MonitorsPublished on Jun 25, 2019
Energy News Monitor | Volume XVI; Issue 2


Oil News Commentary: May – June 2019


In a sign that slowdown in the Indian economy may be long drawn, a government report has projected a modest 3.5% growth in oil imports this year. Considering that India imports more than 80% of its oil requirements, slow growth in imports signals tepid demand and consumption. According to oil ministry’s PPAC country’s oil imports is projected to rise to 233 mt in FY 20 against 227 mt in FY19, a growth of mere 6 mt. While slower growth in oil imports is good news for exchequer in terms of keeping the high oil bill under check, it also signals that less crude will be processed by Indian refineries as there would be less consumption of products such as petrol, diesel and ATF, indicating pressure points in the economy. Against projected crude oil import of 233 mt, the country’s import bill is expected to settle just around $113 bn in FY20. This is growth of a mere $1 bn over oil import bill of $112 bn in FY19. But the projection by PPAC is based on average price of Indian basket crude oil at $66 per barrel and average exchange rate for ₹71 per dollar. Crude has remained above this level for most parts of current fiscal and is expected to settle well over average of $70/barrel in FY20. This could disturb the initial calculations done by PPAC. Apart from crude, petroleum product imports (largely comprising petrol and diesel) have also remained tepid. Product import has, in fact, fallen to 32.5 mt in FY19 as against 35.5 mt in FY18. Also, worrisome is petroleum product exports, which have fallen to 61.1 mt in FY19 from a high of 66.8 mt reached in FY18. With a surplus refining capacity, India is a net exporter of petroleum products. But with international markets also witnessing a slowdown, product exports have been hit. Crude production in India has stagnated around 35 mt for past decade. In FY19, domestic crude production has dropped to 34.2 mt from 35.7 mt in the previous year. Despite best efforts of the government, domestic oil production has not increased. Government has now pinned hope on its new Hydrocarbon Exploration Licensing Policy that institutes an open acreage policy to see more investment in the country’s exploration, thereby increasing the production in the coming years.

The consumption of ATF in India fell 5.7% to 668 thousand tonne in April this year, the first drop in over four years, after passenger traffic took a hit due to the grounding of Jet Airways and Boeing 737 Max planes apart from a sharp rise in fares. ATF consumption, after 52 months of positive growth, recorded a drop of 5.7% in the month of April 2019 as compared to April 2018, the oil ministry’s technical wing PPAC said in its monthly report industry consumption. Domestic airlines carried 10.9 mn passengers in April this year as against 11.5 passengers in the same months last year, a drop of 4.5%. Jet Airways had started grounding its planes in a staggered manner. The airline had announced suspension of all of its domestic and international flights saying it is not able to pay for fuel in the absence of emergency funding from lenders. Subsidy-sharing risks have lately dented valuations of ONGC and Oil India Ltd which trade at book value multiples that are less than half of what is accorded to fuel retailers. The ruling combine’s emphatic poll victory could cause a rerating at these oil producers, which rank among the world’s cheapest upstream companies. In the past three years, ONGC and Oil India Ltd have not financed subsidies, which New Delhi has been funding though the budget. If the zero-burden upstream contribution continued in the March quarter for ONGC, its realisation could touch a record $70 per barrel, compared with $47-57 per barrel in the past 12 quarters, CLSA said. New Delhi has provisioned ₹330 bn for oil subsidy in FY20, up 62%, according to the interim budget. Kerosene and subsidised LPG are currently sold below economic prices, resulting in subsidies. Furthermore, the subsidy burden is expected to be lower after continuous monthly increases in kerosene prices. The break-even rate of kerosene has risen to $45/barrel after gradual increases, compared with $18/barrel three years ago. The government has also indicated that it would take more action on curtailing LPG subsidies that now account for 80% of total federal support on energy consumption.

The re-election of National Democratic Alliance will be credit neutral for the domestic O&G sector, research and ratings agency ICRA said. It said that even though the government’s initiatives should help companies in the sector going forward, clarity on pricing freedom on sensitive products and adequate subsidy provision will be critical for the financial profile of the PSUs. ONGC had last fiscal acquired HPCL, the government-owned fuel retailer at a cost of ₹369.15 bn. While, the acquisition helped the government meet its disinvestment target for the fiscal, it impacted the oil explorer’s working capital and cash reserves during the fiscal. Also, OMCs had to face the ire of the consumers when they had last year initiated a 19-day price freeze on petrol and diesel before the Karnataka elections. Petrol and Diesel prices at retail pumps operated by IOC, HPCL and BPCL remained unchanged for 19 straight-days from 24 April 2018 even as the benchmark international fuel prices had increased on the back of surge in crude oil prices. The government had during its previous tenure revamped O&G bidding framework and the O&G exploration policy. The new bidding frame-work allowed companies to carve out their own blocks and allowed all forms of hydrocarbon extraction under a single license. ONGC is likely to spend around ₹657.73 bn to ramp up production from 13 field development projects and three EOR/IOR projects. The ongoing field development and EOR/IOR projects are expected to produce a cumulative 54.6 mt of crude oil and 114 bcm of natural gas in the next 3-4 years, brokerage Motilal Oswal said in a report. Close to 50% of 54.6 mt of crude oil is expected to be produced from the field development of NELP block — KG-DWN98/2. The development of the above mentioned field is expected to be completed by August 2021 at a cost of ₹340.12 bn and is expected to produce 25.9 mt crude oil and 45.5 bcm natural gas.

Petrol and diesel prices started rising soon after the last phase of the general election concluded, and have increased by ₹0.70-0.80/litre in the past nine days. Prices have been on the rise since May 20, a day after the final phase of polling for the Lok Sabha elections ended. The price of petrol has risen by ₹0.83/litre in the nine days and diesel by ₹0.73 according to price notifications of state-owned oil companies. Rates were largely range-bound during April and May despite a rise in oil prices in the international market. Petrol price was raised by ₹0.11/ litre and diesel by ‘0.05. In Delhi, petrol now costs ₹71.86/litre, up from ₹71.03 price on 19 May. Similarly, a litre of diesel costs ₹66.69, up from ₹65.96/litre on May 19. Petrol in Mumbai costs ₹77.47/litre and diesel is priced at ₹69.88/litre. While state-owned fuel retailers IOC, BPCL and HPCL had in the past completely frozen rates during times of elections, they during the Lok Sabha polls moderated the revision by not passing on all of the desired increase in rates to consumers.

After increasing the penetration of LPG over the last four years, the oil ministry is looking to review the existing structure of LPG marketing in India — a move seen as an effort to bring in more private players. To review the existing marketing structure, the Centre has set up a five-member committee headed by economist Kirit Parikh. Based on the LPG (Regulation of Supply and Distribution) Order, 2000, private players are eligible to operate as parallel marketeers of LPG. The new committee, set up on 30 May, will look into issues related to definition or quality standards of LPG being marketed. Its terms of reference also include scope for liberalising government policies for private participation. The committee is expected to submit its report by end-July. Based on the LPG control order, domestic LPG should be supplied to OMCs only. Later in 2015, RIL had stated in an investor presentation that it has forayed into cooking gas retailing, by launching a 4 kg LPG cylinder on pilot basis in four districts. As of 1 April, the LPG coverage in India was seen at 94.3%, up from 56% in 2014. The three OMCs IOC, BPCL and HPCL —have 265.4 mn active LPG customers in the domestic category, which are being served by 23,737 LPG distributors. Of the total 45.51 mn new domestic customers enrolled by OMCs in 2018-19, 36.29 mn were under a subsidy scheme.

The Union Budget 2019-20 is likely to renew the focus on the NDA government’s flagship Ujjwala scheme with the aim of increasing access to cooking gas, or LPG, to all the country’s households before the year-end. The finance ministry may first propose to complete the targeted 80 mn connections in first 100 days of the government. So far, connections have reached the 71.9 mn-mark. In addition, another 10-20 mn new LPG connections would be given in the subsequent months to cover all poor households, as part of a cabinet decision taken late last year. These measures are expected to increase access to cooking gas to 100% of the country’s households from present level of about 93-94%. With this, the mission of providing clean fuel to all households in the country would be completed, and the next phase would begin with the focus on ensuriung that all new connections, particularly by the poorer sections, take an LPG refill. Under PMUY, gas connections are provided to BPL families with a support of ₹1,600 for each connection. The LPG connection is provided in the name of the female member of the family.

LPG prices have gone up by ₹25 from a month ago, and each 14.2 kg cylinder is now retailing at ₹709.5. At the same time, petrol and diesel rates have fallen by up to ₹2.5 over the last 30 days. The price of non-subsidised LPG cylinders has risen steadily for three months, though is still over ₹200 less than last November’s high of ₹912. It dropped to ₹780 in December, and further to ₹660 in January. After a ₹30 drop in February, the price has gone only upwards, first to ₹673 in March, then to ₹678 in April, and ₹684.5 in May. In March 2015, the ‘Give up Subsidy’ campaign was launched, under which more than a crore Indians gave up their concessions or they were withdrawn automatically in cases of high-income individuals. In comparison, the rate of subsidised LPG has gone up by just a rupee this month, the retail price being ₹495 per cylinder. Though all LPG consumers buy the fuel at its market price, the government subsidises 12 cylinders of 14.2 kg each per household a year by providing the subsidy amount directly in the bank accounts of eligible users.

OMCs have raised the prices of subsidized cooking gas or LPG by ₹1.23 per cylinder beginning. Post the revision, consumers will pay ₹497.37 for every LPG cylinder in Delhi as compared to ₹496.14 in May. While the price of Non-Subsidized LPG at Delhi will increase by ₹25 per cylinder in June 2019 mainly due to increase in international price, the actual impact on subsidized domestic LPG customers is only ₹1.23 per cylinder, which is mainly due to GST on the above, IOC said. The subsidy transfer in the customers’ bank account has been increased to ₹240.13 per cylinder in June 2019 as against ₹216.36 per cylinder in May 2019, IOC said. IOC said that this is meant to protect the domestic subsidized LPG customers against the increase in prices of LPG.

ONGC is planning to drill 100 wells in 21 onshore PML blocks in Sivasagar district at a cost of ₹35 bn. The 21 onshore PML blocks in Sivasagar district will cover major oil producing fields of Lakwa, Rudrasagar and Geleki, where the company has already drilled more than 500 wells, ONGC said. The company had in January applied for drilling 200 wells in Sivasagar at a cost of ₹60 bn. ONGC’s crude oil production from Assam blocks rose 2% to 993 thousand tonne last financial year, while natural gas production dropped 5%to 483 mn cubic meter.

The RIL-BP combine made its first bid for an oil and gas exploration block in more than a decade, vying for one of the 32 blocks up for auction in the OALP-II and III bid rounds, which saw mining major Vedanta put in as many as 30 bids and ONGC for 20 areas. Bidding for 14 blocks on offer in the OALP round-II and another 18 oil and gas blocks and 5 CBM blocks on offer in OALP-III closed. Vedanta, which had walked away with 41 out of the 55 blocks offered in OALP-I last year, bid for 30 areas. ONGC bid for 20 blocks while Oil India Ltd bid for 15. IOC, GAIL (India) Ltd and SunPetro bid for two blocks each. RIL-BP made an offer for one block off the east coast. The government has set a target of cutting oil import bill by 10% to 67% by 2022 and to half by 2030. Import dependence has increased since 2015. India imports nearly 84% of its oil needs.

India has stopped importing oil from Iran after American waivers granted to eight buyers expired early this month, New Delhi’s envoy has said, becoming the latest country to comply with the US sanctions on Tehran over its nuclear programme. The US reimposed sanctions on Iran in November after pulling out of a 2015 nuclear accord between Tehran and six world powers. To reduce Iran’s crude oil export to zero, the US ended on 2 May waivers that had allowed the top buyers of Iranian oil, including India, to continue their imports for six months. Iran earlier used to supply 10% of India’s oil needs. India joins Greece, Italy, Taiwan and Turkey which have stopped importing Iranian oil.

IIT-Madras researchers are developing indigenous processes for efficient recovery of oil from mature offshore wells. Collaborating with research laboratories in Australia, IIT-Madras researchers are studying the efficacy of an emerging enhanced oil recovery method called ‘Low-Salinity Enhanced Oil Recovery’. At present, domestic crude oil production in India is insufficient to meet the nation’s energy demands. Last year, the Union government approved fiscal incentives for enhancing oil and gas recovery from ageing and new fields, which can potentially raise the production of oil by 120 mt. In line with this expectation, ONGC has been looking at EOR techniques to boost O&G output from old and matured fields. Research conducted at Sangwai’s laboratory can help understand and optimise the technique. Sangwai said the research aims to develop indigenous methods for recovery of crude oil from geological reservoirs, which is “a complex process”.

Saudi Aramco will supply IOC an extra 2 mn barrels of crude a month from July to December, IOC said, as New Delhi seeks to make up for a loss in supplies from Iran. Saudi Arabia approached Indian buyers last month offering them additional supplies to compensate for lost Iranian oil after US sanctions kicked in. The US, which imposed new sanctions on Iran in November, initially gave Indian and seven other buyers a six-month waiver to allow them to continue importing Iranian oil. Those waivers have not been renewed. IOC has a term deal to buy 5.6 mt from Saudi Aramco in the financial year 2019/20 that started on 1 April and an option to buy additional 2 mt. India had bought about 300,000 bpd of Iranian oil under the six-month US sanctions waiver. Only state refiners, accounting for about 60% of India’s 5 mn bpd refining capacity, purchased oil from Iran since November. India imported about 304,500 bpd Iranian oil between January and April 2019. IOC, which was the biggest Indian buyer of Iranian oil in 2018/19, has not signed an annual contract to buy oil from Iran this fiscal year. IOC has been diversifying its suppliers. IOC has signed separate annual contracts with Norway’s Equinor and Algeria’s Sonatrach to buy 4.6 mt of US oil in 2019.

Engineers India Ltd said it has signed an agreement to provide project management consultancy for a new 1.5 mt refinery being set up in Mongolia. The pact was signed with Mongol Refinery State Owned LLC, the company said. India had extended a $1 bn (₹70 bn) line of credit to Mongolia during the visit of Prime Minister Narendra Modi in 2015. The Mongolian government is in the process to set up 1.5 mt per annum Greenfield crude oil refinery in Sainshand province, under the line of credit extended by India.

IOC and HPCL said they will contest tax authorities demand for over ₹40 bn in excise duty on ethanol used for doping petrol, saying the sugarcane extract for mixing in fuel is exempt from tax. IOC said it is a responsible corporate and law abiding entity, which is one of the largest contributors to the national exchequer in the form of duties and taxes. India is over 83% dependent on imports to meet its oil needs. HPCL said it is following a legally tenable established practice which is in line with oil industry and it does not envisage any additional duty liability.

State-run oil refiners BPCL and HPCL have signed a pact with IOC to take 25% stake in the 2,757 km cross-country pipeline, billed as the world’s largest LPG pipeline, to be laid from Kandla in Gujarat to Gorakhpur in Uttar Pradesh at a cost of nearly ₹100 bn. The pipeline will source LPG supplies from Kandla and other LPG import terminals on the West Coast and two refineries at Koyali in Gujarat and Bina in Madhya Pradesh. It would directly link 22 LPG bottling plants in Gujarat, Uttar Pradesh and Madhya Pradesh, owned by the three State-run oil firms. It would also feed another 21 LPG bottling plants by using a fleet of trucks. The pipeline would carry up to 6 mt of LPG annually. Lack of funds with IOC was holding up the work on it.

Apex consumer commission NCDRC has directed IOC and its dealer to pay over ₹1.2 mn compensation to the next of kin of a woman who died in a cylinder explosion, saying the accident occurred due to manufacturing defect. The NCDRC held IOC and a Gas Agency liable for the gas cylinder explosion which claimed the life of a housewife, and seriously injured her mother-in-law. The commission said the onus was on IOC to conduct inquiry into the defect as there was no evidence of negligence by the consumer. The order came on an appeal filed by IOC, the gas agency and an insurance company against the Delhi state consumer forum’s order directing them to pay the victim’s kin ₹1,221,734 along with interest. The commission, while dismissing the appeal, also imposed a cost of ₹25,000 on IOC. The complaint against the PSU and its dealer was filed by the deceased’s husband and children who had said that on 3 April 2003 when the cylinder exploded. IOC resisted the complaint saying that the complainant was not a ‘consumer’ as the supply of gas was done by the dealer and IOC had rendered no service. It also said that the fire was caused by the negligent act of the complainants. The dealer contended that no FIR was lodged with the police neither any forensic examination of the site was done, without which it cannot be said that the cause of accident was only due to defective cylinder. The apex consumer commission rejected the contentions of IOC and its dealer while dismissing their appeal.

The Kerala High Court has dismissed two petitions challenging oil marketing companies’ move to establish 1,750 petroleum retail outlets in the state, in addition to the 2,200 retail outlets in existence now. The court considered petitions filed by Petroleum Traders Welfare and Legal Service Society, whose members are petroleum outlet dealers, and four dealers of oil companies who belong to scheduled castes and tribes. Oil companies named as respondents in the cases included IOC, HPCL and BPCL as well as state-level coordinator of oil companies. It was contended by the petitioners that the oil companies have invited applications for new dealerships in spite of sufficient number of retail outlets and without making any assessment, feasibility, and viability study. The oil companies submitted that a decision to grant new dealerships was taken as sale of petrol and diesel is growing in Kerala at the rate of 8% and 4%, respectively. Moreover, such a move will create more employment and business generation opportunities, resulting in economic development, the companies told the court. While dismissing the petition, the court cited the contention of the oil companies that they have conducted feasibility studies and said it cannot be believed that the companies have not done so as they have to make substantial investments.

In a first of its kind, oil major IOC signed a MoU with Punjab to set up 15 petrol pumps to provide fuel to farmers on credit that will be repaid after the harvesting of crops. Under the pact, IOC would open its retail outlets on vacant plots of the cooperative sector institutions. This initiative would provide direct benefit to the farmers. The empty spaces of Markfed, Milkfed, Sugarfed and the rural cooperative societies would see the opening of the petrol pumps. This initiative would lead to the supply of diesel and petrol to farmers on credit for which they would pay after harvesting their crops. Besides, the farmers wouldn’t have to go very far for getting the fuel. The capital investment for setting up the outlets would be borne by IOC whereas the land would be provided by the state. IOC would also set up food courts and departmental stores at these outlets for the sale of products manufactured by Markfed, Milkfed and Sugarfed. Cooperative sugar mills would also provide diesel and petrol on credit to sugarcane growers in the sugar mills itself and the price would be adjusted in the pricing of sugarcane.

Rest of the World

US military vessels in the Gulf are within range of Iranian missiles, a top military aide to Iran’s Supreme Leader Ayatollah Ali Khamenei said, warning any clash between the two countries would push oil prices above $100 a barrel. Iran and the US have been drawn into starker confrontation in the past month, a year after Washington pulled out of a deal between Iran and global powers to curb Tehran’s nuclear programme in return for lifting international sanctions. Washington re-imposed sanctions last year and ratcheted them up in May, ordering all countries to halt imports of Iranian oil. In recent weeks it has also hinted at military confrontation, saying it was sending extra forces to the Middle East to respond to an Iranian threat.

Iran’s oil storage on land and at sea is on the rise as US sanctions on exports bite and Tehran battles to keep its aging fields operational and crude flowing. Washington announced in May the end of sanctions waivers for foreign countries importing Iranian oil, hitting Tehran’s biggest source of income. It is vital for Tehran to keep oil flowing as any disruption would damage its future activities due to the high costs and complexities of restarting production. Data from Kayrros, a company which tracks oil flows, showed onshore storage in Iran was 46.1 mn barrels, from total capacity of 73 mn barrels, its highest since mid January. Iranian oil exports fell in May to 500,000 bpd or lower, more than half the level seen in April. Data based on AIS tracking by shipping intelligence platform MarineTraffic showed 16 Iranian tankers, holding some 20 mn barrels, were estimated to be used for floating storage after being stationary between two to four weeks. Ten of those tankers with nearly 11 mn barrels had been stationary for four weeks. This compared with 12 Iranian tankers holding at least 13 mn barrels of oil in March, which had been stationary from two to four weeks, MarineTraffic data showed. Analytics company GlobalData said Iran had planned investment of around $900 mn in capacity additions on new build storage projects between 2019 to 2023. Iran plans to increase storage capacity from 69.1 mn barrels in 2019 to 79.9 mn barrels in 2023 at an average annual growth rate of 3.6%, according to GlobalData estimates. Analysts have estimated that over 50% of Iran’s oil production comes from fields that are over 50 years old with billions of dollars needed to develop additional capacity.

Iranian crude oil exports have fallen in May to 500,000 bpd or lower, after the US tightened the screws on Tehran’s main source of income, deepening global supply losses. Aiming to cut Iran’s sales to zero, Washington ended sanctions waivers importers of Iranian oil. Iran has nonetheless sent abroad between 250,000 bpd and 500,000 bpd of oil so far in May. Data from Refinitiv Eikon put crude shipments at about 250,000 bpd and exports of crude and condensate, a light oil, at about 400,000 bpd.

Crude oil prices are likely to remain steady around current levels, as growing macro uncertainties, rising US output and large availability of core OPEC nations’ spare capacity will offset supply constraints from Iran and Venezuela, Goldman Sachs said. The US spooked markets worldwide with oil supply worries last month after it reimposed trade sanctions on Iran, one of the major global oil suppliers, bringing focus back on the OPEC. Crude markets posted their biggest monthly losses in six months in May amid stalling demand and as trade wars fanned fears of a global economic slowdown. Oil prices dropped to their lowest in three months, with Brent marking $60.55 per barrel and US crude reaching $52.11 per barrel.

De-escalation of a trade war could result in a weaker dollar and stronger global growth, which along with IMO changes to shipping fuel rules could raise Brent oil to $90 a barrel, Bank of America Merrill Lynch said. The IMO’s mandated switch, due to take effect next year, will require fuels to have a sulphur content below 0.5%, compared with 3.5% now. However, prices could dip to $50/barrel if the US-China trade war hurts consumer sentiment, which could eventually lead to an economic downturn, the bank said. December 2019 Brent options imply only a 10% chance of a jump above $90 per barrel and a 6% chance of prices falling below $50 per barrel, the bank said.

The oil market is expected to be in balance toward the end of 2019, as global inventories fall and demand remains strong. There are still uncertainties around oil demand growth due to concerns about the impact of the US/China trade dispute on global economy, while US shale oil production is still rising. This uncertain outlook is making it tough for OPEC and its allies to have a clear oil supply plan for the second half of the year. It is too early to say now if the oil producers will extend their current output targets after June. The OPEC, Russia and other non-OPEC producers, known as OPEC+, agreed to reduce output by 1.2 mn bpd from 1 January for six months, a deal designed to stop inventories building up and weakening prices. US President Donald Trump has called on OPEC and the group’s de facto leader Saudi Arabia to boost output and lower oil prices. Russia also wants to increase supply after June when the OPEC+ pact is due to expire, but Riyadh fears a crash in oil prices and a build-up in inventories.

The World Bank cut Russia’s 2019 economic growth forecast to 1.2% from 1.5% because of oil production cuts. It held its 2020 and 2021 forecasts at 1.8%. Russia’s average daily oil output has dropped to a three year-low in June after contaminated crude clogged its main export route.

Saudi Arabia said that OPEC and its allies should extend oil production cuts at around current levels as the kingdom did not want a fight for market share with the US or a repeat of the price collapse five years ago. OPEC was close to agreeing to extend a pact on cutting oil supplies beyond June, although more talks were still needed with non-OPEC countries that were part of the production deal. The OPEC plus Russia and other producers, an alliance known as OPEC+, have a deal to cut output by 1.2 mn bpd from 1 January. The pact ends this month and the group meets in coming weeks to decide their next move. Oil prices are up 16% so far this year thanks in part to the OPEC+ deal. But they have fallen from a peak above $75 in April to below $62 a barrel on concerns about demand due to a U.S.-China trade dispute and slowing economic growth. The oil market was still not completely stable and said prices were being influenced by factors outside OPEC’s control, even though the market showed some encouraging signs. Saudi Arabia pumped 9.65 mn bpd cutting deeper than its production target under a global pact to reduce oil supply. The world’s top oil exporter’s output target under an OPEC led supply cut agreement is 10.3 mn bpd.

Russia’s average daily oil output dropped this month to a three-year low after contaminated crude clogged its main export route. Contaminated Urals crude was discovered in the Druzhba pipeline to Europe in mid-April. Russian oil output from 1 May to 16 May fell to 11.156 mbpd below the 11.18 bn bpd level set as part of the global oil deal between OPEC and its allies. Oil intake to the Transneft pipeline system was down by 6% from 1 May to 16 May compared to average April levels.

Russian suppliers will have to provide financial compensation for their mistakes over contaminated oil. Flows through the Druzhba pipeline were suspended last month due to contamination, sending shockwaves through global oil markets. Pipeline operator Transneft is set to compensate buyers for any proven losses. Polish Energy Minister Krzysztof Tchorzewski has requested urgent action from Russia to resume supplies of clean oil as quickly as possible, the ministry said. Operations at Polish refineries are continuing uninterrupted thanks to sea deliveries and the release of oil reserves by the Ministry of Energy. Russian pipeline monopoly Transneft has agreed a technical plan with Belarus to clean up contaminated Russian oil in the country and Belarus has indicated it approves of the plan. Belarus is a transit country for Russian oil shipments to Poland and beyond. Poland will receive clean oil on 9-10 June if the plan is successfully implemented. Russia’s Gazprom Neft said it would set up a joint venture with Shell to develop an oil field in Yamal estimated to hold reserves of around 1.1 bt of oil. Gazprom Neft, the oil arm of state gas company Gazprom, said it planned to close the deal late this year or early next and that both it and Shell would hold 50% stakes in the joint venture.

Mexico’s independent oil regulator approved deepwater energy exploration plans for five areas operated by Royal Dutch Shell Plc in Mexican waters near the maritime border with the US. The plans commit the Anglo-Dutch oil major to invest at least $397 mn over the next four years, but if the drilling proves successful it could grow to some $1.316 bn, according to the regulator, known as the National Hydrocarbons Commission, or CNH. Four of the areas are located in the Perdido Fold Basin, where significant oil and gas activity exists on the US side, as well as one area further south in the Salina Basin. Shell won exploration and production rights to nine deep-water blocks in the Gulf of Mexico at an auction run by the CNH in early 2018.

Mexican state oil company Pemex is striving to increase oil production by 1 mn bpd by the end of 2024 by developing existing oilfields and others yet to be discovered. If the target is met, the heavily indebted company will produce 2.4 mn bpd of oil well above the current level of 1.7 mn bpd. The company is developing 20 new fields, including Ixachi, in the southeastern state of Veracruz, which could yield 1.3 bn barrels of potential reserves. Analysts and experts have said the company needs to increase its spending on exploration and production to discover reserves and develop them, halting the firm’s long-running decline in output.

Nigerian private O&G company Pelfaco signed a production sharing deal with Congo Republic’s state energy firm on a 32 mn barrel oil field, Congo’s oil ministry said. The ministry said that the field in the south of the country would last for 25 years. Congo’s energy industry has staged an unexpected comeback over the past year, owing to major finds from Italy’s ENI and French oil major Total, lifting an economy hobbled by massive debts, civil unrest and graft.

BP has raised estimates for Saudi Arabia’s crude oil reserves by 12%, marking the first major change to the country’s estimated reserves since 1989. In its benchmark 2019 Statistical Review of World Energy, BP recalibrated some Saudi gas reserves as oil, allowing Riyadh to close in on Venezuela’s top spot as the world’s largest reserves holder. BP said Saudi Arabia’s proved oil reserves were revised to 297.7 bn barrels at the end of 2018 from 266.2 bn a year earlier, only slightly behind 303 bn in Venezuela. Canada was third with 168 bn barrels, followed by Iran with 156 bn and Iraq with 147 bn. The increase came after Saudi Arabia started separate reporting of oil, gas and natural gas liquids reserves. As a result, these fell to 208.1 tcf from 283.8 tcf in 2017. Riyadh has rarely changed its oil reserves estimates in the past, despite pumping 8-10 mn bpd. The last big change in reserves happened in 1989, when they were raised without explanation from 170 bn barrels to 260 bn. BP also said oil reserves for the US, which became the world’s top producer in 2018, were revised upwards by 22% to 61.2 bn barrels from 50 bn barrels at the end of 2017. Overall, global reserves were little changed at 1,729.7 bn barrels, roughly equivalent to 50 years of the world’s current demand.

Exxon Mobil Corp said it was going ahead with an oil development project in Argentina that could produce up to 55,000 boepd within five years. The project will include 90 wells, a central production facility and export infrastructure connected to a pipeline and refineries, the company said. Exxon began a pilot project in the 99,000-acre Bajo del Choique-La Invernada block, located about 114 miles northwest of Neuquén city, in 2016 after successful results from an initial exploration. However, the country awarded permits for hydrocarbon exploration in 18 areas off its southern coast to companies, including Exxon, to boost its reserves, which fell in the last decade due to regulations that discouraged foreign investment in the energy sector. If the expansion is successful, Exxon said it could invest in a second phase in the block, which would produce up to 75,000 boepd.

Brazil’s state-controlled oil company Petrobras has delayed the delivery of non-binding proposals for its LPG unit to 11 June. Initially, Petrobras, as the company is known, had set the delivery date for non-binding proposals to acquire Liquigas Distribudora SA to 6 June. Brazilian investment firm Itausa Investimentos Itau SA is in talks with LPG distribution company Copagaz on a potential joint bid. Petrobras restricted the bidders in April to avoid a second blocking of the deal by Cade. Direct competitors with more than 10% of market share in the Brazilian LPG distribution market cannot have a stake in the consortium higher than 30% of Liquigas revenue.

Polish pipeline operator PERN confirmed that clean oil supplies from Russia had been partially restored after Russia’s oil export flows to Europe were disrupted in April because of contamination. Belarus state energy company Belneftekhim earlier said that it had partially resumed oil transit toward Poland and that its daily Western-bound transit plan for June was 65,000 tonnes. PERN said that normal volumes of oil are expected in July. The company’s clients include two Polish refineries – one in Gdansk, owned by Lotos, and one in Plock, controlled by PKN Orlen, plus two plants in Germany. State-run PKN and Lotos have relied on seaborne oil supplies and existing inventories to keep their refineries working during the suspension of Russian deliveries.

Nigeria’s petroleum regulator has revoked six oil block licenses due to “legacy debts”, it said in a public notice. The notice said the move by the Department of Petroleum Resources was “in furtherance of the presidential directive”. The action comes as Nigeria takes a more aggressive approach to collecting taxes and royalties that the country says it is owed. Nigeria has also been increasingly vocal about rescinding licenses that are not being actively developed. The notice also said oil prospecting license (OPL) 206 was revoked from Summit Oil International.

France’s Total declared force majeure on the production of jet fuel at its Leuna refinery in Germany following the supply of contaminated crude from Russia. Total said that due to ongoing problems with crude supply through the Druzhba pipeline, the Leuna refinery was still operating at a reduced rate using crude oil from stocks and alternative supply routes via Gdansk port.

BP said it had agreed to sell its interests in the Gulf of Suez oil concessions in Egypt to Dubai-based Dragon Oil for an undisclosed sum. Under the terms of the agreement, Dragon Oil will purchase producing and exploration concessions, including BP’s interest in the Gulf of Suez Petroleum Company. BP was nearing the sale of the Egyptian assets to Dragon Oil for over $600 mn. The deal, which is subject to the Egyptian Ministry of Petroleum and Mineral Resources’ approval, is expected to complete during the second half of 2019, BP said. It is part of BP’s plan to divest over $10 bn over the next 2 years, it said.

African crude oil sales into China, the world’s biggest importer, have stalled as buyers wait for spot sale offers from top supplier Angola to fall in line with slumping benchmark prices. Chinese refiners are in the market for Angolan imports in August, but they have been slow to finalize orders in the hope that the slide in Brent crude oil futures will lead to weaker cargo prices. In late April Brent was almost 20% below its 2018 peak. Chinese independent refiners account for a fifth of the country’s crude imports, and have increased imports by about 300,000 bpd in the first four months this year compared with the same period in 2018, up to 2.15 mn bpd.

Iraq lifted a state of emergency which was declared at the Majnoon oil field in the south of the country because of floods. The floods did not impact production at the field, which runs at 240,000 bpd. Basra Oil Company took over the operations at the field after the withdrawal of Royal Dutch Shell last year. Iraq has announced plans to boost output from Majnoon to 450,000 bpd in 2021.

Tanzania and Zambia plan to build a refined products pipeline to transport petroleum between the two countries at a cost of $1.5 bn. Zambia, Africa’s top copper producer, imports most of its petroleum requirements, mainly from the Middle East, through the port of Dar-es-Salaam in Tanzania. Tanzania’s energy ministry said the pipeline would also have take-off points at Morogoro, Iringa, Njombe, Mbeya and Songwe regions on the Tanzanian side. Tanzania and Zambia already have a crude oil pipeline between them transporting oil to Zambia, where it is refined in Ndola for local use.

O&G companies working in Norway have hiked their 2019 and 2020 investment forecasts as they add more field development plans, a survey by the country’s statistics agency (SSB) showed. The Norwegian central bank in March said it expected investment in the oil sector, the country’s most important industry, to grow by 12.5% in 2019. After falling by a third from 2014 to 2017, Norway’s oil and gas investments rose 2% year-on-year in 2018 to 151.8 bn crowns as rising crude prices boosted activity. Equinor is Norway’s largest oil company, competing with Aker BP, Lundin Petroleum, Total, ConocoPhillips, ENI and Shell, among others. Key suppliers to the industry, which rely heavily on oil firms’ investment plans, include Aker Solutions, Subsea 7, Kvaerner and TGS.

Shell Upstream Albania B.V. said initial tests showed “a flow potential of several thousand barrels of oil per day” from its Shpirag 4 well in central Albania, and it needed more work to determine its commercial volume. The Shpirag 4 well west of Berat had confirmed the flow potential of a significant light oil discovery. More appraisal work was needed to assess commercial volumes in Shpirag, in an equivalent geological setting to the large Val D’Agri and Tempa Rossa fields in Italy, Shell Albania said.

Germany’s economy ministry said there was not threat to supply security of oil products as a result of the ongoing technical problems with crude supply on Russia’s Druzhba pipeline. Refineries, according to information held by the ministry, were able to use oil from inventories to keep operations running. The ministry is continuing to monitor situation carefully but currently there is no consideration to release oil from strategic stocks. Contaminated oil got into in the Druzhba pipeline, forcing Russia to stop eastbound flows to customers in Belarus, Ukraine, Poland, Germany and a number of central European countries.

Kazakhstan is prepared to supply oil to Belarus, but the countries need to agree such deliveries with Russia across whose territory they would pass. Belarusian President Alexander Lukashenko proposed at a meeting with the Kazakh envoy that Kazakhstan enter into talks with Minsk to deliver oil to Belarus.

BP is nearing the sale of its stake in a major Egyptian oil and gas company to Dubai-based Dragon Oil for over $600 mn. Dragon Oil, a subsidiary of Dubai’s Emirates National Oil Company, has said it plans to expand its international operations and boost its production to 300,000 barrels of oil equivalent per day by 2025. GUPCO produces over 70,000 bpd of oil and 400 mn cubic feet per day of gas. The GUPCO sale has received the initial approval of Egypt’s petroleum ministry after it had objected to an agreement BP had reached last year with North African-focused oil and gas company SDX Energy to buy the asset.

Chinese companies looking to sign long-term agreements to buy crude oil from US oil exporters have virtually disappeared. The trade war has all but shut down shipments of US crude to China, and it is unlikely Chinese buyers will sign long-term offtake agreements with US crude exporters right now. The Obama administration ended a 40-year ban on US crude exports in 2015 and they have risen sharply ever since. The country now routinely exports more than 3 mn bpd of crude. In the first half of 2018, China was the biggest importer of US crude, averaging 377,000 bpd. In the six months ended February, the most recent data available, it has dropped to 41,600 bpd, according to the US Energy Information Administration.

China’s crude oil imports slipped 8% in May from an all-time peak hit the month before, customs data showed, as the world’s top importer of the commodity curbed shipments from Iran amid tightening US sanctions on that country. China’s crude imports dropped to 40.23 mt in May from 43.73 mt in April, General Administration of Customs data showed. China started to scale-back imports of Iranian crude in May in the face of tougher US sanctions on Tehran’s oil sales. China has instead been stepping up purchases from other Middle East suppliers such as Saudi Arabia, Iraq and the United Arab Emirates, as well as from Brazil. Also, several major refineries in China were shut for annual maintenance in May, while poor refining margins and a rise in oil product inventories helped crimp China’s crude demand, analysts said. Still, China’s crude imports in the first five months of 2019 hit a total of 205 mt, up 7.6% from the same period last year. Meanwhile, China’s oil product exports also slowed in May, to 4.49 mt, down from 6.17 mt in April, the data showed.

Hungarian refining company MOL said that it will it start taking clean Russian oil later this week via a major pipeline after agreeing to store 100,000 tonnes of contaminated crude. Russian crude flows to Europe through the major Druzhba pipeline were suspended last month due to contamination, sending shockwaves through global oil markets. Dividing up the contaminated oil between European refiners served by the pipeline is a key step before flows of clean oil can resume.

Ukrainian oil transit company UkrTransNafta has resumed oil transit toward European consumers after Hungary confirmed that it was ready to receive Russian oil, the company said. UkrTransNafta said it had resumed flows but then halted them several hours later after Hungary’s MOL reported technical problems.

Greenpeace activists blocked the entrance to BP’s London headquarters, demanding one of the world’s biggest energy companies ends all new oil and gas exploration or goes out of business. BP is due to hold its annual general meeting of shareholders in the Scottish oil city of Aberdeen. BP, which employs 73,000 people, produces 3.8 mn boepd – more than OPEC members such as United Arab Emirates or Kuwait. BP has said it aims to keep emissions from its operations flat in the decade until 2025, despite strong growth in its business which has been rebuilding after facing $67 bn in fines and clean-up costs following the disastrous 2010 Gulf of Mexico oil spill.

Carlyle Group LP is in discussions with three companies that operate pipelines and terminals to sell a 25% stake in its Corpus Christi, Texas, crude oil export terminal for $625 mn. Carlyle is also in talks with the three companies to jointly operate a crude oil pipeline from Houston to Corpus Christi. Carlyle and other companies are working to open at least eight facilities to export US crude oil to global markets from the US Gulf Coast. The US is now producing more than 12 mn bpd more than Saudi Arabia and Russia. US crude exports were near a new record at nearly 3.4 mn bpd. Carlyle-backed Lone Star Ports LLC is proposing a 1.4 mn bpd export facility on a harbor island near Corpus Christi. It has said it expects to begin operations at the facility in October 2020. Lone Star Ports and its partner, the Port of Corpus Christi, have filed for permits to build a deepwater port that could handle tankers carrying up to 2 mn barrels of oil.

The Czech Republic has oil reserves for 68 days after two loans it gave to PKN Orlen’s Unipetrol refineries to cope with outages in supplies from Russia. Russian export flows have been disrupted since April when high levels of organic chloride were found in crude pumped via the Druzhba pipeline to the Baltic port of Ust-Luga.

South Korea’s Iranian oil imports rose 17% in April from a year earlier, customs data showed, but shipments are set to end from May as waivers on US sanctions on Tehran expired at the start of this month. South Korea in April imported 1.45 mt of crude oil from Iran, or 353,223 bpd compared to 1.24 mtpa according to data. For the January-April period, the country’s imports of Iranian crude dropped by 17.4% to 3.87 mt or 235,533 bpd, versus nearly 4.7 mt in the same period last year, the data showed. South Korea was granted six-month waivers from the US in November to buy oil from Iran, mostly condensate, or an ultra-light form of crude oil. South Korea’s overall April crude oil imports were 12.76 mt, or 3.1 mn bpd, up 10.2% from 11.58 mt a year earlier. Its oil shipments from Saudi Arabia, the country’s top crude supplier rose 8.5% year-on-year to 3.59 mt or 874,401 bpd, the data showed.

PPAC: Petroleum Planning and Analysis Cell, mt: million tonnes, mtpa: million tonnes per annum, FY: Financial Year, mn: million, bn: billion, ATF: aviation turbine fuel, ONGC: Oil and Natural Gas Corp, LPG: liquefied petroleum gas, PSUs: Public Sector Undertakings, HPCL: Hindustan Petroleum Corp Ltd, OMCs: Oil Marketing Companies, O&G: oil and gas, IOC: Indian Oil Corp, BPCL: Bharat Petroleum Corp Ltd, EOR: Enhanced Oil Recovery, IOR: Improved Oil Recovery, bcm: billion cubic meters, NELP: New Exploration Licensing Policy, KG: Krishna-Godavari, RIL: Reliance Industries Ltd, kg: kilogram, PMUY: Pradhan Mantri Ujjwala Yojana, BPL: below poverty line, PML: Petroleum Mining Lease, GST: Goods and Services Tax, OALP: Open Acreage Licensing Policy, CBM: coal-bed methane, US: United States, bpd: barrels per day, NCDRC: National Consumer Disputes Redressal Commission, MoU: Memorandum of Understanding, OPEC:Organization of the Petroleum Exporting Countries, IMO: International Maritime Organization, tcf: trillion cubic feet, boepd: barrels of oil equivalent per day, Petrobras: Petroleo Brasileiro SA, GUPCO: Gulf of Suez Petroleum Company


UAE assures supply of oil, LPG to India despite tanker attacks: Pradhan

17 June. Oil cartel OPEC (Organization of the Petroleum Exporting Countries) member UAE (United Arab Emirates) has assured India of uninterrupted supply of oil and cooking gas or LPG (liquefied petroleum gas) despite disruptions in the Strait of Hormuz, Oil Minister Dharmendra Pradhan said. India is 83% dependent on imports to meet its oil needs and is reliant on nations like the UAE to meet half of its LPG needs. The attacks on oil tankers raised concerns over supplies through the Strait of Hormuz that is the conduit for a fifth of the world’s oil. The UAE has hired storages in the underground storages India has built as insurance against supply disruptions.

Source: Business Standard

Economics can support another 30k petrol pumps: CRISIL report

17 June. The petroleum ministry’s efforts to further expand the country’s retail fuel network may eat into its own existing market, instead of catering to a new one, a report by rating agency CRISIL has suggested. The planned expansion would be feasible if stopped at less than half its target, it said. In November 2018, the government allowed the three Oil Marketing Companies (OMCs) — Indian Oil Corp (IOC), Hindustan Petroleum Corp Ltd (HPCL) and Bharat Petroleum Corp Ltd (BPCL) — to add 78,493 pumps combined to their existing retail network. The economics do not support the addition of 78,000 petrol pumps. There is room for only less than half, that is 30,000 petrol pumps, if the pumps are to maintain current throughput levels, CRISIL said in its note. At present, India has 64,624 fuel retail outlets. CRISIL pegged the current throughput of these outlets at 160 kilolitres a month, which is less than half of what it is for a developed country like the United States.

Source: Business Standard

ONGC to auction over 60 fields to private operators

16 June. Oil and Natural Gas Corp. Ltd (ONGC) will shortly auction more than 60 of its discovered small and marginal fields to private companies. The fields will be auctioned under the production enhancement contracts (PEC) mechanism, followed by global energy firms to enhance production from mature oil fields. Under PEC, the private company invests and introduces comprehensive technologies to improve production, while the ownership of the fields rests with ONGC. In January this year, the government allowed state-owned explorers to rope in the private sector to raise production to better exploit its hydrocarbon resources and cut dependence on foreign oil. The small and marginal fields are said to contribute only 5% to ONGC’s total production while 95% of its production comes from 60 large fields.

Source: Livemint

Petrol price down 6 paise across metros

16 June. Petrol price declined by 6 paise across the four metropolitan cities in the country, data from the Indian Oil Corp (IOC)’s website showed. In Delhi, petrol was sold for Rs69.93 per litre, down from Rs69.99 a litre. In Kolkata, Mumbai and Chennai, petrol was sold for Rs72.19, Rs75.63 and Rs72.64 a litre, respectively, against the previous levels of Rs72.25, Rs75.69 and Rs72.70 per litre. The price of the other key transportation fuel, diesel, fell 9-10 paise in the four cities. Diesel price in Delhi, Kolkata, Mumbai and Chennai were Rs63.84, Rs65.76, Rs66.93 and Rs67.52 per litre, respectively, down from Rs63.93, Rs65.85, Rs67.03 and Rs67.62 a litre. The fall in domestic fuel prices came on the back of decline in global crude oil prices. Brent crude oil is currently priced at around $62 per barrel.

Source: Business Standard


H-Energy seeks additional 1 mtpa LNG as Jaigarh terminal set to start by year-end

18 June. H-Energy, the energy arm of realty major Hiranandani Group, is looking to source around 1 million tonnes per annum (mtpa) of additional LNG (liquefied natural gas) cargo for its Jaigarh terminal as the company plans to start operations in the October-December quarter of 2019. The terminal will start with a capacity of 1.5 mt and will be ramped up to 2.5 mtpa in a year. The company that plans to take its capacity to 8 mtpa after the second phase expansion at Jaigarh, believes, gas demand has been very stable in the last six months, and going ahead expects the demand to grow from the industrial and commercial sectors. Of late industries have become quality conscious and are relying more on cleaner fuels like natural gas. India is planning to raise the share of natural gas in its energy mix to 15% in three years from the present 6.5%. The country currently imports majority of its natural gas requirement in the form of LNG from Qatar, Nigeria, and the United Arab Emirates, among other nations. Qatar accounts for around 62% of overall LNG imports by India, followed by Nigeria (12%). H-Energy imports regassified LNG and supplies to its clients utilising the terminal.

Source: The Financial Express

BPCL’s investment plan for Mozambique gas field gets approval

18 June. A ministerial group headed by Home Minister Amit Shah has given its nod to Bharat Petroleum Corp (BPCL)’s plan to invest $2.2-2.4 bn in the Rovuma Offshore Area-1 gas field in Mozambique. The group — including Finance Minister Nirmala Sitharaman, Commerce and Railway Minister Piyush Goyal, External Affairs Minister S Jaishankar and Oil Minister Dharmendra Pradhan — had met to scrutinise the investment plan, as it is still to be approved by the Cabinet Committee on Economic Affairs (CCEA). Two more Indian firms — ONGC Videsh Ltd (OVL) and Oil India Ltd (OIL) — have stakes in the gas field where 75 trillion cubic feet (tcf) of natural gas has been discovered. In 2013, OVL bought Videocon’s 10% stake in the project for $2.475 bn and a similar stake from Anadarko for $2.64 bn. Later, OVL gave 4% of its stake to OIL. OVL already has approval to invest up to $7 bn in the gas field. BPCL paid $703 mn to buy the 10% stake in the project. The three Indian companies will be investing around $6 bn in all for their 30% stake in the project. For BPCL’s $2.2-2.4 bn investment, $800 mn would be equity and the rest would be raised as debt.

Source: The Financial Express

UP CM wants more CNG stations in state

18 June. Uttar Pradesh (UP) Chief Minister (CM) Yogi Adityanath met Oil Minister Dharmendra Pradhan and demanded setting up more compressed natural gas (CNG) and piped natural gas (PNG) stations in the state to help check air pollution. The CM assured Pradhan that the state government would extend all cooperation in mixing ethanol with fuel so as to lessen the import of crude. The CM urged Pradhan to allot more petrol pumps on the Agra-Lucknow Expressway for the benefit of the people.

Source: Business Standard

IOC issues tender for lease of LNG storage tank in Chennai

12 June. Indian Oil Corp (IOC) has issued a tender for short-term commercial lease of its liquefied natural gas (LNG) storage tank at Ennore terminal near Chennai, according to a notice posted on the company website. The company is seeking bids for the short-term lease for LNG unloading, storage and reloading services at the 5 million tonnes per annum (mtpa) import facility which was commissioned earlier this year. The contract period is for two years from the date of the agreement execution. Tenders are invited in a single-stage two-bid system, with the first part being the commercial bid and the second stage for the price bid, according to the notice. Bids are due by 15 July, the notice said.

Source: Business Standard


Mahanadi Coalfields to double output to 300 mtpa by 2026

17 June. Mahanadi Coalfields Ltd (MCL) said it will more than double production to 300 million tonnes (mt) by 2026 with long-term planning and inclusion of new technology. MCL, a subsidiary of mining major Coal India Ltd (CIL), produced around 144 mt during 2018-19 and has set a target of 160 mt this fiscal. Out of the 300 mtpa (million tonnes per annum) coal production target set by MCL, 200 mt will be produced by Talcher coalfields alone, CMD (Chairman and Managing Director) Bhola Nath Shukla Shukla said.

Source: Business Standard

India’s coal imports jump 10% as power plants face fuel shortage

16 June. Coal imports rose by 9.5% to 18.33 million tonnes (mt) in September, after having registered year-on-year decline for five months in a row, as some power plants faced fuel shortages. There was a revival of coal demand post monsoon rains, mjunction CEO (Chief Executive Officer) Vinaya Varma said. At present the buyers are looking for restocking for the approaching winter months. Besides, he said, the healthy growth in coal-fired generation of late has raised coal demand in the country, resulting in higher off-take from domestic sources as well as imports of the material. Of the 18.3 mt of coal imported in September, 12 mt was non-coking coal, followed by coking coal at 4.1 mt and 1.4 mt pet coke among others. In April, the first month of the ongoing fiscal, India’s coal imports declined marginally to 19.08 mt as against 19.63 mt in the same month of 2016-17. In May, they came down to 18.38 mt as against 19.38 mt a year ago. In June the imports again dropped to 18.22 mt, against 21.50 mt a year-ago. In July, they were at 14.64 mt, down from 19.15 mt. In August, the import of coal were down to 18.80 mt as against 19.75 mt same month of 2016-17. Import of coal saw a decline of 6.37%  to 191.95 mt in 2016-17 on higher production by Coal India Ltd (CIL) that saw the country move to a regime of surplus coal. CIL accounts for over 80% of the domestic coal production.

Source: The Economic Times

CIL to offer 21.5%  more coal to power generators through forward e-auctions

14 June. Coal India Ltd (CIL) has decided to offer 21.5%  additional coal this fiscal to power generators through forward e-auctions, while it will reduce offerings in the spot auction market from 2018-19 level by almost 4%. The company will offer 33 million tonnes (mt) of coal through forward e-auctions in 2019-20 compared with 27.14 mt in 2018-19. About the same quantity will be offered through the spot auctions market during the year compared with 34.34 mt in 2018-19. For the non-power sector, CIL will offer about 64 mt of additional coal for long-term supply contracts through an auction mechanism. The rest of the coal, estimated at about 530 mt, will go to power producers with long-term supply contracts. According to a special forward auction calendar for 2019-20 prepared by CIL, the highest quantity of 8.5 mt will be offered by CIL subsidiary South Eastern Coalfields Ltd, followed by Mahanadi Coalfields Ltd at 8 mt. Northern Coalfields Ltd plans to offer about 5 mt while Central Coalfields Ltd will be offering 3.85 mt. Western Coalfields Ltd plans to offer 2.9 mt. In September this year, CIL plans to offer 6.3 mt of coal– the highest in any month during the year. Spot and forward auctions offer CIL better realisation on the coal it sells.

Source: The Economic Times

India’s Adani wins green light for long delayed Australian coal mine

13 June. India’s Adani Enterprises received the go-ahead to start construction of a controversial coal mine in outback Australia, after a state government approved a final permit on ground water management. First acquired by Adani in 2010, the project is slated to produce 8-10 million tonnes (mt) of thermal coal a year and cost up to $1.5 bn, but has been mired in court battles and opposition from green groups. The approval potentially paves the way for half a dozen new thermal coal mines to come on line in Australia by opening up Queensland’s remote Galilee basin with rail infrastructure to the coast 320 km (200 miles) away at Abbot Point. Holders of other coal deposits in the basin include some of Australia’s wealthiest iron ore magnates such as Gina Rinehart, who has a joint venture with India’s GVK Group, and controversial one-term politician Clive Palmer. The decision comes as other developed nations step up strategies to meet Paris Agreement emissions targets, and as many banks and insurers scale back exposure to coal and to new thermal coal mines in particular.

Source: Reuters

Singareni Collieries April-May coal output at 11 mt

13 June. Singareni Collieries Company Ltd (SCCL) produced 11.37 million tonnes (mt) of coal during April-May, registering an increase of 18.4% compared to the year-ago period. The company produced 9.60 mt coal in April-May 2018-19, according to the latest figures of SCCL. In April 2019, the company produced 5.50 mt of coal, a rise of 21.9%  from the year-ago month. In May, the output was 5.87 mt, up 15.3% from the same month last fiscal. SCCL is a government coal mining company jointly owned by the Telangana government and the Centre on a 51:49 equity basis.

Source: Business Standard

Odisha CM meets PM Modi, reiterates demand for revision of coal royalty

12 June. Odisha Chief Minister (CM) Naveen Patnaik raised the demands with Prime Minister (PM) Narendra Modi when the two met for the first time in New Delhi since the recent general elections. Naveen reiterated his demand for revision of coal royalty from the existing 14% to 20%.

Source: The Economic Times


A ‘power’ shock for electricity consumers in UP

17 June. Power consumers in Uttar Pradesh (UP) are in for a major post-poll shock with the UP Power Corp Ltd (UPPCL) proposing a 25% hike for domestic power consumers. Against the prevailing power tariff of Rs4.90 per unit for the first 150 units, the new tariff will be Rs6.20 per unit in the same slab. The power tariff for the commercial sector will also be hiked by 10 to 15%.This 26%  hike in tariff for domestic sector has been strongly opposed by the Samajwadi Party (SP). The UPPCL has already submitted the proposed new power tariff structure for 2019-20 to the UP Electricity Regulatory Commission (UPERC) for vetting and final approval. The UPERC will now conduct public hearing and issue a public notice before taking a call on the new tariff order for the current financial year. SP President Akhilesh Yadav said that this hike would directly impact the middle and lower income groups. UP Power Consumers Council chairman Avadhesh Kumar Verma has alleged that the yawning revenue-expenditure gap and the projected loss by the state power utility was majorly owing to gross inefficiency of the UPPCL management, apart from the procurement of expensive power.

Source: Business Standard

CERC allows Power Grid to offer towers to telecom companies for BTS installation

16 June. Central Electricity Regulatory Commission (CERC) has allowed state-owned transmission utility Power Grid to offer towers to telecom companies for BTS (base trans-receiver station) installation to improve mobile connectivity, especially in remote rural areas. The move will not only address the issue of deficiency of telecom coverage in the country, particularly remote areas, but this segment could also be money spinner for Power Grid. Besides, the power distribution utilities will get a share of income, which would eventually reduce tariff burden on consumers. Power Grid had sought the CERC’s permission to utilise existing electricity transmission infrastructure for telecommunication purposes.

Source: Business Standard

Power demand in Punjab shoots up on start of paddy transplantation

14 June. With the start of paddy transplantation, demand for electricity in Punjab shot up to 11141 MW, an increase of more than 1900 MW from 9234 MW. Punjab overdrew 224 MW from the grid at the time of peak demand. Punjab State Power Corp Ltd (PSPCL) reiterated that it would maintain eight-hour supply to tube wells. Last year on the first day of the paddy sowing season, electricity demand in Punjab shot up by 1363 MW and touched f 10184 MW over the previous day’s demand of 8621 MW. The eve of the paddy season, electricity supply in Punjab was 1855 lakh units with thermal plants supplying 556 lakh units. Private sector Rajpura thermal plant supplied 233 lakh units and Talwandi Sabo 244 lakh units. The maximum demand this year is expected to touch 14000 MW and PSPCL is likely to meet the challenge. Last year, maximum demand during the paddy season was 12638 MW.

Source: The Economic Times

Telangana government to buy 2 GW additional power from NTPC

13 June. The Telangana government has sought 2000 MW additional power from NTPC Ltd to meet the growing power demand in the state, in view of the upcoming Kaleshwaram lift irrigation project, TS Transco CMD (Chairman and Managing Director) D Prabhakar Rao said. Telangana Chief Minister (CM) K Chandrasekhar Rao had announced his decision to inaugurate the Rs800 bn Kaleshwaram lift irrigation Scheme on 21 June. Telangana has total 16,300 MW installed capacity of conventional and non-conventional power. The present demand of power stood at 7800 MW to 8000 MW as it was lean season for agriculture.

Source: Business Standard

Vedanta Resources, JSW Energy bid low for stressed Odisha power project

13 June. Vedanta Resources and JSW Energy have placed very low bids of about Rs10 mn per MW for an incomplete stressed power project in Odisha, leaving lenders worried over big haircuts for about 15 GW of such non-commissioned assets. Industry insiders said the bids are exceptionally low considering the fact that the project has coal and power purchase tie-ups. The bids cover just the land cost and are very close to liquidation cost. Vedanta Resources has offered upfront payment of Rs6.6 bn for the 660 MW project of Ind Bharat Group, or Rs10 mn per MW, in the National Company Law Tribunal (NCLT) in a recent bidding round. JSW Energy, too, has placed an upfront bid of Rs6.6 bn but has made a conditional offer of another Rs2.2 bn over a period of time.

Source: The Economic Times

Government’s 100-day plan aims to re-energize India’s power sector

12 June. The Union power ministry has proposed a “power sector council” to address issues between the Union and state governments as part of the ministry’s 100-day action plan for the second term of the Narendra Modi government. With power being on the concurrent list of the Constitution, many sectoral issues get stuck due to differences between the Union and the state governments. The council will help the Union and the state governments work on a common agenda and ensure round-the-clock power to all, a government official, who is part of the exercise. Other proposals by the power ministry include separation of the wire and electricity supply business, setting up of a pan-India power distributor and building renewable energy management centres (REMCs) across India. The Modi administration’s plan to provide uninterrupted power supply to households in its second term was articulated by power minister R K Singh after he assumed office. With electricity being on the concurrent list, it is for states to ensure reliable and affordable electricity to consumers. To be sure, the decision-making of the so-called power sector council would preclude legislative and regulatory domains of the centre and states. The ministry’s 100-day plan also includes setting up a national electricity distribution company, proposed as an equal joint venture (JV) between state-run NTPC Ltd and Power Grid Corp of India Ltd. The proposed firm may enter into JVs with the state discoms and help bridge market and credit risks at a time when state-owned discoms are struggling with their finances on account of losses and borrowings. Interestingly, of India’s installed capacity of 349 GW, the peak demand is only 177 GW.

Source: Livemint

Niti Aayog’s ‘privatisation’ recipe irks public sector powermen union

12 June. Energy sector technocrats representing some 1.5 mn public sector powermen have opposed NITI Aayog’s proposals, in its strategy paper, to privatise power distribution in urban areas and run a franchisee system in rural. All India Power Engineers Federation (AIPEF) has said any move to privatise power distribution would meet resistance by power engineers and employees at all levels. According to AIPEF chairman Shailendra Dubey, the NITI Aayog strategy paper had basically highlighted such points, which were part of Electricity (Amendment) Bills 2014 and 2018. These bills elapsed after they could not be passed in the Lok Sabha under the Narendra Modi-I regime. In its paper, NITI Aayog has proposed privatisation of state distribution companies (discoms) and the use of a franchisee model to reduce AT&C (Aggregate Technical and Commercial) losses in the domestic power sector. The federal policy think tank, which replaced the erstwhile Planning Commission, has also recommended discoms may adopt a franchisee model for its retail business in rural areas and stipulate a minimum level of performance parameters, including the use of decentralised generation sources and storage systems for local reliability and resilience. Meanwhile, the AIPEF has written to Union Power Minister R K Singh seeking time for discussing issues facing the domestic power sector. AIPEF has opined that ‘experiments’ of privatisation and franchisee models had failed across the country and under such circumstances, the Centre should discuss related issues with the power sector engineers so that a fruitful power policy could be framed. This would ensure quality and affordable power to consumers.

Source: Business Standard

Delhi Congress chief meets Delhi CM demands six-month waiver for power consumers

12 June. Delhi Congress chief Sheila Dikshit met Chief Minister (CM) Arvind Kejriwal, demanding six-month waiver to power consumers in the city who, she said, have been made to pay over Rs74 bn as increased fixed charges and surcharge for pension fund. A party delegation led by Dikshit met the CM at his Flagstaff Road residence, and raised issues related to power and water supply faced by the people in the national capital. However, the Aam Aadmi Party (AAP) leaders claimed that the current rates of electricity were “cheaper” than what consumers paid during the Dikshit regime and added that the complaints of the Congress delegation were countered with facts, leaving them speechless. A memorandum signed by Dikshit was submitted to Kejriwal. The Delhi Congress has stepped up attack on the ruling AAP over issues related to power and water supply, which the ruling dispensation claims were its biggest achievements, with the Delhi assembly polls due in early 2020. After the meeting, Delhi Congress working president Haroon Yusuf said that Dikshit raised the power and water crises being faced by people during the meeting. The Congress delegation also discussed power outages, particularly in poor pockets in the city, problems of “contaminated” and “scarce” supply of water during the meeting, Yusuf said. Delhi’s Power Minister Satyendar Jain compared the prevailing net bill amount with that during the Dikshit government in 2010 to 2013, and said the tariff now is cheaper. Jain rejected the Congress’s claim that extra amount was collected from power consumers due to the hike in fixed charges and surcharge for pension fund.

Source: Business Standard


Telangana government to come up with new solar policy

18 June. The Telangana government is planning to come out with a new solar policy factoring in the changes in the rapidly expanding renewable energy sector. The policy framework will take forward the State government agenda and align with the Centre’s larger target of achieving 175 GW capacity by 2022. The State plans to come out with fresh solar tenders for capacity addition including for a couple of large floating projects in the two major reservoirs of the State. Ajay Mishra, Special Chief Secretary, Telangana, said that the solar policy announced about five years ago provided a push to the sunrise industry with an installed capacity of about 3,600 MW. And cumulatively, the State’s renewable energy capacity is up at 3,800 MW. The distributed solar installation approach has made a big impact on the State’s energy pool by enabling it to harness the potential of unused transmission networks thereby paving the way for supplying power to deficit locations.

Source: The Hindu Business L ine

Pune firm develops solar-powered irrigation system

17 June. To solve water crisis for farmers throughout the varied climate conditions in India, Pune-based company Khethworks has developed solar-powered irrigation system. The irrigation system is intended to make farmers independent of seasonal rains or expensive fuel along with reducing carbon dioxide emissions and improving food security by developing solar pumps. Over 30 mn farmers in eastern India owned small plots that could be farmed year-round with appropriate irrigation, the company claimed. Khethworks was launched in 2016 after they tested their irrigation technology at the Massachusetts Institute of Technology (MIT) in the United States. The company has emerged from the MIT Tata Centre ecosystem and is supported by the Tata Trusts. Currently, India has a target of installing 175 GW of wind and solar energy by 2022. If achieved, it would be close to 50% of India’s current total installed power capacity.

Source: Business Standard

First pilot floating solar plant to be completed in next 2-3 months: Vedanta

17 June. Vedanta said its first pilot floating solar plant will be completed in the next two to three months. Vikram Solar, module manufacturer and rooftop solar and EPC solutions provider, had earlier in the year announced that it bagged the project order for a 1 MW floating solar plant for Hindustan Zinc Ltd, a Vedanta Group firm. The plant will be located at Ghosunda Dam, near Chittorgarh, Rajasthan, it said. The solar plant is expected to have an energy yield of 1,993 MWh (megawatt hour) a year and will be able to power 1,400 houses a year.

Source: Business Standard

BHEL bags Rs8 bn orders for setting up two solar power plants

16 June. Bharat Heavy Electricals Ltd (BHEL), the country’s largest power equipment manufacturer, announced it has bagged two orders worth Rs8 bn for setting up solar power plants of 200 MW capacity for NTPC Ltd and Gujarat State Electricity Corp (GSECL). BHEL is currently offering Engineering, Procurement and Construction (EPC) solutions for both off-grid and grid-interactive solar PV (photovoltaic) plants at multiple locations in India. It has a current portfolio of over 1 GW of solar PV plants including 500 MW capacity that is already commissioned. The company said it has enhanced its manufacturing capacity for solar cells and solar modules and is currently manufacturing space-grade solar panels and batteries at its Electronics Systems Division in Bengaluru.

Source: The Economic Times

GIP in talks to buy Engie’s Indian solar power business

14 June. American investor Global Infrastructure Partners (GIP) is in talks to buy the Indian solar power business of French energy firm Engie SA in a deal potentially worth around $500 mn. GIP is interested in Engie Solar, which has an 1,100 MW solar portfolio in India, the person said on the condition of anonymity. Of this, 740 MW is operational. Rothschild and Co. has been mandated to find a buyer for the assets. Private equity fund Actis Llp and Edelweiss Infrastructure Yield Plus Fund were in talks to buy the French firm’s Indian solar power business. With the newly-elected Narendra Modi government articulating its vision for reliable and uninterrupted power supply to households in its second term, along with a focus on green energy sources, the interest in India’s emerging green economy continues unabated. Sovereign wealth funds GIC Holdings Pte Ltd and Abu Dhabi Investment Authority agreed to invest $495 mn in Greenko Energy Holdings, in one of the largest funding rounds by an Indian clean energy producer. GIP has been present in the Indian clean energy space and led a group of investors to acquire Equis Energy for $5 bn in October 2017. The sale included liabilities of $1.3 bn and the Indian portfolio of the Singapore-based renewable energy developer, comprising green energy platforms Energon and Energon Soleq. India has an installed renewable energy capacity of 74.79 GW, of which solar and wind power account for 25.21 GW and 35.14 GW, respectively. India is running the world’s largest renewable energy programme and plans to achieve 175 GW of renewables capacity by 2022 as part of its climate commitments. The government plans to award a mammoth 100 GW of solar and wind contracts by March 2020.

Source: Livemint

KKNPP dismisses rumours on AFR spent fuel storage facility

14 June. Kudankulam Nuclear Power Plant (KKNPP) has said that the proposed Away From Reactor (AFR) Spent Fuel Storage facility to be established at the plant is completely safe and not alarming as projected by those opposing it. A public hearing to establish the storage facility is to be held on 10 July. It stated that KKNPP in Tirunelveli’s Radhapuram taluk was the seventh nuclear power generating site of the Nuclear Power Corp of India Ltd in India, with a total capacity of 2000 MW. All the operating nuclear power stations in India and abroad had facilities to store new as well as spent (used) fuel. The scheme to store spent fuel in a nuclear power plant was two-fold. Two AFRs — at Tarapur near Mumbai and Rawatbhata in Rajasthan — were in operation in India and one more was being constructed at Rawatbhata. AFR design was specific to fuel type. The proposed facility was designed for storing spent fuel discharged from reactors at Kudankulam 1 and 2 and not from any other reactor.

Source: The Economic Times

India sees rise in solar PV jobs: IRENA

13 June. India saw expand in solar PV (photovoltaic) employment in 2018, while China, the US (United States), Japan and the European Union (EU) lost jobs, the International Renewable Energy Agency (IRENA) said. In total, 11 mn people were employed in renewable energy worldwide in 2018, up from 10.3 mn in 2017. Accounting for one-third of the total renewable energy workflow, solar PV retains the top spot in 2018, ahead of liquid biofuels, hydropower and wind power. Besides India, PV employment expanded in Southeast Asia and Brazil, while China, the US, Japan and the European Union lost jobs.

Source: Business Standard

Install solar plates on government buildings from this year: Bihar CM

13 June. In a bid to promote renewable sources of energy, Bihar Chief Minister (CM) Nitish Kumar issued a directive for installation of solar plates on all government buildings and offices in the state from this year. He said there is need to spread awareness among people to install solar plates on ponds as well as wetlands. He asked the officials to make proper assessment of farmers in the state willing to take such connection. He asked the officials to ensure adherence to set deadlines for installation of prepaid meters and replacement of old electric wires.

Source: The Economic Times

Solar tariffs increase marginally in SECI auction

13 June. Tariffs rose marginally from February in an auction by Solar Energy Corp of India (SECI) for 1200 MW of projects. SECI is the renewable energy ministry’s nodal agency responsible for conducting wind and solar auctions. Ayana Power, Renew Power, Azure Power and Mahindra Susten quoted a tariff of Rs2.54 for 300 MW, 300 MW, 300 MW and 250 MW respectively. Avaada Energy won 50 MW at Rs2.55 per unit. The tariff ceiling was set at Rs2.65 per unit. The tender was oversubscribed by almost 1000 MW. India imposed a 25% staggering safeguard duty on the import of solar panels and modules, mainly from China and Malaysia, from end-July for a year, followed by 20% for the next six months and 15% for another six. Besides, interest rates have hardened, pushing the tariff upwards. The ministry’s ALMM (Approved List of Models and Manufacturers) is expected to come into force in a year which means that only those approved modules can be installed. The projects can be located anywhere in India, and linked to the interstate transmission system.

Source: The Economic Times

MERC hearing on solar rooftop metering soon

12 June. With the election code of conduct coming to an end, Maharashtra Electricity Regulatory Commission (MERC) is likely to hold a public hearing for gross metering of solar rooftop consumers soon, Maharashtra State Electricity Distribution Company Ltd (MSEDCL) said. At present, net metering is done for solar rooftop consumers. The net meter measures the quantum of solar energy generated by the consumer’s panels and the power consumed by him. MSEDCL bills the consumer for the difference between consumption and generation. If generation is more, then the consumer is paid the amount at the end of financial year. Say your consumption for a month is 500 units and generation 450 units. MSEDCL will bill you for 50 units in this case. As its tariff is slab wise you will be billed at a very low rate. If your generation is 550 units, then you will be paid for 50 units at the average power purchase rate of MSEDCL for that year. If gross metering method is adopted, your bill will be calculated for 500 units and you will be paid for 450 units at a rate decided by the MSEDCL. Your bill will go up substantially because the slab wise tariff means that you pay for 500 units at a very high average rate. Even if you generate more, you still would be required to pay MSEDCL because your bill will be very high. MSEDCL had earlier tried to introduce gross metering through its tariff petition for 2018-19. The commission had then rejected the plea asking the distribution company to file a separate petition. Now, the regulator wants to hold a public hearing for the same. This is because most consumers are dead against gross metering. Meanwhile, some solar rooftop consumers have received very high power bills.

Source: The Economic Times


Equinor makes two small petroleum finds in Norwegian Sea

17 June. Equinor has made two small discoveries in the Norwegian Sea near its Norne field, the Norwegian Petroleum Directorate (NPD) said. Estimates place the size of one discovery at 1.8 and 13 mn barrels of recoverable oil equivalent, while the other is estimated in a range of 0.6 mn and 50 mn barrels of recoverable oil equivalent, the NPD said.

Source: Reuters

Shell to invest up to $2.4 bn in Mexican deepwater oil projects

14 June. Mexico’s oil regulator approved exploration plans for four deepwater areas operated by Royal Dutch Shell , after it gave the green light to five others earlier this week, committing the oil major to invest at least $791 mn. The plans stipulate that the Anglo-Dutch company could invest up to $1.06 bn in the four blocks, mostly dedicated to drilling at least six new wells. One of the blocks is in the Perdido Fold Basin, which straddles the US-Mexico maritime border in the Gulf of Mexico, while the other three are further south in the Salina Basin.

Source: Reuters

OPEC, Russia nearing accord on long term oil supply coordination

14 June. OPEC (Organization of the Petroleum Exporting Countries) and other producers including Russia are in final talks for an agreement, that may be signed in early July, to cooperate on oil supplies on a long-term basis, Russian Energy Minister Alexander Novak said. Novak said that discussions with OPEC on moving the date of the meeting to early July from the originally-planned dates of 25-26 June were nearly finalised. OPEC, Russia and other producers have since 1 January implemented a deal to cut output by 1.2 mn barrels per day (bpd) to support prices. A proposal to create a formal body was abandoned earlier this year after the US Congress started moves to legislate against cartels in the oil industry. OPEC cut its forecast for growth in global oil demand due to trade disputes and pointed to the risk of a further reduction, building a case for supply restraint through the rest of 2019. Crude oil prices jumped 4% after suspected attacks on two oil tankers in the Gulf of Oman sparked tensions between the United States (US) and Iran and raised concerns over the safety of oil shipments through one of the world’s busiest sea lanes. Prior to this latest scare, some OPEC members had been worried about the recent steep slide in prices, which have tumbled to $62 a barrel from April’s 2019 peak above $75, due to concern over the US-China trade dispute and a global economic slowdown. OPEC said that world oil demand would rise by 1.14 mn bpd this year, 70,000 bpd less than previously expected.

Source: Reuters

Brazil postpones bidding round for major oil area to 6 November

14 June. Brazil’s oil regulator ANP announced preliminary rules for a major oil auction in the pre-salt area in the Santos basin and postponed the bidding round to 6 November from 28 October. The preliminary rules will be in public consultation until 3 July, according to ANP. A public hearing is expected to take place in Rio de Janeiro on 5 July. The auction comprises production sharing contracts for a total area of 1,385 square kilometers. The prospects are areas near the fields included in the Transfer-of-Rights contract signed by the government with local company Petrobras. Contracts are expected to be signed by March 2020, ANP said. Petrobras was granted in 2010 the right to explore up to 5 bn barrels of oil equivalent in the those pre-salt areas. As volumes discovered were significantly larger, the government is auctioning the surplus.

Source: Reuters

IEA cuts 2019 estimate for oil demand growth on global trade worries

14 June. The outlook for oil demand growth in 2019 has dimmed due to worsening prospects for world trade, the International Energy Agency (IEA) said, although stimulus packages and developing countries should boost growth going into 2020. The IEA, which coordinates the energy policies of industrial nations, revised down its 2019 demand growth estimate by 100,000 barrels to 1.2 mn barrels per day (bpd), but said it would climb to 1.4 mn bpd for 2020. The oil demand growth forecast assumes the maintenance of US (United States) and Chinese tariffs imposed on goods in 2018, but the IEA said it had not factored in further US tariffs announced in May.

Source: Reuters

Oil prices rise 2% after tanker attacks near Iran

13 June. Oil prices settled 2.2% higher after attacks on two oil tankers in the Gulf of Oman stoked concerns of reduced crude trade flows through one of the world’s key shipping routes. The attacks near Iran and the Strait of Hormuz reignited worries about an impact to flows from the Middle East if insurance companies begin to reduce coverage for voyages through the region and additional shipping companies suspend new bookings, analysts said. Also supporting oil bulls were signs that Organization of the Petroleum Exporting Countries (OPEC) members were close to agreeing on continued production cuts. Analysts said the price swings were subdued by recent grim forecasts for global crude demand.

Source: Reuters

Canadian oil output growth forecast halved to 1.4% annually

13 June. Canadian oil production will grow by 1.4% annually until 2035, the Canadian Association of Petroleum Producers (CAPP) forecast, halving its estimate from five years ago due to constraints by a lack of new pipelines and inefficient regulation. The Calgary-based industry body said output will increase to 5.86 mn barrels per day (bpd) by 2035, a rise of 1.27 mn bpd from current levels, representing a 1.4% annual increase. Even so, it is higher than CAPP’s forecast last year, which said Canadian oil production would reach 5.6 mn barrels by 2035. Most of the growth comes from thermal oil sands projects in northern Alberta. CAPP compared the constrained growth outlook in Canada to a larger-than-expected increase in US (United States) oil production, which the Energy Information Administration said will hit 13 mn bpd by the end of 2019.

Source: Reuters


Ukraine’s Naftogaz proposes gas swaps deal to Russia instead of direct transit

18 June. Ukrainian energy company Naftogaz has proposed a contract for gas swaps to Russian gas giant Gazprom instead of direct transit. Under the proposed deal Gazprom could sell its gas to Naftogaz at the Russia – Ukraine border, while Kiev would sell the same amount to Europe at the Ukraine – European Union border crossing.

Source: Reuters

Greece, Cyprus pressure EU to act over Turkey gas drilling as Ankara digs in

18 June. Cyprus and Greece heaped pressure on the EU (European Union) to take action against Turkey over gas drilling in disputed waters, as Ankara said it would step up exploration in a move that could further strain ties with Western allies. Ankara, which does not have diplomatic relations with Cyprus, claims that certain areas in Cyprus’s offshore maritime zone, known as an EEZ, fall under the jurisdiction of Turkey or of Turkish Cypriots, who have their own breakaway state in the north of the island recognized only by Turkey.

Source: Reuters

Argentinean LNG may enjoy geographic advantage

17 June. Argentina’s rising natural gas output, along with competitive global liquefied natural gas (LNG) shipping costs, should make the South American country an emerging source of gas supply to Asia during peak demand periods, recent research from Wood Mackenzie concludes. Moreover, the consultancy envisions potential implications for US (United States) LNG exporters. Wood Mackenzie found that shipping LNG to Asia from Argentina would be cheaper than doing so from the US Gulf Coast because there would be no need to transit the Panama Canal. Argentina will ramp up production from the Vaca Muerta shale formation in the Neuquen basin over the next few years, and major-scale LNG production should start in 2024. Argentina’s LNG production volumes could reach 6 million tonnes per annum (mtpa) in 2024, increasing to 10 mtpa by 2030, Wood Mackenzie also noted. Moreover, the firm projects that associated gas from Vaca Muerta will account for 15% of Argentina’s gas production by 2024.

Source: Rigzone

Brazilian oil firm Petrobras confirms natural gas find in Sergipe Basin

17 June. Brazilian oil firm Petroleo Brasileiro SA (Petrobras) has made natural gas discoveries in six deep-water fields in the Sergipe Basin, it said. The find was the largest since the sub-salt discoveries in 2006, and that Petrobras could extract up to 20 mn cubic meters of natural gas per day, equivalent to one third of total Brazilian production. The find could help deliver the “cheap energy shock” to Brazil promised by Economy Minister Paulo Guedes, his vision to reduce the cost of natural gas by up to 50% and “reindustrialize” the country.

Source: Reuters

Japan’s Inpex, Indonesian government sign Abadi LNG development agreement

16 June. Japan’s biggest oil and gas explorer Inpex Corp and the Indonesian government signed a basic agreement on the development of Indonesia’s Abadi liquefied natural gas (LNG) project, moving forward the $15 bn project. Inpex President Takayuki Ueda said the Japanese company, which owns a 65% stake in the project, said they plan to submit a development plan for the project within several weeks to the Indonesian government and aim to make a final investment decision within 2-3 years. The remaining stake in the Abadi project, situated in the Masela block, is owned by Royal Dutch Shell, the world’s largest buyer and seller of LNG. Construction for this project was due to start in 2018, but in 2016 was delayed until at least 2020 after Indonesian authorities instructed a switch from an offshore to an onshore facility.

Source: Reuters


Australia’s South32 reduces coal reserve estimate for Illawarra project

17 June. Ausralian-based diversified miner South32 Ltd said it has lowered the estimated coal reserves at its Illawarra Metallurgical Coal project. The company said coal reserves for the Bulli seam have been reduced by 22 mn wet metric tonnes to 114 metric tonnes following conclusion of a commercial agreement to relinquish a portion of its mining lease in the Appin area. Coal reserves for the Wongawilli seam were unchanged, it said. The Illawarra project accounts for nearly all of South32’s coking coal output.

Source: Reuters

Kenyans protest bid to build East Africa’s first coal plant

13 June. Scores of Kenyans protested a project to build a coal power station near the Lamu archipelago, a popular tourist spot that includes a UNESCO World Heritage site and vibrant marine life. A group of about 200 protesters carrying black coffins emblazoned with white skulls, as well as a miniature chimney spewing smoke, marched through downtown Nairobi chanting “coal is poisonous!”  Campaigners argue the project is a costly and damaging venture that makes little sense at a time when most of the world is turning away from coal plants and investing in increasingly cheaper renewable energies. It will be the first coal-fired power station in East Africa, and will import coal from South Africa until Kenya begins mining operations its own mining operations.

Source: The Economic Times

Norway fund may have to offload $1 bn stake in Glencore in shift away from coal

12 June. Norway’s $1 tn sovereign wealth fund may have to sell its $1 bn stake in commodities giant Glencore, among other companies that derive more than 30% of their revenue from coal, to meet proposed tighter ethical investing rules. Under the center-right government’s plan, expected to be adopted by Norway’s parliament, the world’s largest fund would no longer invest in companies that mine more than 20 million tonnes (mt) of coal annually or generate more than 10 GW of power with coal. Uniper said its generation capacity globally was less than one third coal-based.

Source: Reuters


Poland to offer some relief to biggest power consumers

18 June. Poland’s government proposed draft regulations that would allow big electricity consumers to receive compensation for surging power bills. Wholesale power prices in Poland, which generates most of its energy from coal, jumped in the autumn last year following the rising costs of carbon emissions and coal prices. To prevent a surge in prices for households and bigger consumers ahead of elections in the European Union and at home, the ruling Law and Justice (PiS) party passed legislation in December aimed at freezing power prices at mid-2018 levels for all Poles. While the cap worked for households, which represent a regulated segment of the market, it was not effective for companies and local authorities that normally buy electricity based on market prices. The cap for big clients did not work because the energy ministry did not issue supplementary regulations to clarify technical issues related to the prices at which companies buy electricity. As a result the Polish parliament removed the power price cap for big consumers and the government proposed legislation on future compensation.

Source: Reuters

Power mostly restored after massive blackout in Argentina, but questions remain

16 June. Power returned to much of Argentina and two neighbouring countries following a massive blackout that left tens of millions in the dark, but Argentine President Mauricio Macri said the cause of the “unprecedented” outage was still unclear. Argentina’s grid “collapsed” around 7 a.m., leaving the entire country without power, Argentina’s Energy Secretariat said. The outage cut electricity to much of neighbouring Uruguay and swaths of Paraguay, and shut down YPF SA’s La Plata refinery, Argentina’s largest. Power had returned to nearly 90% of Argentina by early and to virtually all of Uruguay and Paraguay. The blackout comes amid a deepening economic crisis in Argentina that has plunged nearly a third of the country into poverty, pushed interest rates skyward and sent the peso tumbling against the dollar, prompting mass protests throughout the country. The blackout also renewed questions about the vulnerability of parts of the South American grid, which transcends borders and connects many of the region´s largest economies.

Source: Reuters


Germany needs to ease rules to hit 2030 renewables target

18 June. Germany needs to ease restrictions on the location and size of solar power plants and wind turbines and increase incentives if the country is to meet a target demanding it double renewable energy capacity by 2030, energy companies said. Germany has set a target of generating 65% of its power from renewable sources by 2030, requiring an increase in wind and solar generation capacity to between 215 and 237 GW from 120 GW now. Renewables account for about 40% now. The government wants to achieve 61% CO2 (carbon dioxide) emissions reductions by 2030 over 1990 levels, which requires 65% of power generation to come from renewables. It is also working to cut CO2 emissions from transport, building and agriculture. It is committed to bringing in a climate law this year that demands more action from polluting industries. German utility industry association BDEW has been pushing for the capacity of offshore wind turbines to be raised to 17 GW each by 2030 from 15 GW, a limit set because of the German North and Baltic Sea’s sensitive maritime environment and fears about adverse effects on tourism. Private bank Metzler said Germany would experience an investment boom in renewables to deliver on the 65% target by 2030 and 77% target by 2038, when it aims to have closed coal-fired plants.

Source: Reuters

EU nations receive mixed scorecard on climate goals

18 June. The European Union (EU) urged its member states to accelerate efforts to meet their 2030 climate goals after a review showed them falling short in some areas as the bloc’s leaders prepare to debate going carbon-neutral by 2050. With the mid-century target on the agenda at an EU summit, the European Commission’s audit showed the 28-nation bloc on track to meet its headline pledge of cutting emissions by 40% by 2030. However, the EU said nations were lagging in some big polluting sectors such as agriculture and transport as well as targets on energy saving and renewable energy use – a potential hurdle in the push by some states to ramp up the bloc’s long-term climate goals. The assessment will play into what is expected to be a difficult debate among EU leaders over what signal to send businesses on the pace of emissions reductions to come. UN (United Nations) negotiators and several EU nations are pushing for the bloc to show leadership by increasing its carbon reduction goals ahead of global climate talks in September to limit global temperatures to 1.5 degrees Celsius. Implementing these goals, however, could allow the EU to cut overall emissions by 45% by 2030, EU projections show.

Source: Reuters

South Korea fires up on renewables, to close more coal plants

18 June. As renewable energy powers up in South Korea, coal-fired generation, long the bedrock of the country’s electricity supply, is being tapped to give up room. Facing choking smog in its major cities and under pressure to meet emission reduction targets, the world’s fourth-biggest coal importer is expected to accelerate targets for green energy in an updated 15-year energy plan later this year. South Korea began its transition to cleaner energy in a 2017 power supply plan that aimed to boost the share of renewables from about 6% to 20% by 2030, while scaling back coal and unpopular nuclear. The 2019 energy plan is expected to reflect the push for even more renewables and more gas-fired power at the expense of coal, imported from countries such as Indonesia, Australia and Russia. Over the next 15 years, the government had initially planned to retrofit some 20 of these with anti-pollution gear when they reached 30 years of age in a bid to extend their operating lifespan, but this has been shelved. The government last year introduced caps on coal-fired generation, halting operations at five plants from March to June to curb pollution and it has done the same this year for four plants. Still, South Korea is facing a tough task to boost renewables and meet its planned carbon emission cuts under the 2015 Paris climate accord.

Source: Reuters

Norway wants to open two new North Sea areas to offshore wind

18 June. Norway will seek to open two areas for the construction of floating offshore wind parks, which combined could hold a turbine capacity of up to 3.5 GW, the Norwegian oil and energy ministry said. The oil-producing nation has recently been seeking to develop wind power, both onshore and offshore. The first offshore area, which the ministry will propose before July, is called Utsira North and is situated in the North Sea. Utsira North could hold a power producing capacity between 0.5-1.5 GW, while North Sea II, a bigger block, could hold turbines with a total capacity of 1-2 GW, the ministry said.

Source: Reuters

Iberdrola to launch Irish retail arm, invest $112 mn in renewables by 2025

18 June. Spanish utility Iberdrola will launch an Irish retail business and plans to invest over €100 mn ($112 mn) in renewable energy and storage projects in Ireland and Northern Ireland by 2025. The move is part of a company-wide goal to invest around €34 bn to 2022 on renewables and energy network systems and expand in retail markets across Europe. The company will be challenging existing market players such as SSE’s Airtricity and Centrica’s Bord Gais Energy and plans to attract customers by offering competitive prices and 100% renewable electricity as standard.

Source: Reuters

Russia’s Novovoronezh nuclear plant starts up a new reactor

17 June. The second unit of the Novovoronezh II nuclear power plant south of Moscow has gone into pilot commercial operation, Rosenergoatom, Russia’s nuclear utility, has said. The reactor is a VVER-1200, the Russian nuclear industry’s flagship product as it seeks to expand its sales abroad. The new Novovoronezh reactor represents only the third of these reactors that has yet gone into service in the world, though Rosatom, Russia’s nuclear corporation, has VVER-1200s under construction in Hungary, Belarus and Turkey. Eventually, the Novovoronezh II nuclear plant will consist of four VVER-1200 reactors, which are being built to replace the power production from the five older VVER type reactors at the first Novovoronezh plant. A similar process is underway at the Leningrad Nuclear Power Plant near St Petersburg.

Source: Bellona

France to double pace of offshore wind projects as costs fall: PM

12 June. France will double its target for developing offshore wind generation to 1 GW per year from around 500 MW previously as costs are falling, Prime Minister (PM) Edouard Philippe said. France aims to rapidly boost power generation from renewable wind, solar and other green sources as it seeks to curb its dependence on nuclear power and phase out coal-fired generation to reduce its carbon emissions. In its long-term energy plan presented last year, the government had said it would boost France’s offshore wind capacity from zero to 2.4 GW in 2023 and about 5 GW in 2028, at a rhythm of around 500 MW a year.

Source: Reuters

US excludes new panel technology from solar tariffs

12 June. US (United States) trade officials said bifacial solar panels, a new technology through which power is produced on both sides of a cell, would be excluded from the Trump administration’s tariffs on overseas-made solar products. The announcement was made in a US Trade Representative (USTR) document posted online and is scheduled to be published in the Federal Register, it said. It is the second time US trade officials have announced exemptions to the tariffs, which were imposed in early 2018. The tariff on solar panel imports was set at 30% but has since dropped to 25%.

Source: Reuters


State-wise Electricity Generation from Thermal Plants


2018-19 (April-December)

Generation  (Million Units)

Andaman Nicobar 99.98
Andhra Pradesh 46, 292.41
Assam 4, 053.81
Bihar 23, 730.92
Chhattisgarh 8, 8426.9
Delhi 6, 155.66
DVC 26, 490.02
Gujarat 69, 052.52
Haryana 19, 520.77
Jharkhand 10, 254.36
Karnataka 21, 437.68
Kerala 1.23
Madhya Pradesh 88, 157.25
Maharashtra 91, 981.11
Orissa 29, 624.07
Puducherry 181.45
Punjab 20, 932.74
Rajasthan 35, 635.77
Tamil Nadu 52, 398.65
Telangana 35, 319.44
Tripura 4, 873.95
Uttar Pradesh 91, 546.28
Uttarakhand 880.81
West Bengal 38, 385.74
Total 805, 433.5

 All India Electricity Generation from All Sources for 2018-19 (till December)

Source: Compiled from Central Electricity Authority & Lok Sabha Questions

This is a weekly publication of the Observer Research Foundation (ORF). It covers current national and international information on energy categorised systematically to add value. The year 2019 is the sixteenth continuous year of publication of the newsletter. The newsletter is registered with the Registrar of News Paper for India under No. DELENG / 2004 / 13485.

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