MonitorsPublished on Jul 11, 2018
Energy News Monitor | Volume XV; Issue 4

Oil News Commentary: June 2018


The recent rally in global crude oil prices has led to India’s oil import bill swelling 49 percent to $115 billion in May as compared to $76 billion recorded in the corresponding month a year ago. This has pushed the country’s merchandise trade deficit to $14.62 billion during the month. Commerce ministry data shows global benchmark Brent crude prices have increased by more than 50 percent in May 2018 year-on-year. Crude prices have been on an upward trajectory since 2017 on the back of production cuts initiated by OPEC, Russia and non-member allies. Also, significant drop in Venezuelan oil production and the recent economic sanctions on Iran by the US pushed oil prices to $80 per barrel last month. The cascading effect of surging crude prices also propped up domestic fuel prices in India, which reached record highs in May.

High crude oil prices are likely to inflate India’s CAD – excess of imports of goods and services over exports – in a range between $22 billion and $31 billion in the current financial year ending March 2019. India is a net commodity importer, and in the case of oil, the country has 80 percent import dependence. A surge in oil import bill is compensated to an extent by export bill of petroleum products. But this cushion is low and insufficient to offset the adverse impact of the oil import bill on the trade and current account. In the last financial year (2017-18), the average price of Indian crude basket increased 18.6 percent year-on-year to $56.43/barrel. Therefore, oil import bill rose 25.7 percent to $109.1 billion and petroleum products export bill rose 24.2 percent to $38.9 billion. The net impact was an increase of $14.7 billion in oil trade deficit, which was 30.73 percent of the incremental trade deficit. Petroleum products – including petrol and diesel — have a weight of 4.417 in retail prices and have the potential to add 4 basis points to retail inflation with every one percentage point increase in retail prices. The impact of higher crude prices alone or in combination with weak currency has the potential to increase retail inflation maximum by 160 basis points. This may add 30-35 basis points to the retail inflation forecast of 4.3 percent for 2018-19. The Monetary Policy Committee of the RBI, in its April 2018 monetary policy, projected retail inflation of 4.7-5.1 percent in the first half of 2018-19 and 4.4 percent in the second half. The average price of Indian crude basket, both in April and May 2018, has been in excess of the RBI’s oil price assumption. State governments on an average, earn ₹ 70-90 million per day from the fuel sale under the present taxation structure.

India’s cumulative oil import bill including petroleum products increased by 46 percent to $219 billion in the first two month of the present financial year, raising concerns over an expected shortfall in budgeted petroleum subsidy and widening CAD. The country’s CAD is expected to reach 2.5 percent of GDP in the current financial year from an estimated 1.9 percent in the last fiscal, SBI Capital Markets and Emkay Global Financial Services said in separate reports. Also, sector analysts expect the surge in crude oil prices to inflate the country’s fuel subsidy bill to ₹ 530 billion in the current fiscal year. The government has budgeted for petroleum subsidy of ₹ 249.33 billion for the current financial year, a mere 2 percent increase over the Revised Estimate of ₹ 244.60 billion allocated last fiscal. Also, as oil prices increase, upstream firms ONGC and OIL face increasing risk of government asking them to share the fuel subsidy burden.

The oil ministry ruled out a daily price review of petrol and diesel, but said the government was concerned about increasing fuel prices and is working on a long-term solution. Daily revision in petrol and diesel prices, which was introduced in mid-June last year, had come under criticism after rates were hiked everyday last month in step with firming international oil rates. It was speculated that the long-term solution being worked out by the government to deal with the volatility may involve review of the daily price review mechanism. Fuel prices have started to decline during the five days but the rates continue to “pinch”. After hitting all-time high of ₹ 78.43/litre for petrol and ₹ 69.31/litre for diesel on May 29, rates have marginally fallen during the subsequent days on softening in international oil prices and rupee strengthening against the US dollar. Petrol price has dropped by ₹ 0.47/litre and diesel by ₹ 0.34/litre. This compares to ₹ 3.64/litre hike in petrol and ₹ 3.24/litre hike in diesel rates in Delhi in the fortnight after state-owned oil firms ended a 19-day pre-Karnataka poll hiatus to resume daily price revision on May 14. Petrol in Delhi currently costs ₹ 77.96/litre and diesel by ₹68.97/litre. Prices in Delhi are the lowest among all metros and most state capitals due to lower sales tax or VAT. The central government levies ₹ 19.48/litre excise duty on a litre of petrol and ₹ 15.33/litre on diesel. State sales tax or VAT varies from state to state. Unlike excise duty, VAT is ad valorem and results in higher revenues for the state when rates move up. In Delhi, VAT on petrol was ₹ 15.84/litre, and ₹ 9.68/litre on diesel in April.

The petroleum ministry vowed to not allow petrol and diesel prices go out of reach of the common man. The government also urged citizens to pay their due share of taxes “honestly” to reduce dependence on oil as a revenue source, and virtually ruled out any cut in excise duty on petrol and diesel saying it could prove to be counter-productive. While salaried class pay their due share of taxes “most other sections” have to improve their tax payment record, which is keeping India “far from being a tax-compliant society”. Almost half of this, 0.72 percent of GDP, accounts for an increase in non-oil tax-GDP ratio. The level of non-oil taxes to GDP at 9.8 percent in 2017-18 is the highest since 2007-08 – a year in which our revenue position was boosted by buoyant international environment. As per government estimates, every rupee cut in excise duty on petrol and diesel will result in a revenue loss of about ₹ 130 billion. The price of Indian basket of crude surged from $66 a barrel in April to around $74 currently.

The government had deregulated or freed petrol pricing from its control in June 2010 and diesel in October 2014. It allowed revision of prices on daily basis since mid-June last year to reflect changes in cost instantly. Pradhan refused to say if the solution being considered includes asking oil producers like ONGC cough-up some money so that fuel can be subsidised, like it used to do till 2015.

Petroleum is the taxation milch cow for the central and the state governments and it is unlikely to be brought under the GST any time soon. Several senior ministers have demanded that petroleum products — basically petrol and diesel — be brought under the new taxation regime. NITI Aayog head said that both the central and the state governments should start the process of weaning themselves away from their dependence on oil taxation. Ever since the new tax legislation was rolled out on July 1 last year, there had been talk of bringing it under the GST with top government officials and ministers supporting the need for such a move. In December last year, the Finance Minister told the Rajya Sabha that the Central government was in favour of bringing petroleum products under the ambit of GST after building a consensus with states. More recently, in April, when the international crude oil prices were going up sharply, pushing the domestic petrol prices to record levels, the current government said that efforts were on to bring petrol and diesel under the GST. From the Road Transport and Highways Minister have bringing petroleum products under the GST. Among states, Maharashtra has also expressed willingness to bring petrol and diesel under GST in his state if a consensus was brought about on it.

The government’s move to get oil companies to hedge crude oil price risk as part of the rejig plan for pump prices has run into a bureaucratic wall. The government was considering a series of steps, including a reduction in levies and hedging of bets that would have covered the risk of prices going below or above a certain level. While the plan has not been junked, a decision will be announced at an “appropriate time”. After the Karnataka elections, the government had faced flak as retail prices of petrol and diesel repeatedly went past record levels, putting pressure on household budgets, prompting the government to deliberate on a strategy to combat the impact of a jump in global crude oil prices, which have softened over the last few weeks. The proposal for oil companies to hedge their bets was part of the plan based on experience in other countries such as Mexico. The plan entails paying a premium to cushion the impact above or below a certain level. Alternatively, there can be a delivery-based mechanism where the prices are locked three months in advance with no premium to be paid. India imports nearly 80% of its crude oil requirement and is particularly vulnerable to a jump in international prices. Not only does it impact buyers but also pushes up inflation and overall economic growth. Amid demands for a reduction in duties on petrol and diesel, the government has indicated that it will not take a rash decision and the outcome will factor in the impact on its finances, crucial for its spending plans in an election year.

OPEC decided to raise its output at a meeting held in Vienna. Though the producer group did not specify the increase, it may be in the range of 1 million barrels per day (bpd), or 1 percent of the global supply. The increase in production happened after consumers like the US, China and India knocked on the door of the producer lobby to avoid an oil deficit. For India, every $1 a barrel increase in crude oil prices will have an impact on its current account deficit by around $1 billion. Industry sources say the output rise may bring down prices to the level of $70 a barrel. After the decision, Brent crude oil prices were seen at $74.11 a barrel, up 1.45 percent from the previous day. The move will ease supply constraints, which were in place since January last year and had led to a rise in international crude oil prices. Though OPEC had planned a cut of 1.8 million barrels per day, its output dropped further to 2.8 million bpd owing to decline in production in Venezuela. According to an estimate, every $1 increase in international crude oil prices demands an increase of at least ₹ 0.63/litre in Indian fuel rates. India is the third-largest consumer of crude oil in the world with around 4.14 million barrels per day or 4 percent of global consumption. The current rise in production has come in the backdrop of resistance by producers like Iran, Venezuela and Iraq. The rising prices increased India’s import bill by 25 percent in 2017-18 to $109.11 billion over the previous financial year.

India’s crude oil production in April 2018 remained nearly flat, decreasing marginally by 0.83 percent to 2.915 mt as compared to 2.939 mt produced in the corresponding month a year ago, pushing the country’s import dependence to 83.7 percent for the month, latest figures published by the oil ministry showed. ONGC, the state-owned upstream player, recorded a 3.7 percent drop in crude oil production to 1.777 mt in April on the back of decreased output from the company’s onshore and offshore blocks. ONGC’s crude production from onshore blocks declined marginally by 0.6 percent to 496,000 tonnes in the month as compared to the corresponding month a year ago. The decrease in production was primarily due to lower output from the company’s Andhra Pradesh block. Production from other onshore blocks in Assam, Gujarat and Tamil Nadu remained flat. The firm’s production from offshore blocks decreased 5 percent to 1.281 mt for April mainly owing to lower output from western offshore blocks. OIL, the second-largest state-run upstream player, witnessed crude oil production increasing marginally to 274,000 tonnes in April. The near-flat production was due to less than planned contribution from old wells. OIL’s crude production from fields in Assam increased marginally and declined from fields in Arunachal Pradesh and Rajasthan. Crude production from fields operated by Private upstream companies and joint ventures (JVs) increased 5.37 percent to 863,000 tonnes mainly due to increased production from the Rajasthan block. Onshore production by private upstream firms and JVs increased 5.61 percent to 715,000 tonnes in April 2018 as compared to the corresponding month a year ago. The rise in production is mainly due to increased production from the Rajasthan block and marginal increase in output from Andhra Pradesh, Gujarat, Assam and Tamil Nadu blocks. Offshore production rose marginally by 6000 tonnes to 148,000 in April primarily due to increased production from Gujarat offshore. Indian private refiner Nayara Energy, a key buyer of Iranian oil, is prepared to replace Iranian oil if required under US sanctions and hopes to settle dues owed to Tehran for past purchases ahead of a November deadline. Uncertainties cloud Iran’s oil exports after US President Donald Trump abandoned a 2015 nuclear agreement this month and ordered the re-imposition of US sanctions on Tehran. Some sanctions take effect after a 90-day “wind-down” period ending on August 6, and the rest, notably on the petroleum sector, after a 180-day “wind-down period” ending on November 4. Nayara, formerly known as Essar Oil, would leverage the vast network of its promoters – Russia’s Rosneft and trader Trafigura, to replace Iranian oil, if required under the US sanctions. The company operates a 400,000 barrels per day (bpd) sophisticated refinery at Vadinar in the country’s west coast. In April, the company was aiming to buy 120,000 bpd) of oil from Iran in 2018/19, the same as the previous year, adding his company was receiving the same concessions as state-owned Indian refiners for Iranian oil purchases.

India’s crude oil production dropped 3 percent to just over 3 mt in May on the back of dip in output from fields operated by ONGC. ONGC produced 1.84 mt of crude oil in May as compared to 1.93 mt in the same period last year. The firm’s output in April-May dipped 4.3 percent to 3.62 mt. This resulted to a drop in the country’s oil production to 5.9 mt from 6.03 mt in April-May of 2017. Natural gas output dropped 1.4 percent to 2,768 billion cubic meters in May as private sector firms like RIL produced less. Oil refineries, however, produced 6.8 percent more fuel at 22.24 mt in May with private sector units of RIL and Nayara Energy operating at over 100 percent capacity.

IOC is exploring term deals with producers in the USA for purchase of about a mt of crude oil, a move that could turn the US into one of its regular suppliers and counterbalance traditional producers in the Gulf. Indian refiners began buying US crude in the spot market last year and IOC’s term deal, when it happens, will be the first regular supply deal with the US. Term deals are usually annual contracts for purchase of a predetermined quantity at a price that varies with international rates during the period of contract. IOC and other state-owned refiners source about 70% of their crude oil via term deals with multiple suppliers across producing regions. The balance 30% is procured from the spot market. Term deals ensure certainty in supply for refiners, and such firm supplies from the far-off US to India could bring traditional suppliers from West Asia under pressure and could help keep prices in check.

IOC the nation’s largest fuel retailer, recorded a 65 percent jump in crude oil production to 2.66 mt last financial year (2017-2018), the company said. The company plans to source 10 percent of its crude requirement from its own oil and gas assets. The company is engaged in exploration activities in nine domestic blocks and 10 overseas blocks, with participating interest ranging from 3 percent to 100 percent. The 10 overseas blocks are located in nice countries including- United Arab Emirates, Russia, Canada, USA, Venezuela, Libya, Nigeria, Gabon and Iran. IOC had acquired 3 percent participating interest in Lower Zakum Concession in Abu Dhabi last year in consortium with ONGC Videsh Ltd and Bharat PetroResources. IOC’s share of reserves increased by 150 million barrels of oil equivalent and daily production increased by 12,000 barrel of oil equivalent per day. The firm had acquired 17 percent participating interest in the Mukhaizna oil field in Oman from Shell last financial year, the company’s first foray in Oman. IOC is planning to spend ₹ 228.62 billion as part of its capital expenditure programme in the current financial year.

India’s domestic sales for diesel and petrol rose to record highs in May, pushing the country’s overall fuel consumption for the month higher year-on-year, data from the PPAC of the oil ministry showed. Fuel consumption, a proxy for oil demand, totalled 18.72 mt last month, during which diesel sales soared to 7.55 mt and petrol consumption climbed to 2.46 mt – the highest monthly sales figures in PPAC data going back to April 1998. India, the world’s third-largest oil consumer, used 35.2 mt of diesel during January to May this year, up 6 percent from the corresponding period last year. The country’s monthly diesel sales have averaged 7.05 mt in 2018, compared with a monthly average consumption of 6.6 mt last year. Sales of gasoline, or petrol, rose 7.6 percent in May from April and are up 2 percent from the same month last year. Monthly demand for petrol has averaged 2.27 mt this year, up 7 percent from the 2017 average of 2.12 mt. Diesel consumption growth during the calendar year of 2018 may be more than double from last year aided by an expected regular monsoon that should boost demand for diesel used in harvesting, while the government targets massive infrastructure spending. More than half of India’s population is employed in the farm sector, which depends on diesel to fuel the pumps for land irrigation. Higher domestic consumption in India, however, may cap the country’s capacity to export diesel. India’s diesel exports during March to April this year were 3.79 mt, down 22 percent from 4.87 mt of the industrial fuel exported during the same time last year.

State oil companies plan to add an unprecedented 25,000 petrol pumps in one shot, nearly half as much as operational today, across the country after the government signalled them to do so. The oil ministry has also scrapped an official policy on petrol pump dealers’ appointment, giving fuel retailers such as IOC, HPCL and BPCL the freedom to design their own rules for setting up filling stations, according to industry executives familiar with the matter. The ministry allowed companies to prepare their own respective guidelines for appointing new petrol pump dealers on ground that a government guideline was no more needed since the sale of diesel and petrol are already deregulated. These companies have almost finalized their guidelines that would govern new appointments. In about a month or so, all three companies will advertise, seeking interested candidates for dealers at 25,000 locations, mostly in rural and other under-served regions. State companies currently operate about 57,000 retail outlets and private firms another 6,000. To be sure, not all locations advertised may attract applicants or finally have a petrol pump, but even a 50% success rate could mean an investment of thousands of billions in the fuel retailing business, jobs for tens of thousands of people, and an increased dominance of state firms in a business they already control more than 90%. New pumps also mean more business for equipment suppliers, transporters and tanker manufacturers. The state firms’ expansion comes at a time private players such as Rosneft-led Nayara Energy, Reliance-BP, and Shell too are expanding their retail network.

India will from November not be able to use European banks for making payments for crude oil it buys from Iran as US sanctions against the Persian Gulf nation take effect. SBI, the country’s largest lender, has communicated to oil refiners that the euro payment route will be not available after November 3, IOC said. US President Donald Trump had last month pulled out of a landmark nuclear deal and said sanctions will be re-imposed on Iran within 180 days. However, it is not “doomsday” for Indian refiners and alternate crude oil sources in the Middle East, US and Russia can be tapped should Iranian supplies dry up due to payment problems, BPCL said.

During the first round of sanctions in 2012 when European Union joined the US in imposing financial restrictions, India initially used a Turkish bank to pay Iran for the oil it bought but beginning February 2013 paid nearly half of the oil import bill in rupees while keeping the remainder pending till opening of payment routes. It began clearing the dues in 2015 when the restrictions were eased. Besides, New Delhi sought to get around the restrictions by supplying goods including wheat, soybean meal and consumer products to Iran in exchange for oil. Iran is India’s third-largest oil supplier behind Iraq and Saudi Arabia. It supplied 18.4 mt of crude oil during April 2017 and January 2018 (first 10 months of 2017-18 fiscal). Iran was India’s second biggest supplier of crude oil after Saudi Arabia till 2010-11 but western sanctions over its suspected nuclear programme relegated it to the 7th spot in the subsequent years. In 2013-14 and 2014-15, India bought 11 mt and 10.95 mt, respectively from the country.

The Delhi High Court has ordered extension of Cairn India Ltd’s Rajasthan oil block contract for 10 years beyond 2020 on old terms and conditions, the company said. The court in an order directed the government to extend till 2030 the PSC for Rajasthan block on the same terms and agreements when it was first entered into in 1995. The 25-year contract for exploration and production of oil and gas from Barmer block RJ-ON-90/1 is due for renewal on May 14, 2020, but Cairn India has to, as per a new policy, apply for a 10-year extension. The government had in March last year approved a new policy for extension of PSCs that provided for an extension beyond the initial 25-year contract period only if companies operating the fields agree to increase the state’s share of profit by 10 percent. The company moved Delhi High Court as it felt that the May 1995 PSC for the block provided for an automatic 10-year extension on same commercial terms if there are oil and gas left to be produced. But the government had midway retrospectively changed fiscal terms. ONGC which as a government nominee picked up 30 percent stake in the Rajasthan block in 1995, also was of the opinion that PSC provides for an extension on same terms. ONGC had first in May 2015, then again on at least two occasions in 2016, concurred with Cairn’s interpretation of the PSC for extension of the Rajasthan contract by 10 years on same terms. The government will appeal against the Delhi High Court  order asking the Centre to extend Cairn India Ltd’s contract for the Barmer oil field in Rajasthan for 10 more years beyond 2020 on original terms and conditions set in 1995.

Rest of the World

Iranian Oil Minister said that OPEC’s oil output agreement did not specify a production increase and that a figure of 800,000 barrels per day (bpd) was an interpretation by some members of the group. The OPEC and other top crude producers, meeting in Vienna, agreed to raise output from July, but the agreement failed to announce a clear target for the output increase, leaving traders guessing how much more OPEC will actually pump. Iran said some countries want to send “positive signals to the market or to the US”, but that is not related to OPEC’s decision. The US, China and India had urged oil producers to release more supply to prevent an oil deficit that could undermine global economic growth. Iran, OPEC’s third-largest producer, had demanded OPEC reject calls from US President Donald Trump for an increase in oil supply, arguing that he had contributed to a recent rise in prices by imposing sanctions on Iran and fellow member Venezuela. Market watchers expect Iran’s oil output to drop by a third by the end of 2018. That means the country has little to gain from a deal to raise OPEC output, unlike arch-rival Saudi Arabia.

Iran is pursuing a plan to increase its oil output by 460 million barrels within three years. The plan will focus on increasing output from 29 oilfields, including in Ilam, Khuzestan, Gachsaran, Falat Qareh and Fars. The bulk of the work to increase the output at the oilfields will be carried out by Iranian companies.

Iran will issue bonds in the coming months to fund oil projects, the head of its Securities and Exchange Organization said, a month after the US withdrew from a nuclear deal and said it would reimpose unilateral sanctions. The US sanctions on Iran’s petroleum industry will take effect on November 4, but many European refiners, as well as buyers in Asia, are already winding down Iranian oil purchases. In May, French oil major Total said it might pull out of its investment in Iran’s South Pars gas field if it cannot secure a waiver from the US government.

Iraq and Iran have begun exchanging crude oil, the Iranian oil ministry said, in a deal that will position Tehran to expand its interests in its most important Arab ally in the face of growing pressure from Washington. Crude from the Kirkuk field in northern Iraq is being shipped by truck to Iran. Tehran will use the oil in its refineries and will deliver the same amount of oil to Iraq’s southern ports, on the Gulf. After helping Iraq stifle a Kurdish push for independence last year, OPEC producer Iran positioned itself to take control of oil exports from the region’s giant Kirkuk field. Baghdad agreed for the first time to divert crude from Kirkuk province, which it retook from the Kurds, to Iran, where it will supply a refinery in the city of Kermanshah. Iraq and Iran plan to build a pipeline to carry the oil from Kirkuk to avoid having to use trucks. The swap deal allows Iraq to resume sales of Kirkuk crude, which have been halted since Iraqi forces took back control of the fields from the Kurds in October 2017.

OPEC and non-OPEC Arab Oil Ministers stressed the need for continued cooperation between oil producers who are part of a pact for a global supply cut that is due to expire at the end of 2018. The OPEC, Russia and several other producers agreed to cut output by about 1.8 million bpd starting from January 2017. The curbs have driven down inventories and pushed up oil prices. OPEC Ministers from Saudi Arabia, the United Arab Emirates, Kuwait and Algeria along with their counterpart from non-OPEC Oman gathered in Kuwait for an unofficial meeting of a joint ministerial committee that monitors compliance with the agreement. The agreement has helped raise oil prices to above $80 a barrel and reduce a global oil supply glut. OPEC could decide to raise oil output as soon as June to cool the market and due to worries over Iranian and Venezuelan supply and after Washington raised concerns the oil rally was going too far, OPEC said.

Gazprom Neft, the fastest-growing Russian oil major in terms of output, is ready to hike crude production if the global deal on output cuts is eased. The OPEC and other leading oil producers including Russia have agreed to cut their combined output by 1.8 million bpd in order to smooth out global oil stockpiles and support oil prices. The OPEC and non-OPEC ministers will meet in Vienna on June 22-23 to discuss the future of the deal, which is valid until the end of the year. He said that the company would be able to hike its oil production by 5,000 tonnes per day (36,650 bpd) if the restrictions are scrapped. He said that if the deal is kept in place, Gazprom Neft’s oil production will be stable, at 62.3 million tonnes (1.25 million bpd) this year. According to analysts, Russia’s largest oil producer Rosneft will be able to restore 70,000 bpd of output in just two days if global production limits are lifted.

Russian oil output was stagnant at 10.97 million bpd for a third month in a row in May, again exceeding quotas set under a global deal, energy ministry data showed. Russia, one of the world’s largest crude producers, and the OPEC agreed to cut their combined output by 1.8 million bpd in order to smooth out bloated oil inventories and prop up prices. Russia has undertaken to cut its production by 300,000 bpd from 11.247 million bpd reached in October 2016, the baseline for the agreement. Production for the past three months in Russia has been at the highest level since output of 11 million bpd in April 2017. Russian oil majors Lukoil and Surgutneftegaz kept their production unchanged last month from April. Output at Gazprom Neft, the only Russian company, which produces oil offshore in the Arctic, declined by 1.1 percent. Output at the world’s largest listed oil producer Rosneft edged up by 0.2 percent in May from April. Analysts said Rosneft is able to restore 70,000 bpd of output in just two days if global production limits are lifted.

The president of Russia’s second-largest oil firm Lukoil, said that oil production cuts should be halved if the oil price reaches $75 per barrel. Lukoil could restore its oil output to the same level as before the OPEC deal in 2-3 months.

OPEC agreed on a modest increase in oil production from next month after its leader Saudi Arabia persuaded arch-rival Iran to cooperate, following calls from major consumers to curb rising fuel costs. But the agreement failed to announce a clear target for the output increase, leaving traders guessing how much more OPEC will actually pump. Oil prices LCOc1 rose by $1.85 to $74.90 a barrel. US President Donald Trump was among those wondering how much more oil OPEC will deliver. US, China and India had urged oil producers to release more supply to prevent an oil deficit that could undermine global economic growth. OPEC said that it would raise supply by returning to 100 percent compliance with previously agreed output cuts, but gave no concrete figures. Saudi Arabia said the move would translate into a nominal output rise of around 1 bpd or 1 percent of global supply. Iraq said the real increase would be around 770,000 bpd because several countries that had suffered production declines would struggle to reach full quotas. Iran, OPEC’s third-largest producer, had demanded OPEC reject calls from Trump for an increase in oil supply, arguing that he had contributed to a recent rise in prices by imposing sanctions on Iran and fellow member Venezuela. Trump slapped fresh sanctions on Tehran in May and market watchers expect Iran’s output to drop by a third by the end of 2018. That means the country has little to gain from a deal to raise OPEC output, unlike top oil exporter Saudi Arabia.

Chinese oil buyers will keep taking crude from the US through September, but plan to reduce future purchases to avoid a likely import tariff amid a trade spat between the world’s two largest economies. Beijing has put US energy products, including crude oil and refined products, on lists of goods that it will hit with import taxes in retaliation for similar moves by Washington. Beijing did not specify when it will impose a 25 percent tax on oil, and that gives buyers time to adjust purchases while waiting for the outcome of trade talks. Unipec, trading arm of Sinopec – Asia’s largest refiner and biggest buyer of US oil – has been offering US crude, such as West Texas Intermediate Midland, to other Asian buyers for July. Unipec said early this year that the company expects to trade up to 300,000 bpd of US crude oil by the end of the year, about triple the trading volume last year. That will be worth roughly $7.7 billion over the whole year based on $70 per barrel of oil.

Nexen Energy, a unit of CNOOC, said that it would move ahead with the construction of its C$400 million ($300.5 million) Long Lake Southwest expansion project in northern Alberta. The expansion will boost output at CNOOC’s Long Lake oil sands facility by 26,000 bpd. The company said construction will begin shortly, with first oil expected in late 2020. The investment decision comes as many foreign companies have exited Canada’s oil sands, frustrated with high costs and a lack of new pipeline infrastructure. Canadian oil trades at a discount to the US benchmark due to transportation constraints.

China’s gasoline exports in May surged from a year earlier, as state refiners sought to profit from good export margins and additional quota, customs data showed. Gasoline exports in May rose 134 percent from a year earlier to 1.47 mt and up from 1.21 mt in April. Diesel exports in May also rose, up 62.6 percent to 2 mt from the year earlier period while kerosene exports were up 43.1 percent to 1.42 mt. The month’s fuel exports were still lower than the record numbers recorded in March however.

Mexico’s leftist presidential may allow more oil and gas fields to be auctioned off. Mexico needed to lower energy dependence on the US, and if the private sector could help it do so, it should.

Brazil’s move to ease rules forcing oil producers to buy from domestic suppliers means Latin America’s top producer will be able to sustain output of 5 million bpd by the mid-2020s, compared to just 3.7 million bpd under prior rules, consultancy Wood Mackenzie said in a report. Brazil’s embattled center-right President’s administration has moved to loosen local content rules that dictated what percent of certain equipment and services must be provided locally. That, together with strong unions and tough regulations, forced many oil firms to choose between incurring high penalties for violating the rules or waiting years more to get oil production online, Wood Mackenzie said. But in 2017 and 2018, fines have been reduced by 40 percent to 75 percent depending on the category. Local content requirements also have been lowered to match levels that operators were able to achieve. The world’s biggest oil companies have bid aggressively in recent auctions to lock in access to the country’s coveted offshore pre-salt play, where billions of barrels of oil are trapped beneath a thick layer of salt under the ocean floor.

Venezuela is considering producing fuels from foreign crude oil for the first time, according to planning documents, as the country struggles to meet its obligations despite having the world’s largest crude reserves. State-run oil company PDVSA may process up to 57,000 bpd of foreign crude in June at the country’s largest refinery, according to a monthly refining plan. The output would help fulfill fuel contracts for Russian, Chinese and other customers and reduce purchases of fuels for domestic use, the documents showed. PDVSA has been falling short on fuel exports in recent years due to a lack of lighter crudes to refine, a shortage of spare parts, poor maintenance, and management upheaval at its domestic refining network. PDVSA also lost access in May to inventories produced in Curacao, where it operates the Isla refinery. Venezuela, an OPEC member country, has never before imported foreign crude oil for its domestic refineries, although it has blended African, Russian and US crudes with its extra heavy oil to make exportable products. It also has purchased foreign oil for Caribbean refineries and to supply allies, including Cuba. In May, the country produced 1.53 million bpd of crude, according to numbers delivered to OPEC, but other sources put the figure at 1.39 million bpd, which would be the lowest monthly output since the 1950s. To meet its domestic demands and PDVSA’s fuel supply contracts, Venezuela would have to produce some 850,000 bpd of fuels, the documents show. Neither of the June alternatives show it getting close to that level. If PDVSA decides to process the foreign crude, it would produce 606,000 bpd, and less if it does not. From January through March, PDVSA’s refineries supplied 78 percent of the 365,000 bpd of the fuels demanded by Venezuela’s domestic market, which forced the company to import finished products including gasoline and diesel. Under the plan excluding foreign oil imports, PDVSA’s domestic refineries would work at about 36 percent of their total capacity, or 473,000 bpd of Venezuelan crude, according to the documents, reflecting an acute lack of spare parts and delayed maintenance projects. PDVSA’s 310,000 bpd Cardon refinery restarted a vacuum distillation unit that was waiting for spare parts to be repaired. Last week, the 645,000 Amuay refinery restarted one of its crude distillation units.

Venezuela’s state-run PDVSA and partners have halted operations at two upgraders that convert extra-heavy oil into exportable crude and plan to stop work at two others, a move aimed at easing the strains from a tanker backlog that is delaying shipments. Venezuela’s problems exporting oil this month led PDVSA to notify customers it would begin sea-borne transfers in an attempt to ease a bottleneck at its ports, where more than 70 vessels are waiting to load about 23 million barrels of oil. PDVSA also told clients they could not send new tankers until the ships waiting to load were serviced. In the January-April period, Venezuela’s crude production fell to the lowest annual average in over three decades and oil exports fell 28 percent to 1.19 million bpd. PDVSA President Manuel Quevedo, who is also Venezuela’s Oil Minister, recently said the upgrader at Petro San Felix would be halted for repairs in July, but the program was moved ahead to this month. PDVSA and its partners typically produce diluted crude oil, made with extra-heavy crude and imported naphtha, during maintenance, but production and export levels usually decline compared with regular output. Most of Venezuela’s upgraded oil is sold on the open market, not through long-term supply contracts. Saudi Arabia has informed five Asian refiners that it will supply full contractual volumes of crude oil in July. The world’s top crude exporter has also reinstated contracted volumes of Arab Heavy crude to one buyer after cutting supplies in the previous month. Three other refiners in Asia said they have not received their July allocation. The state oil giant maintained full contractual supplies to Asia for June supplies by replacing Arab Heavy with Arab Light. Saudi Aramco raised the official selling prices for all crude grades for its Asian customers in July, with flagship Arab Light rising to the highest in four years.

Canada’s oil output is set to rise 33 percent by 2035, driven almost entirely by higher oil sands production, but without new export pipelines Canadian producers will continue to be excluded from emerging markets. The CAPP also warned that Canada’s inability to get new crude export pipelines built, along with regulatory uncertainty, was weighing on investor confidence. Despite the challenges, CAPP said Canadian output would rise to 5.6 million bpd in 2035, compared with 4.2 million bpd in 2017, driven largely by a 58.5 percent jump in oil sand production to 4.2 million bpd. Western Canada accounts for roughly 95 percent of Canada’s oil production, with the bulk coming from Alberta’s oil sands, but an exodus of international oil majors has prompted doubts over whether the region can compete with US shale plays. Indeed, capital spending on oil projects in the US rose 38 percent to hit $120 billion in 2017, while investment in Canada dropped to C$45 billion ($34.6 billion), CAPP said. Efforts to build new pipelines to the coast to tap into emerging markets like China and India have so far failed. Canada sends roughly 99 percent of its oil to the US, most of it deeply discounted against the US benchmark price. With Canadian oil output already surpassing pipe capacity, pipeline operators are also looking to expand major export lines to the US, but those projects face their own political and regulatory hurdles.

Norway’s parliament gave a green light for Equinor’s 47.2 billion Norwegian crown ($5.85 billion) plan to develop the Johan Castberg oilfield in the Arctic Barents Sea. Parties from the center-right government and the main opposition Labour Party joined forces to ensure a 91-10 majority vote for the field development. Johan Castberg, which is expected to start in 2022, would become the second producing oilfield in the Norwegian sector of the Barents Sea after Eni’s Goliat field, which started in 2016. Equinor, which changed its name from Statoil last month to become a broader-based energy firm spanning everything from oil to wind, has dropped plans to build an onshore oil terminal to handle exports from the 558 million barrel field, to cut costs. Parliament nevertheless asked the government to look into the option and report back by the end of 2018. Norway’s largest union of oil workers, Idustri Energi, has welcomed parliament’s push for the terminal, saying it could create more jobs in the country’s Arctic region. The Norwegian Petroleum Directorate estimates the Barents Sea holds more than half of yet-to-be discovered oil and gas resources on the Norwegian continental shelf. Six oil companies plan to drill about 10 exploration wells in the Barents Sea off Norway this year.

CAD: Current Account Deficit, US: United States, OPEC: Organization of the Petroleum Exporting Countries, RBI: Reserve Bank of India, SBI: State Bank of India, ONGC: Oil and Natural Gas Corp, VAT: Value Added Tax, GDP: Gross Domestic Product, mt: million tonnes, IOC: Indian Oil Corp, HPCL: Hindustan Petroleum Corp Ltd, BPCL: Bharat Petroleum Corp Ltd, OIL: Oil India Ltd, RIL: Reliance Industries Ltd, PPAC: Petroleum Planning and Analysis Cell, PSC: Production Sharing Contract, bpd: barrels per day, CNOOC: China National Offshore Oil Corp, CAPP: Canadian Association of Petroleum Producers


MRPL buys first Iraqi Basra Heavy crude from Shell

3 July. India’s Mangalore Refinery and Petrochemicals Ltd (MRPL) has bought its first cargo of Iraqi Basra Heavy crude from Royal Dutch Shell via a tender. It bought the cargo at $1.20 below Dubai quotes on a cost and freight basis. MRPL is likely to blend the one million barrels Basra Heavy crude, which will be delivered in September, with lighter grades so it can be processed at its refinery.

Source: Reuters

Shifting LPG storage facility not technically feasible: IOC

2 July. Indian Oil Corp (IOC) has reiterated that it is not technically feasible to shift the LPG (liquefied petroleum gas) storage facility under construction on Puthuvype Island to Ambalamedu as suggested by those protesting against the project. The company said that it would be highly dangerous to transport the colourless, odourless LPG over a distance of 50 kilometre (km) through pipeline as any leakage cannot be detected. The constituents of LPG, propane and butane, are shipped to the multi-user liquid terminal under construction and they need to be received and stored separately, blended and then evacuated as per specifications. It is highly unsafe to otherwise transport the odourless LPG to Ambalamedu.

Source: The Hindu

ONGC board gives in-principle nod for restructuring options of group firms

2 July. The board of Oil and Natural Gas Corp (ONGC) has given in-principle approval for exploring options for a restructuring of the group firms including the merger of subsidiaries Mangalore Refinery and Petrochemicals Ltd (MRPL) and Hindustan Petroleum Corp Ltd (HPCL). The India’s largest oil and gas producer, ONGC has several subsidiaries and joint ventures including two in refining sector – Hindustan Petroleum Corp Ltd and Mangalore Refinery and Petrochemicals Ltd and two petrochemical units – ONGC Petro additions Ltd (OPaL) and ONGC Mangalore Petrochemicals Ltd. It also has an overseas investment arm in ONGC Videsh Ltd. The board of the company will take a call on the options suggested by the advisor. ONGC is looking at trimming down the structure by merging some of the subsidiaries. While MRPL operates a 15 million tonnes a year refinery at Mangalore in Karnataka, HPCL has two refineries at Mumbai and Vizag. OPaL has built at Rs 320 billion petrochemical complex at Dahej in Gujarat, while ONGC Tripura Power Company Ltd (OTPC) operates a 726 MW power plant at Palatana in Tripura. ONGC referred to the acquisition of government’s stake in HPCL earlier this year as part of government’s proposal to create a public sector ‘oil major’ which will be able to match the performance of international and domestic private sector oil and gas companies. ONGC has in past spoken of benefits of bringing all refining business under one company. HPCL management too has supported taking over MRPL to create India’s second-biggest public sector oil refining firm. The restructuring, it said, would be done taking into account the need for better value creation and synergy among group firms. Also, it would be done to meet the minimum public shareholding requirement in case of MRPL.

Source: Business Standard

Enough sources of crude oil to deal with Trump’s sanctions on Iran: India

2 July. One of Iran’s biggest oil buyers said it has enough alternative sources of crude to replace any supplies cut off by US (United States) sanctions on the Persian Gulf state — even if shipments stop completely. Indian Oil Corp (IOC) Chairman Sanjiv Singh said Saudi Arabia alone can cover most of the world’s supply shortfall in case Iran’s oil exports dry up. Also a narrowing spread between Brent crude and Dubai oil gives IOC even more options, the head of the state-run refiner known as IOC, one of Iran’s largest customers, said. Some customers in Asia are already considering acquiescing to President Donald Trump’s demand to end trade with Iran by early November, when sanctions aimed at curbing the Islamic republic’s nuclear program come into effect. Several refiners in the largest oil market are looking at alternative supplies from Saudi Arabia to Iraq after the White House said it won’t offer extensions or waivers to US allies. IOC plans to buy 7 million tonnes (mt) of crude from Iran in the year ending March 31 versus 4 mt in the previous fiscal year. India imported 771,000 barrels of crude oil a day from Iran in May, a 35 percent increase from the previous month, tanker tracking and shipping data show. IOC added 16 new grades of crude during 2017-18 and has the ability to process 175 different varieties, boosting flexibility in oil sourcing. It also expanded the capabilities of its refineries to process cheaper and heavier grades, which make up close to 60 percent of its crude diet. India’s government has so far been sending mixed signals about its stance on Iranian imports. While the country said it plans to seek exemptions from the sanctions and is also looking at alternate payment mechanisms to enable it to continue purchases from the Persian Gulf state, the government has also asked refiners to brace for all eventualities, including zero imports. India insists it will make sure its energy security is not compromised and a call on Iran oil imports will be guided by its own interests. India continued with purchases from Iran during the last round of sanctions.

Source: Business Standard

Subsidised LPG price hiked by Rs 2.71 per cylinder

30 June. Subsidised cooking gas or liquefied petroleum gas (LPG) price was hiked by Rs 2.71 per cylinder as a result of tax impact of base price rising due to spurt in international rates and fall in rupee. Subsidised LPG will cost Rs 493.55 in Delhi, Indian Oil Corp (IOC) said. Oil firms revise LPG price on 1st of every month based on average benchmark rate and foreign exchange rate in the previous month. Accordingly, the subsidy transfer in customer’s bank account has been increased to Rs 257.74 per cylinder in July 2018 as against Rs 204.95 per cylinder in June 2018. Consumers buy non-subsidised or market price LPG after exhausting their quota of 12 subsidised cylinders of 14.2-kg each.

Source: The Times of India

Congress slams government for hike in LPG prices

30 June. As Modi government hiked the price of non-subsidised LPG (liquefied petroleum gas) or cooking gas by Rs 55.50 per cylinder, the Congress said Prime Minister Narendra Modi’s promise of “Aachhe Din” (good days) has only brought miseries and inflation for the people. The party also asked where are those senior leaders of the Bharatiya Janata Party (BJP) like Arun Jaitley, Sushma Swaraj and Smriti Irani, who had protested hike in the price of non-subsided LPG cooking gas during UPA rule. The price of non-subsidised LPG cooking gas will be hiked by Rs 55.50 per cylinder in New Delhi and that of the subsidised one by a marginal Rs 2.71, effective from July 1. According to the Indian Oil Corp, the increase is mainly on account of GST (Goods and Services Tax) on revised price of domestic non-subsidised LPG.

Source: Business Standard

States will get to levy additional taxes on top of 28 percent GST on petrol, diesel: Bihar Deputy CM

29 June. Petrol and diesel, when brought under GST (Goods and Services Tax), will involve a peak tax rate of 28 percent plus states getting to levy some tax, keeping the retail rates at almost the same level as they are currently, Bihar Deputy Chief Minister (CM) Sushil Kumar Modi said. Modi, however, said it will take some time for states to get around to including petrol and diesel in the GST and the Council will take a final call on the timing. He said 45-50 percent of tax revenues of states come from petrol and diesel. Modi said petrol, diesel would not be included in the GST in the coming few months and focus would now be on new return filing system. The peak GST rate plus VAT (Value Added Tax) will be equal to the present tax incidence, which is made up of excise duty, levied by the central government, and VAT charged by the states. The Centre currently levies a total of Rs 19.48 per litre of excise duty on petrol and Rs 15.33 per litre on diesel. On top of this, states levy VAT – the lowest being in Andaman and Nicobar Islands where a 6 percent sales tax is charged on both the fuel. Mumbai has the highest VAT of 39.12 percent on petrol while Telangana levies the highest VAT of 26 percent on diesel. Delhi charges a VAT of 27 percent on petrol and 17.24 percent on diesel. The total tax incidence on petrol comes to 45-50 percent and on diesel, it is 35-40 percent. Under GST, the total incidence of taxation on a particular goods or a service has been kept at the same level as the sum total of central and state levies existing pre-July 1, 2017. This was done by fitting them into one of the four GST tax slabs of 5, 12, 18 and 28 percent. For petrol and diesel, the total incidence of present taxation is already beyond the peak rate and if the tax rate was to be kept at just 28 percent it would result in a big loss of revenue to both centre and states.

Source: The Indian Express

India preparing for cut in oil imports from Iran

28 June. India’s oil ministry has asked refiners to prepare for a ‘drastic reduction or zero’ imports of Iranian oil from November, two industry sources said, the first sign that New Delhi is responding to a push by the United States (US) to cut trade ties with Iran. India has said it does not recognise unilateral restrictions imposed by the US, and instead follows UN (United Nations) sanctions. India’s oil ministry held a meeting with refiners, urging them to scout for alternatives to Iranian oil. Indian Oil Minister Dharmendra Pradhan said that the country would attend to its interests while deciding on oil imports. During the previous round of sanctions, India was one of the few countries that continued to buy Iranian oil, although it had to reduce imports as shipping, insurance and banking channels were choked due to the European and US sanctions.

Source: Reuters

India to build two more strategic petroleum reserves: Goyal

27 June. The cabinet approved establishment of two strategic petroleum reserves (SPRs) with a total capacity of 6.5 million tonnes (mt), interim Finance Minister Piyush Goyal said. India will set up a 4.4 mt SPR at Chandikhol in Odisha, and a 2.5 mt facility at Padur in Karnataka. India has built three SPR of 5.33 mt in southern India equivalent to meet 10 days of crude requirement. The two planned SPRs will be provide additional supply of about 12 days. India to approach potential investors for operating the SPRs on public private partnership. Establishment of SPRs will significantly help India’s energy security and insulate the country from external price and supply shocks.

Source: Reuters


ONGC wants $8.3 price for CBM gas from West Bengal

1 July. Oil and Natural Gas Corp (ONGC) wants a gas price of at least $8.35 to break even on producing coal-bed methane (CBM) from Raniganj block in West Bengal after part of its acreage was taken away for building of an airstrip. ONGC does not want to relinquish the block which holds some 43 billion cubic metres of in-place reserves and is instead looking at alternate options like deviated drilling from outside the airstrip. Of the 350 square kilometre (sq km) area in North Raniganj CBM block, 7.05 sq km is part of an Airport City Project (BAPL). The project BAPL overlaps 7.05 sq km. To compound the problem, Ardhagram coal block falling in assessment area has been allotted to OCL Iron Steel. Two options are under consideration but none of them would be viable unless a gas price of at least $8.35 per million metric British thermal unit (mmBtu) is paid. In the first option, the entire BAPL overlap area is excluded and 67 wells drilled on the remaining area. But the break-even price of gas for the investment made would come at $8.77 per mmBtu. The other option is to consider drilling eight deviated and two vertical wells in the overlap area apart from the 67 vertical wells, officials said adding the break-even price of gas under this option comes to $8.35 per mmBtu. The price it wants is higher than CBM gas sold from similar blocks and more than double of the $3.06 per mmBtu price set by the government for most of the domestically produced conventional natural gas. ONGC has stakes in three other CBM blocks in Bokaro, Jharia and North Karanpura in Jharkhand. Of the total nine CBM blocks allocated to ONGC, five have already been relinquished due to poor output potential. It plans to produce first gas from the Bokaro, Jharia and North Karanpura blocks in July. ONGC has sold gas from its Bokaro CBM block for $5.77 per mmBtu on a gross calorific value basis. GAIL (India) Ltd is buying gas found below coal-seams in the North Karanpura block at $5.56 per mmBtu while private sector company Positron Energy would offtake gas from Jharia CBM block at $6.12 per mmBtu. ONGC expects peak volumes to touch 3 million standard cubic metres per day. Essar Oil and Gas Exploration and Production (EOGEPL) has sold CBM gas from its Raniganj block for $7.1 per mmBtu.

Source: The Times of India

Government rethinks decision to split GAIL

29 June. India is working on plans to enable gas utility GAIL (India) Ltd to keep its marketing and pipeline operations separate without breaking up the company, Oil Minister Dharmendra Pradhan said. The government had said in January that it wanted to split the company into two —one for laying pipelines and the other for marketing and petrochemicals —to encourage more transparency between the two operations. GAIL is the country’s biggest gas marketing and trading firm and owns most of the nation’s pipelines, giving it a dominant position in the country’s energy market. Investors, private companies and consultants have said that GAIL’s dominance in pipeline infrastructure across the country conflicts with its business of marketing and trading of natural gas.

Source: The Times of India


Coal-starved MAHAGENCO selling coal to private companies

3 July. Beggars can’t be choosers but they can be magnanimous donors if MAHAGENCO (Maharashtra State Power Generation Company)’s conduct is any example. The state-run power generation company that regularly complains of coal shortage is now selling its share of coal to private companies. Its own plants are generating at half load even as private companies are making hay. These claims apart, four power plants of MAHAGENCO — Bhusawal, Nasik, Paras and Parli — have alarmingly low coal stock at present. When power plants have very less coal they do not generate at full capacity. Bhusawal has two days stock and its coal is being sold to private companies. Nasik has only one day’s stock. Activist Anil Wadpalliwar, who has filed a public interest litigation (PIL) in the high court on coal shortage in MAHAGENCO power plants, expressed shock over this revelation.

Source: The Times of India

Power ministry flags coal shortage in letter to states

3 July. Union Power Minister R K Singh has red flagged coal shortage for power plants for the next 2-3 years and has asked states to start importing the fuel. The coal shortage is acute since demand for power has picked up. Data available with the Central Electricity Authority shows that seven power projects have less than seven days coal, while eight are operating with less than four days stock.

Source: The Economic Times

CIL Q1 production up 15.2 percent to 137 mt

2 July. Coal India Ltd (CIL) said it has registered a 15.2 percent growth in coal production during the first quarter (Q1) ended June 2018 to 136.87 million tonnes (mt) while supply to power plants also jumped by 15.4 percent to 122.84 mt. While the offtake was spurred by higher rake loading, the overall coal offtake zoomed to 153.43 mt at the end of June, translating into a growth of 11.7 percent. Coal supplies to power stations stood at 122.84 mt during the quarter. The number of power stations having critical stock has come down from 30 in April to 16 as on June-end, the company said. Power sector accounted for 80 percent of coal supplies during the period. CIL has been working with the Coal and Railways ministries for enhanced rake loading of 217.04 rakes per day on an average to the power sector during the first quarter of FY’19 against 189.9 rakes in the same period last year, registering a growth of 14.9 percent. The company produced 44.88 million tonne in June 2018, reflecting an increase of 5.20 mt in absolute terms over corresponding month of last year. The company liquidated 16.56 mt of its pit head coal stock during the first three months of the current fiscal.

Source: Business Standard

SWPL, Adani gets pollution board nod for coal handling at MPT

30 June. The Goa State Pollution Control Board granted fresh consent to operate to South West Port Ltd (SWPL), a unit of Jindal Steel Work, to handle 4 lakh tonnes of coal per month at Mormugao Port Trust (MPT). The board restricted Adani Mormugao Port Terminal Pvt Ltd (AMPTPL) to handle 4 lakh tonnes of coal per month at the port, GSPCB member secretary Levinson Martins said. Martins said that the decision to allow coal handling was taken in view of the source appropriation study conducted by IIT-Mumbai to ascertain the cause of pollution in the port town. Martins that that coal operations should commence in the port town so that the cause of air pollution in Vasco can be ascertained. Martins said that the board has permitted SWPL to handle 0.4 million metric tonnes of coal for next nine months at berths 5A and 6. Martins said that Adani will also handle 4 lakh tonnes of coal at the port. Adani had never exhausted its permissible limit, Martins said, adding that the board never had an issue with Adani handling coal. Adani used to earlier handle 52 lakh tonnes. Martins said that the board has reduced 25% of coal handling of Adani, and they have approached the board to enhance their coal handling limit. The board allowed MPT to handle varied cargo at its offshore cargo handling facility, mooring dolphin, barring coal. GSPCB also allowed the port to handle varied cargo at berth 9. Martins said that MPT used to handle iron ore at this berth and as a result of iron ore stoppage, the port had approached the board to grant them consent to operate other cargo for financial stability.

Source: The Times of India


Power consumers can now pay bills in small instalments via smart meters: Singh

3 July. Electricity consumers will soon be able to pay their bills in small instalments, Union Power Minister R K Singh said. He was speaking at a conference of State Power Ministers in Shimla. Calling the prepaid meters a pro-poor step, Singh said smart prepaid meters will enable the poor to pay in small instalments as per convenience without the fear of connection being cut. The move will also eliminate the issue of wrong bills. The Minister also called upon the states to plug distribution companies’ losses and said that subsidies in power sector should be routed through Direct Benefit Transfer (DBT). Talking of infrastructure creation in states, Singh highlighted slow utilization of the funds approved by the centre. He said the central government is ready to provide more funds if needed for infrastructure creation and the states must meet their targets speedily. Commenting on the progress of reforms in the power sector, the Minister said affordability is the key and a mechanism must be put in place to ensure power from the most efficient plants is utilized first to bring down electricity prices.

Source: The Economic Times

Himachal Pradesh seeks Centre’s intervention over power arrears

3 July. Himachal Pradesh Chief Minister Jai Ram Thakur sought the Centre’s intervention in settling electricity arrears with neighbouring Punjab and Haryana pending for over half a century in three BBMB (Bhakra Beas Management Board) projects in compliance with a Supreme Court order. The differential energy quantum of 13,066 million units would fetch Rs 3,266 crore to the hill state at an average rate of Rs 2.50 per unit. The issue was raised by Thakur at a Conference of Power and New Renewable Energy Ministers of the states and union territories near here where Union Power Minister R K Singh was present. Thakur urged the Union government to help provide state’s royalty of Rs 3,266 crore on the water used for power generation on rivers flowing through the state. He said that major power projects such as the Bhakra and Pong dams were located in the state but it was unfortunate that it had been deprived of its legitimate share from these projects as compensation. Thakur sought special grants and liberal financial assistance for mini and micro hydroelectric projects in remote areas. Of the total 27,000 MW power generation potential, Himachal has tapped only 10,547 MW till date mainly due to limited resources, he said.

Source: Business Standard

NTPC power generation up 7.45 percent in April-June at 69.2 bn units

2 July. NTPC Ltd said it has recorded its highest quarterly power generation of 69.2 billion units in April-June this fiscal which is 7.45 percent more than that in the year-ago period. NTPC Group recorded the highest quarterly generation of 76.9 billion units against the previous highest of 76.1 billion units (in Q4 of FY 2017-18). NTPC joint venture stations also recorded the highest quarterly generation of 7,701 million units. The company’s highest renewable energy generation of 411.24 million units is also a highlight of this quarter. The company has total installed capacity of 53,651 MW from its 21 coal based, 7 gas based, 11 solar PV, 1 hydro, 1 small hydro, 1 wind and 9 subsidiaries/joint venture power stations. NTPC is currently implementing an additional capacity of over 20,000 MW at multiple locations across the country.

Source: Business Standard

Power production in 800 MW KTPS in Telangana begins

1 July. Power production in the 800 MW seventh unit of Kothagudem Thermal Power Station (KTPS) in Telangana has commenced. The construction of the plant at an estimated cost of Rs 5700 crores commenced on February 1, 2015 and the project has created a record of sorts with its completion within 40 months. Telangana State Power Generation Corp Ltd Chairman and Managing Director (CMD) D Prabhakar Rao formally launched the power production in Paloncha and synchronised to the power grid last night. This is the first plant for which foundation was laid by Telangana Chief Minister K Chandrasekhar Rao. The Central Electricity Agency has stipulated a condition that any new power plant that is taken up shall be completed in all aspects within 48 months of its commencement. This plant was completed in less than that period and within 40 months and thus created a record. With commencement of power at the seventh phase of KTPS, the total availability of power in Telangana crossed 16,000 MW. The CMD said that the state government is all determined to take the state from a deficit power state to surplus state and with the same spirit the Bhadradri and Yadadri plants will be completed.

Source: Business Standard

NTPC acquires equity stake in two Bihar projects with 2.5 GW capacity

30 June. NTPC Ltd announced it has acquired two power projects with combined capacity of 2,590 MW at Nabinagar and Muzaffarpur in Bihar. The 1,980 MW Nabinagar Super Thermal Power Project is being set up in Aurangabad district by Nabinagar Power Generating Company Pvt Ltd (NPGC) in which NTPC and Bihar State Power Generation Company Ltd (BSPGCL) already own equal stake. NTPC has now acquired BSPGCL’s 50 percent stake in the project. The currently operational 610 MW Muzaffarpur Thermal Power Station is developed by Kanti Bijli Utpadan Nigam Limited (KBUNL), a subsidiary of NTPC in which BSPGCL holds 27.36 percent stake. NTPC has now bought BSPGCL’s entire equity interest.

Source: The Economic Times

5 states for buying 3 GW from power plants sans PPAs

29 June. Gujarat, Maharashtra, Rajasthan, Bihar and Jharkhand together want to buy 3,000 MW of power under a government scheme to promote purchases from plants without power purchase agreements (PPAs). Under the scheme, PFC (Power Finance Corp) Consulting will conduct the auction for 2,500 MW capacity and PTC India will sign three-year (mid-term) PPAs with successful bidders and contract with discoms (distribution companies) to sell electricity. The development comes at a time when states are buying more power from the spot markets, indicating a rise in demand. The power ministry has recently suggested to make it mandatory for electricity discoms to tie up long- or medium-term PPAs to meet their ‘annual average power requirement’ in their areas of supply. Short-term

power volumes grew 8% year-on-year to about 129 billion units, comprising about 15 GW capacity in FY18, and the spot market trading at the Indian Energy Exchange grew at 14%, trading more than 46 billion units from 5.3 GW of power plants. Maharashtra, Tamil Nadu, Bihar, Gujarat and Uttar Pradesh were the largest buyers from the short-term market. The Central Electricity Authority has reported that there was a more than 10% annual increase in electricity demand in Uttar Pradesh, Chhattisgarh, Telangana, Arunachal Pradesh, Manipur and Tripura in FY18. The pilot plan proposes that a single entity, which quotes or matches the lowest bid in the auction, will be allocated a maximum capacity of 600 MW. A company cannot quote part capacity from different power stations in the same bid. If PTC procures power less than 55% of contracted capacity in a month, the plant would be paid compensation, the quantum of which would be linked to spot power prices at the Indian Energy Exchange.

Source: The Financial Express

Enough power in grid to avoid blackouts: NTPC

29 June. While the Delhi government has raised an alarm over an imminent power crisis in the capital due to depleting coal reserves, sources in the NTPC Ltd said that coal rakes had started coming in and enough power was available in the grid to tackle any crisis. The coal stock availability at Delhi’s thermal power stations increased a bit and stood at 1,01,985 metric tonnes (mt). Delhi requires 56,000 mt coal daily for generation from the Badarpur, Aravali and Dadri thermal plants. Ideally, the coal stock should be for 15 days, i.e; 8,40,000 mt. But NTPC said the stock situation was improving.

Source: The Times of India

India looking at allowing other nations to participate in power exchanges

29 June. The government is looking at a proposal to allow neighbouring nations like Bhutan to participate in domestic electricity exchanges including Indian Energy Exchange (IEX), the largest platform for spot power trade. The idea is to deepen the country’s market for sale and purchase of electricity by boosting volumes. Power Secretary A K Bhalla said the government expects more supply to come into the system and an increase in the number of registered consumers on the exchange. The country generates around 1,200 billion units of power annually, around 10 percent of which is transacted in the short-term market. This includes bilateral trade (4.7 percent); day-ahead transactions on the exchanges (4 percent) and Deviation Settlement Mechanism accounting for 1.7 percent. India imported 5,600 million units of power from Bhutan last financial year. Bhalla said that the distribution companies (discoms) should run like corporate entity and get listed in the exchanges like National Stock Exchange and Bombay Stock Exchange. He was of the view that discoms should be managed like a corporate and should have their own dividend-paying system.

Source: The Economic Times

Sterlite Power bags six new transmission projects in Brazil

29 June. Sterlite Power, one of India’s largest private developers of power transmission infrastructure, has won six lots at the transmission auction conducted by Brazil’s Electric Energy Regulator ANEEL. ANEEL has auctioned 20 lots totalling 2,562 kilometre (km) of transmission lines and 12,226 MVA (megavolt-ampere) of transformation capacity in sub-stations across 16 states in the country. The transmission projects auctioned will provide investments of around 6 billion Brazilian real ($1.5 billion), ANEEL said. The projects auctioned are to be implemented between 2018 and 2022, while the transmission licences awarded will be valid for 30 years. This is the third time the Sterlite Power emerges as one of the winners in Brazil’s transmission lines’ auctions, after it had bagged several projects in the auctions conducted in April and December 2017. These projects would require around $1 billion investment, the company said then. The new projects won by Sterlite will need another $1 billion capex, the company said. The bid of Sterlite had a discount ranging from 32 percent to 58 percent, while the average discount achieved during the auction was 55.26 percent, ANEEL said. Pravin Agarwal, Chairman, Sterlite Power, has earlier this year projected Sterlite would invest $4 billion in Brazil by 2022. Apart from Sterlite, several other Indian power transmission companies, including the government-owned Power Grid Corp of India, Adani Transmission, KEC International have been lately exploring the Brazilian transmission market.

Source: The Hindu Business Line

Kalpataru Power Transmission bags new orders worth Rs 12.3 bn

28 June. Kalpataru Power Transmission Ltd (KPTL) said it has secured new orders worth Rs 1,235 crore. These include order for railway infrastructure construction from Bangladesh Railways in a Consortium wherein KPTL’s share is Rs 553 crore, the company said. According to the company, the other order is for transmission line and substation in Tajikistan and India totalling Rs 346 crore. The company has also got an order for laying of pipeline and associated works of Rs 151 crore from Andhra Pradesh Gas Distribution Corp Ltd.

Source: Business Standard

Reliance Infrastructure gets MERC nod for sale of Mumbai power business to Adani

28 June. Maharashtra Electricity Regulatory Commission (MERC) has given its approval to the proposed 100% stake sale of Reliance Infrastructure’s integrated Mumbai power business to Adani Transmission. Following the commission’s nod, the transaction is expected to be closed in July 2018. MERC had concluded its hearing into the matter and reserved its order on 14 June 2018. Reliance Infrastructure has already received the approval of Competition Commission of India (CCI) and its share-holders for the deal. Reliance Infrastructure and ATL had signed Definitive Binding Agreement for 100% stake sale of the integrated business of generation, transmission and distribution of power for Mumbai in December 2017. The total consideration value of the deal is estimated at Rs 18,800 crore.

Source: Business Standard

Delhi government issues order on charging security deposit on changed power load factor

27 June. The Delhi government has issued orders for charging of security deposit on the changed portion of consumers’ power load, thus saving them from paying extra to electricity distribution companies. Delhi Power Minister Satyendar Jain said an order was issued on June 25, after the approval of the Lt Governor, to the Delhi Electricity Regulatory Commission (DERC) for necessary amendments in the DERC Supply Code and Performance Standards Regulation 2017. As per the old rate the one-time security deposit was Rs 600 per kilowatt (kW). It has now been revised to Rs 900 per kW. An interest of “eight percent” will be payable on the amount of security deposit, he said.

Source: Business Standard


Rooftop solar systems could help reduce power bills

3 July. Households having rooftop solar panels could save up to 95 percent of their monthly power bill, according to a joint study by policy and research group CEEW (Council on Energy, Environment and Water) and power distribution company BYPL (BSES Yamuna Power Ltd). Residents buying power from a community rooftop solar photovoltaic plant, through a subscription plan, could also save up to 35 percent of their electricity bills, it said. The savings have been estimated over 25-year lifetime of solar systems. The study was undertaken by the CEEW in collaboration with BYPL in east and central Delhi areas covered by the distribution company. Solar system costs have declined by 27 percent over the past three years. However, despite a 30 percent government subsidy, households have installed only about 400 MW of rooftop solar across the country. Key challenges for residential consumers include high capital cost, lack of access to finance, lack of consumer awareness, issues with roof ownership and access, and a roof lock-in period of 25 years, it said. The BYPL and CEEW collaboration has come up with design of three innovative utility-led models — community solar model, on-bill financing model, and a solar partner’s model. These models target diverse residential consumers ranging from those living in gated communities to low-income consumers receiving electricity subsidies.

Source: Business Standard

Solar tariffs once again hit all-time low of Rs 2.44 a unit at SECI auction

3 July. Solar power tariffs touched Rs 2.44 per unit once more, the lowest they have ever reached, in the latest 2000 MW auction conducted by Solar Corp of India (SECI). ACME Solar, one of the biggest domestic solar developers, with around 875 MW of commissioned solar projects, won 600 MW with this bid. The tariff had fallen to Rs 2.44 per unit only once before, in a SECI auction for projects at the Bhadla Solar Park in May 2017, but had been climbing significantly in subsequent auctions, the highest reached being Rs 2.94 to Rs 3.54 per unit in an 860 MW auction across different talukas of Karnataka, held by the Karnataka Renewable Energy Development Ltd in February this year. Other auctions by Gujarat, Maharashtra and NTPC too have seen winning tariffs of well over Rs 2.50 per unit. The other winners at the auction were Shapoorji Pallonji, which won 250 MW bidding Rs 2.52 per unit, along with Azure Power, Hero Solar and Mahindra Susten, all three of which bid Rs 2.53 per unit. While Azure Power won 600 MW, Hero and Mahindra got 250 MW each. The remaining 50 MW was awarded to Mahoba Solar at Rs 2.54 per unit. All 2000 MW of projects will be connected directly to the Inter State Transmission System. Solar tariffs had been rising for the past year due to two main reasons – the rising cost of solar panels from China, and the possibility of safeguard duty being imposed on Chinese solar imports ever since domestic manufacturers complained to the Director General, Safeguards that Chinese imports were seriously hurting their industry. However, domestic manufacturers do not have the capacity to meet India’s solar equipment requirements, sparked by its ambitious programme of achieving 100 GW of solar capacity by 2022.

Source: The Economic Times

India should be wary of West’s carbon imperialism: Former CEA

2 July. Former Chief Economic Adviser (CEA) Arvind Subramanian said that India and other South Asian countries should always be wary of the carbon imperialism of the West. However, he also lauded India’s commitment to fight climate change by pushing for renewables. Subramanian was speaking at the launch of the World Bank report on the impact of changes in precipitation and temperature on the living standards in South Asian countries. Subramanian, who recently resigned as India’s CEA, said countries also need to actively consider carbon capture and storage techniques and put in more efforts for its utilization. Discussing the impact of climate change on India, where the total share of irrigated agricultural land is less than 50%, Subramanian said there was urgent need to bring more land under irrigation. He also cautioned against the problem of water-stress due to climate change.

Source: Livemint

Rajasthan thermal plant shuts 5 units amid weak power demand

2 July. Five units of 1,500 MW Suratgarh Thermal Power Station (STPS) in Rajasthan are shut due to weak electricity demand in the state, STPS chief engineer Madan Lal Sharma said. Five of total six units having total generation capacity of 1,500 MW are shut from June 27 due to weak demand in the state, he said.

Source: Business Standard

Tata Power commissions 100 MW solar power capacity in Andhra Pradesh

2 July. Tata Power said its subsidiary Tata Power Renewable Energy Ltd (TPREL) has commissioned 100 MW capacity at the Anthapuramu solar park in Andhra Pradesh. With this, the overall operating renewable capacity of TPREL in the country now stands at 2,215 MW, the company said. This project is part of the Ministry of New and Renewable Energy (MNRE) scheme for developing grid connected solar power capacity of Jawaharlal Nehru National Solar Mission (JNNSM) Phase II, batch-III. A power purchase agreement has already being signed with the Solar Energy Corporation of India for 25 years. Tata Power president-renewables Ashish Khanna said the company continue to seek potential of sustainable growth in India and selected international geographies. The company has organically added 159 MW wind and solar capacity in financial year 2016-17 along with the acquisition of Welspun Renewables Energy last year.

Source: Business Standard

NABARD sanctions over Rs 7.3 bn for Bengal for rural infra projects

2 July. NABARD (National Bank for Agriculture and Rural Development) said it has sanctioned Rs 735.53 crore in the first quarter of the current fiscal under the Rural Infrastructure Development Fund (RIDF) for West Bengal for facilitating the execution of 86 projects. They include six solar power, one medium irrigation, five minor irrigation and 12 flood protection projects, besides 57 projects for the widening and strengthening of roads and five rural bridges. Elaborating on the projects, the financial institution said the grid connected solar power projects would generate 88.61 million units of green energy per annum.

Source: Business Standard

New solar power goal lands Chandigarh in a corner

2 July. The ministry of new and renewable energy has enhanced the city’s solar power generation target from 50 MW to 69 MW to be achieved by 2022, compounding the problems of the administration which is struggling to catch up. Chandigarh Renewal Energy, Science and Technology Promotion Society (CREST) has only managed to install solar power plant with a capacity of 22 MW in last six years. CREST will have to ensure generation of 47 MW within four years to meet the goal. The Central government in 2008 had selected Chandigarh to be developed as a ‘model solar city’. CREST has done well in installing rooftop solar power plants on government buildings, but is struggling to motivate residents to install solar-power plants. So far, only 200-odd plants are installed on private buildings, that too, despite orders making their installation on residential buildings above 500 square yards mandatory. CREST has fixed rates at which resident can get solar plants from empanelled agencies. Solar rooftop plants have been installed in 260 government buildings and 255 private buildings.

Source: The Times of India

Bangladesh is keen on buying renewable power from India

1 July. India’s neighbour Bangladesh is exploring the possibility of expanding electricity trade between the two countries using capacity generated from renewable sources. Currently, Bangladesh brings 500 MW through Bheramara-Bherampur inter-connectivity and is readying to bring another 500 MW through the same transmission line. It is also importing 160 MW electricity using Tripura-Comilla interconnection. As Bangladesh aims to provide 100 percent household access to electricity by July 2019, the country is actively growing its generation capacity as well as investing in grid expansions and upgrade, Ahmad Kaikaus, Secretary, Power Divisions, Ministry of Power of Bangladesh, said. According to Kaikaus, wind energy could be an opportunity for growing the country’s generation capacity fast.

Source: The Hindu Business Line

Solar dome adopted at Prime Minister’s residence

1 July. Solar dome, an innovation developed by city based solar power expert Santi Pada Gon Chaudhuri that instantly generates power by absorbing solar energy, has been adopted at the Prime Minister’s residence at 7, Race Course Road, New Delhi. Gon Chaudhuri, who had came up with the design of the solar dome said that already over 6,000 such solar domes have been installed mainly in the rural and tribal areas of MP, Chattisgarh, Uttarakhand and Manipur. Solar Energy Corp of India Ltd (SECI), a government enterprise that coordinated the installation of the solar dome at the Prime Minister’s residence said that the dome was installed in the month of May. Explaining the technology, Gon Chaudhuri said that it is a dome-like structure that is being set up on a house and fitted on a floor ceiling with a reflective material in such a way that once the dome absorbs sunrays, those living in the floor below instantly see light reflecting off the ceiling as if a bulb was fitted inside. He said that in many European countries, houses were being built with the rule that adequate sunrays should enter the homes so that panels installed could capture the light. It was in October, 2015 that the city-based Arka Ignou Community College of Renewable Energy headed by Gon Chaudhuri, installed 100 solar domes in a cluster of slums in New Delhi that was inaugurated by Union Minister of Science and Technology Harsh Vardhan.

Source: The Times of India

India to auction 40 GW of renewable energy every year till 2028

30 June. India will auction 40 GW of renewable energy projects comprising 30 GW solar and 10 GW wind every year for the next 10 years till 2028, indicating huge potential for domestic manufacturers and developers, New and Renewable Energy Secretary Anand Kumar said. The government’s power projection indicates that India will have to bid out 140 GW of wind energy to meet demand by 2030, he said. The country would complete bidding of 60 GW of wind energy by 2020. India would ultimately have around 500 GW of renewable energy capacity by 2030, including 350 GW of solar and 140 GW of wind energy. The Central Electricity Authority and other government agencies have worked out a demand projection of 862 GW by 2030 factoring in 6 percent growth in electricity demand per annum. Kumar explained that some players had expressed concerns that the bidders with deep pockets can hurt small developers by outbidding them in auctions for renewable projects. However, he also admitted that tariff-based reverse auction helps in achieving the best pricing. Suzlon Group Chairman Tulsi Tanti and President Indian Wind Turbine Manufacturers Association said India would double its wind energy manufacturing capacity to 25 GW per annum by 2020.

Source: Business Standard

BHEL to co-develop solution with Korean company to comply with emission norms

28 June. Bharat Heavy Electricals Ltd (BHEL), India’s largest power equipment manufacturer, has signed Technology Collaboration Agreement (TCA) with NANO Co, Republic of Korea for design and manufacture of a solution to comply with emission norms for thermal power plants. To comply with the norms of SOx and NOx emission, issued by the Ministry of Environment and Forest for thermal power plants, BHEL is geared up to provide complete solutions by offering suitable flue gas clean-up and emission control systems.

Source: The Economic Times

India prepares quest to find a trillion-dollar nuclear fuel on the Moon

28 June. India’s space program wants to go where no nation has gone before -– to the south side of the moon. And once it gets there, it will study the potential for mining a source of waste-free nuclear energy that could be worth trillions of  dollars. The nation’s equivalent of NASA will launch a rover in October to explore virgin territory on the lunar surface and analyze crust samples for signs of water and helium-3. That isotope is limited on Earth yet so abundant on the moon that it theoretically could meet global energy demands for 250 years if harnessed. In the United States, President Donald Trump signed a directive calling for astronauts to return to the moon, and NASA’s proposed $19 billion budget this fiscal year calls for launching a lunar orbiter by the early 2020s.

Source: The Economic Times

Climate change could shave off 2.8 percent of India’s GDP by 2050: World Bank

28 June. Climate change could cost India 2.8 percent of GDP (Gross Domestic Product), and depress living standards of nearly half of its population by 2050, as average annual temperatures are expected to rise by 1-2 percent over three decades, the World Bank report titled ‘South Asia’s Hotspots: The Impact of Temperature and Precipitation Changes on Living Standards’ said. If no measures are taken, average temperatures in India are predicted to increase by 1.5-3 degrees, the report said. Even if preventive measures are taken along the lines of those recommended by the Paris climate change agreement of 2015, India’s average annual temperatures are expected to rise by 1-2 degrees Celsius by 2050, the report said. According to it, almost half of South Asia’s population, including India, now lives in the “vulnerable areas” and will suffer from declining living standards that could be attributed to falling agricultural yields, lower labour productivity or related health impacts. About 600 million people in India live in locations that could either become moderate or severe hotspots of climate change by 2050 under a business-as-usual scenario. States in the central, northern and north-western parts of India emerge as most vulnerable to changes in average temperature and precipitation. By 2050, Chhattisgarh and Madhya Pradesh are predicted to be the top two climate hotspot states and are likely to experience a decline of more than 9 percent in their living standards, followed by Rajasthan, Uttar Pradesh and Maharashtra, the report said.

Source: The Times of India

Amazon installs 1 MW rooftop solar panels at Hyderabad centre

27 June. Amazon India plans to generate clean energy by installing solar panels on the roof of its fulfilment centres and sorting sites in India. It has installed 1,000 kilowatt (kW) of solar power panels at its fulfilment centre in Shamshabad, Hyderabad, and 600 kW at its fulfilment centre in Jamalpur, Haryana. By the end of 2018, Amazon India plans to generate close to 8,000 kW of solar energy. Installations will cover an area of approximately 1 million square feet, reduce carbon-dioxide emissions by around 9,000 tonnes a year and provide energy to support the building’s annual energy needs. The company plans to further deploy large-scale solar panel systems on the roof of five more fulfilment centres and sorting sites in Bengaluru, Mumbai and Chennai, while expanding its existing capacity in Delhi.

Source: The Hindu Business Line


South Korea turns to Kazakh CPC oil as US sanctions on Iran loom

3 July. South Korea has imported four times more CPC Blend crude so far in 2018 than in the same period last year, as the major Asian oil consumer seeks to replace Iranian supplies. South Korea, which consumes about 3 percent of the world’s oil output, is increasingly buying CPC Blend as its refiners prepare to halt imports from Iran and comply with US (United States) sanctions on Tehran that will kick-in from November. The Asian nation’s Iranian oil imports could fall to the lowest in three years in September. The most visible drop in Seoul’s imports from Iran was in May, when purchases fell to 179,444 barrels per day (bpd), the lowest since January 2016, data from the Korea National Oil Corp show. As Iranian imports have fallen, CPC Blend shipments to South Korea since May have been setting record monthly highs and are set to exceed 284,000 bpd in July. South Korea bought 4 million tonnes of CPC Blend for delivery in January to July this year, compared to 1 million tonnes in the same seven-month period of 2017. CPC Blend, mostly made of Kazakh oil with some crude from Russia’s Caspian fields, is named after the CPC pipeline through which it flows to the Russian Black Sea terminal of Yuzhnaya Ozereyevka. The pipeline is co-owned by US firm Chevron. The CPC pipeline capacity has been increased by 20 percent this year to 67 million tonnes, or 1.4 million bpd, which is expected to boost exports and make it cheaper.

Source: Reuters

Iran eyes private oil exports to help beat US sanctions

1 July. Iran will allow private companies to export crude oil, part of a strategy to counter US (United States) sanctions, and is urging fellow OPEC (Organization of the Petroleum Exporting Countries) members, including regional rival Saudi Arabia, not to break output agreements. Iran is looking at ways to keep exporting oil as well as other measures to counter sanctions after the US told allies to cut all imports of Iranian oil from November. Iran has an oil and petrochemicals bourse as part of its mercantile exchange. Iran had been pushing hard for oil producers to hold output steady as US sanctions are expected to hit its exports.

Source: Reuters

Israel’s Navitas raises estimate at Gulf of Mexico oil field

1 July. Israel’s Navitas Petroleum said its Yucatan oil field in the Gulf of Mexico is estimated to have more than triple the reserves than previously thought. The Yucatan field, which is located in deep waters about 175 miles south of Louisiana, contains an estimated 49 million barrels of oil, up from a previous estimation of 15 million, the company said. Yucatan is near another field Navitas is looking to develop, Shenandoah, which is estimated to contain 155 million barrels of oil.

Source: Reuters

Russia could raise oil output by more than 200k bpd: Energy Minister

29 June. Russia could increase oil output by more than 200,000 barrels per day (bpd) if needed to help OPEC (Organization of the Petroleum Exporting Countries) and non-OPEC producers to increase production by one million bpd, Energy Minister Alexander Novak said. OPEC agreed with Russia and other oil-producing allies this month to raise output from July by about 1 million bpd, and Novak said that his country would add 200,000 bpd in the second half of this year.

Source: Reuters

BP holds millions of barrels of oil off China as demand falters

29 June. Four supertankers chartered by energy major BP have been held up or delayed off China’s east coast over the last two months, unable to fully discharge oil as slowing demand from the country’s private refiners starts to impact global markets. Two of the four BP-chartered very large crude carriers (VLCCs) are still off Shandong province holding half their cargoes of Angolan crude oil, and another is headed back there from South Korea. It’s not clear why the tankers have had so much trouble offloading all their oil, or if BP had first secured buyers for the 8 million barrels – worth more than $600 million at current market prices – that was loaded onto the vessels out of Africa. Several traders and shippers said BP was unlikely the only seller caught off guard by the slowdown in demand and the teapots’ troubles, although all said stranded cargoes of this size and duration is rare. China’s teapot refiners, of which there are now almost 40, were only given oil import permits from 2015. They now make up a fifth of the 9 million barrels per day (bpd) taken by the world’s largest crude importer. BP, which produces some 2.5 million bpd globally including equity production in Angola, was one of the first western firms to sell into China’s booming independent oil market. It regularly ships West African oil to Shandong, the teapot hub. While most western majors market oil from offices in Singapore, BP has a China-based team of four traders, including staff hired away from state oil firms Sinochem and China National Offshore Oil Corp.

Source: Reuters

Struggle to control Libyan oil ports adds to global supply worries

29 June. Libyan oil production could face protracted disruption as factions in the east seek to seize control of crude exports, adding pressure to a tight global market. Eastern factions have tried to take over oil exports in the past but have struggled to find buyers because Western nations insist they will deal only with the internationally recognized National Oil Corp (NOC) based in the Libyan capital of Tripoli. The damage to Libyan oil production started with the latest series of battles over Ras Lanuf and Es Sider ports, which have been closed for two weeks, causing losses of about 450,000 barrels per day (bpd). The NOC in Tripoli said that it expects to declare force majeure at Zueitina and Hariga on July 1, bringing total losses to 800,000 bpd, or $60 million in daily revenue. The oil market — already under pressure from falling Venezuelan and Angolan output, as well as worries about a squeeze on Iranian supplies as US sanctions bite — remains tight even after OPEC (Organization of the Petroleum Exporting Countries) and its allies agreed to ease their production curbs. Libya’s output had tumbled as low as 200,000 bpd in mid-2016 before last year’s recovery to about 1 million bpd.

Source: Reuters

Taiwan’s CPC buys 5 mn barrels US WTI Midland crude for August-September

28 June. Taiwanese refiner CPC Corp has bought about 5 million barrels of US (United States) WTI (West Texas Intermediate) Midland crude for delivery over August to September. CPC last bought 7 million barrels of US WTI Midland crude for delivery in July-August, the largest volume purchased so far in its monthly tender. A wide WTI-Brent price spread has been encouraging more US crude to flow into Asia. But a trade dispute between the United States and China is expected to slow the flow of crude oil from the US to Asia.

Source: Reuters

Shell hands over Iraq’s Majnoon oilfield

27 June. Royal Dutch Shell has exited the Majnoon oilfield in southern Iraq and handed over its operations to the Basra Oil Company. The Iraqi oil ministry signed a two-year contract with Anton Oilfield Services and Petrofac to operate the giant Majnoon oilfield on behalf of state-owned Basra Oil Company. Crude oil output from Majnoon is now about 235,000 barrels per day (bpd) and Iraq plans to boost output to 450,000 bpd in three years.

Source: Reuters

Canada dreams of oil exports to Asia, but California beckons

27 June. The nationalization of a crude oil export pipeline in western Canada has buoyed long-standing hopes for crude exports to markets beyond the United States (US) – but the most likely destination for much of that oil is California. Faced with declining production from Latin America and rising prices for higher-grade crudes from the Middle East, the Golden State is importing more oil from Canada – much of it via the Trans Mountain pipeline, which Kinder Morgan Canada sold to Ottawa for C$4.5 billion ($3.5 billion). The Canadian government has pledged to “immediately” start work on the C$7.4 billion Edmonton-to-Vancouver expansion, in an attempt to alleviate a bottleneck of Canadian crude oil due to full pipelines and several aborted attempts to add additional capacity. This line, when completed, would nearly triple flows to 890,000 barrels per day (bpd). The US currently buys virtually all of Canada’s oil exports, most of it at a steep discount. Canadian Prime Minister Justin Trudeau has tried to sell the pipeline to a divided public as a crucial link to Asia, amid domestic concerns over the mounting trade tussle with the United States. Just days after Trudeau’s government agreed to buy the project, an Aframax tanker carrying more than 500,000 barrels of heavy crude left Kinder Morgan’s Westridge Marine Terminal and traveled to Long Beach, California, one of eight shipments to California in May. The state currently imports the bulk of its crude from Canada, Ecuador, Colombia and the Middle East. But production is declining in Ecuador and Colombia, and Canadian crude is priced more attractively than Middle Eastern grades, making the Trans Mountain expansion a lucrative possibility for refiners. Canada has been trying for years to build a pipeline to its coast to access world markets. Recent attempts like Enbridge Inc’s Northern Gateway and TransCanada Corp’s Energy East have failed amid court battles and regulatory uncertainty. Rising output from Canada’s oil sands has outstripped current pipeline capacity and rail has not yet ramped up to meet existing demand from producers, leaving Canadian crude deeply discounted.

Source: Reuters

Pan-African firm Oranto Petroleum to explore for oil in Zambia

27 June. Pan-African firm Oranto Petroleum said it would start exploring for oil in Zambia after it was awarded two blocks, its first investment in the southern African nation. Zambia does not produce oil, but the government says soil samples sent to European laboratories have shown good traces of crude. Under the agreement, Oranto will hold a 90 percent stake in the two blocks and will be required to conduct geological and geophysical studies over two years. British company Tullow Oil started exploring for oil and gas in Zambia, Africa’s No.2 copper producer, as the country pushes to diversify its economy and reduce its reliance on the industrial metal.

Source: Reuters


Algeria raises production at eastern Alrar gas field

2 July. Output at Algeria’s Alrar gas field close to its border with Libya has risen to 24.7 from 16 million cubic metres per day following an extension of the field, the state energy firm Sonatrach CEO (Chief Executive Officer) Abdelmoumen Ould Kaddour said. CEO is pushing to raise output at ageing gas fields as part of an effort to boost Algeria’s revenue from hydrocarbons production. A number of gas projects, most of which are expansions of existing fields, have come online in 2017 and 2018, including at fields in Reggane and Timimoun. The cost of the extension at Alrar, completed with the help of foreign firms Petrofac and Bonatti, was 64 billion Algerian dinars ($545 million). Algeria, a supplier of gas to Europe, produced 135 billion cubic metres of gas in 2017. In recent years it has struggled to attract investment to help develop new fields and increase existing production.

Source: Reuters

BP starts up Shah Deniz 2 gas development in Azerbaijan

2 July. BP plc and its partners in the Shah Deniz consortium announce the start-up of the Shah Deniz 2 gas development in Azerbaijan. BP plc and its partners in the Shah Deniz consortium announced the start-up of the Shah Deniz 2 gas development in Azerbaijan. The BP-operated, $28 billion-project is the first subsea development in the Caspian Sea and the largest subsea infrastructure operated by BP worldwide. At plateau, Shah Deniz 2 is expected to add 16 billion cubic meters of gas per year to current Shah Deniz production. Offshore, the Shah Deniz 2 project includes 26 subsea wells, 310 miles of subsea pipelines and flowlines and two new bridge-linked platforms. Gas is transported onshore through a 52 mile pipeline to the Sangachal terminal near Baku, which underwent an expansion to accommodate the new increased gas output. The project includes the new South Caucasus pipeline expansion – 265 miles of new pipeline in Azerbaijan and 36 miles in Georgia, including two new compressor stations around the size of 20 soccer pitches each – carrying Shah Deniz gas to Turkey. The company described Shah Deniz 2 as a “major milestone” in the creation of the new Southern Gas Corridor, which, once completed, will transport Caspian gas directly into the heart of European markets for the first time.

Source: Rigzone

Taiwan agrees preliminary LNG purchase deal with US producer

2 July. Taiwan’s CPC Corp announced a preliminary deal to buy liquefied natural gas (LNG) from US producer Cheniere Energy for 25-years. CPC, a major importer of LNG, signed a Heads of Agreement to purchase 2 million tonnes of LNG annually from Cheniere, which is gearing up to start exports from its second U.S. export plant at Corpus Christi, Texas. Cheniere started exporting LNG from its Sabine Pass plant in Louisiana in 2016.

Source: Reuters

Importing LNG to Australia’s southeast faces cost hurdles: Government

2 July. Plans to import liquefied natural gas (LNG) to Australia, the world’s second largest LNG exporter, could help cap soaring local gas prices, although the economics might not work, the Australian government said. Over the past two years, four projects to import LNG have been proposed following the opening of three new LNG export plants on the east coast that have sucked gas out of the southeastern market and nearly tripled wholesale gas prices. The Australian energy market operator recently wound back a forecast for a near-term deficit, saying it no longer expects a gas shortfall in southeastern Australia before 2030 thanks to expected new production and government pressure on LNG exporters to boost local supply. But LNG import plans are advancing and could still be justified as gas produced in Queensland state is expensive, piping it to the south where the gas is needed is costly, and LNG from the Asian spot market could be cheaper, the Department of Industry said in a report. The report said the main challenges will be to find cheap LNG beyond 2022, when demand is expected to start outstripping supply, and to line up enough gas demand to underpin import projects. The report found that US (United States) gas at around current prices could be delivered to Asia for $8.00 per million metric British thermal units (mmBtu), or A$10.10 per gigajoule (GJ), roughly in line with current gas prices for industrial users. However regasification, including capital costs, would add between A$1.30-A$2.60 per GJ to the cost.

Source: Reuters

Tellurian to decide on Louisiana LNG project in early 2019

29 June. Tellurian Inc Chairman Charif Souki said the US (United States) natural gas company expects to make a final investment decision on its proposed Driftwood liquefied natural gas (LNG) export facility in Louisiana in the first quarter of 2019. Souki said the company expects to start producing LNG at the $30 billion project in early 2023. Unlike most other proposed US LNG export projects that will liquefy gas for a fee, Tellurian is offering customers the opportunity to meet their gas needs by investing in a full range of services from production to pipelines and liquefaction. Tellurian is offering equity interests in Driftwood Holdings at $1,500 per ton of LNG delivered at cost – expected to be around $3 per million metric British thermal units (mmBtu)- which Souki said removes the commodity price risk from the customer’s list of concerns. That compares with an average of $3.25 per mmBtu for gas at the Henry Hub benchmark over the past five years. Tellurian said about 25 prospective customer/partners are looking at the offering. Souki said the company expects to narrow the list and convert letters of intent into firm sales agreements by the end of the year. Current partners include Total SA, General Electric Co and Bechtel, which has a $15.2 billion contract to build the liquefaction facility at the center of the project. Pipelines, reserves and other costs make up the rest of the $30 billion price tag of the project.

Source: Reuters

Gazprom aims for record gas sales to Europe despite US competition

29 June. Russia’s Gazprom expects record high gas sales this year in Europe, Chief Executive Officer (CEO) Alexei Miller said, downplaying the threat posed by imports of US (United States) liquefied natural gas (LNG). Gazprom has managed to gradually increase its market share in Europe, its main market, to around 34 percent despite the general aversion to Russian energy supplies, which became increasingly politicized following Moscow’s annexation of Crimea in 2014. Miller said the Russian gas exports to Turkey and Europe outside of the former Soviet Union may exceed 205 billion cubic meters (bcm) this year, up from 194.4 bcm last year, also a record-high. The US exported its first cargo of LNG gas last year. Some European nations, including Lithuania and Poland, started to reduce their dependence on Russian pipeline gas by importing LNG from the US. However, Miller said that due to high production and transportation costs, LNG from the United States will not be competitive in Europe. He said US LNG consumption in Europe last year was a mere 2 million tonnes. Miller said that Gazprom plans to start supplying Bulgaria, Serbia and Hungary via a new gas link after it finishes the second line of the Turkstream gas pipeline which will run from the Russian Black Sea coast. Turkstream is a part of Moscow’s efforts to bypass Ukraine as a gas transit route to Europe, which receives around a third of its gas needs from Gazprom. Gazprom is building the Turkstream in two lines, with capacity of 15.75 billion cubic meters of gas per year each, the first of which will supply Turkey and the second southern Europe. The second line of the Turkstream will be directed to Bulgaria, Bulgarian Prime Minister Boyko Borissov said after talks with Russian President Vladimir Putin.

Source: Reuters

Trans-Korea gas pipeline project reappears, but challenges remain

29 June. The long-planned and much derided Trans-Korea gas pipeline project is back on the agenda, buoyed by hopes North and South Korea can make peace. If realized, it would be a pipeline dream-come-true for South Korea. Lacking its own energy resources or pipelines to regions with gas, South Korea has been shipping the fuel in on tankers as liquefied natural gas (LNG). Based on trade data and average LNG prices in 2017, that cost South Korea around $12 billion in 2017. With LNG prices rising, this year’s tab will likely be even bigger. With relations between North and South warming, albeit from sub-zero levels, the idea of constructing a 1,200 kilometre (740 mile) long pipeline to bring Russian gas through North Korea to the South’s industrial hubs has been revived. The project is now part of South Korea’s New Northern Policy. Korea Gas Corp and Russian state gas company Gazprom will conduct a joint pipeline study. The plan was to supply 7.5 million tonnes of Russian gas annually over 30 years from Vladivostok into North Korea and on to the South, starting from 2015.

Source: Reuters

Bulgaria to seek EIB financing for gas link with Greece

29 June. Bulgarian Energy Holding (BEH) signed a Memorandum of Understanding with the European Investment Bank for a preferential loan to finance the construction of a gas pipeline with Greece. The 182 kilometre (113 mile) gas link, estimated to cost about €240 million ($279 million), will boost security of supply and reduce Bulgaria’s almost complete dependence on Russian gas. The interconnector link is expected to become operational in 2020 and transport one billion cubic meters of Azeri gas to Bulgaria, as well as some liquefied natural gas from terminals in Greece. Bulgaria has built a gas link with neighbouring Romania and is working to build new pipelines with Turkey and Serbia.

Source: Reuters

CNOOC plans $2.2 bn LNG terminal in east China

29 June. China National Offshore Oil Company (CNOOC) plans to build a receiving terminal of liquefied natural gas (LNG) in the eastern province of Jiangsu that is expected to cost 14.4 billion yuan ($2.17 billion). The project, located in the city of Yancheng, will include a berth to anchor 100,000 ton vessels, land-based storage and a pipeline grid and is expected to be completed in December 2020. The storage tanks will each have a storage capacity of 220,000 cubic metres, or roughly 90,000 tonnes.

Source: Reuters

Eni to begin gas exploration at Egypt Noor field in 2 months

28 June. Italian oil company Eni will begin drilling an exploratory well at its Noor field in Egypt’s North Sinai in two months, Egyptian oil ministry said. Egypt’s cabinet approved the $105 million deal to explore the North Sinai region of the Mediterranean Sea in March. Eni’s discovery of the giant Mediterranean gas field Zohr in 2015, estimated to hold about 30 trillion cubic feet of gas, has raised interest in gas exploration in Egypt.

Source: Reuters

Growing global LNG market needs better pricing system

27 June. The growing world liquefied natural gas (LNG) market requires a better pricing benchmark to facilitate big-ticket investment decisions and stabilize demand, executives said at an industry conference in Washington. LNG has traditionally been sold on long-term contracts indexed to oil prices, rather than being pegged to a natural gas index. Jack Fusco, the Chief Executive Officer of Cheniere Energy Inc which exports LNG from the United States (US) and pegs its contracts to CME Henry Hub natural gas futures, said benchmarking to oil also risked eroding demand in some cases. With US LNG deliveries now dominating the spot market and North American output set to rise sharply through 2019, some players said they were grateful for the Henry Hub benchmarking option.

Source: Reuters

Poland’s PGNiG signs agreements on long-term LNG supplies from US

27 June. Poland’s dominant gas firm PGNiG said it signed agreements with US (United States) Port Arthur LNG and Venture Global LNG on long-term liquefied natural gas (LNG) supplies. Based on the agreements, PGNiG will conduct talks with both the American companies regarding supplies of 2 million tonnes of LNG annually from each firm over 20 years, the Polish company said.

Source: Reuters

Russian Arctic LNG makes debut NSR voyage to Asia

27 June. A landmark Russian Arctic liquefied natural gas (LNG) shipment has begun its journey through the Northern Sea Route (NSR) to Asia, marking the delayed start of summer navigation as thawing sea ice clears a short-cut to the world’s biggest LNG market. The $27 billion Yamal LNG plant developed by Russia’s Novatek and France’s Total despite US (United States) sanctions started exporting in December, but cargoes ferried on ice-class LNG tankers have sailed to Europe. The NSR, which is crucial for Yamal LNG, typically opens for summer navigation from June until November but severe ice conditions this year have delayed the start of deliveries.

Source: Reuters

Israel hopeful about second offshore gas auction

27 June. Israel is confident a second auction to sell rights to develop offshore natural gas will be more successful than its first because some Arab countries have shown they are open to importing the fuel, Israel’s Energy Minister Yuval Steinitz, said. Israel, which discovered it has large reserves of natural gas offshore in 2009, will hold a second auction in October or November, offering about 20 or 25 blocks in the Mediterranean. The first auction, held last year, only got bids from two companies as some oil majors were concerned about a backlash from oil-rich Arab states hostile to the country. But Egypt agreed to buy $15 billion in Israeli gas and Steinitz is confident that sale, and another one to Jordan, will help the auction get more attention this year. Steinitz met with five energy companies, in part to spark interest in the auction, including Exxon Mobil, France’s Total, and Australia’s Woodside Energy, on the sidelines of the World Gas Conference held in Washington. Israel could offer incentives for companies interested in developing its offshore gas, Steinitz said. In addition, some companies would not necessarily have to link up with the Israeli natural gas transmission system and would have the option to pipe gas to Cyprus or Egypt or build a floating liquefied natural gas (LNG) platform, he said. Israel has many plans for its gas abundance. It hopes to sell more to Egypt where the fuel could be converted to LNG for export, and to build pipelines, one to Jordan, where gas could be sent to India and avoid the Suez Canal, and other to Europe.

Source: Reuters

Anadarko expects final decision on Mozambique LNG export project in 2019

27 June. US (United States) oil and gas producer Anadarko Petroleum Corp said it expects to make a final investment decision in the first half of 2019 on whether to build the first liquefied natural gas (LNG) export terminal in Mozambique. Mitchell Ingram, Anadarko’s executive vice president, international, deepwater and exploration, said at the World Gas Conference in Washington, D.C., that the U.S. oil and gas producer was ready to move forward with the Mozambique project after lining up enough customers for the LNG. Ingram said the company was in the process of converting the sales agreements into binding sales agreements and ramping up financing for the project. That deal with the Japanese and UK (United Kingdom) energy companies calls for the delivery of 2.6 million tonnes per annum (mtpa) from the start-up of production in Mozambique until the early 2040s. Other firms lined up to buy gas from the project include units of Electricite de France SA, Japanese utility Tohoku Electric Power Co Inc and Thailand’s state-run PTT. The company has said it expects to complete the facility in the 2023-2024 timeframe. Anadarko made its first discovery in Offshore Area 1 in 2010. In total, Ingram said the company and its partners have discovered about 75 trillion cubic feet of recoverable natural gas in the field. Ingram said this project paves the way for significant future expansion of up to 50 mtpa in the future. Anadarko has said the Golfinho/Atum project will also supply initial volumes of about 100 million cubic feet per day of natural gas for domestic use in Mozambique.

Source: Reuters

Panama Canal opens way for more LNG tankers with US exports rising

27 June. The Panama Canal Authority will ramp up the movement of massive liquefied natural gas (LNG) tankers through the waterway starting in October, as US (United States) exports of the fuel are set to expand. Under the new rules, the ships can traverse the canal at night, and two at a time can be on Gatun Lake, the man-made waterway at the canal’s north end. The ability to handle the huge tankers that carry LNG is closely watched in the US, where two operating export terminals are set to be joined by four more through 2020. Using the canal greatly cuts the time to ship to Asia, where China is now the world’s largest natural gas importer. In October, LNG traders will be able to compete with other shippers for a second daily slot. The canal has a total of 10 slots available for reservations, and has sent as many as 11 ships through. Benitez says their analysis shows the new locks may handle as many as 13 a day. In fiscal year 2019, the Panama Canal Authority expects 60 million metric ton of LNG to pass through the waterway — with 41 million ton of that coming from the US. It expects to be able to offer three bookings a day for LNG carriers in 2022.

Source: Bloomberg


Australian Newcastle spot coal prices hit $120 for 1st time since 2012

3 July. Australian thermal coal prices have broken through $120 per tonne for the first time since 2012, driven up by strong consumption in Asia and spot market buying by Japanese utilities to meet demand through the rest of 2018. Thermal coal cargoes for prompt export from Australia’s Newcastle port last settled at $120.10 per tonne. That’s the highest close since November 2012 and up by 140 percent from record contract lows in late 2015/early 2016. The price surge has been driven by strong demand from China to feed healthy power demand and industrial growth, despite a drive to shift industry and millions of households from coal to cleaner natural gas.

Source: Reuters

US coal cargo reaches China ahead of hefty import tariffs

28 June. A vessel carrying 164,000 tonnes of coal from the United States (US) reached Caofeidian port in northern China, ship tracking data showed. The vessel named Partnership is on schedule, while Beijing plans to impose steep tariffs next month on a list of US products, including thermal coal and coking coal due to mounting trade friction between the world’s two leading economies. At least three US coal shipments, including Partnership, are on their way to China, but traders are worried they may end up casualties of the escalating trade dispute. The other two vessels, Navios Taurus and West Trader, are expected to arrive at Jingtang port on July 18 and August 10 respectively, according to data

Source: The Economic Times

China’s coal province imposes special emission caps on industry

28 June. The major coal producing province of Shanxi in northern China will impose special emissions restrictions on big industrial sectors by October as part of its bid to curb smog. The province produces more than 900 million tons of coal a year, a quarter of China’s total, and is also a major gas and petrochemical producer. China promised in January to impose “special emissions restrictions” on major industrial sectors in 28 cities in northern China, including the four in Shanxi. It said firms that failed to comply with the deadlines would be fined, ordered to renovate or shut down completely. The 28 cities were all part of a special winter anti-smog campaign that began in October last year and imposed tough restrictions on traffic, coal consumption and industrial output. In its air quality plan for 2018, Shanxi promised to close down 22.4 million tonnes of annual coal capacity and 1.9 million tonnes of steel capacity this year.

Source: Reuters

US coal industry needs ‘fundamental shift’ to fight black lung

28 June. Coal companies need to make a “fundamental shift” in how they control exposure to coal dust in underground mines to address the recent surge in black lung disease rates, according to the National Academies of Sciences, Engineering and Medicine report. The report found that even though coal operators largely comply with recently tightened rules requiring monitoring for coal dust, those measures may not be sufficient. The Government Accountability Office report said that the federal fund to help coal miners disabled by black lung disease will require a multibillion-dollar taxpayer bailout if Congress does not extend or increase the tax on coal production that funds it. The coal industry has been lobbying Congress to ensure that scheduled reduction in the tax it pays into that fund goes forward, arguing the payments have already been too high.

Source: Reuters


Azerbaijan hit by massive blackout, worst in decades

3 July. Azerbaijan has been hit by a massive blackout affecting most of the country, the worst power outage since the 1991 collapse of the Soviet Union. President Ilham Aliyev set up a government commission to investigate the accident at a power plant in Mingechavir that caused the blackout. The emergencies ministry said a transformer’s breakdown in Mingechavir sparked a fire that was put out in 20 minutes and inflicted no casualties. The blackout came amid a heat wave in the Caspian Sea nation, with temperatures exceeding 40 degrees Celsius (104 degrees Fahrenheit) resulting in a power consumption surge that plunged the capital, Baku, and nearly 40 other cities and regions into pitch darkness. It took several hours to fully restore power in Baku but efforts to restore power in other regions continued.

Source: ABC News

Kenyan consumers set to pay more in ERC’s electricity tariff review

3 July. The Energy Regulatory Commission (ERC) has restructured the subsidised tariff currently targeted at low income electricity consumers in a move that will see many that have enjoyed the low-priced power locked out. They will instead pay higher charges. Under a new billing structure by ERC, the lifeline tariff has been capped at 15 units of power per month from the current regime where low-income earners had a leeway of up to 50 units, and pay at subsidised rates. Poor households will also pay a higher rate for energy consumed in the new harmonised tariff of Sh12 per unit, compared to the current rate of Sh2.50 per unit. ERC has however scrapped the fixed charge that currently stands at Sh150 per month. It has instead factored it in the per unit cost of power. The new tariff, which ERC expects to be used for August billing, has also reduced power prices for the wealthy domestic power consumers. Households that consume over 1,500 units a month are charged Sh20 per unit but will now pay Sh16.50 a unit. The same charges will apply for people with less spending capability – consuming more than 15 units. The new tariff that will take effect in a month’s time is expected to be much simpler, and will give clarity to power consumers on how they are charged for their electricity. Under the proposed tariff, the energy industry regulator said prepaid customers would not get varying number of tokens whenever they spent the same amount. For example, if one spends Sh1,000 for the prepaid units, they will always get a constant number of units. The regulator however does not expect the changes to affect revenues for Kenya Power and the other sector players.

Source: The Standard

Norway adopts new power grid regime from 2019

2 July. Norway will force big power consumers and producers to pay more for grid upgrades and extensions under a new regulation from 2019, the country’s water resources and energy directorate (NVE) said. The plan is widely opposed by Norway’s energy industry, which says it will have to foot a significant part of the bill, with grid investments of around $17 billion planned between 2016 and 2025. NVE decided to adopt the regulation in an amended version, effective from 1 January 2019, for consumers and producers of more than 1 megawatt per hour. The new regulation requires big consumers and producers to pay up to half the cost of any grid investment they require, in a move to encourage building power facilities in locations that already have strong grids, cutting the overall connection cost. In its amended version, NVE said grid companies can ask for an advance payment of up to 15 percent of the construction fee and a transition period will only include projects already granted a license. Existing customers that have filed requests for connection or increased capacity before July 1, 2018, will also be included in the transition period. In the amendments adopted, NVE has waived the requirement that the customer must have entered into a binding financial agreement with a network company or third party. The regulator has the authority to impose the changes unilaterally. Norway’s largest power consumer Norsk Hydro warned that the regulation would make grid costs a challenge for new project investments.

Source: Reuters

Baltic states to decouple power grids from Russia, link to EU by 2025

28 June. The leaders of the Baltic states and Poland signed a long-awaited deal to connect their power grids to the European Union (EU) by 2025 and break their dependence on Russia, a Soviet legacy. Nearly ten years in the making, the politically fraught, technically challenging and costly plan to unplug Estonia, Latvia and Lithuania from Russia comes amid mounting concerns over Russian posturing in the region. The Baltic States, once ruled from Moscow but members of the European Union and NATO since 2004, view being linked into Russia’s power network as a threat to their national security. Under the deal, states would use the existing overland LitPol Link between Lithuania and Poland, as well as a new high-voltage direct current cable to run under the Baltic Sea, looping around the territorial waters of Russia’s Kaliningrad exclave. The underwater cable will offer 700 MW capacity and could be completed by 2025, Lithuania’s Energy Minister Zygimantas Vaiciunas said. It will be used both for power trading and synchronisation purposes, he said. Brussels is to negotiate with Moscow over how to maintain the power supply to Kaliningrad, which is currently synchronised with mainland Russia through the Baltic states. The deal proposes connecting Kaliningrad with two back-to-back power converters. Russia, on which the Baltic states currently rely to balance their power flows, has never cut power or threatened to do so, but the three EU nations fear it might and say there is a lack of transparency on upkeep of the network in Russia. Lithuania expects Baltic states to test their ability to work autonomously from Moscow in June 2019, before formally switching by 2025.

Source: Reuters

Nigeria raises $1.5 bn for power transmission management

27 June. Nigeria has raised $1.57 billion for the rehabilitation of its transmission infrastructure from international backers, Usman Gur Mohammed, managing director of the Transmission Company of Nigeria (TCN), has said. He said that TCN was acquiring Supervisory Control and Data Acquisition System (SCADA), a new energy management platform, which would help in providing transparency, as the industry activities can be monitored by operators of distribution, generation firms and other stakeholders, including online real-time fault detection and clearance. He said that two attempts by previous administrations failed but he raised a committee in 2017 to review the process and engaged EDF of France which raised a feasibility report on their installation and is being reviewed at the two day workshop. He said that the company’s goal is to achieve 20,000 MW, through its Transmission Rehabilitation and Expansion Programme (TREP) in the next four years was going according to plan and that the funding was raised from the World Bank, Japan International Cooperation Agency (JICA), African Development Bank (AfDB) among others. He also said TCN had standardized its procurement process as incompetent contractors had abandoned 800 container shipments of transmission equipment for about 15 years at the ports. He said that the transmission wheeling capacity had risen to 7,124 MW from the 5,000 MW.

Source: Naija247news

Bangladesh gets $500 mn ADB loan for power plant

27 June. The Asian Development Bank (ADB) will provide Bangladesh a $500 million loan to set up an 800 MW power plant in the southwestern region of Khulna. The plant, operating on the latest technology, will help meet the south Asian country’s growing demand for clean energy, ADB said. The total cost of the project is $1.14 billion, with the Islamic Development Bank contributing $300 million in financing and the government contributing $338.5 million over and above the ADB loan. Peak demand in Bangladesh, which faces recurring power generation shortages, is estimated at 10,400 MW while available capacity in 2017 was 9,479 MW. Net peak demand is expected to exceed 13,300 MW by 2020 and 19,900 MW by 2025, while existing generation facilities will gradually retire and need replacement. The plant, due to be completed by end-June 2022, will use the most advanced water treatment processes to purify and recycle liquid waste, leaving zero discharge. So far, ADB has provided around $5 billion in loans to Bangladesh’s energy sector.

Source: Reuters

Spain’s Repsol invests $869 mn in electricity assets

27 June. Spanish oil major Repsol said it had bought the electricity generation and marketing assets of fellow Spanish firm Viesgo for €750 million ($868.73 million). With the deal, Repsol will add 2,350 MW of production capacity, 1,650 MW of which will be in two combined cycle plants and 700 MW of which will be hydro-electric, the company said.

Source: Reuters


German engineering group warns of drop in new wind power projects

3 July. A drop in the number of new German wind power projects coming on stream in 2019 and the early 2020s could make it harder to achieve economies of scale and hit investment, according to the country’s VDMA mechanical engineering group. That in turn could jeopardize Germany’s target of producing 65 percent of power from renewable sources by 2030, which is expected to require 20 GW of total offshore wind capacity, four times the current number, VDMA said. Policymakers have recently shifted the industry away from fixed feed-in tariffs towards auctions for new building permits, hitting the profitability of wind power companies. VDMA believes the transition may have been too drastic, leading to a slowdown in new projects already this year. Industry figures show 5.6 GW of capacity were added in the onshore German wind industry last year, while that figure could fall to 3-4 GW in 2018 and 2.8 GW in 2019. Offshore wind construction in Germany’s North and Baltic Seas last year came in at 1.25 GW while, from this year, only 2.3 GW are under construction up to 2020.

Source: Reuters

Japan aims for 24 percent renewable energy but keeps nuclear central

3 July. Japan’s government pledged to modestly boost the amount of energy coming from renewable sources to around a quarter in a new plan that also keeps nuclear power central to the country’s policy. The plan aims to have 22-24 percent of Japan’s energy needs met by renewable sources including wind and solar by 2030, a figure critics describe as unambitious based on current levels of around 15 percent. Japan’s own Foreign Minister Taro Kono called the goal “significantly low” and described the country’s commitment to renewables as “lamentable”. The European Union agreed to raise its renewable energy target to 32 percent by 2030. Japan’s policy also envisions nuclear providing more than 20 percent of the country’s energy needs by 2030, reflecting the government’s ongoing commitment to the sector despite deep public concern after the 2011 Fukushima disaster. The government has reduced Japan’s reliance on the sector, but defends nuclear as an emissions-free energy source that will help the country meet its climate change commitments. Japan currently generates around 90 percent of its energy from fossil fuels, and the plan calls for that figure to drop to just over half, with energy efficiency policies to cut demand. Reliance on fossil fuels like coal increased in Japan after the Fukushima disaster, as public anger over the accident pushed all of the country’s nuclear reactors offline temporarily. Six reactors are currently operating, and utilities face public opposition to activating more despite political support for the nuclear industry. Japan’s TEPCO, which operated the Fukushima plant, signalled that it was ready to resume work on the construction of a new nuclear plant in the country’s north.

Source: The Economic Times

Egypt’s first nuclear power plant construction to begin in 2 yrs

2 July. Egypt announced that construction of its first nuclear power plant will begin in the next two to two and a half years. The plant is to be built by Russian-owned construction company Rosatom, following an agreement in 2015 for Russia to build a nuclear power plant on the Egyptian soil after extending a loan for Egypt to cover the cost of construction. The loan is said to be worth $25 billion and will finance 85 percent of the value of each work contract, with Egypt expected to fund the remaining 15 percent. Among other benefits, the nuclear plant is said to have a 4,800 MW capacity. It is to be built in Dabaa, located in northern Egypt. Figures released by the Ministry of Electricity and Renewable Energy stated that Egypt aims to generate 20% of its energy generation from renewable sources by 2022 and 42% of its electricity from renewable energy by 2025.

Source: Egyptian Streets

Ivory Coast eyes biomass power generation from cocoa waste

2 July. The world’s top cocoa producer Ivory Coast plans to build a 60 to 70 MW capacity biomass power generation plant running on waste from cocoa pods, part of its aim of developing 424 MW of biomass power generation capacity by 2030. The plant, which will enable Ivory Coast to diversify its electricity generation sources, was among five projects to receive grants from the US (United States) agency for trade and development (USTDA), the US embassy in Abidjan said. Others included a hydropower project in Kokumbo and two smart grid power projects. The biomass power station, the first in Ivory Coast, would be based in the southern cocoa region of Divo.

Source: Reuters

Rhode Island sues major oil companies over climate change

2 July. Rhode Island sued several major oil companies, including Exxon Mobil Corp and BP plc, accusing them of contributing to climate change that is damaging infrastructure and coastal communities in the state. The lawsuit announced by Rhode Island Attorney General Peter Kilmartin was the first by a state seeking to hold oil companies responsible for costs associated with climate change and followed similar cases by several local governments nationally. The lawsuit, filed in Providence County Superior Court, named as defendants Exxon, BP, Royal Dutch Shell Plc, and Chevron Corp, among other companies. The lawsuit by the Democratic attorney general follows similar cases by US (United States) cities and local governments, arguing the production of fossil fuels had led to rising tides that damaged shorelines, roads and other properties requiring remediation. The lawsuit contended that the companies sought to refute scientific findings regarding how greenhouse gas pollution was causing climate change, and failed to prevent the harm that would result from consumers’ using fossil fuel products. The lawsuit said that companies also violated the state’s Environmental Rights Act by polluting and destroying natural resources in Rhode Island.

Source: Reuters

Italy’s Eni aims for oil industry first with carbon neutral goal

2 July. Italian oil major Eni will make a binding commitment to becoming carbon neutral, its Chief Executive Office Claudio Descalzi said. BP has said it will maintain total CO2 (carbon dioxide) emissions in 2025 at 2015 levels and that it will reduce them by 3.5 million tonnes, thereby offsetting higher production, while Shell has “ambitions” to halve its emissions by 2050. Eni was assessing the costs and expected to release targets in terms of timing and volumes before the end of the year, Descalzi said. Descalzi said the targets would include not only atmospheric emissions but the soil too.

Source: Reuters

Bosnia invites bids for first large-scale solar power plant

2 July. Bosnia’s autonomous Serb Republic has launched a tender for the construction of a 65 MW solar power plant in southeastern Bosnia, the country’s largest so far, the energy ministry said. International and local investors have until July 27 to submit bids for the project which is expected to cost around 150 million Bosnian marka ($89.4 million), the ministry said. The solar power plant, which will be located near the town of Ljubinje, is expected to produce 104 gigawatt hours (GWh) of electricity per year to be sold on the open market. The future operator will hold a 50-year concession to operate the plant. Bosnia aims to generate 40 percent of its energy from renewable sources by 2020 versus 34 percent currently as part of its plans to join the European Union. Unlike other Balkan countries which rely on power imports to cover much of their demand, Bosnia is able to export power largely thanks to its hydro capacity.

Source: Reuters

German renewables up 9.5 percent in first half, above 100 bn kWh: E.ON

2 July. German power production in the first half of 2018 from renewable energy totalled 104 billion kilowatt hours (kWh), 9.5 percent more than in the same period of 2017 and was above 100 billion for the first time, utility E.ON said. The company said that, looking back over three years, the increase over the six months had been 33 percent. E.ON Energie Deutschland markets electricity to retail and industry customers and in wholesale markets on behalf of green power producers, holding six million customer accounts. The 2018 total included 55 billion kWh of wind power, 21 billion kWh of solar power, 20 billion kWh of power from biomass and 8 billion kWh of hydroelectric output. Wind power output in the first half 2017 had amounted to 48 billion, solar 20 billion, biomass 20 billion and hydro 7 billion kWh.

Source: Reuters

Grid operator warns wind will not fill Sweden’s nuclear gap in winter

2 July. Sweden will have to import more electricity during winter as the country, a net power exporter to the rest of Europe, shifts from nuclear to wind. Last winter, the first since the closure of its Oskarshamn 1 reactor, stretched Sweden’s resources as peak consumption rose by 800 MW, triggering start-up procedures in its reserve energy plants. Sweden’s power balance will deteriorate further from next winter, the country will need imports and the situation will become worse with two more of its reactors closing by 2020, state-grid Svenska Kraftnat (SVK) said. Of Sweden’s eight remaining nuclear reactors, two will close soon, Ringhals 2 in 2019 and Ringhals 1 the year after, cutting a combined production of 1,700 MW from its power system, 40 percent of which is nuclear output-dependent. The expansion of Sweden’s wind power capacity, with new farms coming into the system, may also be insufficient to cover the deficit the lost nuclear reactors leaves, SVK said.

Source: Reuters

China carbon emissions in retreat after ‘structural break’ in economy

2 July. China’s carbon dioxide (CO2) emissions fell from 2014 to 2016 and might already have peaked, according to a study published, with structural economic changes allowing Beijing to meet targets earlier than expected. China vowed before the Paris climate talks in 2015 to bring CO2 emissions to a peak by “around 2030”, and the country’s top climate official, Xie Zhenhua, has already said it could meet the pledge ahead of time. But the study, published by Nature Geoscience, said “in retrospect, the commitment may have been fulfilled even as it was being made”, with emissions hitting a record 9.53 gigatonnes in 2013 and declining in the following three years, dropping to 9.2 gigatonnes in 2016. While emissions rose by an average of 9.3 percent per year from 2000 to 2013, China’s economy underwent a “structural break” in 2014, and is shifting to less carbon-intensive high technology sectors, it said. An early Chinese peak in CO2 emissions would bolster arguments that the Paris agreement is too lenient on the country, an argument made by US (United States) President Donald Trump when he vowed to withdraw from the deal last year.

Source: Reuters

Polish parliament approves changes to green energy law

29 June. Poland’s upper house of parliament approved an amendment to the renewable sources of energy law meant to remove obstacles to green energy investment and help Warsaw meet EU (European Union) renewable energy targets. Poland’s conservative Law and Justice (PiS) party won the 2015 election partly with promises to sustain the traditional coal industry. In 2016, the government banned construction of new wind farms close to dwellings and imposed new taxes on investors that made many wind farms loss-making. It also took Poland off the track to meet an EU target of 15 percent of energy from renewables overall in gross final energy consumption – with sub-targets including renewable electricity, green heat and transport – by 2020. But as part of a wider plan to ease tensions with the EU, which has criticized the PiS over its politicisation of the judiciary, and in light of falling production of high-polluting coal, Poland changed direction towards green energy this year. According to the Polish Wind Energy Association, a non-government wind farm lobby group, Poland achieved 13.9 percent of electricity consumption through renewables last year, short of a target of 14.7 percent.

Source: Reuters

Blackrock buys 197.4 MW wind project in Norway

28 June. Blackrock, the world’s largest investment company, bought a 197.4 MW wind farm in western Norway through one of its funds and will cover its construction cost, the firm and the project’s previous owner Zephyr both said. Zephyr, a Norwegian wind farm developer and operator, will continue to manage the farm’s construction, which will cost about €200 million ($231.76 million) and is expected to be completed by the end of 2020. The wind farm, called Guleslettene, will carry 47 turbines of 4.2 MW capacity from Vestas and will have an ability to produce enough electricity to power more than 40,000 houses, Zephyr said. The construction cost will be funded by Blackrock’s equity and a long-term loan from Dekabank. After the transaction, the cost of which was not disclosed, Blackrock has $5 billion of renewable energy assets under management, with 170 projects within wind and solar, it said. To date, BlackRock Renewable Power has a total invested portfolio of approximately 4.6 GW of generating capacity across wind and solar projects located in Norway, Sweden, USA, Canada, Australia, Japan, Ireland, France and Britain.

Source: Reuters

Israel confident US to keep protections in any Saudi nuclear power deal

27 June. Israel’s Energy Minister Yuval Steinitz, said after meeting Trump administration officials he is confident that the United States (US) will not relax non-proliferation standards in any nuclear power deal it agrees with Saudi Arabia. Israel vehemently opposes any effort by the Saudi Arabia to relax “gold standard” non-proliferation limits on enriching uranium or reprocessing nuclear fuel in any deal between the two countries, Steinitz said. Steinitz, in Washington for the World Gas Conference, met with people in the Trump administration about Saudi Arabia’s quest to build at least two nuclear power stations with the help of US technology. US Energy Secretary Rick Perry has been working with Saudi Arabia on a civilian nuclear agreement that could allow the kingdom to enrich uranium and reprocess plutonium, practices that non-proliferation advocates worry could one day be covertly altered to produce fissile material for nuclear weapons. Steinitz said it would support Saudi Arabia’s development of nuclear power only if it included the gold standard protections and if the kingdom purchases uranium from the US. Saudi Arabia has said if it does not get US assistance to build reactors it could turn to other international partners. The kingdom is also in talks with companies from Russia, China, South Korea and other countries on nuclear power.

Source: Reuters


Investment Scenario of Large Public, Private and Public Private Partnership Projects

Ministry/Sectors-wise No. of Projects

Anticipated Investments

(INR Crore)

% Share

(in Investments)

Power 14 157641.9 24.2
Petroleum & Natural Gas 5 16832 2.6

Chemical & Fertilisers-Chemicals

& Petrochemicals

3 38574 5.9
New and Renewable Energy 1 5764 0.9
Others 163 431783.4 66.4
Total 186 650595.2 100

Source: Rajya Sabha, Unstarred Questions

Publisher: Baljit Kapoor

Editorial Adviser: Lydia Powell

Editor: Akhilesh Sati

Content Development: Vinod Kumar Tomar

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