Framework for Resolution of Stressed Assets issued by the Reserve Bank of India (RBI) has forced the electricity sector towards NPAs (non-performing assets) and the new guidelines will only deepen the sector’s crisis, a Parliamentary panel has noted. India has around 75,000 MW of operational coal-based power generation capacity. Of this, around 60,000 MW capacity is under financial stress. Lenders have exposure to around Rs 3 lakh crore of these stressed assets. With a view to clean-up the books of the banks, RBI had issued the revised framework which substituted the then existing guidelines with a simplified generic framework for resolution of stressed assets.
Source: The Economic Times
6 August. Power distribution companies (discoms) in Delhi sold 615.5 million units (mu) of electricity to customers outside the state during April-June despite the AAP-led government’s allegation that the capital was staring at power crisis in peak summer season due to coal shortage at plants. According to official data, discoms in Delhi sold 296.228 million units (mu) of electricity in June 2018 against 233.578 mu in May, registering an increase of 26.8 percent. Among distribution companies, BSES Yamuna Power Ltd (BYPL) sold 144.14 units, BSES Rajdhani Power Ltd (BRPL) sold 4.29 mu and Tata Power Delhi Distribution Ltd (TPDDL) sold 106.381 mu in June. In May, BYPL sold the maximum 130.047 mu, BRPL sold 16.594 mu and TPDDL sold 64.071 mu to outside customers. BSES said that due to the nature of the power business in India, power demand is arranged keeping in mind the peak power demand. In June, the AAP government wrote to Power Minister R K Singh that Delhi was staring at a power blackout due to the fast depleting coal stockpiles at power plants in the city and urged him to take up the issue with the Railways which transports coal to the national capital.
Source: The Economic Times
5 August. India may be looking at a huge electricity surplus in most part of the country in the current financial year, according to the latest data released by the power ministry’s technical planning wing Central Electricity Authority (CEA). The country is likely to experience energy surplus of 4.6 percent and peak power surplus of 2.5 percent in the fiscal year through March 2019, the CEA has said. Three states are expected to witness peak time power surplus of more than 30 percent including Tripura at 30.6 percent surplus, Himachal Pradesh at 35.7 percent and Sikkim at 79.2 percent, apart from areas served by Damodar Valley Corp (DVC) at 40.4 percent. However, five states are likely to have peak power deficit of more than 15 percent — Punjab with 19.6 percent power deficit, Bihar at 18.9 percent, Uttar Pradesh at 17.4 percent, Assam at 17.4 percent and Jammu and Kashmir at 15.1 percent. In 2017-18, CEA had projected an all-India peak power surplus of 11,471 MW or 6.8 percent but the country suffered from a peak power deficit of 2 percent. Experts said the Indian power system is becoming energy surplus but peak deficit due to increased share of renewables and reducing share of hydro and gas-based power generation. CEA said the assessment of the anticipated power supply position for 2018-19 has been made taking into consideration power availability from various stations in operation and renewable energy sources apart from fuel availability and anticipated water availability at hydro stations.
Source: The Economic Times
5 August. Energy Efficiency Services Ltd (EESL), an arm of the power ministry, announced it has signed Memorandum of Understanding (MoU) with North Bihar Power Distribution Company Ltd (NBPDCL) and South Bihar Power Distribution Company Ltd (SBPDCL) to deploy smart electricity meters in 130 towns and adjacent rural areas covering 1.8 million consumers in the state. Power Minister R K Singh said smart meters will reduce AT&C (Aggregate Technical and Commercial) losses, improve the financial health of power distribution companies (discoms), incentivise energy conservation, enhance ease of bill payments and ensure billing accuracy by getting rid of manual errors in meter reading. Smart meters are part of the overall Advanced Metering Infrastructure (AMI) solution that measures the consumers’ electricity use at different times of the day and sends this information to the energy supplier. This gives consumers better access to information and allows them to make more informed decisions on the use of electricity in their homes, leading to reduced power wastage, and long-term carbon and financial savings. Under the MoU, the smart meters are to be installed within 1.5 years in a phased manner. Through its Smart Meter National Programme (SMNP), EESL aims to replace 250 million conventional meters in India with smart meters. The idea is to improve billing efficiencies across the nation, enabling alignment with the loss trajectory agreed by the discoms under the centre’s Ujjwal Discom Assurance Yojana (UDAY) scheme.
Source: The Economic Times
4 August. For the next three months, city residents will have to shell out more for power as the UT (Union Territory) electricity department has proposed an increase in fuel and power purchase cost adjustment (FPPCA) charges on the existing tariff. The electricity department has proposed its hike up to 10% on the existing tariff under different slabs and categories. The rate will be imposed with effect from April after getting approval from the Joint Electricity Regularity Commission (JERC). The department has calculated FPPCA charges ranging from 10 paisa to up to Rs 1 per unit in various slabs of different categories. The charge is levied on all the categories of consumers, except agriculture. FPPCA is the difference between per unit actual cost of power purchase and per unit approved cost of power purchase. JERC, in the tariff order issued on March 29, had imposed a cap on FPPCA charges to be levied by the department April onwards. It was limited to 10% of the approved cost for a quarter. As per official records, there are as many as 2.16 lakh electricity consumers, of which 1.75 lakh fall in the domestic category. The department has regular billing of around 94% of consumers. It generates bills for domestic customers bi-monthly. Domestic consumers are divided into four groups of 50,000 each and they pay bills in six cycles a year. Bills of commercial consumers are generated every month. In residential category, the consumers who were earlier paying Rs 4,000 will have to pay over Rs 4,400, while in the commercial category, the consumers who were earlier paying around Rs 15,000 will have to pay around Rs 16,500. It is the difference between per unit actual cost of power purchase and per unit approved cost of power purchase. The charge is added on a per-unit basis to each power bill over and above the regular tariff. The charges are revised after every quarter.
Source: The Economic Times
3 August. Average spot price of power increased 39 percent to Rs 3.46 per unit in July over a year ago at Indian Energy Exchange (IEX). The price however declined 7 percent sequentially compared to Rs 3.73 per unit rate in June this year. It said ‘One Nation, One Price’ was realised for 21 days last month. The day-ahead market (DAM) experienced minor transmission congestion of 6 percent mainly in import of power towards northern region. According to the NLDC (National Load Dispatch Centre) statistics, the all India peak demand touched 168 GW on July 10, 2018, about 1 percent decline over the previous month. The electricity market at IEX Term ahead-market (TAM) and DAM combined traded 4,148 million units (mu) last month vis–vis 5,053 mu in June, and 3,729 mu in July last year. Good monsoon rains dampened the power demand as well as prices in July this year vis–vis the preceding month. The DAM traded at 4,028 mu in July registering a decline of 19 percent over 4,965 mu in June, and 10 percent increase over 3,669 mu in July 2017, it said. On a daily average basis about 130 mu were traded during the month with average daily sell bids at 237 mu and average daily buy bids at 161 mu, it said.
Source: Business Standard
1 August. Setting another record in the power sector, Telangana registered its highest ever peak power demand of 10,429 MW. The new record surpassed the earlier peak demand of 10,284 MW on March 8, 2018. The power demand has been on the rise in the state for the past few years due to uninterrupted and 24×7 hours power supply to agriculture, domestic and industrial sectors. Energy Minister G Jagadish Reddy and Telangana Genco and Transco Chairman and Managing Director D Prabhakar Rao said the demand is expected to touch 11,500 MW this kharif season and expressed confidence that the discoms (distribution companies) will meet the demand. The Minister said the irrigation department has given indent for 10,852 MW of power for lift irrigation projects that would be commissioned in the next three years.
Source: The Economic Times
7 August. India is all set to comfortably achieve 100 GW of solar energy capacity by 2022 and has already installed solar capacity of 23.12 GW till July this year, Parliament was informed. The data regarding generation of power from various renewable energy projects is consolidated by the Central Electricity Authority (CEA). Power and New and Renewable Energy Minister R K Singh said solar power projects require around 4 to 5 acres of land per MW and the Ministry of New and Renewable Energy (MNRE) monitors the development of upcoming and commissioned renewable energy projects with implementing agencies like Solar Energy Corp of India (SECI), NTPC Ltd, state nodal agencies and state governments/UT administrations through regular meetings, video-conferences and on the site visits. Karnataka topped the installed solar energy capacity chart at 5.16 GW followed by Telangana at 3.4GW and Andhra Pradesh at 2.56 GW as on July 31, 2017, he said. He said the National Institute of Solar Energy has assessed the solar power potential of the country at 748 GW.
Source: Business Standard
7 August. Most power plants are likely to miss the revised deadlines for complying with stricter air pollution emission norms, GE Power India Managing Director (MD) Andrew DeLeone said. The Ministry of Environment, Forests and Climate Change had brought out new norms for coal-based power stations to cut down emissions of particulate matter (PM10), sulphur dioxide (SO2) and oxides of nitrogen (NOx) to improve the air quality around power plants. The ministry had for the first time fixed SOx and NOx norms in 2015. The earlier deadline for power stations to adhere to these guidelines was December 2017. But, these norms were not complied by the 400 power plants that were to be retrofit with modern Flue-gas desulfurisation (FGD) units for lowering emission intensity. The Central Electricity Authority then chalked out at detailed plan to retrofit old plants with required equipment to meet new norms with a deadline ranging from 2020-24. GE India is currently executing a ₹ 309 crore contract by NTPC Ltd for installing FGD system at Phase-I (2 X 800 MW) of Super Thermal Power Project in Telangana. GE announced the successful completion of the first turnkey full flow wet flue gas desulphurisation (WFGD) unit at NTPC’s 500 MW Super Thermal Power project site in Vindhyachal, Madhya Pradesh.
Source: The Hindu Business Line
6 August. Going against the policy of state government to promote solar power, MSEDCL (Maharashtra State Electricity Distribution Company Ltd) has proposed to levy a surcharge of Rs 1.25 per unit on solar rooftop prosumers. While the discom (distribution company) is discouraging solar rooftops, another government body Maharashtra Energy Development Agency (MEDA) is installing solar panels atop government buildings at full steam. The decision on the surcharge will be taken by Maharashtra Electricity Regulatory Commission (MERC). MSEDCL itself has tied up for large quantum of solar power as it is cheap. It will purchase 1,000 MW for around Rs 2.70 per unit against average power purchase cost of Rs 4 a unit. Tenders have been floated for another 1,000 MW. Energy Minister Chandrashekhar Bawankule had announced that all farm pumps would go solar by 2025 and the process has already started. MSEDCL said that the surcharge was necessitated due to large number of high-paying consumers switching over to solar.
Source: The Economic Times
5 August. The Kerala State Electricity Board (KSEB)’s Soura Roof Top solar power plant project is getting good response from the public. So far, 2065 persons including the owners of residential buildings and commercial buildings have registered with the KSEB for taking part in the Soura venture. The Soura project of the KSEB aims to generate 500 MW electricity by installing roof top panels at maximum number of buildings across the state. The project offers three different schemes to the consumer. Under first two schemes, the KSEB will bear the expenses for installing and maintaining the solar panels, K B Swaminathan, deputy chief engineer of KSEB Kozhikode Circle, said. It is the first time that the KSEB is volunteering to generate solar power energy, he said. While the first scheme offers 10 percent of the total produced electricity to the consumer free of cost, the second scheme offers any quantity of electricity produced at a fixed rate to the consumer. The third schemes will be completed with the investment of the consumer. The consumer will have the right to use the whole energy generated at his roof top or can sell the energy completely or partially to the KSEB. The Soura project aims to generate 500 MW renewable energy in three years. The plan is to generate 150 MW with the support of domestic and agriculture consumers, 250 MW with the support of commercial and non-governmental buildings, and 100 MW electricity with the support of government buildings. Interested building and land owners can register for the scheme till August 31. The KSEB will select the participants of the project after site inspection and feasibility study at all buildings. The project report will be submitted after study during September- December period. The plan is to complete the installation of the panels between January 2019 and March 2021.
Source: The Economic Times
5 August. Leading wind turbine maker Suzlon is looking to capture about 30 percent of the 20,000 MW of wind capacity likely to be commissioned by financial year 2020-21, the company said. According to industry estimates, with the thumb rule of Rs 650 million per MW. The domestic wind market is on a growth trajectory with 7,500 MW of capacity already auctioned, 10,000 MW of bids in the pipeline, and another 3,000 MW soon to be auctioned, according to Kirti Vagadia, group chief financial officer, Suzlon. The company at present has a 20 percent share in the 7,500 MW wind capacity already auctioned, according to him. Suzlon, with an installed manufacturing capacity of 4,200 MW, has a strong presence across the entire wind value chain with a comprehensive range of services to build and maintain the projects, which include design, supply, installation, commissioning of the project and dedicated life cycle asset management services. The company is currently a market leader in the country with over 11.9 GW of installed capacity and global installation of 17.9 GW spread across 17 countries in Asia, Australia, Europe, Africa and the Americas.
Source: Business Standard
4 August. A research scholar of Indian Institute of Technology Roorkee (IIT-R) has claimed to have developed a cost-effective heating system using stored solar energy which will work on minimal power and can be used to heat homes in rural areas at a nominal cost. The system has been developed by Vikas Verma, who completed his PhD from the mechanical and industrial engineering department of the institute in 2017 and is currently an assistant professor in the department of energy, Tezpur University, Assam. The research on the Solar-Assisted Ground Source Heat Pump System (SAGSHP) was done as part of an MoU (Memorandum of Understanding) between IIT Roorkee and Geo-environmental Research Centre of Cardiff University, UK. A unique feature of SAGSHP is that it enables solar energy available in the day time to be stored and used for space heating in the night time. According to Verma, the system requires only 25 percent of the electricity used in the electric heaters to produce the same heat energy.
Source: The Economic Times
4 August. The government is set to approve a subsidy of around Rs 3,500 crore for promoting electric vehicles over the next five years as part of the FAME (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles) 2 plan, while limiting support only to government-run buses and denying benefit currently available to private vehicles, including hybrids. The plan leaves out private cars, cab aggregators, two-wheelers and even hybrid vehicles from the government’s financial incentive package that is aimed at supporting green mobility initiatives. A committee headed by expenditure secretary A N Jha approved the allocation against the demand of around Rs 12,000 crore by the heavy industries ministry as it pushed the scheme as a major thrust to electric mobility in the country under the second phase of FAME scheme.
Source: The Economic Times
3 August. Solar Energy Corp of India (SECI), the nodal agency for implementing National Solar Mission, has cancelled all but the lowest priced projects allotted in its mega solar auction held on July 13. The decision to cancel allotment of 2,400 MW solar power capacity out of 3,000 MW auctioned in July was announced at a meeting of developers with government officials and Solar Energy Corporation of India (SECI). The only developer that did not get the axe was Acme Solar that won 600 MW quoting the lowest tariff of Rs 2.44 per unit. This is the first time auction results have been cancelled only partially, not fully. Recently, Uttar Pradesh had cancelled a 1000 MW auction held in mid-July without assigning any reasons. Gujarat too had cancelled a 500 MW auction in February.
Source: The Economic Times
2 August. The Joint Electricity Regulatory Commission (JERC) has approved the ambitious project of the Chandigarh administration to install a 15 MW solar plant in the city. The project will come up at MC water works in Sector 39, which receives water from Bhakra Canal on a daily basis. The UT administration has already explored modalities and related exercises. Even though this will be the city’s biggest ever solar plant, to be built at a cost of Rs 80 crore to Rs 90 crore, the authority will not spend anything on it. The private company of the developer selected for the project will work on it and sell electricity to the MC for 25 years.
Source: The Economic Times
7 August. Venezuela’s state-run oil company PDVSA has limited the damage from an unprecedented slump in crude exports by transferring oil between tankers at sea and loading vessels in neighbouring Cuba to avoid asset seizures. But the OPEC (Organization of the Petroleum Exporting Countries) member nation is still fulfilling less than 60 percent of its obligations under supply deals with customers. Venezuela has been pumping oil this year at the lowest rate in three decades after years of underinvestment and a mass exodus of workers. The state-run firm’s collapse has left the country short of cash to fund its embattled socialist government and triggered an economic crisis. PDVSA’s problems were compounded in May when US oil firm ConocoPhillips began seizing PDVSA assets in the Caribbean as payment for a $2 billion arbitration award. An arbitration panel at the International Chamber of Commerce (ICC) ordered PDVSA to pay the cash to compensate Conoco for expropriating the firm’s Venezuelan assets in 2007. Conoco’s actions also forced PDVSA to stop shipping oil on its own vessels to terminals in the Caribbean, and then onto refineries worldwide, to avoid the risk the cargoes would be seized in international waters or foreign ports. The Venezuelan company has used a terminal at the port of Matanzas as a conduit mostly for exporting fuel oil, according to shipping data. Venezuela’s fuel oil is burned in some countries to generate electricity. Two tankers set sail from the Matanzas terminal for Singapore between mid-May and early July, data showed. Each ship carried around 500,000 barrels of Venezuelan fuel, data shows. In recent months, Venezuela has been shipping fuel to Matanzas in small batches, according to the data. PDVSA and Cuba’s state-run oil firm Cupet have used Matanzas to store Venezuelan crude and fuel in the past but exports from the terminal to Asian destinations are rare.
Source: Reuters
7 August. US (United States) crude oil production in 2018 was expected to grow at a slower rate than previously forecast amid lower crude prices, according to a monthly US government report. US crude production has climbed dramatically, fueled largely by increased output from shale formations, but may now rise more slowly as prices drop. Output was expected to rise 1.31 million barrels per day (bpd) to 10.68 million bpd in 2018, lower than last month’s forecast of growth of 1.44 million bpd to 10.79 million, according to the US Energy Information Administration (EIA). Higher production from Russia and members of the Organization of the Petroleum Exporting Countries has put downward pressure on crude oil prices in recent weeks, the EIA said. The EIA said US oil demand growth was expected to be 470,000 bpd in 2018, unchanged from its previous forecast. Demand growth is expected to rise 290,000 bpd in 2019, compared with 330,000 bpd previously expected.
Source: Reuters
6 August. Vietnam’s Nghi Son oil refinery is seeking approval to export oil products as high inventories and pre-existing import contracts have limited domestic fuel demand. If the approval is granted, this would be the first time Vietnam, a net importer of fuel, has allowed oil product exports produced domestically. The fuel shipments could also weigh on regional margins at a time when supplies are expected to start flowing from new projects in Malaysia and China. Nghi Son Refinery and Petrochemical LLC, owner of the 200,000 barrels per day (bpd) refinery, has ramped up output to more than 50 percent of capacity since starting up earlier this year and this has contributed to high fuel inventories. Vietnam’s imports of oil products in July fell to its lowest since January 2016, shipping data showed. Nghi Son and the 130,000 bpd Dung Quat refinery that started up production in 2009 are expected to jointly meet about 70 percent of the country’s refined oil product demand. The plant is scheduled to import 6 million tonnes of crude oil and churn out 4 million tonnes of refined products this year, the company said.
Source: Reuters
6 August. Royal Dutch Shell Plc is restarting the gasoline-producing unit at its 209,787 barrel per day (bpd) Convent, Louisiana, refinery. The 92,000 bpd gasoline-producing Fluidic Catalytic Cracking Unit (FCCU) is expected to return to full production by the weekend, if not sooner. The unit was shut on May 30 for a planned overhaul.
Source: Reuters
6 August. Iraqi Oil Minister Jabar al-Luaibi said oil prices are approaching stability. Iraq plans to raise oil production to more than 7.5 million barrels per day (bpd) by 2023-2024, including 6 million bpd of oil for exports and 1.5 million bpd for domestic consumption, Luaibi said.
Source: Reuters
2 August. Russian oil output rose by 150,000 barrels per day (bpd) in July from a month earlier, surpassing the amount Moscow had promised to add following a meeting of global oil producers in Vienna in June, energy ministry data showed. Under an initial deal between OPEC and non-OPEC producers, Moscow had agreed to cut 300,000 bpd from the production level of 11.247 million bpd Russia reached in October 2016. When oil prices subsequently rose, the producers decided on 22 June to increase their combined output by 1 million bpd, of which Russia was to contribute 200,000 bpd starting on 1 July. According to the ministry data, Russian oil production rose to 47.429 million tonnes in July versus 45.276 million in June. In barrel terms, output reached 11.21 million bpd, up from 11.06 million bpd in June. Russian Energy Minister Alexander Novak said Russia planned to increase its production by 200,000-250,000 bpd and that the OPEC+ group led by Russia and Saudi Arabia would meet in September to discuss the current deal. Russia has used stocks held in tanks at its oilfields to boost production, yet, the specific amount which may have been used was unknown. Sources estimated that Russia has a combined spare capacity of around 200,000 bpd which may be used to hold oil stocks. Although not large compared to some countries such as the United States, which may release stocks to bring oil prices down if needed, it shows Russia still has supply flexibility.
Source: Reuters
2 August. Russia’s Rosneft signed a contract with Poland’s Grupa Lotos to supply Poland with oil until the end of 2020, the Russian oil company said. Rosneft will supply between 6.4 million and 12.6 million tonnes of oil during that period, it said.
Source: Reuters
2 August. South Korean imports of US (United States) crude oil are set to hit all-time highs in September and October as refiners snap up supplies to replace Middle East grades. US crude loadings for South Korea have been rising since July and arrivals are expected to reach 6 million barrels in each of September and October, the highest ever, according to the trade flow data. South Korea’s imports of US crude jumped more than fourfold to 14.1 million barrels in the first half of the year from a year ago, according to data from Korea National Oil Corp. That’s an average monthly intake of 2.35 million barrels of US crude. The increase in American oil shipments follows the world’s fifth-largest oil importer halting Iran crude loadings from July, ahead of US sanctions, while its refiners are also seeking cheaper alternatives to Iraq’s Basra crude.
Source: Reuters
1 August. OPEC (Organization of Petroleum Exporting Countries)’s crude output increased last month as Saudi Arabia pumped near-record volumes to make good on a pledge to consumers that demand would be met. The kingdom’s oil production grew by 230,000 barrels a day in July, to 10.65 million barrels per day. This is just shy of an all-time peak reached in 2016, according to a survey of analysts, oil companies and ship-tracking data. Saudi Arabia’s production increase shows it’s delivering on promises to prevent prices from damaging the global economy after Brent crude reached a three-year high above $80 a barrel earlier this summer. The kingdom has been under acute pressure from President Donald Trump to open the taps as he chokes off exports from Saudi’s political rival, Iran. The survey shows Saudi Arabia’s output was below the 10.8 million barrels a day threshold that the kingdom was said to be indicating it would pump in July, suggesting demand for its oil isn’t as strong as initially expected.
Source: Bloomberg
1 August. Italian oil major Eni expects to invest $1.795 billion (1.37 billion pounds) in three offshore Mexican oil fields by 2040, according to a development plan approved by Mexico’s oil regulator. The plan covering the Amoca, Mizton and Tecoalli shallow water fields is the second one approved by the regulator, known as the National Hydrocarbons Commission (CNH), following a landmark 2013 energy opening that has led to more than 100 oil and gas contracts being awarded in a series of auctions. Eni sees initial crude oil production of 8,000 barrels per day (bpd) in early 2019 from its Amoca and Mizton fields, and ramping up to 90,000 bpd by 2022, according to the CNH. Initial production at the Tecoalli field is seen beginning in 2024. Through the end of this year, Eni plans to invest $232 million as part of its work program for the project, while the total value of the project is estimated at about $7.3 billion.
Source: Reuters
1 August. Iraq exported 3.543 million barrels per day (bpd) of crude oil from its southern ports in July, slightly above the June average, the oil ministry said. Iraq exported 3.521 million bpd of crude oil in June. All the volumes shipped in July came from the southern fields, the ministry said. The average sale price in July was $69.163 per barrel, generating around $7.6 billion in revenue, the ministry said.
Source: Reuters
7 August. ExxonMobil Corp has offered to sell a liquefied natural gas (LNG) cargo from the 15.6 million tonnes a year Gorgon LNG plant in Australia for August to September delivery. Chevron, operator of the Gorgon LNG plant off Western Australia, completed planned maintenance at the plant’s Train 2 in early June. Gorgon LNG is owned by Chevron, Exxon, Royal Dutch Shell, Japan’s Osaka Gas, Tokyo Gas and JERA.
Source: Reuters
7 August. US (United States) dry natural gas production should rise to an all-time high of 81.10 billion cubic feet per day (bcfd) in 2018 from 73.57 bcfd in 2017, according to the Energy Information Administration (EIA)’s Short Term Energy Outlook (STEO). The latest August output projection for 2018 was down from the EIA’s forecast of 81.34 bcfd in July but would still easily top the current annual record high of 74.15 bcfd produced on average in 2015. EIA also projected US gas consumption would rise to an all-time high of 79.57 bcfd in 2018 from 74.22 bcfd in 2017. In 2019, EIA projected output would rise to 84.10 bcfd, while usage would slip to 79.47 bcfd. After the US became a net gas exporter for the first time in 60 years in 2017, EIA projected US net exports would rise to 2.0 bcfd in 2018 and 5.4 bcfd in 2019, up from 0.4 bcfd in 2017.
Source: Reuters
6 August. Tanzania wants to build a pipeline to pump natural gas to neighbouring Uganda, another step in the two countries’ bid to expand energy cooperation. Tanzania Petroleum Development Corp (TPDC) said that the pipeline would start from its capital Dar es Salaam, then pass through Tanga port on the Indian Ocean and to Mwanza, a port on Lake Victoria before crossing the border to Uganda. It said it was looking to hire a contractor to conduct a feasibility study to determine current and future natural gas demand “by identifying all potential customers”. Tanzania boasts estimated recoverable natural gas reserves of over 57 trillion cubic feet, mostly in offshore fields in the south of the country.
Source: Reuters
5 August. An Egyptian company plans to start importing gas from Israel for re-export in the first quarter of 2019, sources in the country’s energy sector said, under agreements signed in February to buy $15 billion worth of gas over 10 years. Partners in Israel’s Tamar and Leviathan offshore gas fields said in February they would supply the private Egyptian company Dolphinus Holdings with around 64 billion cubic metres of gas over a decade. The deal has stirred controversy in Egypt, which until a few years ago exported gas to Israel. Egypt hopes the imports will help in its efforts to become a regional energy hub.
Source: Reuters
5 August. US (United States) energy regulators have told EQT Corp and other companies building the $3.5-$3.7 billion Mountain Valley natural gas pipeline from West Virginia to Virginia to stop all construction. US Federal Energy Regulatory Commission (FERC) said in its decision that it cannot predict when the BLM or Forest Service may act or whether the agencies will ultimately approve the same route for Mountain Valley. Before the FERC decision, EQT delayed its target date to finish the pipeline to the first quarter of 2019 from late 2018. The 303 mile (488 kilometre) pipeline is designed to deliver 2 billion cubic feet per day of gas to meet growing demand for the fuel for power generation and other uses in the US Southeast and Mid-Atlantic.
Source: Reuters
3 August. China’s state planner issued new draft rules to give private companies access to the country’s oil and gas infrastructure, including crude oil pipelines, gas pipelines, liquefied natural gas (LNG) terminals and underground gas storage. The new draft rules followed requests from the country’s energy operators, especially in natural gas, for equal access to the nation’s natural gas pipeline network, the National Development and Reform Commission (NDRC) said. The draft marks the first time the government has published a concrete plan to promote fair access to gas-related facilities, including LNG terminal and storage. It is Beijing’s latest move in its ongoing reform of the oil and gas sector to keep it from being monopolized by state companies. The NDRC proposed adopting thermal units as the standard measurement of gas instead of tonnes, saying it’s an easier way to calculate gas transportation cost.
Source: Reuters
3 August. Production of natural gas from two deepwater wells at Shell’s West Nile Delta field 9B in Egypt will begin in the first half of October, Petroleum Minister Tarek El Molla said. Molla said the whole project, which includes several other wells being dug and linked to production, was set for completion in the second half of 2019 and that its output aims to reach 400 million cubic feet per day. Egypt plans to become a regional hub for the trade of liquefied natural gas after a string of major discoveries in the Mediterranean that are expected to make Egypt self-sufficient in gas by the end of 2018. The discoveries include the mammoth offshore Zohr gas field. Italian oil company Eni said that the daily production capacity of Zohr stood at 1.6 billion cubic feet and would reach 2 billion by September. Egypt in February issued long-awaited executive regulations to allow the private sector to import natural gas directly, hoping to attract greater private-sector participation in the country’s rapidly expanding gas sector.
Source: Reuters
2 August. Malaysian state-owned oil company Petroliam Nasional Bhd (Petronas) said it had delivered its first liquefied natural gas (LNG) cargo to Japan’s Hokkaido Electric Power Co. Inc. on August 1. The delivery marks the beginning of its supply to Hokkaido Electric via a 10 year agreement signed on 2 March 2017, according to Petronas. The delivery was done via Malaysia LNG Sdn Bhd, a Petronas subsidiary, and the cargo was delivered from Petronas’ Bintulu LNG complex in the East Malaysian state of Sarawak, according to Petronas.
Source: Reuters
1 August. Vietnam’s state oil firm PetroVietnam said it has signed an agreement with two Japanese companies to sell gas from a South China Sea oil block close to waters disputed by Beijing. Vietnam is struggling to maintain its crude oil and gas output amid declining production from key fields and ongoing pressure from China that has affected work on some projects. PetroVietnam said that maritime tensions with China will hurt its offshore exploration and production activities this year. The agreement will pave the way for the project to start commercial gas production from the third quarter of 2020, PetroVietnam said.
Source: Reuters
7 August. Australia’s Wesfarmers Ltd has agreed to sell its last coal asset for A$860 million ($635 million), taking advantage of a surge in coal prices, as the conglomerate embarks on the biggest overhaul of its portfolio in a decade. The sale of its 40 percent stake in the Bengalla thermal coal mine to New Hope Corp at a big profit follows Wesfarmers’ sale of its Curragh mine last December, and a less glorious exit from a disastrous foray into British hardware. New Hope agreed to pay virtually the same price for the stake from Wesfarmers as it paid in 2016, even though coal prices are more than double what they were when it bought global miner Rio Tinto’s stake in the mine. The other partners in Bengalla, Taiwan’s Taipower and Japan’s Mitsui, with 10 percent each, have pre-emptive rights to match New Hope’s offer, but didn’t exercise those rights when coal prices were much lower.
Source: Reuters
7 August. Chinese thermal coal futures surged by the most since August 2017 as traders with bets on falling prices paid up to close out their positions in the market. The most-actively traded coal futures on the Zhengzhou Commodity Exchange (ZCE), for September delivery, soared as much 5.5 percent to 622 yuan ($91.06) a tonne, the biggest intra-day percentage gain since 25 August 2017. The top 20 futures brokers in the coal contract held 13,463 more short positions than long positions, or bets for rising prices, according to data from the ZCE.
Source: Reuters
7 August. German energy group Uniper warned that it would have to review its entire business in France if a planned shutdown of coal-fired power plants will be implemented. French President Emmanuel Macron in November said the country would phase out all coal-fired stations by 2021. Uniper owns about 2,100 MW of installed capacity in France, of which 1,200 MW are coal. Along with French state-controlled utility EDF, it is the only operator of coal-fired power plants in the country.
Source: Reuters
7 August. Pangilinan-led Manila Electric Company (Meralco) announced a slight increase in electricity rates this month, following the rise in the cost of power. Meralco said it will increase overall electricity rates by P0.0265 per kilowatt hour (kWh) to P10.2190 from July’s P10.1925. For households consuming 200 kWh per month, this will translate to an adjustment of around P5 in their total bill. Meralco currently operates and maintains electric distribution systems in the cities and municipalities of Bulacan, Cavite, Metro Manila, and Rizal, and certain cities, municipalities, and barangays in the provinces of Batangas, Laguna, Pampanga, and Quezon.
Source: GMA News
1 August. The Asian Development Bank (ADB) has approved more than $375 mn made up of a loan and grants to help Bangladesh provide electricity to all its citizens. The package will go towards a project to develop two power lines in support of the government’s national target of electricity for all by 2021. The government of Bangladesh has pledged to address infrastructure deficiencies, including modern and affordable energy services. About 35 million people in the country are without access to electricity. The government will contribute $174.5 mn towards the total cost of the project, estimated at $532 mn, which is due to be complete at the end of June 2023.
Source: Public Finance International
7 August. The French government has approved bids for 103 solar power projects with a total capacity of 720 MW, Energy Minister Nicolas Hulot said. The ground solar projects, which could provide power for around 100,000 homes annually, are part of the government’s plan announced in 2016 to add 3,000 MW of solar capacity to France’s energy mix by 2020. He said that two other tender rounds were expected with a capacity of 850 MW each. France is racing to increase its wind, solar and other low carbon power generation sources so as to reduce its dependence on nuclear power generation which currently accounts for over 75 percent of its electricity needs.
Source: Reuters
7 August. Indonesia plans to require all diesel fuel used in the country contain biodiesel starting next month to boost palm oil consumption, slash fuel imports, and narrow a yawning current account gap. While the proposal has been welcomed by the palm oil industry and government, it has raised concerns among the automobile industry the fuel could impact engine performance. Environmentalists fear the boost to local palm oil consumption will hasten Indonesia’s already fast spreading deforestation. In Indonesia, the bio component in biodiesel consists of fatty acid methyl esters (FAME) made from palm oil. Indonesia has 26 FAME producers, including units of palm oil giants like Sinar Mas Group, Wilmar, and Musim Mas, according to the Indonesian Biofuels Producers Association.
Source: Reuters
3 August. Albania has called for bids to build the Adriatic country’s first solar power station, telling investors it would favor whoever committed to ramping up capacity and selling power more cheaply to its distributor. With more than 90 percent of Albania’s power being produced from rivers and a newly built power plant not functioning, the Socialist government of Prime Minister Edi Rama wants to install 120 MW of solar and 70 MW of wind power capacity by 2020. Albania expects an investment of around €70 million. Under the bidding rules, any company meeting the technical and financial criteria will be awarded 70 points. The remaining 30 points, which will most likely decide the outcome, will be given to the company choosing to sell at a cheaper rate to the OSSHE power distributor monopoly, securing a guaranteed buyer for the first half of the renewable 30-year-deal. It would also give points to whichever bidder commits to adding 20-50 MW to the original 50 MW capacity of the photovoltaic panels. The salty lands at Akernia near the Adriatic seaport of Vlore have been chosen as the location of the plant because it has the highest potential solar power efficiency. Its potential solar power output is estimated at more than 1,600 kilowatt hours per square meter. The energy ministry offered take questions before August 24, and to meet a team of three of any interested parties at its premises on August 27 and give them a tour of the site. It will answer their questions until the end of August.
Source: Reuters
3 August. The US (United States) Securities and Exchange Commission (SEC) has recommended no action against Exxon Mobil Corp over its investor disclosures, ending a two-year probe with a victory for the company. The SEC in 2016 launched its review of Exxon’s reserves and climate-change disclosures to investors in the wake of low oil prices and concerns over potential curbs on carbon emissions from burning fossil fuels. The world’s largest publicly traded oil company is being investigated by the New York and Massachusetts Attorneys General over its disclosures to investors and the public about the impact of climate change.
Source: Reuters
2 August. Few US (United States) energy policies can bring together coal miners, oil drillers, environmentalists, Republicans and Democrats. But tax credits for capturing and storing carbon dioxide emissions have appeased all these camps, and Congress this year tripled the subsidy’s value with broad bipartisan support. If only they could convince utilities – the biggest industrial polluters – to get on board. A survey of the top 10 US power companies showed eight have no plans to purchase and install carbon capture and storage (CCS) equipment, citing high costs and uncertain demand, while the other two declined to comment. Another three utilities that are well-placed to adopt the technology – because of their proximity to existing carbon pipelines and coal reserves – also said they have no plans to tap the newly enriched subsidy. The technology employs sophisticated equipment to pull carbon dioxide from industrial plants and then inject it underground so it never pollutes the atmosphere. That could help fight climate change while giving coal and natural gas plants a new commodity they can sell to oil drillers. When carbon dioxide is injected into aging oil fields, it helps drillers increase pressure and push more oil to the surface.
Source: Reuters
2 August. Lloyds Banking Group said it will not fund new coal-fired power stations or thermal coal mines, or bank new clients that derive most of their revenue from either of these operations. The new policy brings Lloyds in line with peers Royal Bank of Scotland and HSBC, which both announced similar changes earlier this year as lenders update their approach amid growing concerns about coal’s impact on the environment. David Oldfield, group director of commercial banking at Lloyds, pointed to the landmark accord agreed between almost 200 nations at a Paris summit in 2015 to limit climate change, which was seen as marking a global turn away from fossil fuels.
Source: Reuters
1 August. Nineteen international firms have expressed interest in taking part in the construction and financing of the 160 MW Dabar hydropower plant in southeastern Bosnia, the country’s hydropower producer HET said. They include General Electric, Strabag, Turkish Enka, as well as seven Chinese firms such as Dongfang Electric Corp and Norinco International Cooperation, HET’s production manager Ilija Tamindzija said. The Dabar plant on the Trebisnjica river will be part of a planned 250 MW hydropower complex, Gornji Horizonti, which is designed also to incorporate two smaller hydropower plants, Nevesinje and Bileca. The cost of building the Dabar plant is estimated at €200 million ($234 million). Tamindzija said interested partners would soon be invited to submit formal bids for the plant, which will produce 251 gigawatt hours of electricity a year.
Source: Reuters
US$ Million
| Fuel Type | 2016-17 | 2017-18 |
% change FY18 w.r.to FY17 |
| Coal | 15759.93 | 22901.23 | 45.3 |
|
India’s Total Imports (ITI) (of All Commodities) |
3,84,355.56 | 4,65,578.29 | 21.1 |
|
Coal imports as % of ITI |
4.1 | 4.9 | – |
Direction of India’s Coal Imports (in Value terms) for 2017-18
This is a weekly publication of the Observer Research Foundation (ORF). It covers current national and international information on energy categorised systematically to add value. The year 2018 is the fifteenth continuous year of publication of the newsletter. The newsletter is registered with the Registrar of News Paper for India under No. DELENG / 2004 / 13485.
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