OIL: DEARER FOR LONGER?

Oil News Commentary: September - October 2018

India

Increasing tensions between the US and Venezuela, the US demanding an end to all imports of Iranian oil by early November and the rupee’s performance as Asia’s worst performing currency of the year have compounded the situation and put India, the world’s third-largest oil importer, in a difficult spot. The international crude oil prices had registered an all-time high of $147 per barrel in July 2009. The cost of the Indian basket of crude rose to $81.23 a barrel on 27 September, according to Petroleum Planning and Analysis Cell. To this, taxes at the central and state levels are added, besides dealers’ commission, to arrive at the retail price. The Indian basket represents the average of Oman, Dubai and Brent crude. With the US sanctions on Iran looming, Moody’s Investors Service has estimated around $500 million decline in earnings for Indian state owned refiners—IOC, BPCL and HPCL, on account of substituting crude oil imports from the Persian Gulf country. Petrol prices have crossed ₹ 90/litre in many states while diesel is selling at over ₹ 80/litre, due to high VAT rates that states charge on these items. While Maharashtra has the highest VAT on oil products in the country to the tune of over 39 percent, making almost 53 percent of the price that a motorist pays is taxes, Goa, Delhi and Chandigarh have the lowest VAT rates. Ahead of the US sanctions, kicking in from 4 November on Iran, crude prices have been on an upward spiral and Brent--the benchmark price for the Indian crude basket--is trading over $80 a barrel now. The country meets 82 percent of its oil demand through imports. Reducing taxes on oil products by the Centre and the states will not have any lasting impact due to the volatility in crude prices. The Delhi High Court refused to interfere in a PIL seeking the sale of petrol and diesel at reasonable prices instead of letting oil companies increase the rates exorbitantly. However, the court asked the government to consider an earlier representation pending before it on price rise of petrol and diesel and listed the matter for further hearing on 16 November. The petitioner has sought a directive to the Central government to fix a "fair price" of petrol and diesel in line with the Essential Commodities Act. The petitioner also alleged that the oil companies had stopped increasing the prices when the Karnataka election campaign was going on. Punjab said petroleum products should be brought under the purview of the GST to maintain an uniformity in price across the country. Punjab has one of the highest rates of VAT on petrol in the country and it is second to Maharashtra. The state levies about 36 percent VAT and surcharges on petrol. The Jharkhand Petrol and Diesel Association has called a strike on 1 October against the rising fuel prices. The association has demanded a decrease in the VAT. Decreasing the VAT on diesel was not possible as the money generated from it was used for development. The rising prices have forced the Ranchi Bus Association to increase the bus fares up to ₹ 30. Karnataka announced the coalition government's decision to cut petrol and diesel prices by ₹ 2/litre. The announcement comes in the wake of political pressure building against Karnataka Chief Minister H D Kumaraswamy after Rajasthan, Andhra Pradesh and West Bengal governments reduced fuel prices. Andhra Pradesh has cut taxes on fuel by ₹ 2/litre and West Bengal by ₹ 1/litre. Fuel prices are the steepest in Maharashtra and the lowest in Andaman and Nicobar. Fuel prices continue to soar in Bihar as petrol was sold at ₹ 88.38/litre in Patna. Industry experts claimed petrol prices in Bihar are among the highest in the country. The only silver lining was that the prices of both diesel and petrol remained unchanged in the state over the last 24 hours. The continuous surge in petrol prices have irked the city consumers. Bihar Petroleum Dealers Association said the northward movement of fuel prices could be controlled only with the intervention of central as well as state governments. The VAT imposed by Bihar government on petrol is 26% with additional 20% surcharge on VAT. Similarly, the VAT imposed by Bihar government on diesel is 19% with additional 10% surcharge on it. No relief lies in store for Maharashtra’s residents, where petrol prices breached the ₹ 90/litre mark. Petrol price climbed to ₹ 90.08/litre in Mumbai and stood even higher in many parts of the state. The new rate came into effect after a hike of 11 paise was implemented. Petrol is priced at ₹ 82.72/litre in Delhi, ₹ 84.54/litre in Kolkata and ₹ 85.99/litre in Chennai. Meanwhile, diesel prices were ₹ 74.02/litre, ₹ 75.87/litre and ₹ 78.26/litre in Delhi, Kolkata and Chennai respectively. The Maharashtra government said the state would lose revenue to the tune of ₹ 22 billion per year if it slashes the prices of petrol and diesel by ₹ 1/litre. The government had already slashed taxes on petrol and diesel to check the surging prices of petrol and diesel at the state level. Prices of petrol have crossed the ₹ 90-mark in more than 20 districts of total 36 districts in Maharashtra. Rising prices is a matter of concern for citizens as well as for the state government. Maharashtra gets 26 percent in tax revenue from the retail sale of petrol. State OMCs have hiked ATF or jet fuel price by 7.25 percent in October. This is the third consecutive price revision. Firms have not included 5 percent Customs duty in the latest revision. A kilolitre of ATF is now priced at ₹ 74,177 in Mumbai, highest in the past four years. Indian Oil Corp said the hike was due to an increase in ATF prices in the global market and falling rupee. It said the Customs duty was not being passed on to the airlines. Domestic ATF pricing in India is based on import parity principles. Fuel accounts 24.2 percent of an average airline’s cost structure. In India it is 34 percent, making Indian carriers particularly sensitive in this area, International Air Transport Association said. Petroleum products are unlikely to be brought under GST in the near future, despite a few central government ministers batting for their inclusion as states are opposed to the idea at present. States are of the view that inclusion of petroleum products under GST is unlikely to reduce their prices as states have powers to levy a tax over and above the peak GST rate. The Union finance ministry is unlikely to push for its inclusion as it believes that states will not favour such a measure. The burden of the high fuel prices on the common man had triggered demands for a reduction in excise duties levied by the centre. Fuel prices have been rising rapidly over the last few months.  As of now, petroleum is among the few items kept out of the GST net.  Inclusion of petroleum needs the nod of the GST Council. Petroleum taxes roughly account for a third of tax revenue for state governments. States are reluctant to bring these items under GST as these are among the very few items on which they have the liberty to raise taxes without consulting the GST Council. The Union government raised excise duty on petrol and diesel several times since November 2014 when global price of these commodities started softening. At present, petrol attracts central taxes of ₹ 42.64/litre and diesel of ₹ 33.16/litre, combining excise duty and customs duty. In the current context of a weaker rupee, restricting fuel consumption makes sense for policy makers as crude oil imports is a major contributor to India’s import bill. India’s government has not told the country’s oil refiners to halt their imports of Iranian crude, even as most Indian refiners have cut down their imports ahead of US sanctions on Iran. India has close diplomatic ties with Iran and is also building the strategic Chabahar port in the Middle Eastern country. It is expected to be operational by 2019. However, at the same time, India is closely working with US to further its strategic interests and recently signed a military communications agreement with the US. India’s Chennai Petroleum will stop processing Iranian crude oil from October to keep its insurance coverage once new sanctions by the US against Iran go into effect. Iran’s Naftiran Intertrade Company Ltd, a trading arm for state-owned National Iranian Oil Company, owns a 15.4 percent stake in Chennai Petroleum, which has two refineries with a total combined capacity of 230,000 barrels of oil per day. United India Insurance has informed Chennai Petroleum that its new annual policy that is set to take effect from October will not cover any liability related to processing crude from Iran. Chennai Petroleum’s reduced demand will further cut India’s imports from Iran to about 10 mt in October, lower than previous estimates. Chennai Petroleum, a subsidiary of the country’s biggest refiner IOC, has a deal to buy up to 2 million tonnes, or 40,000 barrels per day, of oil from Iran in the fiscal year 2018/19. State-owned refiner HPCL has already halted purchases due to insurance problems, while BPCL boosted Iranian purchases earlier this year and expects to sharply cut Iranian flows once the sanctions take effect. Nayara Energy is also preparing to halt Iranian imports from November, while Reliance Industries and HPCL-Mittal Energy Ltd have already stopped buying Iranian oil. The ongoing Mumbai High South Redevelopment Phase III is expected to result in a cumulative increase in production of 7.547 million metric tonnes of oil and 3.864 bcm of gas in the next 10 years. Phase III was approved in 2014 at a cost of ₹ 6,068 billion and is slated for completion by March 2019. The final package involves complete topside deck replacement of 10 wellhead platforms, which has already been completed. ONGC owns and operates the Mumbai High oil and gas fields located in the Arabian Sea, around 175 kilometre north-west of Mumbai which became operational in 1974, besides having collaborations with oil and gas companies around the world. Oil PSUs are scouting for discovered oil and gas fields in Russia as India looks to bolster energy ties with the resource-rich nation. Indian PSUs have already invested $15 billion in picking up stakes in Russian oil and gas projects like Sakhalin-1. ONGC Videsh Ltd in 2001 bought a 20 percent stake in the Sakhalin-1 project in Far East Russia. It further bought Imperial Energy a few years later and has recently invested in Vankorneft and TasYuryah along with IOC, OIL and Bharat PetroResources Ltd. In return, Russian firm Rosneft has bought a majority stake in Essar Oil for $12.9 billion. Also, gas utility GAIL (India) Ltd has contracted 2.5 million tonnes per annum of LNG from Russia's Gazprom for 20 years. India and Russia are expected to conclude a deal during their 5 October annual summit to increase Delhi’s investments in Russian oil fields. India is eyeing to develop energy ties as a key pillar of the strategic partnership. Indian hydrocarbon firms, which over the last two years have invested in Russia's Vankorneft oil field, are expected to further invest in Vankor cluster. The annual summit between the Russian President and the Indian Prime Minister Narendra is expected to reach a new agreement for additional investments in Russian oil fields. Indian public sector firms have already invested $15 billion in picking up stakes in Russian oil and gas projects like Sakhalin-1. Oil PSUs are scouting for discovered oil and gas fields in Russia. Soviet oil and gas experts had helped ONGC strike Bombay High in the Arabian Sea in the 1960s and that Soviet technology had also helped in the refining sector in 1960s and 1970s. India and Russia have deeply strengthened their hydrocarbon engagement and built an “energy bridge” between the two nations. India has received investments worth ₹ 59 billion ($810 million) in its latest oil and gas exploration licensing round. India would offer 14 oil and gas blocks in the next licensing round. Vedanta is seeking renewal of its licence to produce oil from the Barmer block under the government’s new policy even as it has been legally fighting the policy’s application in this case. Vedanta has been fighting the government in court for more than two years on renewal terms of the contract for the prolific block in Barmer, Rajasthan. The original 25-year-contract ends in 2020 and under the government’s new renewal policy, an application by a contractor must be made two years ahead of the expiry of the term. Even though it disagrees with the government stand that the Barmer license can be renewed only under the new policy, the company has applied for contract extension under this policy to bring certainty to its own investment plan for the block. Three months ago, Vedanta had obtained a favourable judgment from the Delhi High Court, which directed government to renew the Barmer contract on the same terms as in the original contract. Vedanta has won 41 exploration licenses in the first open acreage licensing round while ONGC has won just two. All winners of the auction signed contracts with the government. These exploration contracts will bring in investments of ₹ 6,000 billion. Vedanta will put in ₹ 3,000-4,000 billion in exploring its 41 blocks. Vedanta may be interested in participating in a refinery project in future, but for now its hands are full with upstream projects. The government is considering a plan to sell LPG blended with methanol, which could help reduce its cooking gas subsidy by around a third at current prices. Mixing 20 percent methanol with LPG, as is done in several countries, is estimated to bring down the cost of cooking gas for household consumption by ₹ 100 a cylinder. The portion of methanol in the mix could be scaled up further as India enhances production of methane from coal. The financial benefits could be substantial, considering the country’s LPG subsidy bill that is estimated at more than ₹ 200 billion in the fiscal 2019 budget. The government has allocated dedicated coal mines for production of methane —methanol is its liquid form — after the NITI Aayog laid out a roadmap for a methanol economy for the country, both in the automotive and household sectors to bring down India’s rising fuel import bill. As per the NITI Aayog’s ‘methanol economy’ roadmap, there can be an annual reduction of $100 billion in crude imports by 2030 if the country moves to 15 percent blended fuel, both for transportation and cooking. The plan is to produce methanol from abundantly available low-quality coal and other bio resources, and also manufacture it synthetically. ONGC expects crude oil prices to continue their upward trajectory in the backdrop of impending Iran sanctions and declining production in Venezuela. A high crude oil price projection by ONGC that accounts for 73% of India’s oil and gas production comes in the backdrop of Brent crude oil spot prices breeching the $80 per barrel mark. S&P Global Ratings said in a recent report that the agency expected Brent price to be at $70 for the rest of 2018, $65 for 2019 and $60 for 2020. Also, retail diesel and petrol prices in India continue to set new records every other day. IOC expects India’s crude oil demand to grow to 500 mt per year by 2040, but persistent increases in oil prices might act as a dampener for the rate of growth. That would be equivalent to around 10 million bpd, up from about 4.7 million bpd in 2017. Globally oil demand will increase by 15.8 million bpd from now until 2040. India’s growth of 5.9 million bpd will make up about 24 percent of the overall gain. India’s refining capacity would increase to about 439 mt per year by the financial year of 2030 as new and existing refineries continue enhancing their infrastructure, while domestic demand is forecast to increase to 356 mt per year over the same period. Higher refining capacity will mean India could export more refined oil products to countries in the region. The rate of oil demand growth, however, will slow down by 2024 to 2025. India is a major buyer of Iranian oil and is seeking a waiver on the sanctions the United States is set to impose on the country in November. However, IOC will be able to manage even if it does not gain an exemption. India will continue to depend on oil as a mainstay of its energy but its oil demand growth will likely slow as the government pushes for cleaner energy and renewables according to the private sector refiners. However, oil consumption will still increase to 480 mt by 2040 as the renewable push will not completely halt oil demand growth. To meet that consumption, India has been boosting its overall refining capacity with first production from its upcoming West Coast refinery expected in 2022. India has plans to add 190 mt per year of refining capacity over the next 10 years to its existing 228 mt per years. With oil traders forecasting crude oil to rise to $100 a barrel by the end of the year, Indian refiners are considering cutting back their imports and relying more on cheaper crude already stored in inventories, according to industry executives. Benchmark Brent crude oil futures surged 2 percent to over $80 a barrel as markets have tightened ahead of the start of sanctions by the United States on Iran, with commodity merchants Trafigura and Mercuria predicting $100 oil by the end of 2018.  The soaring oil prices are occurring at the same time emerging market currencies, such as India's rupee, are under pressure. That combination means Indian crude imports are 47 percent more expensive this year in rupee terms. To cope with the higher costs, India, the world’s third-biggest oil importer, is considering cutting its imports and relying on stockpiled crude. IOC confirmed the plan to cut imports in favour of stockpiled crude was discussed at a meeting attended by refinery officials. Indian refiners must pay for their crude in dollars and the soaring import costs are becoming a headache for the government ahead of general elections next year. India’ petrol prices are among the highest in the world in terms of how much it costs as a portion of gross domestic product per person. India imports more than 80 percent of its oil needs. The country imported 4.4 million bpd oil in August, costing about $12 billion, according to government data. Using up crude inventories could save Indian refiners short-term import costs but poses the risk that if prices do not ease later on the companies will have to import more later at higher prices. Energy savings are 30 percent more at 8.67 mtoe than the target in the first phase of the energy conservation scheme PAT. Under PAT Cycle I, more than 400 large industries from key energy intensive sectors in India took measures to improve energy efficiency during the last three years which resulted in energy savings worth ₹ 95 billion annually. The PAT scheme is mandatory for all designated consumers notified by the BEE and it is one of the major initiatives under the National Mission for Enhanced Energy Efficiency. The scheme has been extended to over 800 designated consumer covering 13 sectors with the inclusion of refinery, distribution companies, Railways, Petrochemical and Commercial Buildings (Hotels). The projected target under this scheme is over 15 million tonnes of oil equivalent by 2019-20. Under PAT Cycle I, more than 400 large industries from key energy intensive sectors in India have made exemplary efforts towards improving energy efficiency during last three years. The outcome report for the study conducted by the BEE which demonstrated energy savings of 8.67 mtoe against target of 6.686 mtoe which is 30 percent excess over the targeted energy saving was released. State-run OMCs have asked loss-making Air India to clear its dues towards daily billing amid rising oil prices. Air India group, which comprises Air India, Air India Express and Alliance Air, currently operates 475 flights per day to 78 domestic and 44 international destinations with a combined fleet of 161 aircraft. It is the only domestic carrier which flies long and ultra-long haul flights or flights which are up to 16 hours duration. Air India said that the oil companies have sought to increase the payment amount. The government-run airline lifts jet fuel from three oil marketing firms -- IOC, BPCL and HPCL -- worth ₹ 6 billion per month on an average.

Rest of the World

If oil prices head above $100/barrel, it could shave 0.2 percentage points from global economic growth next year -- but this hinges crucially on the dollar, according to Bank of America Merrill Lynch. Sanctions on Iran, shale bottlenecks, Venezuelan turmoil and increased demand pose an upside risk to prices, the bank said. Higher prices would slow growth in the euro-area, UK and Japan though ramped-up energy production in the US, Australia and Brazil would likely cushion the blow to the world’s economy, it said. While the shale boom in the US means the country is less at risk from higher oil prices, the euro-area, Japan, China and India stand to lose significantly from a spike. The countries that stand to lose from higher prices have historically been much more systemically important to the global economy and financial markets than oil exporters, it said. Global oil markets could witness a modest surplus into early 2019 as new spare capacity comes online, despite strong demand and uncertainty on the size of supply losses from Iran due to US sanctions set to start next month, Goldman Sachs said. Goldman said there was a higher initial inventory buffer heading into the fourth quarter due to a production surge in Saudi Arabia in June, and output in volatile regions like Libya and Nigeria was 0.3 million barrels per day above expectations. World oil consumption will top 100 million bpd in the next three months, putting upward pressure on prices, although emerging market crises and trade disputes could dent this demand, the IEA said. The Paris-based IEA maintained its forecast of strong growth in global oil demand this year of 1.4 million bpd and another 1.5 million bpd in 2019, unchanged from its previous projection. US sanctions on Iran’s energy industry, which come into force in November, have already cut supply back to two-year lows, while falling Venezuelan output and unplanned outages elsewhere will also keep the balance between supply and demand tight, the IEA said. The US and China have imposed a series of tariffs on each other’s goods since May that have unnerved equity markets, while a rising US dollar has put emerging market currencies under pressure, raising the energy bill for some of the world’s largest oil importers. Demand from nations not in the OECD group of industrialised countries, led by China and India, is expected to rise by 1.1 million bpd to 51.6 million bpd this year and by 1.2 million bpd to 52.8 million bpd next year, the IEA said. Global demand will hit a high of 100.3 million bpd in the final quarter of this year, before moderating to 99.3 million bpd in the first quarter of next year, the IEA said. Demand for crude from the OPEC will moderate in 2019 to 31.9 million bpd, from an estimated 32.3 million bpd this year, the IEA said. OPEC further trimmed its forecast for 2019 global oil demand growth and said the risk to the economic outlook was skewed to the downside, adding a new challenge to the group’s efforts to support the market next year. In a monthly report, the Organization of the Petroleum Exporting Countries said world oil demand next year would rise by 1.41 million bpd, 20,000 bpd less than last month and the second consecutive reduction in the forecast. The report provides further indication the rapid oil demand that helped OPEC and allies get rid of a supply glut will moderate in 2019. OPEC last month said global growth faced “numerous challenges”, although its latest report suggests concern about them has deepened. In the report, OPEC said its oil output rose in August by 278,000 bpd to 32.56 million bpd following the June deal. OPEC said the world will need 32.05 million bpd from its 15 members in 2019, unchanged from last month. This suggests there will be a 500,000 bpd surplus in the market should OPEC keep pumping the same amount and other things remain equal. Plastics and other petrochemical products will drive global oil demand to 2050, offsetting slower consumption of motor fuel, the IEA said. Despite government efforts to cut pollution and carbon emissions from oil and gas, the IEA said it expected the rapid growth of emerging economies, such as India and China, to propel demand for petrochemical products. Oil demand for transport is expected to slow by 2050 due to the rise of electric vehicles and more-efficient combustion engines, but that would be offset by rising demand for petrochemicals, the IEA said. Global demand for petrochemical feedstock accounted for 12 million bpd, or roughly 12 percent of total demand for oil in 2017. The figure is forecast to grow to almost 18 million bpd in 2050. Most demand growth will take place in the Middle East and China, where big petrochemical plants are being built. Oil companies such as Exxon Mobil and Royal Dutch Shell plan to invest in new petrochemical plants in the coming decades, betting on the rising demand for plastics in emerging economies. Saudi Arabia said the kingdom will further raise oil production in November from the level of 10.7 million bpd. Saudi Arabia has weekly communication channels with Russia in order to stabilize global oil markets. Oil producers have added around 1 million bpd of combined output in “recent weeks and months”. Saudi’s ATC expects to increase its oil trading volume to 6 million bpd in 2020, 50 percent higher than current levels. About 50 percent of the 2.5 million bpd of oil products it trades currently are hedged. The company is also looking at building its capacity in trading LNG, using its Singapore office as a trading hub. ATC plans to set up its European office in either Geneva or London and also aims to have an office in Fujairah to manage oil storage. Saudi Aramco has signed a long-term deal with Zhejiang Rongsheng to supply crude oil to the Chinese company’s new refinery in eastern China. Rongsheng International Trading Company, the trading arm of Chinese conglomerate Zhejiang Rongsheng Holding Group, has already bought spot Omani crude ahead of the new refinery’s start-up. Zhejiang Petrochemical, 51 percent owned by textile giant Rongsheng Holding Group, was in August awarded a quota to import 5 mt of crude oil this year. The company plans to start up its 400,000 bpd refinery-petrochemical project in eastern China in late 2018. Iraq plans to increase the production and exports of light crude oil to 1 million bpd in 2019, as part of its strategy to boost state revenue. The light crude oil is a new grade with an API gravity of around 34-43, while the current Basrah Light grade that Iraq exports will be renamed Basrah Medium. Iraq is OPEC’s second-largest producer after Saudi Arabia and pumps around 4.6 million bpd. The majority of its crude exports go to Asia. The bulk of Iraq’s oil is exported via the southern terminals, which account for more than 95 percent of the OPEC producer’s state revenues. Iraq exported 3.583 million bpd from the southern ports on Gulf in August. Iraq, which relies on oil to generate most of its budget revenues, is seeking to increase crude production capacity to 7 million bpd by 2022 from 5 million bpd now. Iran’s oil tankers are starting to disappear from global satellite tracking systems with just under six weeks to go until US sanctions are due to hit the country’s exports, making it harder to keep track of the nation’s sales. No signals have been received by shore stations or satellites from 10 of the Persian Gulf nation’s crude oil supertankers for at least a week, according to tanker tracking. The most likely explanation is that the vessels’ transponders have been switched off, making it more difficult to track the their movements. When they were last seen, the 10 vessels, which are listed below, were holding around 13 million barrels of crude and condensate, a light form of crude extracted from gas fields. If they’re now full, that would rise to about 20 million barrels. The disappearance of Iran’s tankers will make it increasingly difficult to monitor ship movements as the 4 November deadline looms for buyers to halt purchases of Iranian crude and condensate or face being blocked from the US financial system. The three full vessels last seen heading out of the Persian Gulf were all showing destinations in China. Iran appeared to soften its stance on potential increases in OPEC oil output, saying it was the group’s responsibility to balance the market if production from Iran or any other member declined. Tehran had previously said no OPEC member was allowed to grab market share from rivals, such as Venezuela or Libya, whose production had declined due to unrest or a lack of investment. Iran itself faces the prospect of much lower oil exports and output in coming months due to fresh US sanctions. Russia could raise oil production by 200,000-300,000 bpd. Oil prices have reached four-year highs to over $85 per barrel due to production declines in some countries, such as Venezuela, and amid fears that US sanctions against Iran will further reduce oil supplies to the markets. The OPEC and Russia agreed in June to ease production curbs imposed earlier. Oil output in Russia hit a 30-year high in September of 11.36 million bpd. Russia said that current high oil prices of between $70 and $80 per barrel were temporary and were mainly driven by sanctions. The long-term price would stand at around $50 per barrel. The $50 per barrel forecast was based on estimates by analysts and oil companies. Russia’s oil production in 2018 is expected to total 553 mt (11.105 million bpd), up from around 547 mt in 2017, and that production would peak at 570 mt in 2021. China has hiked its 2019 crude oil import quota for “non-state trade”, generally meaning independent refiners, by 42 percent to 202 million tonnes, as two private companies prepare to launch commercial production at major new plants. It is the second consecutive year that Beijing has increased the quota, which is equivalent to 4.04 bpd. The commerce ministry said companies must submit their applications for the quotas by 10 November. At least two private refiners, Hengli Group and Zhejiang Petrochemical, are preparing to launch commercial production of two new large plants. China’s Sinopec Corp has joined a group planning to build an oil refinery in Alberta, an enterprise that would strengthen demand for the Canadian province’s heavily discounted crude. Sinopec, formally known as China Petroleum & Chemical Corp, along with an Alberta indigenous group, China State Construction Engineering Corp and Alberta management company Teedrum, plan to build a refinery to process 167,000 bpd of crude into gasoline and other products, the project’s consulting firm Stantec Inc said. Most of Canada’s crude is produced in landlocked Alberta, where pipeline capacity has not expanded as rapidly as production. Resulting bottlenecks have hindered transportation to US refineries, steepening an already deep price discount for the province’s crude, which grew to a multi-year high. Sinopec’s interest is encouraging news for a Canadian sector that has seen foreign oil majors retreat over concerns about high production costs and the oil sands’ environmental toll. China’s diesel demand has peaked and gasoline will peak in 2025, while natural gas demand will increase over the next two decades to feed a massive gasification campaign, according to the research unit of CNPC. China, the world’s top crude oil importer, will maintain annual crude oil production of 200 million tonnes, or about 4 million bpd, before 2030, CNPC said. Demand for diesel is waning amid moderating economic growth and tighter environmental scrutiny, while gasoline demand is capped by slowing growth in private car sales and the rise of electric and natural gas-fuelled vehicles. As additions to China’s refining capacity outpace the nation’s fuel demand growth, more than 50 million tonnes of surplus fuel is forecast for 2050, CNPC said. The country’s natural gas demand will reach 620 billion cubic metres by 2035, CNPC said. China’s refining capacity will grow to 880 mt a year, equivalent to 17.6 million barrels per day, by 2020, 14 percent higher than 2017, CNOOC said. This will exceed demand for fuels by the world’s largest energy consumer, creating surplus refining capacity of 136 mt a year. Asia’s emerging markets, the key driver for global oil demand growth, are being hit hard by soaring crude prices and sliding currencies, raising red flags over expectations of further increases in consumption. Import-reliant economies are already aching under oil prices that have risen above $80 per barrel, the most since late 2014. Analysts warn the inflationary combination of higher oil costs and weakening currencies, including India’s rupee, Indonesia’s rupiah and the Philippine peso, could cause a global economic slowdown that would also crimp oil demand in those countries. The rumblings of falling demand undermines the current market narrative that projects rising crude prices, in some cases to $100 a barrel, amid the loss of Iranian supply as the United States is set impose new sanctions on the country on 4 November. Citi Research, said the emerging market woes could shave 100,000 bpd off oil demand growth in 2019. The IEA currently expects global oil demand growth for 2018 and 2019 at 1.4 million bpd and 1.5 million bpd, respectively. At $80 per barrel, Asia’s oil import bill would breach $1 trillion a year, and few traders or analysts expect crude prices to ease. Global oil consumption is set to increase by 1.4 percent in 2018, according to the IEA. But that number may fall as Asian governments and consumers try to cut their oil costs. Asia’s oil deficit will widen to 35 bpd by 2025, up about 30 percent from the current 27 million bpd, amplifying global trade flow imbalances, French oil and energy group Total said. At the same time, Europe’s imports will be cut by 10 million bpd, while exports from North America and the Middle East will increase, Total said. The US will export shale oil, but its refineries will continue to import medium and heavy sour grades, Total said. The Mozambican government said it had signed oil exploration agreements with US energy firm Exxon Mobil and Russia’s Rosneft. Mozambique’s National Petroleum Institute, an energy regulator in the southern African country, said the government was preparing to sign similar agreements with South Africa’s Sasol and Italy’s Eni. The agreements could lead to as much as $700 million of investment in Mozambique as the energy firms are expected to drill a minimum of 10 wells, eight in deep water and two onshore, the institute said. The firms earlier won oil tenders as part of Mozambique’s fifth licensing round in 2014. Saudi Arabia’s Aramco has agreed in principle to invest in a new oil refinery in Pakistan’s Chinese-funded, deepwater port of Gwadar. In the Gwadar refinery agreement, state-owned Pakistan State Oil will partner with Aramco, the Saudi state oil giant. Pakistan wants a new refinery to reduce its $16 billion bill for foreign petroleum by importing more cheaper crude oil to refine itself. Rising oil prices have sent Pakistan’s current account deficit soaring. Foreign reserves have dropped to $9 billion, barely enough to cover external debt payments through the end of the year. Bangladesh will hold talks with Dubai-based ENOC to set up a LPG terminal in the country. Bangladesh currently imports LPG mostly from Oman and Qatar, he said. Transport costs for LPG are now about $100 per tonne but once the terminal is built that cost could fall to $30 as it will allow big ships to anchor, which would translate into a 10 percent lower price for end-users. The LPG terminal could be built at Matarbari on Moheshkhali Island in the Bay of Bengal, where the country's first deep-sea port will be built. The government is encouraging the use of LPG for households to cope with a shortfall in supplies of natural gas. Repairs to a dock at Venezuela’s main oil export port will take at least another month to complete following a tanker collision more than a month ago, further restraining the OPEC member nation’s crude exports, according to shipping data. A minor incident in late August forced state-run oil company PDVSA to shut the Jose port’s South dock, one of three used to ship heavy and upgraded oil to customers including Russia’s Rosneft and US-based Chevron Corp, and to receive diluents needed for the exports. Jose port typically handles about 70 percent of Venezuela’s total crude exports, which in September declined 14 percent compared with the previous month to 1.105 million barrels per day (bpd). Oil exports are the financial backbone of Venezuela’s economy, which is struggling to overcome hyperinflation. Venezuela has sold 9.9 percent of shares in oil joint venture Sinovensa to a Chinese oil company. The OPEC nation expected some $5 billion in joint investment with China to boost its crude output. Venezuelan President Nicolas Maduro said the Sinovensa sale formed part of plan to invest $5 billion over the next year in Chinese projects to double oil production and be able to send a million barrels per day to China. Venezuela’s oil production is at a 60-year low after years of little investment and crumbling infrastructure. Japanese refiner Cosmo Oil has replaced its Iranian crude oil imports with supplies from other Middle Eastern producers ahead of US sanctions on Iran in November. Refiners in Japan, the world’s fourth largest crude oil importer, halted oil imports from Iran in mid-September, the country’s refinery association said, allowing time for payments before sanctions are imposed. Saudi Arabia, the UAE and Kuwait are supplying more crude to Cosmo Oil to replace its 10,000 bpd shortfall from Iran, or 5 percent of the refiner’s imports. OPEC and other oil producers are considering raising output by 500,000 bpd to counter falling supply from Iran World oil demand will peak at 104.4 million bpd in the mid-2030s, up from just below 100 million bpd currently, as new technologies gradually eat into oil use, China’s Unipec said. Improved energy efficiency and technological changes, including the rise of renewables, meant global oil demand growth would slow in coming years before peaking in 2035, Unipec said. This in turn will slow growth in global oil refining capacity, which is set to hit 5.6 billion tonnes per year in 2035. Despite the trade dispute, Chen said US crude supply was an important new source for Chinese refiners as it allowed diversification from Middle East and African crudes. Beijing has excluded US crude imports from its tariffs list so far, but most Chinese buyers are staying away from US oil as the trade war shows no signs of cooling. Brazilian oil industry regulator ANP approved an additional payment of 706 million reais ($173.19 million) to state-controlled oil company Petrobras to compensate for diesel subsidies. ANP said it green-lighted a payment of 877 million reais to Petrobras, the first for the company since the subsidy program was unveiled in late May to end a truckers’ strike over high diesel prices. The subsidy plan raised fears of further state meddling in Petrobras, the world’s most indebted oil company, and has spurred criticism of the government’s subsidy program and lack of timely payment of compensation. ENOC has chartered at least one vessel to store jet fuel to ensure supply to airlines in Dubai as pending US sanctions on Iran have cut off its access to feedstocks for producing the aviation fuel. The company will store jet fuel onboard at least one of the vessels, which can store about 100,000 tonnes of jet fuel. Jet fuel differentials in the Middle East have been trading at low levels due to high refining run rates and weak demand from Europe. So, ENOC’s demand for fuel to fill the ships could boost the differentials. While the ship-borne storage will help ENOC ensure an immediate supply of jet fuel for Dubai International Airport, the stockpiling also highlights ENOC’s lack of access to Iranian condensate, an ultra-light crude oil, used to produce jet fuel. The UAE government asked ENOC to replace its Iranian condensate purchases with other grades such as Eagle Ford from the United States after the announcement of the US sanctions against Iran. ENOC processes Iranian condensate at its 140,000 barrels per day condensate splitter at the UAE port of Jebel Ali, which typically yields about 20 percent jet fuel. Oil output from seven major shale formations in the US is expected to rise by 79,000 barrels per day to 7.6 million bpd in October, the US EIA said. Production is expected to rise 31,000 bpd in the Permian formation of Texas and New Mexico, the EIA said. Output from five other major shale formations is expected to rise in the month. Output in the Haynesville shale, the smallest of the seven formations that the EIA tracks, was expected to be unchanged at 43,000 barrels per day in the month. Production per rig from new wells was expected to rise in all formations except for the Permian Basin, where it was expected to decline by nine barrels a day. Libya’s state oil firm NOC said that it continued to manage its operations normally throughout the country, without loss of production, after a shooting attack on its Tripoli headquarters. However, the NOC has continued to function relatively normally across Libya, which relies on oil exports for most of its income. Oil output has been hit by attacks on oil facilities and blockades, though last year it partially recovered to around one million barrels per day. Mexico has already contracted to cover a significant part of its oil hedges for 2019 that will guarantee export prices and revenues. Due to the government’s dependence on oil income to fund part of the federal budget, Mexico hedges its crude every year and the deals are closely watched by the market since the trades are big enough to affect prices.

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IOC: Indian Oil Corp, BPCL: Bharat Petroleum Corp Ltd, HPCL: Hindustan Petroleum Corp Ltd, US: United States, VAT: Value Added Tax, PIL: public interest litigation, GST: Goods and Services Tax, OMCs: Oil Marketing Companies, ATF: aviation turbine fuel, bcm: billion cubic meters, ONGC: Oil and Natural Gas Corp, PSUs: Public Sector Undertakings, OIL: Oil India Ltd, LNG: liquefied natural gas, LPG: liquefied petroleum gas, mt: million tonnes, bpd: barrels per day, mtoe: million tonnes of oil equivalent, PAT: Perform, Achieve and Trade, BEE: Bureau of Energy Efficiency, UK: United Kingdom, IEA: International Energy Agency, OECD: Organization for Economic Cooperation and Development, ATC: Aramco Trading Company, OPEC: Organization of the Petroleum Exporting Countries, CNPC: China National Petroleum Corp, CNOOC: China National Offshore Oil Corp, ENOC: Emirates National Oil Company, Petrobras: Petróleo Brasileiro SA, UAE: United Arab Emirates, EIA: Energy Information Administration, NOC: National Oil Corp

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NATIONAL: OIL

Over 80 percent households in Northeast could have LPG connections by March 2019

16 October. The LPG (liquefied petroleum gas) cylinder penetration in the Northeast region is likely to touch 80 percent by the end of 2018-19, much ahead of its initial plan to reach this target by 2030. The rigorous push to achieve the target ahead of its time was received during implementation of the Pradhan Mantri Ujjwala Yojana (PMUY) in the region from last year, state level coordinator for Assam (Petroleum Products) Uttiya Bhattacharyya said. Bhattacharyya informed that the penetration level in the region has gone up to over 76 percent at present from around 44 percent in 2015-16. Bhattacharyya said earlier the oil marketing companies, comprising Indian Oil Corp (IOC), Hindustan Petroleum Corp Ltd (HPCL) and Bharat Petroleum Corp Ltd (BPCL), together used to release around six lakh LPG connections annually, transforming an average of about 1,700 per day. Under the 'Gram Swaraj Abhiyan', which was launched on 14 April this year in the region, LPG connections are being distributed in 6,942 villages. The public sector undertaking IOC currently has 10 LPG bottling plants across the Northeast region and these are functioning at over 100 percent utilisation. The company is investing over Rs 286 crore to enhance its LPG bottling capacity, including setting up of two greenfield plants at Agartala in Tripura and Barapani in Meghalaya, by 2020. Source: Business Standard

Government does not interfere in fuel pricing: Oil Minister

16 October. Oil Minister Dharmendra Pradhan said the government does not interfere in the pricing of petroleum products which had been deregulated, allowing state-owned retailers to fix rates based on the international benchmark. The comment came as criticism mounted on the move by the government to ask state-owned oil PSUs (Public Sector Undertakings) to subsidise petrol and diesel by Rs 1 per litre to make retail price cut look bigger after it cut excise duty on the fuels by Rs 1.50 a litre. In Delhi, petrol costs Rs 82.83 per litre and diesel is priced at Rs 75.69. Pradhan said the government had asked state governments to match the Rs 2.50 per litre cut in prices announced by the Centre with a similar reduction in local sales tax or VAT (Value Added Tax). After the Centre cut excise duty by Rs 1.50 per litre and asked PSU oil firms to subsidise fuel by Rs 1, Maharashtra and Gujarat governments were among the first to announce a matching Rs 2.50 cut. Source: Business Standard

India oil demand to rise by 5.8 mn bpd by 2040: OPEC

16 October. India’s oil demand is expected to rise by 5.8 million barrels per day (bpd) by 2040, accounting for about 40 percent of the overall increase in global demand during the period, OPEC (Organization of the Petroleum Exporting Countries)’s secretary general Mohammed Sanusi Barkindo said. He said that the global oil sector needed $11 trillion in investment to meet future demand by 2040. Global oil demand is expected to increase by 14.5 million bpd from 2017 to 111.7 million bpd in 2040, OPEC said in its latest report, issued in September. Retail fuel prices in India, the world’s third biggest oil consumer and importer, recently touched record levels due to high oil prices and a weakening rupee, leading to protests across the country. Barkindo said consumers including India have expressed concerns on the outlook for supply. Source: Reuters

India hopes to finalise partners for strategic oil reserves within a year

15 October. India hopes to forge partnerships with private players to build out its strategic petroleum reserves within the coming year, the Indian Strategic Petroleum Reserves Ltd (ISPRL) said. India’s government approved two strategic petroleum reserve (SPR) sites with a total capacity of 6.5 million tonnes in June. ISPRL, a government-owned a special purpose vehicle, planned to get bids from investors for the second phase of the storage plan in six to nine months. Source: Reuters

High crude prices hurting global growth: PM to oil producers

15 October. Prime Minister (PM) Narendra Modi warned oil producers like Saudi Arabia that higher crude prices are hurting global economic growth and they should do more to bring down rates to reasonable levels. He flagged concerns of consuming nations like India over high crude oil prices that have already sent retail petrol, diesel and LPG (liquefied petroleum gas) rates to record highs. He said crude oil prices at a four-year high was hurting global growth, causing inflation and upsetting budgets of developing countries like India. The Prime Minister in 2015 had set a target of reducing India's oil dependence by 10 percent to 67 percent (based on import dependence of 77 percent in 2014-15) by 2022. Import dependence has only increased since then and the government is now looking for ways to raise domestic output. Source: Business Standard

IOC to complete eastern India's first LPG pipeline commissioning in November

15 October. Indian Oil Corp (IOC) is giving final touches to the commissioning of eastern India’s first LPG pipeline - Paradip–Haldia-Durgapur LPG pipeline (PHDPL). The inter-state pipeline, built with an investment of Rs 13.3 billion, is slated to be commissioned in November this year. Originating from Paradip, the PHDPL will cater to the LPG demand of Odisha, Jharkhand and West Bengal. IOC in April this year, had commissioned the Paradip-Balasore section of the pipeline. The pipeline will have pump stations at Paradip and Haldia and delivery stations at Balasore (Odisha), Budge Budge, Kalyani and Durgapur (West Bengal). 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 cater to the swelling demand, IOC is focusing on infrastructure development and improving logistics for movement of LPG. The completion of the pipeline is expected to give a fillip to the overall LPG demand in eastern India and also to the energy sector, as a whole, in the country. The pipeline holds the key to the evacuation of LPG from IOC's 15 mt capacity refinery at Paradip which is spread over an area of 3,345 acres with an estimated cost of Rs 345.55 billion. Source: Business Standard

Government's oil subsidy bill exceeds Rs 460 bn at end of September

13 October. The government’s oil subsidy burden has already exceeded Rs 460 billion — almost 84 percent higher than the budgeted estimate of Rs 250 billion for the whole financial year. In FY18, the subsidy for cooking gas was Rs 208.8 billion and that for kerosene was Rs 46.72 billion. The government has recently cut Rs 1.5 per litre on excise duty of petrol and diesel, which will lead it to loss of Rs 10.5 billion in revenues for October-March. The government will bear around Rs 61 billion of that hit, with states bearing the rest, since 42 percent of the proceeds from duties are passed on to them. The big subsidy bill will add to the government’s fiscal deficit woes. Apart from the excise duty cuts, Oil Marketing Companies (OMCs) are absorbing Rs 1 per litre each on petrol and diesel. A number of states have also cut fuel prices by Rs 2.50 per litre. The cut by the OMCs may lead to an annual loss of Rs 45 billion. According to a Moody’s Investors Service report, the market capitalisation of three OMCs alone has declined by about Rs 2.04 trillion ($27.5 billion) between 1 September 2017, and 10 October 2018. Source: Business Standard

Record fuel prices hit Indian petrol, diesel demand in September

12 October. India’s monthly diesel consumption fell for the first time in 10 months year-on-year in September, while petrol sales grew by the least in four months as record high pump prices dented demand, government data showed. Lower local sales of petrol and diesel curbed growth in India’s overall fuel demand to 1.1 percent in September, despite higher sales of liquefied petroleum gas and jet fuel. India’s fuel consumption, a proxy for oil demand, totalled 16.54 million tonnes (mt) in September, a decline of about 1.3 percent from August, data from the Petroleum Planning and Analysis Cell (PPAC) of the oil ministry showed. A sharp fall in the value of the Indian rupee and soaring oil prices led to record high pump prices of diesel and petrol, forcing the government to cut taxes on them and asking retailers to cut marketing margins by Rs 1 a litre. Diesel sales, which account for about 40 percent of refined fuels used in India, declined by 0.8 percent to 6.03 mt in September, the data showed. Growth in sales of gasoline, widely used for transportation, eased to 4.2 percent to 2.23 mt from the same month last year, as demand for passenger vehicles fell 5.6 percent in September from a year ago. Lower consumption of diesel also indicates slowing industrial activity, as it is used in industries and mining. Source: Reuters

Looking to cut oil import by 10 percent, Modi reviews ONGC, OIL production profile

12 October. Prime Minister Narendra Modi reviewed the oil and gas production profile of state-owned Oil and Natural Gas Corp (ONGC) and Oil India Ltd (OIL) over the near to medium term to assess how his target to cut oil imports by 10 percent would be met. ONGC Chairman and Managing Director Shashi Shanker and OIL Chairman and Managing Director Utpal Bora gave projections of oil and gas production of their respective companies over the next five-year period. Modi had in March 2015 called for bringing down India's import dependence on oil and gas to 67 percent of its requirement by 2022. He had used 77 percent oil import dependence in the fiscal year 2013-14 (ending March 31, 2014) as the reference to call for reducing import dependence to 67 percent by 2022. Import dependence has, however, increased since then. India's oil import dependence rose to 81.7 percent in 2016-17 and further to 82.8 percent in 2017-18. During the April-August period of current 2018-19 fiscal, it has gone up further to 83.2 percent, according to the oil ministry's PPAC (Petroleum Planning and Analysis Cell). India's crude oil fell from 36 million tonnes (mt) in 2016-17 to 35.7 mt in 2017-18. ONGC is investing $5.07 billion in bringing to production a cluster of discoveries in Bay of Bengal block KG-DWN-98/2 or KG-D5. First gas is expected by December 2019 and oil by March 2021. The firm is targeting a peak oil output of 77,305 barrels per day (3.8 million tonnes per annum) within two years of the start of production. Gas output is slated to peak to 16.56 million standard cubic metres per day by 2022. Source: Business Standard

'BPCL refinery to make India less reliant on other countries for crude oil'

11 October. Oil Minister Dharmendra Pradhan said that refinery plant under Bharat Petroleum Corp Ltd (BPCL) will make the country less reliant on other for crude oil and will also fulfill Prime Minister Narendra Modi's promise of doubling farmers' income. Odisha Governor Ganeshi Lal laid the foundation of the BPCL ethanol bio-fuel refinery plant in Bargarh. Source: Business Standard

India's oil output dropped 3.3 percent in April-August

10 October. Domestic oil production has contracted this year, increasing the country’s dependence on imports and making it more vulnerable to soaring crude prices. Local output declined 3.3% from a year earlier to 14.6 million metric tonnes in the April-August period this year, raising dependence on imports for 83.2% of the country’s oil requirement. India’s domestic crude oil output has stagnated or declined for more than seven years because of lower production from ageing fields, suboptimal oilfield management and policy issues. A straight decline since 2011-12 has pushed up country’s import dependence in six years to 83.2% from 75.6%, a trend that runs counter to Prime Minister Narendra Modi’s plan of cutting import dependence by 10% to 68% by 2022. India paid $88 billion for importing crude in 2017-18. Having already spent $49 billion on oil imports in the April-August period, Indian refiners are set to fork out much more this year with crude touching $85 a barrel. Source: The Economic Times

Petroleum issue in Bhutan border causing heavy revenue loss for India

10 October. Petroleum dealers in Bengal want Government of India to take up the matter with Bhutan for a resolution. Priced at Rs 64 and Rs 72 a liter in Bhutan, diesel and petrol both are now cheaper by Rs 12 a liter there compared to pumps in WB. The difference is also steadily increasing as Bhutan does not change oil price every day. Almost all Indian vehicles, travelling through NH31, run a few kilometre extra to get into Bhutan to refill instead of refilling at Indian pumps, North Bengal Petrol Dealers Association (NBPDA) said. Under Indo-Bhutan friendship treaty, no visa is needed to cross the border. As NBPDA estimation goes, near 150 outlets on NH31 are losing around 20% of their total sales. The estimated loss is around 250 kiloliter of diesel and 135 kiloliter petrol per day. Source: The Economic Times

NATIONAL: GAS

Total SA in talks to buy 50 percent stake in Adani's LNG, city gas projects

14 October. French energy giant Total SA is in talks to buy up to half of Adani Group's stake in LNG (liquefied natural gas) projects in Gujarat and Odisha, an under-construction LPG (liquefied petroleum gas) import facility and in its city gas projects. The French firm is keen on investing in fast growing gas market in India and finds Adani a suitable vehicle as it owns the crucial downstream infrastructure. Adani holds 25 percent stake in just-completed 5 million tonnes a year LNG import terminal at Mundra. It is also building a similar capacity LNG import terminal at Dhamra in Odisha at a cost of Rs 51 billion. Total is in talks to buy half of Adani's stake in the two terminals. India is looking at more than doubling the share of natural gas in its energy basket to 15 percent in next few years and is giving major push to city gas distribution projects. It imports half of its gas needs, which are projected to rise exponentially as it shifts from polluting liquid fuels to environment friendly natural gas. Adani Gas, a subsidiary of Adani Enterprises Ltd, is developing city gas distribution (CGD) networks to supply the piped natural gas (PNG) to the industrial, commercial, domestic (residential) units and compressed natural gas (CNG) to the transport sector. It already has set up city gas distribution networks in Ahmedabad and Vadodara in Gujarat, Faridabad in Haryana and Khurja in Uttar Pradesh. Total is looking at buying half of Adani's stake all the CGD networks. Total has signed an agreement to sell 0.5 million tonne LNG per year to Shell over five years, on a delivery basis to supply the Indian and neighbouring markets. The deliveries will be sourced from Total's global LNG portfolio and are expected to begin in 2019. Source: Business Standard

IOC to invest Rs 54.6 bn in city gas network in 7 districts

11 October. Indian Oil Corp (IOC) said it will invest Rs 5,463 crore in setting up city gas distribution network for retailing CNG (city gas distribution) to automobiles and piped cooking gas to households in seven districts. IOC had, in the recently concluded 9^th bid round for city gas licences, won permits for seven cities on its own and another nine in a joint venture with Adani Gas. The company said its board in a meeting approved investments in seven cities it has won on its own. IOC said its board approved a Rs 520 crore investment for production of ethanol using LanzaTech gas fermentation technology at Panipat refinery in Haryana. The proposed ethanol plant is designed to produce 33.5 kilotonnes per annum of anhydrous ethanol for use in automotive fuel. The board approved a Rs 1,332 crore investment in laying a pipeline from Paradip in Odisha to Haldia in West Bengal. Source: The Economic Times

'H-Energy will commission first LNG retail outlet in Maharashtra by October 2019'

10 October. H-Energy, the oil and gas arm of Mumbai-based Hiranandani Group, is planning to commission its first LNG (liquefied natural gas) retail outlet in Panvel, Maharashtra in a year. The outlet, part of a larger expansion plan, will help the company sell gas from its Jaigarh LNG terminal located in Ratnagiri district in the state. The company is setting up the Jaigarh terminal in two phases. The first phase of the project – consisting of a jetty-based Floating Storage & Regasification Unit (FSRU) of 4 million tonne per annum (mtpa) capacity -- is already operational. In the second phase, a land-based terminal of 8 mtpa capacity is being planned. H-Energy has started work on laying a tie-in pipeline from Jaigarh to Dabhol which will carry regasified LNG from the terminal to the natural gas grid of GAIL (India) Ltd. The 60 kilometre (km) tie-in pipeline will carry re-gasified LNG to natural gas grid of GAIL in Dabhol. H-Energy Managing Director and Chief Executive Officer (CEO) Darshan Hiranandani said the 60 km tie-in pipeline is expected to be complete in two months, effectively kicking off operations by next year, and helping the company extend gas supply to natural gas consumers located in key demand regions. Also, the company is working on laying a 635 km pipeline from Jaigarh to Mangalore, to connect to natural gas consumers in the east part of the country. He informed the work on the second LNG terminal being planned to be set up by the company at Digha in West Bengal is likely to start in December. That project will be based on a mixed model with both floating and on-land facility for LNG regasification. The company’s investment plan of around Rs 4,500 crore for setting up the LNG terminals and the pipelines is on track, he said. Petronet LNG Ltd (PLL), the country’s largest importer of natural gas, is planning to launch around 20 LNG fuelling stations on a 4,000 km route between Delhi and Thiruvananthapuram as part of a larger plan being worked upon with oil marketing companies and state road transport authorities of Rajasthan, Gujarat and Kerala. PLL expects around 2 lakh trucks to run on LNG every year in the near future. Source: The Economic Times

NATIONAL: COAL

India coal import forecast raised by 6 mt in 2018 on local supply crunch

15 October. Coal imports by India are set to reach 164 million tonnes (mt) against the earlier forecast of 158 mt due to historic low levels of stocks at Coal India Ltd (CIL) and power plants amid surging industrial demand, Wood Mackenzie report said. India's spot market prices, for both coal and power, are expected to remain strong in the coming months as continuous industrial production growth is pushing demand, while supply remains tight, the report said. With a decade-low stockpile at CIL's mines and more than half of the plants with a supercritical level of less than seven days' stock, the reliance on imported coal for several power plants will increase the flow of imports into India. With the power sector increasingly relying on imports, we expect the rally in Indian imports to continue till early next year, Wood Mackenzie's coal principal analyst Pralabh Bhargava said. Source: Business Standard

Delhi court grants bail to Jindal, others in coal scam related case

15 October. A Delhi court granted bail to industrialist and Congress leader Naveen Jindal and 14 others, accused of money laundering in a case pertaining to irregularities in the allocation of a Jharkhand coal block. Special Judge Bharat Parashar granted the relief on a personal bond of Rs 1 lakh and one surety of the like amount. The case filed under the provisions of the Prevention of Money Laundering Act (PMLA) pertains to the allocation of the Amarkonda Murgadangal coal block in Jharkhand. Source: Business Standard

Government to give priority to state power producers for coal supply

14 October. The government has asked Coal India Ltd (CIL) and its subsidiaries to prioritise coal supply to state power producers like NTPC Ltd, leaving private electricity plants in a lurch. The coal ministry has directed CIL to prioritise the coal supply to select central and state government-owned power houses under the pretext of building coal stocks at these plants. All subsidiaries of CIL like South Eastern Coalfields Ltd (SECL) have been directed to supply coal to state power generators such as NTPC. CIL has its subsidiaries like SECL to supply 25 rakes per day of coal to NTPC's Korba, Mouda and Bhilai power plants and such other state power plants. Source: Business Standard

Coal ministry to take back Sitanala mine in Jharkhand from SAIL

14 October. The government has decided to take back Sitanala coking coal block in Jharkhand from the country's largest steel producer SAIL (Steel Authority of India Ltd) on accounts of delays in the development of the mine. The PSU (Public Sector Undertaking) had in March and again in April written to the coal ministry for surrendering the coal block. SAIL had said that the block was techno-commercially non-viable. Source: Business Standard

'India needs to make smooth, viable transition from coal'

14 October. A recent report by the United Nations (UN)'s Intergovernmental Panel for Climate Change (IPCC) gives India a "huge" opportunity to develop differently and also stresses on the need to make smooth and viable transition from coal. According to the report, India could witness deadly heatwaves if the planet's temperature goes up by two degrees Celsius. India needs to make smooth and viable transition from coal, and simultaneously safeguard related jobs in the short term, Priyadarshi Shukla, Co-Chair, IPCC Working Group III (Mitigation), said. The successful transformation of coal sector would need re-skilling the workforce along-side application of emerging technologies like Carbon Capture and Storage. Source: Business Standard

Government wants CIL to liquidate 10 mt of stocks by end of October to address demand surge

12 October. The government has admonished Coal India Ltd (CIL)’s brass for poor project management, long delays in tendering, leniency with contractors and other issues that have starved thermal power plants of fuel and warned the company’s non-performers that it can take stern action. The central government wants CIL to liquidate 10 million tonnes (mt) of pit head stocks from its existing 21 mt by end of October to take care of increased demand during festival season. The coal ministry is concerned that despite repeated instructions and reviews and even after the end of rainy season, coal production and supplies did not pick up to the extent necessary for achieving production and offtake target of 652.25 mt and 681.20 mt respectively. Source: The Economic Times

No loss in skipping tender route for coal purchase: TANGEDCO

12 October. Tamil Nadu Generation and Distribution Corp (TANGEDCO) sought to justify its decision to purchase imported coal from private players without going through the tender process. The discom (distribution company) said the calorific value of imported coal was much higher than what is supplied by Coal India Ltd (CIL) and hence the higher price is justifiable. The Indian coal cost is more than Rs 2,000 per tonne and as it has to be transported through rails, and then by sea, the total landing cost would be around Rs 3,655 per tonne. If imported, coal with similar GCV (gross calorific value) would be available at Rs 3,150 per tonne. It also said through a recent tender, TANGEDCO had decided to purchase 17.5 lakh tonnes of imported coal and in the process saved Rs 139 crore compared to the prevailing international prices. Source: The Economic Times

Captive power units urge PMO to address coal supply issue, seek rate parity

11 October. Power industry body ICPPA has requested the Prime Minister's Office (PMO) to take steps to address the issue of coal availability and its supply. The Indian Captive Power Producers Association (ICPPA) members include players from key sectors such as steel and aluminium. In the letter to PMO, ICPPA said aluminium is a highly power-intensive industry and around 14,500 kWh (kilowatt hour) units are used for the production of 1 tonne of aluminium metal, which requires 11.7 tonne coal. Supply of coal is a long-standing issue for the captive power producers who unlike the IIPs (independent power Producers) don't produce it for commercial purpose. On prices, ICPPA had earlier said that the dry fuel must be supplied by Coal India Ltd (CIL) to CPPs (captive power producers) at the same rate at which it is being given IPPs. Source: Business Standard

Maharashtra facing power cuts because coal diverted to poll-bound states

11 October. The NCP (Nationalist Congress Party)  claimed that rural areas in Maharashtra are facing extended power cuts every day because the coal supply meant for the state is being "diverted" to poll-bound Rajasthan, Madhya Pradesh and Chhattisgarh--all ruled by the BJP (Bharatiya Janata Party). Assembly elections are scheduled to be held in these three states over the next two months. Maharashtra Power Minister Chandrashekhar Bawankule had said the power load-shedding is likely to coincide with the upcoming festive season when the demand typically shoots up to 16,000 MW per day. The NCP leader claimed Maharashtra received only 30,000 tonnes of coal of the total requirement of 1.5 lakh tonnes. Source: Business Standard

Expect higher coal imports this year: Care Ratings

11 October. Care Ratings said that it expects higher coal imports during the year on the back of improved capacity utilisation in various sectors, including power. Improved capacity utilisation in power, cement and steel sectors will be major drivers of coal import, it said. Coal imports grew by 13.9 percent at 95.2 million tonnes (mt) during the April-August 2018 period. Share of coal from Australia, Indonesia and South Africa stood at 21.8 percent, 41.8 percent and 14.8 percent, respectively. India is the second largest producer and importer of coal behind China, it said. Total domestic coal production, it said, is likely to remain stagnant with 2.5-3.5 percent of growth in FY19 at 705-712 mt. Source: Business Standard

NATIONAL: POWER

In UP, poor may get electricity connections for just Rs 10

16 October. The Uttar Pradesh Power Corp Ltd (UPPCL) is planning to launch a new scheme for providing electricity connections easily and swiftly. The proposed scheme, 'Jhatpat Connection Yojana' (instant connection scheme), envisages quick processing of applications for electricity connections, mainly through online process. UPPCL chairman Alok Kumar said under the scheme, a consumer's application would be immediately forwarded to the engineers concerned under a swift processing system for quick approval. A consumer may get his application filed online or at e-suvidha/Jan Suvidha centres. Kumar said a below poverty line consumer would be required to pay just Rs 10 for an electricity connection, while those in above poverty line category would be required to pay Rs 100 for getting an electricity connection of load between 1 kilowatt (kW) to 25 kW. The proposal comes amid repeated complaints of consumers facing harassment while seeking an electricity connection. Kumar said an engineer would be required to visit the spot and file an assessment for an electricity connection within a set time frame under the scheme. Source: The Economic Times

Sterlite Power commissions power transmission project in J&K

15 October. Sterlite Power announced commissioning of a power transmission project in Jammu and Kashmir (J&K) which will ensure reliable power supply especially during winters in the Kashmir Valley. The 414 kilometre long project, the Northern Region Strengthening Scheme 29 (NRSS 29) which was one of the most challenging transmission projects globally, will ensure reliable power access for the Kashmir Valley by augmenting the state's transmission capacity by at least 33 percent, the company said. The project was commissioned two months ahead of the schedule to allow benefits to be reaped during coming winter, it said. Sterlite Power Group CEO (Chief Executive Officer) Pratik Agarwal said that the company surmounted numerous challenges to finish the project ahead of schedule and it was among handful of global transmission developers, with projects worth Rs 268 billion across India and Brazil, solving toughest challenges of energy delivery. Source: Business Standard

NTPC, Nalco call off proposed 2.4 GW power project

15 October. The NTPC Ltd and Nalco managements have decided to cancel the proposed 2,400 MW Gajamara power project located in Dhenkanal district of Odisha. The project was supposed to provide power to Nalco’s smelter plant, which is located 60 kilometre way at Angul district. In December 2016, both the PSUs (Public Sector Undertakings) had entered into a MoU (Memorandum of Understanding), for developing power projects and other business collaborations in India. Under the MoU, the companies were to float a joint venture namely NTPC-Nalco Power Company (NNPC) to set up power plants. But that agreement stands cancelled. NNPC’s first such power plant was planned at Gajamara. The super critical power plant project was to cost ₹ 14,000 crore, with three units of 800 MW. The plant was to provide uninterrupted power to Nalco’s Angul smelter. But the power project has run into coal linkage issues and land acquisition troubles. Source: The Hindu Business Line

States to get Rs 1 bn award for being efficient under Saubhagaya scheme

15 October. The power ministry announced Rs 100 crore award for states that would complete the household electrification early under the Saubhagaya scheme. Apart from discoms (distribution companies), the employees would also collectively get Rs 50 lakh award for completing the task of electrifying household under the Rs 16,320 crore Saubhagaya scheme launched by Prime Minister Narendra Modi last year in September. Power Minister R K Singh informed that there are three categories of states to compete under the scheme which include special category states (northeast and other hilly states). Besides, the states would be categorised in two other broad categories - one pool of states would have those where number of households to be electrified are less than 5 lakh. Another pool of states would cover states that have more than 5 lakh households to be electrified. Singh said that out of the Rs 50 lakh award for employees of a discom, Rs 20 lakh can be distributed among employees of its division for commendable work. He said that some of the states have already achieved almost 99 percent of household electrification work and those eight states would be kept out of this Award scheme. These states are Gujarat, Punjab, Goa, Andhra Pradesh, Haryana, Kerala, Tamil Nadu and Himachal Pradesh. Source: Business Standard

Under pilot project, 1.2 lakh houses in Tamil Nadu to get smart meters

14 October. In a pilot project, 1.27 lakh consumers in T Nagar will soon be connected to smart meters for measuring electricity consumption, with Tamil Nadu Generation and Distribution Corp (TANGEDCO)’s proposal getting a nod from the Chennai Smart City Ltd (CSCL). Corporation said Rs 86 crore has been sanctioned for the project, to be carried out by TANGEDCO. The project will help to remotely monitor consumption and reduce pilferage. TANGEDCO’s proposal is for providing the design, supply, installation, and maintenance of advanced metering infrastructure for 1.27 lakh household in the thickly populated T Nagar region. The project is estimated to cost around Rs 113 crore, of which Rs 86 crore will be spent by CSCL, and the remaining money will be mobilised by TANGEDCO. TANGEDCO said that the project had been implemented in other states like Uttar Pradesh because the billing process was not proper leading to huge losses. TANGEDCO is often under staff crunch and the manual way of reading meters can be changed to remote monitoring using these meters, CSCL said. Source: The Economic Times

UP government asks discoms to set up power police stations in all districts by 1 November

14 October. The government has set 1 November as the deadline for Uttar Pradesh Power Corp Ltd (UPPCL) to set up power police stations across 75 districts in the state. Chief secretary, UP government, Anup Chandra Pandey recently gave orders to the effect. These will be dedicated police stations to crackdown on power theft. The directives were issued to the discoms (distribution companies) earlier but a deadline was not set to establish police stations to address power-related issues. Though efforts are on to identify land for constructing these police stations, given the deadline, it is also being considered that a suitable portion of existing power corporation buildings be vacated from where a police station can function. Earlier, it was decided that police personnel who were to be deputed in these upcoming police stations would not be engaged in maintaining law and order and only be responsible to address electricity-related matters. However, the corporation has decided that policemen from existing police stations would be assigned duties at power police stations as well. Last year, UPPCL had announced that the corporation would initially be introducing power police stations in major UP districts including Bareilly, Meerut, Moradabad, Varanasi, Ghaziabad, Muzzafarnagar, Saharanpur, Gorakhpur, Allahabad, Aligarh, Lucknow and Jhansi. The pilot project was aimed at dealing with power-related cases such as power theft, taking legal actions against defaulters and addressing power-related public grievances. Source: The Economic Times

In Punjab, 10 hour power for farm connections

14 October. The Punjab State Power Corp Ltd (PSPCL) would provide 10-hour electricity supply to agriculture consumers on alternate days in the state from 14 October to 31 March. Punjab Power Minister Gurpreet Singh Kangar said they had divided vegetable feeders of each substation into four groups for this. Supply would be given to two groups on one day and the other two the next day, he said. Source: The Economic Times

Jaiprakash, RKM, 5 others bag 1.9 GW power supply deals

13 October. Seven companies including RKM PowerGen, Jaiprakash Associates and MB Power have secured contracts to supply 1,900 MW of power to five states. Power Finance Corp Consulting Ltd, a wholly-owned subsidiary of Power Finance Corp, awarded the contracts. The companies, which also include Jindal India Thermal Power, IL&FS, Avantha Group’s Jhabua Power and SKS Power, will supply power to Tamil Nadu, Telangana, Bihar, West Bengal and Haryana. Power purchase agreements with power distribution utilities of these states will be signed after receiving requisite clearances. Source: The Economic Times

Adani Electricity offers subsidised tariff for Navratri, Durga Puja pandals

13 October. Adani Electricity Mumbai Ltd (AEML) has offered close to 925 temporary connections this year to Navratri/Durga Puja pandals at a subsidised tariff. Last year, it gave close to 895 temporary connections. AEML has appealed to all Navratri/Durga pandals to undertake wiring from authorised licenced electrical contractor to ensure safety of devotees visiting pandals for playing garba or for Durga Puja. Source: The Economic Times

Bokaro becomes second fully-electrified Jharkhand district: CM

10 October. Bokaro has become the second "fully-electrified" district of Jharkhand after Ramgarh, Chief Minister (CM) Raghubar Das said. The state would become power-surplus by 2021. Five more districts of Jharkhand will be fully electrified on 15 November. The state government is spending Rs 35,000 crore to boost the power infrastructure, he said. Work on producing 4,000 MW electricity at Patratu is underway. Das said that 23 lakh out of the 30 lakh households in the state have been provided electricity, a task which was achieved in "three-and-a-half years". Source: Business Standard

NATIONAL: NON-FOSSIL FUELS/ CLIMATE CHANGE TRENDS

Tata Power aims to grow solar rooftop business 4 times in 4 yrs

16 October. Tata Power Renewable Energy, the wholly-owned subsidiary of Tata Power Company, plans to grow its rooftop business four-fold to around 1,000 MW from present 250 MW in next three to four years, even as the company plans awareness campaigns in 100 cities by end of FY19. The company is working with financial companies and at advocacy level to provide a holistic solution to the residentials and commercial & industrials as the segment failed to grow to the level it should have due to inverted tariff structure. The current initiative is to make the residential sector aware of the savings benefits that are available from the project. In 2015, the Ministry of New and Renewable Energy (MNRE) announced 40,000 MW target for rooftop installations by 2022 which was backed by a 30% subsidy for residential buildings. Besides, the government also urged the state governments to announce policies to enable net-metering, a billing mechanism that enables power consumers to be paid for injecting renewable power into the grid. Commercial and industrial building owners have shown more enthusiasm as their large power bills justify the expense of solar power systems, even though they get no subsidy. As of 31 March 2018, India installed 2,538 MW of rooftop capacity, according to the consultancy Bridge to India. This gives rooftop solar a 10% share in India’s overall solar capacity installation with large-scale and off-grid solar installations cumulatively nearing 22,000 MW during the same period. Source: The Financial Express

India to achieve 76 percent of renewable energy target by 2022: Wood Mackenzie

15 October. India may achieve about 76 percent of the target of having 175 GW of renewable power generation capacity by the scheduled date of 2022 as it faces myriad challenges, Wood Mackenzie said. India is targeting 100 GW of solar capacity and 75 GW of wind power by 2022. Wood Mackenzie's solar analyst Rishab Shrestha said India faces a myriad of challenges in the renewables industry. Wood Mackenzie said combined wind and solar capacity have almost doubled from 2014 levels to 61 GW this year. Wood Mackenzie expected non-hydro renewables to make up 13 for percent of power generation mix by 2023. Source: Business Standard

JSW Energy puts solar power plans on backburner over policy

14 October. As uncertainties loom over the solar power sector, mainly on the policy front, the JSW Energy has put its ambitious expansions plans in the segment on the backburner. The company in May had announced plans to set up a 1,000 MW solar photovoltaic (PV) panel manufacturing facility at Vijayanagar in Karnataka and to install 200 MW of solar power systems in the current fiscal. However, it has so far commissioned just about 12 MW of solar capacity. The firm had said that it would look at entering the PV cell/wafer manufacturing space. JSW Energy currently operates over 4,500 MW capacity, including a thermal capacity of 3,140 MW, hydro of 1,300 MW and solar of 12 MW. Source: Business Standard

Getting clearances major hindrance for hydro projects: Arunachal Pradesh CM

13 October. Arunachal Pradesh Chief Minister (CM) Pema Khandu said that major hindrance with hydro power project is time consumed in getting clearances which extends beyond 10 years. The CM said that one of the major hindrances in its growth is the long duration for the hydro projects to obtain clearances that extends beyond 10 years. He said the issue must be discussed to sort out such hindrances. Locals must be brought into confidence before going ahead with hydro projects. Arunachal Pradesh is known as the power house of India however several projects are caught in logjam and are facing massive delays. Source: The Economic Times

NGT summons Delhi government official on action plan on climate change

12 October. The National Green Tribunal (NGT) has summoned an official of the Environment Department in Delhi to explain the proposed amendments made by the AAP (Aam Aadmi Party) government in the State Action Plan on Climate Change (SAPCC). The order was passed after the Environment Department informed the Tribunal that it has decided to make certain amendments to the SAPCC. The plea had also sought directions to Arvind Kejriwal government to place on record relevant material and documents relating to steps taken by it in order to implement Action Plan on Climate Change. The government of NCT of Delhi had earlier claimed that it formulated a Climate Change Agenda for the national capital in 2009. However, the Agenda expired in 2012 and since then Delhi has no Action Plan on Climate Change, the plea alleged. The NGT had in 2015 directed all states and Union Territories to "expeditiously" prepare their action plans on climate change in accordance with the Centre's guidelines and get them approved by the environment ministry. Source: Business Standard

India may miss target of auctioning solar, wind capacities in FY19

11 October. India may miss the solar and wind energy auction target in the current fiscal, mainly due to rupee depreciation, safeguard duty and grid connectivity, India Ratings and Research (Ind-Ra) said. The Ministry of New and Renewable Energy (MNRE) has set a target of auctioning 34 GW of solar energy projects and 10 GW of wind energy projects. According to Ind-Ra, a sense of cautious optimism is spreading across renewable projects, with bidders and lenders going circumspect around low margin of error owing to the steep fall in tariffs since the start of auction regime. It said that recent scrapping of solar auctions around tariff concerns can derail the ministry's target to achieve 100 GW of solar capacity by FY22. On the positive side, solar projects in Ind-Ra's portfolio demonstrated stable generation levels with improving grid availability in FY18. Also, major state distribution utilities, including Solar Energy Corp of India, demonstrated a stable payment history in FY17 and FY18. Stable generation nature of solar power compared to other renewable sources remains a major advantage for solar power projects. On wind side, grid connectivity related concerns have forced bidders to skip auctions in the past, and the ministry target to conduct 10 GW of auctions in FY19 may be missed, it said. Source: Business Standard

NTPC wins 160 MW solar capacity in UP government 500 MW solar tender

11 October. NTPC Ltd has won 160 MW of solar capacity in a reverse auction held the UP (Uttar Pradesh) government. Out of the total 160 MW; 140 MW was won at a tariff of Rs 3.17 per kWh and 20 MW was won at a tariff of Rs 3.21 per kWh. This is the first time NTPC has participated in tariff based bidding of solar projects. NTPC participated in the tender floated by Uttar Pradesh New and Renewable Energy Development Agency (UPNEDA) for 500 MW grid connected solar projects. Source: The Economic Times

Chennai Central to get solar power panels

10 October. In a major green initiative, almost 25% of Chennai Central and Basin Bridge yard’s electricity requirements will soon be met by solar panels installed on the platform shelters of the station, resulting in energy savings of Rs 1.5 crore per year. Southern Railway has started installing solar panels totalling 1.9 megawatt peak at Central and 250 kilowatt peak at Egmore station. Together, the panels will generate close to 3 lakh units every month. At Egmore, the power generated would be 3.65 lakh units per annum which will result in carbon credit of 328 metric tonnes with a reduction of Rs 16 lakh per annum in the energy bill. Until now, the division has only installed small solar panels on the rooftops of stations including the Moore Market Complex, the suburban terminal, Tambaram, Katpadi, Jolarpet, Arakonam and Chengalpet. The mega solar plant in Central will be able to generate 8,333 units per day. Railways has invested Rs 6.5 crore per MW for this project. Source: The Economic Times

INTERNATIONAL: OIL

Global spare oil capacity shrinking: OPEC Secretary General

16 October. OPEC (Organization of the Petroleum Exporting Countries) Secretary General Mohammad Barkindo said global spare oil capacity was shrinking. Producers and companies should increase their production capacities and invest more to meet current demand. Members of the OPEC and non-OPEC countries participating in a supply-reduction agreement are on course to reach 100 percent compliance, Barkindo said. Source: Reuters

French O&G group Total CEO sees lower demand, higher supply of crude in 2019

16 October. Demand for crude oil will be lower in 2019 and supply higher, French oil and gas (O&G) group Total CEO (Chief Executive Officer) Patrick Pouyanne said. Higher oil prices and a strengthening dollar will affect demand for crude, Pouyanne said. Crude prices could come down once pipeline infrastructure is ready in the United States, Pouyanne said. Source: Reuters

US Gulf of Mexico oil output down 32 percent from storm

12 October. US (United States) Gulf of Mexico producers have cut oil output by 32 percent and natural gas production by 18 percent as a result of the lingering effects of Hurricane Michael, the Bureau of Safety and Environmental Enforcement (BSEE) said. The reductions continued as oil and gas companies moved more workers back to production platforms that were evacuated. It can take several days after a storm passes to inspect platforms, return crews and restore production after a shut-in. The cuts represent 550,313 barrels per day of oil production and 476 million cubic feet per day of natural gas output, BSEE said. In all, Gulf producers have lost about 2.94 million barrels of oil production. Source: Reuters

Russia to suspend light, heavy oil product exports to Belarus from November

11 October. Russia plans to halt exports of light and heavy oil products to Belarus from November until the end of next year, with restrictions also applying to shipments of liquefied petroleum gas (LPG). Russia, Belarus and Kazakhstan have a duty-free arrangement under which Moscow has been sending crude oil and oil products to Minsk with no export fee. Belarus then re-exports some of those goods, pocketing the associated charges. Russia and Belarus signed amendments to intergovernmental agreements regarding exports of oil and oil products from Moscow to Minsk, according to Russian energy ministry data. Moscow supplies Belarus each year with around 2 million tonnes of duty-free oil products but wants to cut that to 100,000-300,000 tonnes, the Russian finance ministry has said. Source: Reuters

UAE expects to raise oil output in October, November to meet demand: Energy Minister

11 October. The United Arab Emirates (UAE) started to increase its oil production in the third quarter of this year and expects to further raise its output in October and November to meet market demand, the UAE’s Energy Minister Suhail al-Mazrouei said. The Gulf OPEC member’s December oil output “will be subject to customer’s demand” and the country’s oil production capacity will reach 3.5 million barrels per day by year-end, he said. Source: Reuters

OPEC cuts forecast for global oil demand growth in 2019

11 October. OPEC (Organization of the Petroleum Exporting Countries) cut its forecast of global demand growth for oil next year for a third straight month. OPEC said world oil demand would increase by 1.36 million barrels per day (bpd) next year, marking a decline of 50,000 bpd from its previous estimate. The group cut the estimate for demand in 2019 for its own crude by another 300,000 bpd from last month to 31.8 million bpd, which in turn marks a decline of 900,000 bpd from the projection for 2018. Saudi Arabia and Libya increased output last month by 108,000 bpd and 103,000 bpd respectively, more than offsetting the 150,000-bpd decline from Iran to 3.447 million bpd. OPEC said Iran told the group its oil output had fallen by just 51,000 bpd to 3.775 million bpd. The group, led by Saudi Arabia, has pledged to increase output to compensate for the loss of any Iranian supply to US sanctions that come into force next month. OPEC cut its forecast for growth in non-OPEC oil supply in 2019 by 30,000 bpd to 2.12 million bpd. Source: Reuters

World's biggest traders see oil at $65-$100 next year

10 October. The world’s biggest trading houses said they saw oil prices not falling below $65 per barrel and possibly breaking above $100 next year due to US (United States) sanctions on Iran. Trafigura CEO (Chief Executive Officer) Jeremy Weir said that he would not be surprised to see oil trade at more than $100 per barrel next year. Alex Beard, CEO for oil and gas at Glencore, said that he sees the mid-term oil price at $85-90. Source: Reuters

Oil flowing at new site within petroleum reserve in Alaska

10 October. Oil is flowing from a drill site in what is now the farthest-west producing site on Alaska’s North Slope, ConocoPhillips Alaska Inc said. Production at Greater Mooses Tooth 1 (GMT 1), a prospect on the western edge of existing Arctic Alaska oil development started, ConocoPhillips said. Production at GMT 1 is expected to peak at 25,000 to 30,000 barrels a day, the company said. It is the second producing oil field within the borders of the National Petroleum Reserve in Alaska, or NPR-A, a vast federal land unit on the western side of the North Slope. ConocoPhillips is seeking to develop a related drill site about 8 miles (13 kilometres) to the southwest of GMT1 that could start production by 2021. Peak production at that site, Greater Mooses Tooth 2, would be 35,000 to 40,000 barrels a day, according to ConocoPhillips. Source: Reuters

Chevron becomes first oil major to exit Norway

10 October. US (United States) oil firm Chevron will become the first oil major to formally exit the Norwegian Continental Shelf (NCS) as it transfers its last stake in an exploration license, according to a government letter. Oil majors, including Exxon Mobil, BP and Shell, have scaled down their presence in Norway by selling or merging their assets in the mature region to focus on new growth opportunities elsewhere. Chevron is also seeking to sell assets in the British North Sea in order to focus on growing US onshore shale production as well as the giant Tengiz field in Kazakhstan. Norway’s Equinor, the PL859 operator, made a small, non-commercial gas discovery in 2017 but postponed plans to drill a second well permitted by the license until 2019. Source: Reuters

INTERNATIONAL: GAS

Azerbaijan to deliver one-third of Bulgaria’s gas demand

12 October. Azerbaijan will deliver one-third of Bulgaria’s gas demand, Azerbaijan’s ambassador to Bulgaria Nargiz Gurbanova during the John Batchelor Radio Show, said. Gurbanova said that it is envisaged that this project to be fully operational by the end of next year – early 2020 and will be able to supply 1 billion cubic meters of gas to Bulgaria. The diplomat noted that most importantly, recently, Azerbaijan’s state oil company SOCAR has expressed interest in participating in gasification of Bulgaria. IGB is a gas pipeline, which will allow Bulgaria to receive Azerbaijani gas, in particular, the gas produced from Azerbaijan's Shah Deniz 2 gas and condensate field. IGB is expected to be connected to TAP via which gas from the Shah Deniz field will be delivered to the European markets. The initial capacity of IGB will be 3 billion cubic meters of gas. Source: AzerNews

Naftogaz courting partners to develop Ukraine gas fields

11 October. Ukraine’s Naftogaz is in talks in London with a number of big oil and gas firms to help it develop the country’s existing and yet-to-be-tapped gas fields, CEO (Chief Executive Officer) Andriy Kobolev said. Ukraine used to produce around 70 billion cubic meters (bcm) of gas a year when it was part of the Soviet Union but now draws out only around 20 bcm. Kobolev believes the potential to recover some of the production lost over the last 50 years is sizable if it can revive existing gas fields and tap new shale and offshore areas. Ukraine imported almost 30 percent of its gas during last year’s icy winter but the cost has risen in recent years due to the hryvnia’s devaluation in international currency markets. The International Monetary Fund is also demanding Kiev hike what households are charged for gas to match what it costs the country to buy it. Source: Reuters

US natural gas output, demand seen rising to record highs in 2018: EIA

10 October. US (United States) dry natural gas production should rise to an all-time high of 82.67 billion cubic feet per day (bcfd) in 2018 from 74.77 bcfd in 2017, according to the Energy Information Administration (EIA)’s Short Term Energy Outlook (STEO). The latest October output projection for 2018 was up from the 80.96 bcfd forecast in September and would easily top the current annual record high of 74.15 bcfd produced on average in 2015. EIA projected US gas consumption would rise to an all-time high of 80.58 bcfd in 2018 from 74.27 bcfd in 2017. In 2019, EIA projected output would rise to 87.73 bcfd, while usage would slip to 80.42 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 2.1 bcfd in 2018 and 7.6 bcfd in 2019, from 0.4 bcfd in 2017. Source: Reuters

INTERNATIONAL: COAL

Q1 coal sales dip on output hiccups at mine: Australia's Whitehaven Coal

16 October. Australia’s Whitehaven Coal Ltd said equity coal sales fell 14 percent in the September quarter, as certain mechanical issues choked output from its Narrabri mine. Equity coal sales for the quarter came in at 4.1 million tonnes (mt), compared to the 4.7 mt clocked in the corresponding period a year ago. The figure overtook a UBS forecast of 3.84 mt. This result follows a disappointing June quarter which saw equity coal sales decline 7.0 percent, again due to issues at Narrabri when the company had said longwall production at the mine is expected to recommence in September. Whitehaven said it sold thermal coal for an average of $113 per tonne over the quarter, at a 4.0 percent discount to the Newcastle index price of $117.51 per tonne. Newcastle coal is thermal coal exported from the port of Newcastle in New South Wales and is the price benchmark for seaborne thermal coal in the Asia-Pacific region. Australian spot thermal coal prices have traded around six-year highs in recent months, pushed up by a summer heatwave across the northern hemisphere as well as output cuts in China, the world’s biggest consumer of coal. Whitehaven’s stock, which debuted on the Australian exchange in 2007, has advanced over 24 percent so far this year on the back of intensifying demand for coal. Source: Reuters

ClientEarth seeks to revoke Greek coal power plants permit

15 October. Environmental campaign group ClientEarth has launched a legal challenge seeking to revoke a permit for two coal-fired power plants in Greece, one of which has yet to be built, it said. ClientEarth said it launched the action with the Greek branches of Greenpeace and the World Wildlife Fund (WWF) because Greece had failed to comply with Greek and European Union laws when renewing the permit. Greece is heavily reliant on coal and has extended until 2028 the permit for the existing Meliti I plant and the adjacent Meliti II plant, which has yet to be built, ClientEarth said. Source: Reuters

South Africa's Exxaro looks to fill Eskom coal shortage

12 October. South African miner Exxaro Resources said it was looking to supply coal to state-owned power utility Eskom, which has been hit by supply shortages, posing a threat to the power supply in Africa’s most industrialised economy. Eskom, which has fewer than 20 days of coal supply at 10 of its power stations, supplies more than 90 percent of the nation’s power and is one of its most indebted state firms. Eskom said it was trying to secure new contracts with companies to ensure it had enough coal, after a major supplier cut supplies and sought insolvency protection. Eskom needs 3 million tonnes (mt) of coal to close its deficit but was also looking to stockpile a further 10 mt. Source: Reuters

China coal city vows 'no-coal zones' in bid to curb pollution

11 October. Datong, a major coal-producing city in northern China’s Shanxi province, will establish “no-coal zones” in urban districts as part of its efforts to curb pollution, the provincial government said. The Shanxi government said the restrictions would cover 102 square kilometres (39 square miles) and would include bans on the storage, sale and direct combustion of all kinds of coal. Coal-fired power and central heating systems will still be permitted. It said 16,200 households in Datong would switch to cleaner gas heating this winter and that it had already demolished 3,812 coal-fired boilers. Datong was one of China’s major coal producing regions for decades, but many of its collieries are now depleted. Shanxi, which produces nearly a billion tonnes of coal a year, has been forced to relocate more than 650,000 people from unsafe former mining districts at risk of collapse. The province is one of China’s major pollution control zones over the 2018-2020 period and it is under pressure to keep coal consumption levels unchanged from 2015-2020. Neighbouring Hebei, which has been on the frontline of China’s war on pollution since 2014, established similar “no-coal zones” in several districts in the smog prone cities of Langfang and Baoding last year. Hebei was ordered by the central government to cut coal consumption by 40 million tonnes over the 2013-2017 period as part of its commitments to boost air quality. Source: Reuters

Turkey transfers operating rights of seven coal fields to private companies

11 October. Turkey has transferred the operating rights of seven high-potential coal fields to private companies, Energy Minister Fatih Donmez said. Donmez said 19 million tonnes (mt) of coal would be produced with the new agreements, which is expected to halve annual imported coal costs. He did not give a time scale for the increased production. Turkey produced 78.9 mt of raw coal in 2017, including 1.8 mt of hardcoal, and imported 36.6 mt of hardcoal, data from Turkey’s statistics institution shows. Source: Reuters

INTERNATIONAL: POWER

Power generation in Tarbaila dam decreases to 730 MW

16 October. After reaching the maximum level of Tarbaila dam reservoir from last one month the water level has started decreasing on daily basis, recorded water level was 1482.34 cusec feet where water inflow remained on 33100 cusec feet and outflow was 35000. Owing to out flow of the water from Tarbaila lake power generation has also reduced to 730 MW electricity where only 7 units were producing electricity and 10 units were shut down. Source: Pakistan Observer

TenneT ends contract with mast builders, delaying Dutch power line

15 October. Electricity grid operator TenneT said it had cancelled a contract for the construction of electrical towers in the Netherlands, delaying the building of a new high tension transport line in the south of the country. TenneT said builders Heijmans and Europoles had failed to deliver electricity masts of the right quality on time, breaching the €250 million ($290 million) contract for the building of two high tension power lines in the north and south of the Netherlands, granted last year. The new power lines are needed to deal with the expected increase in electricity in the coming years, a large part coming from future wind farms on the Dutch part of the North Sea. The cancellation will delay the construction of a 48 kilometres (29.8 miles) long power line in the southern province of Zeeland, originally planned to be ready in 2020, the Dutch government-owned operator of electrical grids in the Netherlands and Germany said. Source: Reuters

Poland to protect households from power price surge

12 October. The Polish government is looking to reduce the impact of surging electricity prices on households, either by helping suppliers or giving tax relief for consumers. Such a move would be the latest costly proposal from the ruling Law and Justice (PiS) party ahead of municipal elections this month. Electricity prices on the Polish power exchange have leapt 60-70 percent in the year to September, on the back of higher coal prices and the rising cost of carbon emissions permits. Poland has liberalized power prices for companies but still regulates them for households. While the head of the energy market regulator said earlier this year the higher price would have to be reflected in households bills, the energy minister has said prices will remain unchanged. The current electricity tariff expires at the end of this year. Source: Reuters

UK no-deal Brexit paper warns of complications for power imports

12 October. Britain has warned operators of electrical power links with Europe that they will need to set up alternative trading arrangements if the country leaves the European Union (EU) next year with no exit deal. The United Kingdom (UK) imports around 6 percent of its electricity via power links with France, the Netherlands and Ireland but plans to build several more. Companies operating electricity interconnectors, which include Britain’s National Grid and French grid operator RTE, should “carry out contingency planning for a ‘no deal’ scenario”, a government paper said. In the event of no deal on Britain’s EU exit, European energy law will no longer apply to the UK electricity market. Britain has issued a series of papers outlining the implications of a no-deal Brexit for a range of sectors. The British government wants to increase power supply options, such as new interconnectors, as old domestic coal and nuclear plants close from the mid-2020s. However, Norway’s state-owned grid operator Statnett warned earlier this year that Brexit could hamper new projects, including two planned links with Norway. Source: Reuters

Poland's PKN Orlen, Tauron eye building power plant in Czech Republic

11 October. Poland’s largest refiner PKN Orlen and utility Tauron are mulling possible construction of a combined heat and power plant in the Czech Republic, the companies said. The companies will look into terms of providing premises by PKN Orlen to Tauron for a possible construction of a plant in Neratovice, the Czech Republic, they said. The plant would serve PKN Orlen’s unit Spolana, one of the biggest chemical firm in the Czech Republic, as well as produce electricity intended for Czech or Polish markets. Source: Reuters

INTERNATIONAL: NON-FOSSIL FUELS/ CLIMATE CHANGE TRENDS

HSBC UK Pension Scheme to invest $328 mn in wind and solar

16 October. The HSBC UK (United Kingdom) Pension Scheme will invest 250 million pounds ($328 million) in renewable energy infrastructure in Britain, namely solar plants and wind farms, the firm said. HSBC UK Pension Scheme is one of Britain’s largest, with 190,000 members. It made the announcement during the government’s “Green GB Week”, which aims to raise awareness of the benefits of low-carbon growth. The scheme will acquire operational solar plants and wind farms from developers in Britain. It has not yet selected those acquisitions but aims to have a portfolio of renewable energy generation that could power homes in an area equivalent to the size of Oxford. Renewable energy provides around 30 percent of Britain’s electricity. Source: Reuters

Congo signs deal for $14 bn Inga hydroelectric project

16 October. Congo signed a joint deal with a consortium led by China Three Gorges Corp and another Spanish-led consortium to develop its $14 billion Inga 3 hydroelectric project. Inga 3 is part of a $50 billion-$80 billion project to expand hydroelectric dams along the Congo River, but it has repeatedly been delayed by red tape and disagreements between Congo and its partners. Source: Reuters

Poland asks EU to intervene in CO₂ market: Energy ministry

15 October. Poland’s Energy Minister Krzysztof Tchorzewski asked the European Commission to intervene on the carbon permits market due to surging carbon dioxide (CO₂) prices, the Energy ministry said. Carbon permits traded under the EU (European Union)’s Emissions Trading System (ETS) have become the commodity showing the biggest price rise this year, leading to a significant increase in production costs for Polish utilities, which generate most of their power using polluting coal. Tchorzewski said that the Commission has a number of tools it can use to intervene, including releasing extra permits. Source: Reuters

Germans to pay slightly lower levy for renewable energy in 2019

15 October. Germany will cut a green energy surcharge on consumers’ electricity bills by 5.7 percent next year, but savings for households will be limited as other fees are expected to rise. Germans pay the highest electricity bills in Europe as state-induced taxes and fees account for over 50 percent of power bills. German power network operators said that revenues collected to support green electricity are high and wholesale market prices have risen, allowing renewables producers to rely less on subsidies. Energy regulator the Bundesnetzagentur said renewable producers will add 6 GW of capacity next year. Source: Reuters

Chinese solar projects facing closure amid subsidy backlog

12 October. Solar power projects in the northwest Chinese region of Ningxia are struggling to maintain operations and face “bankruptcy risks” because of long subsidy payment delays, according to an investigation by regulators. The warning follows rapid growth in China’s solar sector, which has led to a subsidy backlog of 120 billion yuan ($17.4 billion), with prices for solar power varying wildly from region to region. China wants to bring down renewable energy costs to allow wind and solar projects to compete subsidy-free with coal-fired power. It has already capped the number of new projects this year in a bid to ease its subsidy burden and help the sector focus on efficient supply. The National Energy Administration (NEA)’s bureau in charge of northwest China said the payment backlog had forced many Ningxia projects to take high-interest loans to stay afloat, with some unable to afford basic maintenance. Government-approved solar projects are entitled to a subsidy for each kilowatt-hour they sell to the grid, but the surge in new capacity has left the finance ministry struggling to make the payments on time. Source: Reuters

New geothermal plant nearly ready: Kenya's KenGen

12 October. KenGen’s new 165.4 MW capacity plant powered by geothermal steam is three quarters complete and on schedule for commissioning next July, Kenya’s main electricity producer said. Geothermal steam, hot underground steam found in the Rift Valley which is used to drive turbines for electricity production, is the second biggest source of Kenya’s annual power generation of 2,336 MW, accounting for 26.84 percent of the total. KenGen has an installed capacity of 1,631 MW and it plans to add an additional 720 MW by 2020 to cater for growing electricity demand, it said. Source: Reuters

Japan's Kyushu Electric restricts renewable energy supplies for first time

12 October. Japan’s Kyushu Electric Power Co said it restricted third-party solar power supplies over the weekend, marking the first time a Japanese utility has curbed the use of renewable energy to avoid a sudden blackout. The move underscores the need for the country to boost its transmission capacity between regions, to allow it take full advantage of the growth in renewable energy in the wake of the Fukushima nuclear disaster in 2011. The Fukushima disaster prompted a shift toward renewable energy, backed by mandatory preferential rates for solar, wind and other supplies. Source: Reuters

Exxon puts $1 mn into climate group promoting US carbon tax

10 October. Exxon Mobil Corp’s latest shift on climate includes a $1 million donation to a political action committee’s lobbying campaign to promote a US (United States) tax on carbon-gas emissions, a central factor in global warming. The contribution, made to the Americans for Carbon Dividends political action committee of the Climate Leadership Council, was disclosed by the group, less than a month after Exxon agreed to contribute $100 million to oil companies’ efforts to develop technologies to reduce greenhouse gas emissions. Exxon, the world’s largest publicly traded oil company, has supported a carbon tax in the past and has stepped up efforts to reduce greenhouse gas emissions in its operations. Source: Reuters

'Governments must change tack to contain global warming'

10 October. Governments not energy firms need to take the lead in achieve UN (United Nations) targets to contain global warming, with policies that will change fuel and other energy consumption habits, oil and gas companies said. A UN panel called for “unprecedented” changes in how the world consumes energy and a dramatic rise in the use of renewable power to contain global warming at lower levels and protect the planet from heatwaves, floods and rising sea levels. Several oil and gas firms are among those taking steps to contain emissions of some greenhouse gases. Royal Dutch Shell, BP and Exxon Mobil have all set targets to reduce methane emissions. To contain the rise in global temperatures at 1.5 degrees Celsius, the UN Intergovernmental Panel on Climate Change (IPC) said manmade global net carbon dioxide (CO2) emissions would need to fall by about 45 percent by 2030 from 2010 levels. BP CEO (Chief Executive Officer) Dudley said more industry collaboration would help, saying cooperation between the energy industry and carmakers was helping achieve greater fuel efficiency and reducing emissions. Governments have been introducing steps to reduce emissions, including promoting the use of electric cars, phasing out sales of more polluting diesel vehicles and encouraging use of renewable sources of energy. US emissions have fallen to levels last seen 30 years ago as it uses more gas, which produces lower emissions than other fossil fuels such as oil and coal. Britain’s carbon pricing policy has cut its emissions to the lowest in over a century. Source: Reuters

DATA INSIGHT

Electricity Scenario of Private Sector in India: Growth in Electricity Generation Vs Installed Capacity

Year(s)	Installed Capacity (MW)	Generation (MU)
2007-08	20511	80932
2008-09	22879	89798
2009-10	29014	119918
2010-11	35450	140878
2011-12	54276	199400
2012-13	68859	230793
2013-14	88164	281858
2014-15	107304	350074
2015-16	127076	408275
2016-17	142608	447310
2017-18	155511	471312

Year on Year Growth in Installed Capacity & Generation of Private Sector Source: Central Electricity Authority

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Publisher: Baljit Kapoor

Editorial Advisor: Lydia Powell

Editor: Akhilesh Sati

Content Development: Vinod Kumar

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OBSERVER RESEARCH FOUNDATION 20, Rouse Avenue, New Delhi- 110 002 PHONE: (011) 3533 2000, FAX: (011) 3533 2005 E-Mail: [email protected]

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